[FoRK] [fhapgood@pobox.com: [nsg] Meeting Announcement]

Eugen Leitl eugen
Sun Jul 17 08:32:40 PDT 2005

----- Forwarded message from Fred Hapgood <fhapgood at pobox.com> -----

From: Fred Hapgood <fhapgood at pobox.com>
Date: Sun, 17 Jul 2005 11:27:41 -0400
To: Nanotech Study Group <nsg at polymathy.org>
Subject: [nsg] Meeting Announcement
X-Mailer: MIME::Lite 1.5  (F2.73; T1.001; A1.64; B3.05; Q3.03)

Meeting notice: The July 19 meeting will be held at 7:30 P.M. at the
Royal East (782 Main St., Cambridge), a block down from the corner of
Main St. and Mass Ave.  If you're new and can't recognize us, ask the
manager. He'll probably know where we are. More details below.

Suggested topic:  The Generational Storm

I've been reading the best-selling The Coming Generational Storm, by BU
professor Lawrence Kotlikoff and Scott Burns.

The core thesis is probably familiar to you -- that the boomer
generation is screwing its children by 1) voting themselves immensely
expensive services, 2) the bill for which will only come due after they
are retired and therefore safe from the tax man, 3) while at the same
time restricting childbirth, and therefore the number of contributors 
capable of shouldering, and sharing, the load. Nobody was looking
explicitly for ways of causing the most possible pain per person, but
they might as well have been.

K. estimates the shortfall -- the size of the check being skipped out on
-- at around $50 trillion, though was last year (the number gets
bigger every year nothing is done).  $50 trillion is about five times
the size of the economy.

It's interesting to read this from a nanotech perspective.  On the one
hand we tend to be far more impressed by the chaos of everyday life than
the BU professor is.  For K., 2030 is tomorrow and even 2080 is
something to worry about.  He is contemptuous of social security
scenarios for looking only 75 years out, for instance.  On the other,
the members of this group probably expect life expectancy at 65 to crank
up a lot faster than the Congressional Budget Office (K's source) does.
All in all the $50 trillion dollar bugout seems to be one of those
problems nanotech will make worse. (K. points out that productivity is
linked to wages and at least in the case of SS, wages are linked to
benefits, which adds up to another way in which technological change
drives entitlement costs.)

If you buy the argument as developed to this point there are only three
possible outcomes -- and by "outcomes" I do not mean solutions.

The first, cutting benefits, is obviously not going to happen.  So
forget that.

The second is raising taxes.  Perhaps the most useful single thing in
this book is K's demonstration that taxes are really much higher than we
think they are.  When the IRS tells you are paying at a rate of 30% or
whatever they are calculating across the base as a whole, as if they got
30% out of your first dollar. But if you make, say, $50,000 a year, the
first $15,000 is tax free (in the sense that if that was all you made
you wouldn't have to pay anything) and you don't pay a whole lot more on
next $15,000 (if you were only making $30K your taxes  would be

It's the final $20K, the marginal dollar, that takes the hit.  Here are
some real numbers:

1st column: Household  income   
2nd column: net marginal tax rate (net means govt. benefits are

$21K           72%
$42K           66%
$64K           63%  
$85K           59%

... and the numbers really don't ever get much lower than that.  (The
72% and 66% in second column reflect the loss of means- tested 
government services rather than actual taxes.)

So while K. is sure taxes are going to go up, he is equally sure they're
not rising anywhere close to the point of handling a $50 trillion debt.
Try it and people will stop working in droves, because people basically
would just as soon not work for free.

That leaves only the debtor's friend, inflation, and K. expects a lot of
it for a long time. 

Of course the clash of generations is going to be even worse in the many
countries that boast both longer life expectancies and more rapidly
populations.  I was just a tiny bit surprised that K. didn't speculate a
about the reaction of countries like these to seeing themselves shrink
after year after year. Myself, I bet they won't like it. I bet it will
them blue.  I bet lots of people, and especially lots of politicians, in
shrinking nations are going to think that boosting tax breaks per kid is
a much
better use of the social dollar than giving it to infertile old people.

We aren't really seeing much of this now but I think we will, and when
we do, the "clash of generations" will get perfectly explicit.


In twenty years half the population of Europe will have visited the

                                -- Jules Verne, 1865


Announcement Archive: http://www.pobox.com/~fhapgood/nsgpage.html.



"NSG" expands to Nanotechnology Study Group.  The Group meets on the
first and third Tuesdays of each month at the above address, which
refers to a restaurant located in Cambridge, Massachusetts.

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