Since national decisions affect us personally, and since our collective personal decisions instigate national decisions, our big- and small-picture problems are actually closely intertwined.
It’s 10 weeks since I began writing this column. I’ve received lots of emails from readers and want to respond to some questions. But first I’d like to clarify where I’m coming from in writing about what may seem like an unusual mix of big- and small-picture topics.
I’m a passionate but frustrated economist. I see economics’ enormous unused potential to address our national and your personal problems. Economics relies on impartial thinking, complex data analysis and scientific rigor. It can produce surprising answers to important questions. But in our agenda-ridden political and sales-driven financial environments, economics’ lessons get short shrift.
Since national decisions affect us personally, and since our collective personal decisions instigate national decisions, our big- and small-picture problems are actually closely intertwined. Hence, as the column links at kotlikoff.net indicate, I’ve been writing about both.
If, for example, we don’t get health care right, our financial, not to mention physical, futures will be at far greater risk. Most economists, myself included, endorse a version of Medicare Part C for all. I wrote about this plan to give you a framework for engaging with members of Congress. This national issue is now so personal that we all must help our hapless politicians see the way.
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Tax reform is another big issue. I’ll be writing in detail about the House GOP plan shortly. The plan is remarkably good and can help turn our economy around. But it will only get enacted if enough of us understand and get behind it.
By the way, please don’t presume that if I support (or reject) something initiated by the reds, I’m red (or blue). If you need to color me, color me purple.
Beyond injecting economics into your big-picture thinking, I’ve been trying to show you the capabilities of economic analysis and powerful new software tools to help you manage your financial futures.
Early columns discussed the potential for a stock-market crash and why so many of us ignore the huge financial risk of living too long. A recent column suggested treating risky investing like casino gambling. The strategy? Assume risky investments will be totally lost and ignore them until you leave the casino (until you’ve swapped risky for safe assets). Other columns discussed safe, legal ways to get higher Social Security benefits and pay lower taxes. Yet another column explained how to get divorced without engaging in an expensive legal war.
Yes, the gap between topics like health-care reform and fair divorce decisions is dizzying. But sound economics blends them together.
Now for some Q&A.
Q:Why would it be smart to sell long-term municipal bonds? I agree the stock market has to be in for a correction, but the age-old question is when. Also, how do you know when the “dust settles and it’s time to rebuy”?
A: Our country’s long-term finances look terrible. Countries that can’t pay their bills print money. Printing money means inflation, which means all long-term bonds not linked to inflation will pay back in watered-down dollars. This is why I hold no such securities. As for stocks, I pulled out of the market when I wrote the column. I’ll go back in after the correction, which seems to have started. When I do, I’ll let you know. And I’m not going to make a habit of predicting financial markets. I’ll shout only when I see a fire.
Q: I can’t wait to open the business section in The Seattle Times since they began offering your column! We are so appreciative of the education that you offer the public!
How can we get your health-care proposal to “the powers that be” in D. C.?
A: I’m deeply grateful for your encouragement. Social networks can greatly amplify our voices. Start an email chain letter. Email 10 friends to email 10 friends to email 10 friends, etc., with the message: “Medicare Part C for all.”
Q: I’m 68 years old, and my husband is turning 66 soon. He is receiving Social Security. I haven’t filed yet. Am I eligible to file for a spousal benefit when he turns 66 and able to take my own retirement benefit at 70?
A: Yes. But you should file immediately just for a spousal benefit. You should be able to get six months of retroactive benefits. Your husband doesn’t need to be 66. You could have filed for this benefit when you turned 66, assuming he was collecting Social Security at the time.