Headlines (Scroll down for complete stories):
1. Forbes: Bush Shouldn't Deal to Rescue Social Security
2. Jobs Are Up; Will it Jeopardize a Fed Cut?
3. Consumers Say ‘Bah Humbug' to Holiday Shopping
4. Paulson: China Must Speed Trade Reforms
1. Forbes: Bush Shouldn't Deal to Rescue Social Security
Steve Forbes, publisher of namesake Forbes, comments in his magazine that the
Bush administration shouldn't give into Democrats' demands when it comes to
revamping Social Security.
MoneyNews told readers on Wednesday about Treasury Secretary Henry Paulson's
plight in reaching a deal with Democrats. With a rumor that the administration
just might be ready to compromise, Forbes says the administration should instead
pick a plan and stick with it.
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The rumored deal is expected to include means testing for future benefits,
eliminating or lifting the cap on income tax, raising the age when beneficiaries
can collect to 70 or 75, and changing the way future benefits would be indexed.
Forbes says the President's plan of creating personal accounts would likely
mutate into supplemental Super IRAs.
Forbes says he hopes "the President's more sensible advisers put the kibosh on
this nonsense" because it would be "on par with the President's father breaking
his ‘read my lips' pledge not to raise taxes."
According to Forbes, "These should be sine qua non (when it comes to reforming
Social Security): genuine personal retirement accounts; no rise in the income
caps, other than what is already mandated by law; no raising the retirement
age."
Forbes implores the administration to stop debating the specifics of when Social
Security will go bankrupt, and "adopt a sunny, Reaganesque approach" that
emphasizes the positive of Social Security reform.
Forbes says the administration should focus on young people, and continue the
plan as is for older citizens. According to Forbes, the current Social Security
system will be able to cover current beneficiaries and those coming into the
program for the next ten years or so. The administration, says Forbes, should
push its privatization plan by explaining to young workers that they should own
their Social Security retirement plans, "not Washington politicians."
Forbes criticizes the Bush administration's lack of a comprehensive plan for
reforming Social Security. Forbes advocates the American Institute for Full
Employment's so-called 7.65% Solution plan, which covers both Social Security
and Medicare.
The 7.65% Solution is modeled after the federal Thrift Savings Plan, the
government's own 401(k) plan. The plan calls for taking the entire employee
contribution to Social Security and Medicare (7.65% of each paycheck) and
investing it in a diversified portfolio.
According to Forbes, the Thrift Savings Plan model has outperformed the returns
on Social Security. Forbes also advocates giving workers (23 years old and up)
the choice of taking benefits from the traditional Social Security/Medicare
plans or taking the proceeds from the personal account on retirement, which he
says would eliminate the fear of a stock market crash. This also extends the
life of the current Social Security coffers.
Editor's Note:
2. Jobs Are Up; Will it Jeopardize a Fed Cut?
Employers added about 132,000 jobs to payrolls in November. That was way more
than the 105,000 analysts were expecting. So why isn't Wall Street cheering?
Stocks dipped when the jobs number was announced. The Street initially concluded
that rising payrolls would translate into rising or steady interest rates from
the Federal Reserve, not the cut that it's predicting.
In addition, wages crept up 0.2 percent to an average hourly wage of $16.94.
Wages have risen 4.1 percent in the past 12 months. Rising wages tend to send up
a red flag on inflation. Fed Chairman Ben Bernanke has said the Fed is
monitoring wages for any signs of inflation, according to the Associated Press.
However, stocks rebounded after traders realized the numbers weren't so bad. The
unemployment rate edged up to 4.5 percent from a five-year low of 4.4 percent in
October. And the wage gain was smaller than the 0.3 percent originally forecast.
In addition, a separate report showed consumer confidence dipped in December,
suggesting that the economic slowdown isn't over. (More below.)
The construction and manufacturing sectors saw the most job losses, but were
offset by gains in retail, education, health care, financial activities, leisure
and hospitality, and government.
Construction companies slashed 29,000 jobs in November, and factories cut
15,000. Retailers, which add many temporary positions for the holidays, bulked
up by 20,000 jobs. Education and health services added 41,000 jobs, and
financial services increased 11,000 payrolls. Meanwhile, leisure and hospitality
added 31,000 employees to its payrolls, and the government added 18,000 jobs.
Editor's Note:
3. Consumers Say ‘Bah Humbug' to Holiday Shopping
U.S. consumer sentiment ebbed in December as consumers pared back their view of
their future financial conditions, raising concerns on the outlook for spending.
The University of Michigan said on Friday its preliminary reading on consumer
sentiment in December was 90.2, down from November's reading of 92.1, and below
economists' median forecast for 92.0.
"We are seeing a tailing off after a jump in September from the fall in energy
prices. This along with the income proxy component in the payroll report is
consistent with moderate holiday spending during the period," said Keith Hembre,
chief economist at FAF Advisors in Minneapolis.
Consumer spending accounts for about two-thirds of U.S. economic activity, but
in recent years confidence measures have been a weak guide to actual spending.
Stocks initially fell on the report, but later recouped losses. The dollar
extended losses, with the euro rising 0.5 percent to $1.3350, while U.S.
Treasuries showed little reaction.
The survey's index of current conditions rose to 108.2 in December from 106.0 in
November, while consumer expectations dipped to 78.6 from 83.2 in November.
Consumers' expectations for increased inflation was little changed in December,
the report said.
The University of Michigan's preliminary December reading on one-year U.S.
inflation expectations was 3.0 percent, unchanged from 3.0 percent in November.
Median expectations for inflation over a five-year horizon nudged higher to 3.1
percent from 3.0 percent in November.
© 2006 Reuters.
Editor's Note:
4. Paulson: China Must Speed Trade Reforms
Treasury Secretary Henry Paulson said Friday the Chinese need to move more
quickly on economic reforms because the rest of the world is growing impatient
and protectionist pressures are rising.
Paulson said that is the message a high-level delegation of administration
officials will deliver to the Chinese during two days of talks next week in
Beijing.
Paulson will be joined by Federal Reserve Chairman Ben Bernanke and six other
top members of Bush's economic team in the first meeting of what is being dubbed
a Strategic Economic Dialogue.
"A big part of the dialogue is to persuade the Chinese to accelerate the pace of
their reform," Paulson said in an interview on CNBC. "They are a global economic
leader and the rest of the world isn't going to give them a lot more time."
Paulson's comments came on a day when the administration previewed a report it
will send to Congres next week which charges that China is failing to live up to
a number of the market-opening commitments it made when it joined the World
Trade Organization five years ago.
© 2006 Reuters.
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