Archive | Economy

Postal Workers Might Pay for Own Salvation

Pulling the U.S. Postal Service (USPS) out of the Federal Employees Health Benefits Program (FEHBP) might prevent financial Armageddon, but that salvation could come at a high price to postal workers, according to the Government Accountability…

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The True Cost of War

The U.S. announced it could launch air strikes against Syria as early as Thursday. That’s because the U.S. believes the Syrian government used chemical weapons on its rebels, killing 1,000 men, women and children.

Defense Secretary Chuck Hagel said any strike would be limited, such as cruise missiles that would strike specific Syrian military targets. These missiles would be launched from U.S. warships that have already been moved to the Mediterranean. It would not be massive bombing on Syrian President Bashar al-Assad. The action would be in partnership with allies in NATO and the Arab League. (Source: New York Times, Momentum Builds for Military Strike in Syria, August 27, 2013

How It Affects You

The Dow dropped 100 points, adding to its decline since August 2. (For more, see Dow Closing History.) Investors flocked to the traditional safe haven investments, gold and Treasuries. As a result, gold prices rose while Treasury yields dropped to 2.76%. Oil prices rose above $108 a barrel, as investors grew worried the conflict could escalate and create shortages. (Source: CNBC, Dow Drops 100 Points, August 27, 2013)

This potential conflict affects you in two ways, one short-term and one long-term. The short-term impact will be felt over the next few months, depending on how involved the U.S. becomes. This, of course, depends on the reaction of Syria and its allies, Iran, Hezbollah and Russia. The current unrest in Egypt could also be worsened, which has investors worried. Therefore, expect volatility in the next few weeks, which will drive stock prices lower and gold, Treasuries and oil prices higher.

The long-term impact may surprise you. Most analysts say that war is good for the economy. The theory is that defense spending creates jobs. This theory is based on the boost in U.S. economic growth from World War II, which many say ended the Great Depression.

However, times have changed. First, military spending is not the way to create jobs. A Brown University study estimated the cost of the Afghanistan, Iraq and Pakistan wars at $3.7 trillion, or $31,000 for every family in America. This counts benefits to disabled vets — nearly half of the 1.25 million who served have made health or disability claims.  It also counts the interest on the debt incurred to finance the wars — $185 billion.

A U Mass/Amherst study showed that $1 billion of military spending created 8,555 jobs and added $565 million to the economy. That sounds great until you compare it to other ways the money could have been spent. That same $1 billion given back to your family as a tax cut would have created 10,779 jobs and put $505 million into the economy as retail spending.

The best way to create jobs? Spend $1 billion on building mass transit. That creates 19,795 construction jobs and puts $880 billion into the economy. If you want to leverage that $1 billion in government spending into the best bang for the buck, try spending it on education. It puts $1.3 billion into the economy, while creating 17,687 jobs.

Even more important than the money are the lives disrupted. A quarter of a million people were killed, half of them Iraqi civilians.  The wounded total 365,000, while 7.8  million have been displaced.

As put so well by Reuters reporter Daniel Trotta:

In one sense, the report measures the cost of 9/11, the American shorthand for the events of September 11, 2001. Nineteen hijackers plus other al Qaeda plotters spent an estimated $400,000 to $500,000 on the plane attacks that killed 2,995 people and caused $50 billion to $100 billion in economic damages.What followed were three wars in which $50 billion amounts to a rounding error. For every person killed on September 11, another 73 have been killed since.

Perhaps it’s time to admit we can no longer afford the true cost of war. Tell us in How Much Should the U.S. Spend on National Security?

Related Articles

  • Current Military Budget
  • How Bin Laden’s Death Could Help the Economy
  • The War on Terror: Facts About Its True Cost

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Source: About.com

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Congress Has Six Weeks to Avoid Debt Ceiling Crisis

On Monday, Treasury Secretary Jack Lew gave Congress until the middle of October to raise the U.S. debt ceiling, or risk a possible debt default. This means that the rate of currently authorized spending will drive the U.S. debt above the $16….

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Closing for Holidays – Must You Pay Employees?

You decide to close your business on Labor Day. Or any holiday. Do you have to pay employees for that day? The answer is, no. No federal or state law requires you to pay for holiday time off.   But…

You do have to pay employees for holidays if:

  • They are salaried. You aren’t really paying them for the holiday, because you pay them monthly. But you can’t take away pay from these employees if you are closed on a holiday, if they worked during the week of the holiday.
  • You put paid holidays in writing. If you have an employee handbook or policy manual that lists paid holidays, don’t try to get out of paying for holidays.
  • Your company has a government contract which requires holidays be paid.
  • Your employees are working under a labor contract that specifies paid time off for holidays.

You can pay some employees for holidays and not others, depending on their status. For example, you can state in your employee handbook that full-time employees receive holiday pay but part-time or temporary employees do not. Or you can pay part-time employees a pro-rated amount for holidays.

Most employers pay for holiday time off for at least some employees; it’s a good business practice not to do less than what other employers are doing.

If your business needs employees to work on a holiday, you must pay them. There is no specific federal or state law that requires you to pay extra for holiday work, but most employers pay extra, some at “double time.”

More on holiday pay practices from About’s Human Resources site.

Source: About.com

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VA Paid Incompetent, Missing Doctors Bonuses

The Department of Veterans Affairs (VA) paid bonuses to many of its doctors even though they had been disciplined for incompetent performance and negligent patient care, according to a report from the Government Accountability Office (GAO).

I…

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A “Nudge Squad” Comes to the U.S….

A few years ago, David Camerson created a Behavioral Insights Team within the U.K. government in order to better understand people’s decision making processes and, in some cases, “nudge” them towards making better decisions. (The term “nudge”…

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A Handy Guide for Finding Your Economic Soul Mate…

No, I’m not talking about a Match.com specifically for economists. (That would be both amazing and terrifying.) Instead, a clever economist with a knack for web programming used the questions posed to the IGM Forum Economic Experts Panel to …

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This Is What Happens When People Don’t Take Econ 101…

Anyone who understands that basics of supply and demand gets that an increase in supply, in which more of a product is available at every possible price than before, is going to cause a surplus in the market at current prices and will therefor…

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Monetary Policy, Interest Rates, and Investment Bubbles…

One of the main criticisms of using expansionary monetary policy to try to stimulate economic activity during a recession goes something like this: The purpose of expansionary monetary policy is to lower interest rates in order to encourage …

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Durable Goods Down 7.6%, Signaling Economic Soft Spot

Business orders for aircraft, machinery and equipment fell 7.9% in July, adding up to just  $226.6 billion. This was largely driven by a 52.3% drop in orders for commercial aircraft.  However, even when this was stripped out, orders for non-transportation durable goods were down .6%.  Nondefense capital goods orders, for just machinery and equipment, also fell 3.3%.These disappointing numbers means that the economy may have hit a soft spot, and signals that businesses are hesitant about purchasing expensive equipment.

However, this downturn follows three months of strong growth:  3.9% in June,   5.5% in May, and 3.6% in April’s 3.6%.

Shipments of previously ordered durable goods were down .3%. July is the first month in the third quarter, so this is not good news for the future Gross Domestic Product (GDP) report. Shipments are an important component of the nation’s economic growth. (Source: Census Bureau, Advance Report on Durable Goods, August 26, 2013)

How This Affects You

The only goods news is that July’s downturn followed three months of strong growth. Therefore, it could just be a temporary soft spot, and August orders could return to the long-term trend. Nevertheless, it’s important to keep an eye on it, and to remain cautious. The durable goods report is the most important leading economic indicator for future GDP growth.

Related Articles

  • Durable Goods as a Component of GDP
  • Other Leading Economic Indicators
  • Types of Manufacturing Jobs

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Source: About.com

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