Tuesday, June 24, 2008

Reader Mailbag: Various Questions from Hawaii

A reader writes in the following (I've put points and questions to which I'll respond in bold):

I was moved to write to you after reading a short article about John McCain's proposal to use Ebay entrepreneurs as the model for creating new jobs for the US economy. I have a hard time believing that a serious candidate for President of the United States could be this profoundly ignorant on economics.

A couple of questions for you (and Senator Obama's position/solution) about some economic issues that I have encountered recently.

I have been job hunting over the last month, since I graduated from University of Hawaii with a BS (!) in Civil Engineering last month. Two weeks ago I visited a local engineering-architecture firm here in Kailua-Kona (Hawaii) to apply for a job. they informed me that the now have outsourced all of their engineering work to China, merely having the finished design drawing CADD files and documents emailed to their clients here. The CEE 490 (senior project) class I had last year did have two guest speakers who warned us about the need to be able to compete "in an open marketplace" with civil engineers based in India and China, and that outsourcing is becoming a major source of cost-cutting for companies trying to stay competitive and in business both here in Hawaii and the US mainland.

It seems to my very economically-ignorant mind that removing the hope of getting a decent-paying job here in the US would pretty much remove the major motive for students to major in civil or other kinds of engineering in a university. Certainly I (and I am sure pretty much all of my classmates as well) plan to "cash in" on the huge investments we have made in our degrees by getting a good-paying, secure job from it. Is that being "selfish" or "greedy"?

Since I am now 42, not married (hope that will change soon though), have no kids, and would make around $40,000 to 45,000 per year, would I be considered "rich" and subject to the proposed tax increases? (My mom, who is leaning towards McCain, tells me that I would be considered "rich and successful" and thus a target for increased taxation and "punishment for being successful" by the Obama Administration).

In case you are wondering why someone as old as I am just graduated, I had to get my degree at UH after a job-related shoulder injury in October 2003 caused the doctors to insist that I get into a "non-physical" career.

I don't own any property right now but am planning to save up for a house hopefully in the next 5 years or so. So I am interested in wise investing and want some money after taxes to save for this goal.

I have heard some clips on the Rusty Humphrey talk-radio show that Obama's campaign would like to nationalize the oil companies and "other industries" as well. Is this true?

I am not sure what to make of an Obama Administrations' economic and other policies. Could be really good or really bad (depending on who I listen to).

I do know that a McCain Administration would be at best a continuation of George Bush's economic and other policies. I don't think we can handle much more of that kind of unrestricted "globalization" and deficit spending.

I do know that by the time I retire in 25 years from now (age 67), Social Security will be only something that I read about in a history book. I know I will never collect a cent of what I had paid into that system. At least I helped pay for my parents' generation and the Baby Boomers that followed them....

What do you think of former US Comptroller-General David Walkers' warnings on possible bankruptcy/insolvency of the US Government in the next 20 to 30 years if current spending trends continue? What if anything would an Obama Administration do about it?

I will probably buy gold and maybe even foreign currencies to try to shield myself a little against this possibility.
Would I have to pay reparations for slavery or other past injustices? My parents immigrated from Switzerland to the US in 1956.

Dear R,
These are all thoughtful questions. I will try to respond briefly.

This is a difficult issue to which there's no easy answer, and neither Obama nor McCain would do anything to reduce outsourcing. With or without outsourcing, you're better off with more education. The right policy is not to try to reduce outsourcing but 1) to improve education across the board, and 2) to weave a stronger social safety net, so that people who lose out in the face of globalization still have a good wage, health care, and the promise of a decent retirement. Obama has proposals that address all of these points, while McCain is offering almost nothing. On health care in particular, Obama would make sure health insurance is offered to everyone and take some steps to reduce costs. As I explain here, McCain's health care care proposal is to make your health care benefits taxable to try to kill the current health care system.

Your income puts you in the middle quintile (20%) of the income distribution. While of course your taxes vary with your particular situation, according to the analysis described here, people in the middle quintile would have lower taxes (i.e. higher after-tax income) under Obama's proposals.

Will Obama nationalize companies?
This is talk radio hysteria. Obama has never suggested that he would nationalize companies, and there is zero indication that he would even think about doing so.

Social Security: The financing issues around Social Security have been greatly exaggerated by the media and by right wingers who have been looking for an excuse to get rid of the whole system. In fact the government's own projections--which many economists think are too pessimistic--show the program fully solvent and able to pay 100% of benefits through 2041. After that, it could pay 78% of expected benefits, with no changes to the current system. Social Security needs a few tweaks, not an overhaul, and Obama has suggested he would work on this, first by extending the payroll tax to those making over $250K.

The much bigger problem is the projected shortfall in Medicare, driven by increased health care costs. I think it's fair to say that neither Obama nor McCain has a serious plan to deal with this problem, but Obama at least has a few cost-reduction proposals that will help. Here's an analysis which explains some of these issues.

Will there be reparations for slavery under Obama?
Based on my quick research, despite what some right-wing websites say, Obama has never said he favors reparations. When the issue came up in 2004 during a debate and his opponent--Republican Alan Keyes--announced his own position in favor of reparations, Obama said "The legacy of slavery is immeasurable, but the best strategies for moving forward would be vigorously enforcing our anti-discrimination laws in education and job training."


Fake John McCain said...

It is unfortunate to see that people are being so mislead by right-wing talk radio. It is one thing to oppose a candidate due to differences of opinion. It is quite another to oppose a candidate due to bogus "facts".

Fake John McCain said...

My advice to the gentleman who sent the email is that perhaps Hawaii is not an area where civil engineering jobs are in high demand. Rather than waiting for the job to come to him or blaming foreign competition, perhaps he needs to move to a part of the country where civil engineering jobs are in high demand.

Back in the late 1990s when the technology industry was booming, I had a friend who graduated from a Hawaii university with a B.S. in computer science. Rather than looking for a job in Silicon Valley, Redmond, Boston, or DC, he only looked for jobs in Hawaii. Well, Hawaii's economy is tourism-based, not technology-based, so he never found a computer job.

An article from early 2007 (here) suggests that Iowa has a shortage of civil engineers—And that was before they had levees that needed fixing. With the floods destroying everything, I'd bet there will be lots of civil engineering jobs there for years to come.

Here is what the U.S. Bureau of Labor Statistics has to say about the national outlook for civil engineering jobs:

Civil engineers are expected to experience 18 percent employment growth during the projections decade, faster than the average for all occupations. Spurred by general population growth and the related need to improve the Nation’s infrastructure, more civil engineers will be needed to design and construct or expand transportation, water supply, and pollution control systems and buildings and building complexes. They also will be needed to repair or replace existing roads, bridges, and other public structures. Because construction industries and architectural, engineering and related services employ many civil engineers, employment opportunities will vary by geographic area and may decrease during economic slowdowns, when construction is often curtailed.

There is a civil engineering blog here. The very first blog post refers to a "continuing civil engineering staffing shortage."

Don't blame foreign competition. Go to where the jobs are. —And vote McCain in '08.