Philosophical questions...

Discussion in 'Economics & Trade' started by OldManOnFire, Jun 16, 2014.

  1. OldManOnFire

    OldManOnFire Well-Known Member

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    What would happen in the USA if 15%, 25%, or more of the workers simply decided to quit working?

    Also, let's assume all of those who quit can somehow adjust their lives in order to exist. For example, if only one person per household continued to work, all the 2nd and 3rd incomes would disappear.

    Obviously personal consumption will plummet, there will be few to no workers to service others, GDP will plummet, tax revenues will plummet at all government levels, all financial institutions will be in a state of chaos, real estate will plummet, materials and products won't be readily available, businesses will close their doors, etc.

    Capitalism...damned if we do and damned if we don't...
     
  2. OldManOnFire

    OldManOnFire Well-Known Member

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    No responses to the question?

    How fragile is the US economy and society? If 10% of the workers stopped working this is about 15 million who no longer pay income taxes, FICA taxes, and have reduced consumption.

    How many millions per year of Baby Boomers are leaving the workforce and will continue to do so during the next decade or longer?

    We have ~145 million workers today and we can't pay our way regarding government funding! As the participation rate drops so will tax revenues and personal consumption.

    If the GDP is $17 trillion and we have 145 million workers, this is on average $117,000 per worker. Losing 15 million workers should generally reduce GDP by about $1.8 trillion.

    How will the US survive 'if' the participation rate declines...
     
  3. emilynghiem

    emilynghiem Active Member Past Donor

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    It depends what they do instead
    1. do they join or expand on church or nonprofit organizations to serve in a barter type fashion of covering costs while they work productively without direct pay?
    2. do they quit work and start investing in and developing real estate to provide spaces and service to others while earning income passively?
    3. do they work in schools and invest in education and training, also combined with services and productive activities that help others or reduce costs of problems?

     
  4. Not Amused

    Not Amused New Member

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    Lets assume those 15% are retirees that leave the workforce, and live off their investments, SSI and Medicare.

    The effect on the stock market as retirees sell off, is prices fall.

    As retirees sell off T-Bills (they own more T-Bills than the Chinese), the government will need to raise interest rates to continue borrowing. Interest on the debt increases, which requires even more borrowing, or cuts in other spending.

    SSI and Medicare costs will increase by 39% (15% of 145 million = 21 million + 54 million, 75 million), exacerbating government spending (borrowing).

    In parallel, tax revenue will drop by about 15% (assuming the fall in stock prices and increase in T-Bill interest has no impact on the economy as a whole - bad assumption).


    Fortunately, the government, being good Keysnians, has known about, and properly planned, for this increase in draw, and reduction of income, and has a large reserve of cash, so everything will be just fine.
     
  5. OldManOnFire

    OldManOnFire Well-Known Member

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    4. They simply stop working for myriad reasons including age, health, cost to work, hassle to work, termination, government welfare, etc.

    How fragile is the US economy if 5-10-20% reduction in jobs and GDP, etc. can basically ruin the nation?
     
  6. OldManOnFire

    OldManOnFire Well-Known Member

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    Whether people are leaving or do not enter the workforce in the future, IMO, based on your comments above as well as others, will lead this nation down an interesting path. I'm not smart enough to know where this path leads but I can see there will be monumental challenges for governments at all levels. When the USA was in tall cotton following WWII with a growing economy and excellent prosperity, we got lulled to sleep not paying attention to how fast other world markets and resources would open up and compete with the US. In the past few decades we have outsourced business and jobs all over the world, ramped up automation and robotics, meanwhile having a very high cost of doing business in the US, it's hard to imagine the US will see high GDP growth. Yet every day we have more and more people in the US who are demanding resources from all government levels and the tax revenues don't fully fund these governments. Another 5-15% drop in workers and/or GDP will be doom and gloom for the US. I've said for years now that I doubt Americans can consume themselves into economic prosperity therefore to achieve higher growth we need to increase exports. Exports means we must have trade agreements and be able to compete in these markets.

    Thanks...
     
  7. AlpinLuke

    AlpinLuke Well-Known Member

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    And this is why the trade agreement with EU is essential for both the economies [US & EU].

    Overall thinking to Euro zone, we have a currency which values well more than US$, so it would be very easy for you to export to our countries. But this doesn't happen on large scale.

    Do you know why?

    I can tell you about the society I work for. We import electronic goods from US and we sell them in EU market. Ok, thanks to Germany, the EU market requires accurate certifications of similar products [with duties and responsibilities of the importer] and the details are different from the American ones. So that it's like a double certification. The result is that US electronic goods have to be processed to get the "CE" label.

    Not to talk about US cars ... Despite today an Italian society owns a US car multinational, no way, EU rules win and to import, directly, American cars here is very complicated.

    Result? Euro countries import well more from Asia than from US ...
     
  8. AlpinLuke

    AlpinLuke Well-Known Member

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    Then, coming to the eventuality that the working base of the US economy will decrease, it's simple:

    * or the outsourcing of production will increase
    * or the cost of job will increase
    [without a wider outsourcing, firms will have to pay more the workers to persuade them to stay at work ...]
    --- in this case I guess that investment in technology to increase productivity would be important.

    So, the system would find an equilibrium at a different point of meeting of demand and offer in the job market.
     
  9. emilynghiem

    emilynghiem Active Member Past Donor

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    Most ppl I know who offer productive contributions
    would not just quit but would invest that time/energy elsewhere.
    They would have good reason, as contributing members of society.

    If people are doing nothing, or it is expendable,
    then if they stop, what difference would it make?

    I think I operate under the assumption/understanding that people seek to fulfill some purpose in life,
    and don't just randomly quit or change UNLESS there is a compelling reason and motivation with greater BENEFITS.

    Just quitting does not offer enough benefits that large numbers would do so "en masse" with no alternative that offers them
    greater stability or security.

    Some people would stick to their jobs just to keep going.

    I don't understand how masses of people could just quit with no plan to do something else?
    People resist change, it has to be something secure or a real reason forcing them to change, or they will stay the same course.
     
  10. OldManOnFire

    OldManOnFire Well-Known Member

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    Maybe not for all countries, but for the USA, trade agreements are necessary in order to expand the economy. And we can't expect to export unless we allow imports so agreements are necessary.

    I agree with the CE mark because it's basically saying if someone wishes to exports products to a particular country or economic zone that those products must meet applicable standards. It's kind of like being ISO certified, which generally tells a consumer that the products meet or exceed certain criteria.

    What I don't understand is for those US companies who desire to export to other nations which have compliance policies, why the US companies don't just design them into the product and produce them as such without needing additional processing? I know there is additional cost to comply but is that cost so high that a US company can't profit?
     
  11. OldManOnFire

    OldManOnFire Well-Known Member

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    http://www.bls.gov/opub/mlr/2013/images/toossifigure1.png

    This BLS table shows the steady decline in the US workforce. In parallel we have a growing population, more demands on government at all levels, and growing cost of government. We can't afford the government we have today so it's not going to be a pretty picture in another 10 years and beyond. And who knows the impact of global climate change, another terrorist attack, more wars, a natural disaster, etc. As some on this forum believe, all of these problems can be funded by the so-called 1% top earners...but this will never happen because even the 1% have a tipping point where they know enough is enough. These issues are in process today and we don't have any national dialogue going...
     
  12. OldManOnFire

    OldManOnFire Well-Known Member

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    Those large numbers in the US are happening because of the large group of baby-boomers who are too old, diseased, have been terminated from work, are quitting work.

    As it becomes more difficult for many to find work, due in part to the economy but also because millions lack skills and education or are located in non-job producing areas, and the government provides more welfare, these people simply drop out of the workforce.

    My point is we don't actually need 'en masse' workforce dropouts to cause severe pain to the US economy. Just a flat economy is a problem so a 5-10% drop in the workforce can be a huge problem.

    It is a fact which is provided by the BLS that the workforce is declining...surely there are myriad reasons but the bottom line is more people, more demands on government, less productivity, and less government revenues...
     
  13. goober

    goober New Member

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    What happened in Europe when 2/3 of the workers stopped working (because they stopped breathing- the plague)

    Wages rose, the price of housing and land plummeted, the wealthy were forced to sell off their holdings to survive, the distribution of wealth went from highly concentrated to well dispersed, and the Renaissance happened, a flowering of arts and science and learning.
     
  14. OldManOnFire

    OldManOnFire Well-Known Member

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    As 10% of the US workforce disappears over the next decade I can't imagine the things you mention above being part of the process...
     
  15. goober

    goober New Member

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    As the workforce decreases wages rise, as workers become more valuable.
    What we have now is an abundance of labor and a shortage of jobs. Pressure to lower wages is created in that situation.
    The country adjusts, the big problem is the equitable distribution of wealth, it doesn't have to been equal, but people need to get enough, people need to see improvement or they won't be content, and the political system will change with a mandate to adjust the distribution of wealth. It's a balancing act.
     
  16. Same Issues

    Same Issues Well-Known Member

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    It wont disappear, just slow the growth. Baby boomers retiring might help, but it wont stop growth in the workforce, need something like plague, war, or financial collapse as incentive to leave.
     
  17. OldManOnFire

    OldManOnFire Well-Known Member

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    Wages cannot increase unless the markets will allow the inflation.

    We always have more workers than we have jobs.

    There are millions of open jobs across the USA.

    'Distribution of Wealth' as a solution to anything is 100% political BS.

    Those who invest to gain knowledge, skills and access to jobs are doing just fine...the remainder are cry-babies...
     
  18. OldManOnFire

    OldManOnFire Well-Known Member

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    My point is growing population...fewer people in the workforce...lower tax revenues at all government levels...continued government deficit spending and debt...higher demand for government resources...lower national productivity.

    Things like plague, war, further financial issues will simply exacerbate the pain which will evolve from those areas above...
     
  19. Anikdote

    Anikdote Well-Known Member

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    Wow... Hard to know where to start, most measures of how well the economy is doing would free fall, world markets would seize up as faith in T-Bills vanished. There'd likely be a steep increase in suicide and sharp decreases in happiness. If it happened in any relatively short period of time it would be a complete catastrophe both here and abroad.

    That sort of already happened (just not to the degree you talking about). It's part of the reason that median household income is stagnant/falling depending upon who you talk to. The dynamics of what is a household have changed a lot, divorce rates being a significant contributor. More importantly, I'm not sure the average American has the skills to be self sufficient.

    That seems rather cynical. People like to be proactive and work is an outlet for that, maybe I'm alone but I very much enjoy my job and would be very unhappy if I weren't able to be productive.
     
  20. smevins

    smevins New Member

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    Tax revenue would not likely plummet at the local level. The person working would be able to extract much higher wages and the person not working would just spend it to pass the time.
     
  21. OldManOnFire

    OldManOnFire Well-Known Member

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    Many people like to work but many people can't work or don't wish to work. If the participation rate, or the workforce is reducing, then obviously more and more people are out of the workplace. This means less income, less consumption, less tax revenues, etc.

    We would need to define 'self sufficient'? Someone earning $75K, with $400K in debt, and living pay check to pay check...is this self sufficient? But I do agree with your comment in the sense of our current economy, at it's inflated prices, most Americans do not possess the skills/education to achieve more. And even if they did, can our economy provide a spot for millions more middle class workers...probably not.

    The US has enormous debt, deficit spending, crumbling infrastructure, a declining workforce, more demand on government resources, and more competition outside of the US...I don't see how these trends can be reconciled...
     
  22. Anikdote

    Anikdote Well-Known Member

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    Yup, it'd be bad all around. I suppose out of curiosity I'd ask what is it that happens to trigger this mass exodus from the work force?

    I guess I thought we were talking about something more catastrophic. By self sufficient I meant growing most of your own food, maybe making your own clothes.

    As for education, if we spent less time teaching kids how to fill in bubbles on standardized tests and focused more on skills that machines can't do then maybe that spur the type of innovation that created the digital age. I for one have a great deal of faith that if kids were better educated, things/places would emerge where they could work.

    Our debt to GDP ratio isn't as bad as other places and despite the things you mention, lots of people still see the US as an extremely safe place to invest. When people stop being interested in treasuries, I'll start panicking, but not before then.

    The answer is simple and we've known it for a long time, but the past couple decades of politicians won't act on it or a variety of reasons, mostly centered around campaign financing. We need to increase revenues, and the best route would probably be the elimination of some of our favorite deductions, making some minor changes to the big three entitlement programs (such as increasing the lower age threshold on social security), and a significant change in our foreign policy to be significantly less interventionist.
     
  23. OldManOnFire

    OldManOnFire Well-Known Member

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    My point or question is it does not take a 'mass exodus' to cause severe problems. IMO we are on track to realize some troubling stuff without any specific movement.

    The BLS is forecasting a drop in the participation rate. Baby boomers will also have a direct impact on employment during the next 10-15 years. I'm guessing the quantity of unskilled and uneducated will increase. There is more global competition every day. Now couple this with $17 trillion and climbing national debt, continued deficit spending, governments at all levels teetering on solvency, lowered personal consumption, lowered tax revenues, with more and more demands on government, wars in the ME, and things become interesting. Can the US economy suddenly realize a $2-3 trillion bump in GDP with less unemployment and higher tax revenues...anything is possible but what is the impetus for this to happen?

    If Americans need to be self-sufficient then we're in big trouble!

    If you see a decline or slowing in the US economy, you may see investments in the US slow and dry up. Debt to GDP IMO is meaningless because the government has nothing to do with the GDP other than a consumer. And even if taxpayers contributed $4 trillion per year to the government I'm betting the government will spend >$4 trillion thereby adding to the debt. Spending $450 billion per year in debt interest is the problem!

    For every penny you remove to increase tax revenues, you are removing one penny from the private sector. And for each penny removed the government will put back something less than one penny. I would prefer we maximize the private sector and minimize government.

    Lastly, I think the idea of the 1% paying more and more to support the USA has some diminishing returns...you can collect a little more but at some point it will backfire. Just to balance the budget requires >$500 billion from the 1% and others...this is a huge hit to the private economy!
     

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