I was infinitely more fortunate than many, many people, but my Wednesday evening still did not go entirely as planned. I emerged from a cinema to find a downpour, the subway down, and that cabs were nowhere to be seen. Passing on the chance to join a sodden group sheltering in an ATM zone, I trudged the 25 or so blocks home, thinking about . . . infrastructure.
Nearly a decade after the (far more destructive) Hurricane Sandy, New York City’s preparedness for, yes, an astonishingamount of rain — an aftershock from Hurricane Ida — appeared less than impressive. And this was not the only time that something like this has happened recently. In July part of the subway had found itself underwater after another downpour, on that occasion in the wake of Hurricane Elsa.
When fast-moving storms flooded parts of New York City’s vast subway system on Thursday, they stranded some rush-hour commuters and underscored just how vulnerable the city’s underground transportation lifeline is to water . . .
The Metropolitan Transportation Authority, which operates the 472-station subway, has spent $130 million to address water issues as part of a 2017 subway action plan, including cleaning and repairing 40,000 street and sidewalk vents that allow water to run down into the subway, and clearing drainage pipes under tracks and inside stations that carry rainwater to pumps . . .
John Surico for Bloomberg:
New Yorkers can’t help but ask just what the MTA has accomplished since 2012’s Superstorm Sandy. After nine years and at least $5 billion of repairs designed to harden the system against the threats of inundation, why are subway riders still getting washed out? The catch, says Freudenberg, is that deluges like this are different because they don’t just hit coastal areas. “If you look at Sandy, which was a coastal storm, we’re much better prepared today for storm surge.”
Sandy flooded the subway tunnels with millions of gallons of saltwater from the Atlantic Ocean, corroding the intricate power cables and lines that keep the system running 24 hours a day, 365 days a year. It inflicted, in turn, more long-term damage: For years, I reported on the shutdown of the Canarsie Tunnel, which had to be totally rehabilitated with climate resiliency in mind. The city and state are still completing recovery projects in low-lying areas from then.
But record-breaking rainfall, which blindsided the city in its intensity and pace, poses a different threat to the entire system — and flood-proofing it poses a bigger lift. At a media appearance the day after the storm, Janno Lieber, the MTA’s acting chairman, admitted as much. “We’ve done a ton on coastal resiliency. So all those areas that were hit by Superstorm Sandy — the under-river tunnels — they’ve been made much more resilient and impervious to storms,” Lieber said. “But what we’re seeing now is these repetitive flash floods which are at higher ground. The street-level drainage system gets overwhelmed and then the water gets into the subway in mass quantities.”
In an email accompanying the Manhattan Institute’s Bigger Apple this week, Michael Hendrix, MI’s director of state and local policy, wrote:
Having miles of impervious surfaces leading to storm drains dumping excess water into subway tunnels that take 15 years to unclog is a big problem.
If the frequency and intensity of storms such as Wednesday night’s are the result of climate change (here’s CNN on that topic and, on the specific subject of hurricanes, here’s Reason), and if the change to the climate up to now is (as the IPCC claims) effectively irreversible (to be clear: the IPCC still maintains that even more damaging climate-related change further in the future can be averted if we act in time), it would be sensible — and this is true far beyond New York City — to, as I argue below, prioritize our climate spending for now on reinforcing our infrastructure. This is a better use of funds over more-ambitious (to use a gentle adjective) and grotesquely expensive schemes focused on altering what the climate may be in 2100. That said, allocating resources in this way is about weighting. It is not a binary process. It does not rule out government support for research into new technologies or, say, backing nuclear energy. Hurling money at Amtrak, however, ought to be out of the question.
Meanwhile, so far as New York City is concerned, the inconvenient truth is that it is ill-equipped to deal with weather-related dangers of the past, let alone any that the future may throw up. For a depressing look at the situation, check out NYC’s Risk Landscape: A Guide to Hazard Mitigation, a report from 2014 developed by NYC Emergency Management in connection with other city agencies. Tweeting (please read the whole thread for some intriguingly subversive data) on Thursday, Roger Pielke noted that NYC’s sewer system [was] “designed to accommodate a 5-year storm, one with a 20% chance of occurring in any year.”
Improving the resilience of Gotham and other low-lying coastal cities in the face of flooding will (as is evident from existing plans) not be cheap, but in many cases it is likely to pay for itself. Hurricane Sandy cost an estimated $19 billion in damages and lost economic activity in New York City alone. Even worse, it also cost lives, as did Ida.
To take something else of relevance to the Northeast, although not only there: How about putting more power lines underground so that swaths of the region are not deprived of electricity when a large winter storm strikes?
Exceptionally high tides and power outages still linger throughout the Northeast from last week’s storm, which at its peak grounded thousands of flights, halted Amtrak rail services and left more than 2 million customers in the dark from Ohio to Maine. Damages from the storm may exceed more than $1 billion in insured losses, according to Jonathan Adams and Derek Han, Bloomberg Intelligence analysts.
And, on the topic of overhead power lines’ weather-related vulnerability, I read this in MIT’s Technology Review (my emphasis added):
Any effective plan to tackle climate change hinges on a basic technology: long wires strung across tall towers.
The US needs to add hundreds of thousands of miles of transmission lines in the coming decades to weave together fragmented regional power systems into an interconnected grid capable of supporting a massive influx of renewables.
On the left coast, PG&E is doing the right thing (the combined threats of fire and litigation helped).
Pacific Gas & Electric, California’s largest power company, announced Wednesday plans to bury 10,000 miles of its power lines to reduce its future liability for damages from wildfires sparked by its equipment.
Don’t underestimate the upfront expense:
PG&E’s plan is a massive undertaking that could cost between $15 billion and $20 billion, Patricia Poppe, chief executive of PG&E’s parent company, said Wednesday, according to the New York Times . . .
But improving resilience works.
New Orleans’ levees, flood gates and pumps held fast even as Ida dumped more than a foot of rain on the region, passing their biggest test since a $14.5 billion restoration after Hurricane Katrina devastated the city.
Writing for the Wall Street Journal, Daniel Henninger:
What saved human lives in Louisiana was real infrastructure—an extraordinary $14.5 billion concrete-and-steel project, funded by Congress, called the Hurricane and Storm Damage Risk Reduction System. Built by the U.S. Army Corps of Engineers, with the advice of several private Dutch engineering firms, it is a 133-mile-long system of elevated levees, breakwalls, floodgates and pumping stations . . .
The bad news, beyond, again, the loss of life (my emphasis added):
By Tuesday, almost 1.1 million customers in Louisiana and Mississippi lacked power according to PowerOutage.us . . .
Even as the area’s flood-prevention infrastructure absorbed Ida’s blow, the power grid collapsed. The storm’s ferocious winds, measuring 150 miles (240 kilometers) an hour at landfall, took out all eight transmissions lines that deliver power to New Orleans, snapped utility poles in half and crumpled at least one steel transmission tower into a twisted metal heap, blacking out the entire city. Utility executives say it’s impossible to tell how long it will take to fix.
While the levees’ resilience is no doubt due to the rebuilding effort that followed Katrina, the starkly different outcomes also stem from the storms’ different characteristics. Katrina slammed the coast with a 30-foot storm surge of ocean water, while preliminary estimates from Ida put its surge far lower. Ida’s winds, however, were stronger than Katrina’s, and that’s what ultimately took out so many power lines.
Local factors may make burying power lines in some parts of Louisiana trickier than in many places elsewhere in this country (although it would be interesting to ask the Dutch about this), but the broader point remains: Dig, baby, dig!
One advantage of focusing on resilience is that it is a means of sidestepping the debate over whether climate change is causing (or will cause) more extreme weather. Climate skeptics can support it because of what the climate is doing now (and has been doing for a very long time). Climate warriors ought to follow suit, because, if they are correct, the need for a hardened infrastructure will only increase.
It does not mean abandoning the effort to restrict greenhouse-gas emissions over the longer term, but it does mean putting a priority on making the consequences — as indicated by the IPCC’s models — of climate change more manageable. It would also avoid wrecking our economy, something that will be inevitable as we adopt the course now advocated by those setting our climate agenda. We can discuss those greens who believe that trashing (sorry, “degrowthing”) the economy is a feature not a bug on some other occasion.
Emphasizing resilience and the preservation of our economic system more or less “as is” will, as NRO recently editorialized give us
the time and the resources to develop new cost-effective methods to reduce our climate footprint rather than, as we are now doing, rushing headlong into unproven and unreliable technologies that will be as inefficient as they are expensive.
Perversely, some of the measures being proposed to head off the climate crisis/chaos/emergency will actually lessen resilience. Where to attribute the greater part of the blame for the power outages in Texas earlier this year continues to be controversial, but consider this (via Kelly Evans at CNBC):
Hurricane Ida wiped out electricity in a region that is heavily dependent on it, and less energy diversified. In our home, in New Jersey, when the electricity goes out, our nat gas-powered generator comes on. Even if we didn’t have one, I could still cook with gas, and turn on the gas fireplace for heat (which is exactly what our neighbors did when Hurricane Sandy wiped out power for two weeks.) I could still drive my car with gasoline. When everything goes electric, you lose that resiliency.
Cooking with gas! Tsk, tsk . . .
A New York City ban on natural gas connections in new buildings by 2030 and announced policies to ban natural gas and other fossil fuels in large buildings by 2040 could cost New York City households upwards of $25,000, a Consumer Energy Alliance study shows.
New York City Mayor Bill de Blasio announced in January the ban on gas hookups in new buildings, joining other cities that have done the same, including Berkeley and San Francisco in California, Reuters reported. Blasio also announced intentions to block new pipeline infrastructure, the study states.
Consumer Energy Alliance, a non-profit, energy-industry support group, used a cost calculator to determine the potentially “astronomical” cost to a New York City household, which factors in appliance models, home configuration, labor and reliance on natural gas . . .
Now imagine the situation when electric cars are the norm. While it is true that, if adequately charged, an EV can under certain circumstances (it’s not as straightforward as is sometimes claimed, at least currently) be rigged up to supply some power to a house for a while, that’s not going to work for apartment dwellers, out-of-towners, and so on. More critically perhaps, there are obvious issues in the event of an emergency in which people need to drive away from trouble.
That’s why laws such as this, designed to assist drivers of conventional autos, have been passed:
After a string of hurricanes swept through the south of Florida in 2004 and 2005, lawmakers passed a bill requiring that any fill stations on evacuation routes install transfer switches, allowing them to switch over to generator power in the case of an emergency.
Oil companies with more than 10 stations in one county — like Exxon Mobil and Shell — need to have portable generators available within 24 hours. Smaller gas station chains are exempt from that rule, but some still have transfer switches installed or generators on hand . . .
One year after superstorm Sandy left tens of thousands of motorists scrambling to find a working gasoline pump, the governors of New York and New Jersey are trying to ensure that the region’s service stations will be powered up and supplied with fuel should another disaster strike.
This weekend, Gov. Andrew Cuomo (D) announced that New York would be the first state in the nation to maintain a strategic gasoline reserve, saying it would prevent the kind of supply shortage that caused long lines and frayed nerves at gas stations after last year’s storm. The pilot program will store about 3 million gallons of gasoline for emergency vehicles and motorists in Long Island in the event of a similar crisis.
New York also became the third state to require that gas stations maintain backup power. This summer, state lawmakers approved a bill requiring almost half the gas stations in New York City, on Long Island, and in other downstate communities to install emergency switches to wire up with nearby backup power generators. By next April, strategically located stations within a half-mile of highway exits or evacuation routes must be connected to a backup generator within 24 hours of a declared emergency.
Such laws could make a worthwhile contribution to increasing resilience. How feasible they would be for electric charging stations, when the required backup would have to be sufficient to provide power for vehicles, rather than, as in the case of gas stations, being merely enough to power up the fuel-delivery systems (the pumps) is an interesting question.
Every household and business on the planet right now should be thinking hard about how they get power, and how good their backup options are. The “mushy middle” of this global energy transition could be a very uncomfortable place to be.
Boosting resilience is not an “easy” alternative. The initial bill will be high. It is, however, feasible in the way that the “Paris” approach, which will destroy wealth rather than create it, is not. That will matter. Wealth creation has long helped us cope with whatever the weather may bring. The world’s population has roughly quadrupled in the last hundred years, and yet, as Ron Bailey points out in this article for Reason magazine, “the annual number of people dying as a result of natural disasters has fallen by about 90 percent over the past century.” Bailey cites another tweet from Pielke in which the latter argues that a “random person on earth in 1920s . . . had a 0.01 percent chance of dying due to an extreme weather or climate event.” Over the next hundred years that risk fell, recounts Pielke, by 99.75 percent. This is despite the fact that the huge increase in population means that many more people are living in riskier climate zones. The best protection from a hostile climate has been — and still is — affluence.
The fact that we are getting richer means that global warming has less impact. When a hurricane hits Florida, it causes devastations worth maybe billions of dollars but very few people die. When a hurricane of similar strength hits Guatemala, it eradicates their economy. It typically costs them a third of their economy for years and it kills tens of thousands of people.
The point is, if you’re poor, you’re incredibly vulnerable. If you are rich, you’re not — you’re resilient. Heat waves are not nearly as bad in the sense that they don’t kill nearly as many people as they used to. Why? Richer people get air conditioning.
It drives me nuts how people say global warming will harm the poorest in the world. That is true but it is because they’re poor . . .
President Biden rarely misses opportunities to stress his commitment to fighting climate change, and so it is not without irony that the substantially more onerous tax burden intended to accompany his $3.5 trillion spending package will damage wealth formation, given that, as the Wall Street Journal’s Henninger puts it, “the U.S. survives the blows it gets, such as Hurricane Ida, because we live in a free market of free people that produces the wealth and knowledge to build systems of self-preservation.”
The irony doesn’t end there. To agree with Henninger is not to deny that government has a role to play in improving our ability to handle the threats that the climate may pose. But looking at what this administration is proposing, it is hard not to think that its overall climate strategy is as feckless, shortsighted, and wasteful as its policy toward Afghanistan.
The demonstrable problem is that the Democrats cannot establish priorities or be trusted to spend tax revenue to construct anything without grossly wasting productive capital.
The Biden-Pelosi-Schumer-Yellen redefinition of infrastructure to mean all public spending would turn the U.S. Treasury into a sump pump, draining away the country’s supply of private capital to support such nongermane ideas as an Office of Climate Change and Health Equity . . .
And that is only a minor example of the idiocies that lie ahead.
Given the importance that the White House attaches to job creation, it is curious that resilience is not the priority it ought to be. Not only is it something to which all sides in the climate wars should be prepared to agree but it is also likely to be highly labor intensive.
So why the relative lack of interest?
Climate change is a fact and has been since this planet has had a climate. The greenhouse effect is also irrefutable, and it is reasonable to conclude that mankind’s activities (even more so when there are nearly 8 billion of us) are adding to that effect. By how much remains, in my view, debatable, as does the extent of the problem this may represent and what should be done about it. Acknowledging that rational people can disagree about such issues seems reasonable, as does (to me) recognition of the fact that adaptation and heightened resilience (the latter, of course, is part of the former) is a short- to medium-term solution to the difficulties that may be on their way or, indeed, may already be beginning to make themselves felt.
But emphasizing resilience and, even more so, adaptation — which will often take place at a bottom-up level — means foregoing the opportunities to boss people around (and harvest the rewards, psychological and otherwise, that go with that) built in to the command-and-control model favored by those now setting our climate agenda. That this model fits neatly with the preexisting leftist instincts of many of those advocating it is not, I reckon, a coincidence. Never let a crisis (however exaggerated) go to waste and all that. In a piece for Capital Matters on Friday on some of the economic issues involved in shaping (or, regrettably, not shaping) climate policy, John Cochrane observed:
There is nothing in the science that justifies uniting “climate” with a left-wing political agenda. Yet even the IPCC mixes climate change with “sustainable development, poverty eradication and reducing inequalities.” Mixing anti-capitalist politics with climate change makes those skeptical of the rest of the agenda wonder about the objectivity of climate science, and whether the planet really is in such danger.
Nor does concentrating on resilience and adaptation follow the millenarian narrative that is an unmistakable subtext of the message now being sent out by many climate warriors, whether inside government, linked to government, or outside it. Underpinned by the expectation of apocalypse, this narrative, which has repeatedly demonstrated its dangerously persuasive power over the centuries, is based on the thought that a wicked humanity faces punishment and must, with the assistance of a morally superior, enlightened vanguard, be made to change its dreadful (often self-indulgent) behavior. Adaptation and resilience, by contrast, offer the prospect that our species will muddle on through, living pretty much as it has been doing, except even better, and without donning the hairshirt integral to so many climate warriors’ faith. Theirs has the characteristics of a religion, and there is little that is original about it. Pointless asceticism comes with the territory.
Viewed at in that light, it is easy to understand why those in the West now driving our climate agenda have so little time for adaption and resilience but prefer policies that promise misery and will deliver failure — and a great strategic victory to China and other rivals, enemies that must be unable to believe their luck.
The Capital Record
We released the latest of a series of podcasts, the Capital Record. Follow the link to see how to subscribe (it’s free!). The Capital Record, which appears weekly, is designed to make use of another medium to deliver Capital Matters’ defense of free markets. Financier and NRI trustee David L. Bahnsen hosts discussions on economics and finance in this National Review Capital Matters podcast, sponsored by National Review Institute. Episodes feature interviews with the nation’s top business leaders, entrepreneurs, investment professionals, and financial commentators.
In the 32nd episode David again hosted Louis Gave of Gavekal Research Capital Record, this time elaborating on his bullish thesis for China’s bond market and currency and explaining a perspective on the country’s entire strategic direction that is contrarian to say the least.
And the Capital Matters week that was . . .
China’s emissions-trading scheme shows no indication it will curb the country’s growing appetite for coal, oil, or natural gas — but it was never meant to. Thanks in part to the environmental agitprop of American activists, China’s ETS will serve its purpose: shielding China from criticism as it increases its emissions with each successive year.
The Fed should not have a climate policy, but it’s 2021, and so the central bank has been edging towards having one . . .
Climate advocates have done themselves and the planet a great disservice by wrapping climate policy in increasingly shrill, apocalyptic, partisan, and unscientific rhetoric. “Global warming” became “climate change,” reflecting in part effects on rainfall or different geographies, but also inviting media commentary on every weather event to become a sermon. In the Green New Deal and comparable movements, it became “climate justice,” wrapping climate inexorably in a far-left-wing politics of anti-capitalism. The required vocabulary moved on to “climate crisis.” Still not enough: In April the (formerly) Scientific American proclaimed that, in coordination “with major news outlets worldwide,” it would start using the term “climate emergency.” Will “climate catastrophe” be next?
There is nothing in climate science to justify apocalyptic rhetoric. If the question is, “What threatens the collapse of civilization,” war, nuclear war, civil war, pandemic, crop pandemic, and social and political disintegration are far higher on the list. No healthy society fell apart over a slow and predictable change that came over a hundred years. There is nothing in climate science to say life on earth is threatened. Climate has varied far more in the past. The retreat of ice 10,000 years ago came from a much larger and more natural warming, and was a boon to humans, producing agriculture and civilization.
There is nothing in the science that justifies uniting “climate” with a left-wing political agenda. Yet even the IPCC mixes climate change with “sustainable development, poverty eradication and reducing inequalities.” Mixing anti-capitalist politics with climate change makes those skeptical of the rest of the agenda wonder about the objectivity of climate science, and whether the planet really is in such danger . . .
President Joe Biden recently met with Big Tech executives to discuss how to improve cybersecurity after recent cyberattacks in which government software contractor Solarwinds and oil pipeline Colonial Pipeline were targeted. Leading tech corporations, including IBM, Google, and Amazon, will all try to improve cybersecurity by investing in the training of personnel in this field and upgrading their respective encryption and security systems. Microsoft has also committed to investing $150 million in upgrades for cybersecurity systems of government agencies. Big Tech may not always do the right thing, but these plans to enhance cybersecurity are certainly something that we can all stand behind . . .
The idea that portfolio companies or potential portfolio companies should be analyzed to see how well they do when measured against various environmental, social, and governance guidelines.
It has always been entertaining to speculate just how BlackRock reconciles its enthusiasm for ESG with its excitement over investment in China . . .
There is a growing awareness among conservatives that the effort to make corporations socially responsible has been a Trojan horse for an array of policy goals that can only be advanced via institutions that eschew transparency and accountability in favor of “expert” guidance. Whether it’s issues such as climate-change-disclosure mandates or gender- and racial-diversity requirements for corporate boards, progressive activists with ideas unlikely to prevail at the ballot box have long since left the halls of Congress and directed their efforts at big-business boardrooms.
The counteroffensive, however, is heating up . . .
What the professors miss is that making a company profitable — adding to its value for its shareholders and its stakeholders — is by itself highly virtuous. It’s by far the most noble and important role businesses play in a free and prosperous country. Policies that reduce profits also reduce job opportunities, wealth to help the disadvantaged, and support for government functions; in addition, shareholders’ returns fund the endowments and other investments that pay the salaries of professors at noble institutions such as Harvard Law School.
Investors place their wealth at risk because they expect superior returns and, if our economic system is to continue generating prosperity and abundance, we need them to keep investing. People donate to charities to do good works for others. They invest in businesses to make a profit.
For months, Lebanon has been suffering from brutal fuel “shortages.” Lebanese wait hours to fill their tanks. Electricity is only sporadically supplied because diesel fuel for generators is as scarce as hen’s teeth. But, as the governor of Lebanon’s central bank, Riad Salameh, recently confirmed, Lebanon is currently importing three times more fuel than what is being consumed in Lebanon. What explains this paradox? Where is the missing fuel?
The political elites in Lebanon, who in some ways operate much like a criminal syndicate, have created a system of fuel subsidies and price controls that has made them rich, but has bankrupted Lebanon and left it short of fuel. Here’s how the system works . . .
Landlord and Tenant
Late last week the U.S. Supreme Court vacated a stay on a lower-court decision that struck down the Biden administration’s extension of the CDC’s nationwide eviction moratorium. Speaker Nancy Pelosi claimed the Court’s decision was “cruel” and that it “immorally ripped away” tenant protections. But who is really cruel here? Neither Pelosi nor her progressive colleagues seem at all concerned about the plight of small landlords whose pandemic losses have been exacerbated by the moratorium combined with government ineptitude and indifference . . .
Stobie and her husband aren’t alone. Even though the Supreme Court ended the federal eviction moratorium in late August, rental owners in several blue states still are struggling under a bevy of state moratoria (which often have more teeth), and new tenant-friendly laws and regulations. Local landlords increasingly are cashing in while the housing market is hot.
The United States already has a severe rental housing shortage. In fact, not a single state in the country has an adequate supply of affordable rentals for low-income renters, according to the National Low Income Housing Coalition. Industry leaders worry that a massive sell-off of single-family rental homes driven by record high prices and increasingly burdensome government regulations will make any already dire rental-housing situation substantially worse . . .
Despite our dismal record at nation-building, we marched forward in Afghanistan, repeatedly reaching for the foreign-aid checkbook. What makes this so shocking is that professionals of all stripes know that government-to-government foreign-aid schemes typically fail and are often little more than poster children for waste, fraud, and abuse. As a House Foreign Affairs Committee put it back in 1989, U.S. foreign-aid programs “no longer either advance U.S. interests abroad or promote economic development.” A Clinton administration task force rendered a similar conclusion on the efficacy of foreign aid: “Despite decades of foreign assistance, most of Africa, and parts of Latin America, Asia, and the Middle East are economically worse off today than they were 20 years ago.”
In Afghanistan, none of the mountains of evidence pointing to the failures of foreign aid and nation-building were ever allowed to see the light of day. As it turns out, the professional elites who live off the “delivery” of foreign aid are a tightly knit epistemic community that promotes and runs the foreign-aid . . .
Peter Jacobsen and Brad Polumbo:
Nobel prize-winning economist Milton Friedman famously quipped that “nothing is so permanent as a temporary government program.” If only he’d lived to see this pandemic prove his words so prescient.
When COVID-19 first reached our shores in early 2020, Americans acquiesced to sweeping expansions of government power in order to corral the virus and protect those at-risk — all with assurances that such measures were “temporary.” Unfortunately, they have proven to be anything but . . .
The shortcomings of Medicaid’s long-term-care benefit owe much to the program’s resources being improperly targeted. Instead of being a safety net of last resort, the program has loose and inconsistent eligibility requirements, disincentivizing the purchase of private long-term-care insurance — which ought to bear the bulk of long-term-care costs. Policymakers should use the provision of additional funds to facilitate reforms that fix these deeper structural problems.
Long-term care refers to assistance with basic daily living tasks (such as bathing, dressing, cooking, and personal mobility) that healthy adults are typically able to perform for themselves, as opposed to medical treatment. Long-term-care needs exist on a spectrum of intensity from informal assistance with, say, groceries to 24-hour nursing care . . .
Social Security and Medicare
In present-dollar terms, the [Social Security] program is in a $19.5 trillion hole over the trustees’ 75-year projection period. Because we’ve punted on the issue for so long, at this point, making the combined retirement and disability components of Social Security solvent over the long run, the trustees calculate, would require increasing the current 12.4 percent payroll tax to nearly 15.8 percent. Absent tax hikes, benefits would have to be immediately slashed by 21 percent for all current and future retirees, or 25 percent if the changes were to apply only to those who retire starting this year.
If this seems bad, the situation facing Medicare is even more urgent. The core hospital program is projected to run a deficit “in all future years,” and its trust fund is expected to run out in 2026. That’s just five years from now, in the next presidential term. While Social Security’s finances are strained by the retirement of Baby Boomers and longer life expectancy, Medicare — in addition to those challenges — is affected by the staggering growth in health-care costs. For the program to be in balance in the long run, the trustees estimate that it would require increasing the Medicare portion of the payroll tax this year from 2.9 percent to 3.67 percent, immediately slashing Medicare spending by 16 percent, or some combination of the two . . .
Our economy has been transformed by the pandemic. Think of services you use now that you didn’t use before, and services you used to use that you don’t use anymore. Then, remember there are 330 million other people like you. Businesses have to respond to those swings in consumer preferences, and that process is not immediate.
Smart entrepreneurs will see our post-pandemic economy as a huge opportunity. They’ll come up with ideas that we haven’t thought of yet to respond to consumers who want different things than they wanted before.
As the $300-per-month federal unemployment supplement comes to an end on September 6, some workers on the margin should be pushed into employment. But don’t expect any sea changes in the employment situation because of that. It’s going to take time. It takes time to match people with job openings. And it takes time for entrepreneurs to develop new opportunities to employ the people who want to work . . .
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