By Paul Solman

Paul Solman answers questions from the PBS NewsHour audience on business and economic news here on his Making Sense Business Desk page.

Paul Solman: Last hired, first fired. It's a cliché of the labor market that becomes an especially bitter reality during economic downturns. In both the Great Depression of the 1930s and the more recent Great Recession, the cliché held particularly true for African-Americans, as we pointed out in this broadcast story about East St. Louis from 2009.

So how are African-Americans faring in the labor market these days? The question is prompted by this email from Dr. Napoleon N. Vaughn of Philadelphia:

What is the unemployment rate for blacks 16-24 with less than high school, high school only, and four years of college?

The answer to Dr. Vaughn's question: Dismal. Indeed, the numbers never cease to stun me.

Start with the overall unemployment rate for the category "Black or African-American" in Table A-2 of the "Employment Situation Survey" that is published at 8:30 in the morning on the first Friday of every month. May's Table A-2 reports a black unemployment rate for April of 13.2 percent. Astoundingly, that is slightly higher than the seasonally adjusted rate a year ago. For April 2012, the rate was officially 13.1 percent.

The reason I write "officially" is that the real numbers are surely much higher. Every month on this page we calculate a more inclusive measure of un- and underemployment, what we call "U-7." The most recent post containing the U-7 data reports a U-7 of 16 percent, more than double the official overall unemployment figure of 7.5 percent. Admittedly, much of the difference is accounted for by part-time workers who say they want full-time work. But remember: if you worked just one hour in the past week, you're officially counted as "employed." Furthermore, the rest of the difference is made up of people who haven't looked for work in the past week, known as "discouraged" workers.

Since the U-7 rate is more than double the official unemployment rate, the broader measure of African-American un- and underemployment would be more than 28 percent.

Table A-2 also breaks down employment by age.

There is no breakdown for 16-24 year olds, but there is one for 16-19 year old African-Americans, kids who obviously have no college degrees of any kind. Their official unemployment rate is -- I'm not making this up -- 40.8 percent. By comparison the so-called white rate for 16-19 year-olds is officially 21.8 percent.

Again, adjusting for those who are barely employed or haven't looked for work in the past week, African-Americans aged 16-19 and not in school undoubtedly have an unemployment rate well in excess of 40 percent.

As for educational attainment beyond age 19, the monthly data are not broken down by race or age. But you can see how much higher the numbers are for all Americans "25 years and older": an official unemployment rate of 11.6 percent for those who haven't finished high school; 7.4 percent for those with a high school diploma but "no college"; 6.4 percent for "some college or associate degree" from a community or junior college and only 3.9 percent for those in the category "Bachelor's degree and higher."

What you might call "full employment," then, would seem to be about 4 percent. Young African-Americans have an unemployment rate more than ten times as high.

In 2010 Paul Solman reported on African-American unemployment.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow @PaulSolman

By Martin Weitzman

No one can say with any assurance what the dollar value of damages would be from the highly uncertain climate changes that might accompany a planet earth that is steadily warming.

Paul Solman: Are headlines trumpeting the fact that carbon dioxide levels in the earth's atmosphere have now passed 400 parts per million for the first time in something like three million years unduly alarmist? Or are they a timely warning?

I asked noted environmental economist Martin Weitzman to address the question.

An expert on the Soviet economy in the '70s and '80s, Weitzman first made news in 1984 with the publication of a book called The Share Economy, an argument for profit sharing instead of fixed wages. Fourteen years later came his paper Recombinant Growth, which revolutionized how some of us understood the enormous potential of technology.

But for many years, Weitzman has also been working on environmental economics and most recently, in a series of widely cited academic papers, on the economics of global warming; the most famous, on the "Economics of Catastrophic Climate Change."

Weitzman's central idea is not unlike the legendary bet proposed by the 16th century Catholic French philosopher Blaise Pascal. One way to interpret Pascal's argument: even if you think the likelihood of God's existence is vanishingly small, the cost if you're wrong -- eternal damnation -- is infinitely high. An infinite cost times even a tiny probability is still ... an infinite cost.

So you make a finite investment by believing in God and acting accordingly in order to avoid an infinite cost. To put it another way, you're obliged, mathematically, to make the investment in belief.

You might keep Pascal's argument in mind while reading Weitzman. Or think of the "Black Swan" argument of Nassim Taleb: certain events, however unlikely you think they may be, could have such enormous consequences, you just can't take the chance of letting them happen.

Martin Weitzman: Recently the concentration of atmospheric carbon dioxide (CO2) reached an unprecedented level of 400 parts per million. What is the significance of this "milestone"? Does it portend catastrophic climate change? The short answer is no. The long answer is a more complicated and more nuanced maybe.

The modern era of carefully measuring and recording atmospheric CO2 began with the work of famed scientist Charles Keeling. In 1958, Keeling began to accurately monitor daily CO2 levels atop Mauna Loa, the highest mountain in Hawaii. Keeling chose this location because it was so remote from manmade sources that it would accurately track average "well mixed" CO2 levels throughout the world. Thanks to Keeling's pioneering work we now have a continuous ongoing record of CO2 levels since 1958.

In 1958, Keeling recorded an atmospheric CO2 level of 315 ppm. Every year since then the Mauna Loa station has recorded ever-higher levels of CO2 than the year before. Atmospheric CO2 concentrations have grown relentlessly over the years until they just recently blew past the well-publicized milestone of 400 ppm.

The 400 ppm milestone is basically just a round number. To see why it might (or might not) be viewed as something unusual, or even threatening, we need to examine a longer record of CO2 levels over time.

Carbon Dioxide Levels Over Time

There is a remarkable record of CO2 concentrations preserved in tiny bubbles in Antarctic ice cores going back 800,000 years. These measurements are less accurate than modern Keeling-style instrumental readings, but they are plenty accurate enough to see the big picture clearly. All throughout the past 800,000 years, which encompasses several ice ages and interglacial warming periods, CO2 levels fluctuated in a relatively narrow band between about 180 ppm (during the colder ice ages) to 280 ppm (during the warmer interglacial periods). For about the last 10,000 years we have been living in a warm interglacial period, with CO2 concentrations at about 280 ppm. Then, beginning with the industrial revolution about 1750, CO2 concentrations gradually moved up to Keeling's accurately measured 1958 level of 315 ppm. Since then, as we have seen, CO2 concentrations have grown rapidly to the current 2013 level of 400 ppm.

So, the current CO2 concentration of 400 ppm is some 40 percent higher than anything that has been attained in the last 800,000 years. The glacial-interglacial cycles began some two and a half million years ago. Scientists estimate that a CO2 concentration of 400 ppm has not been attained for at least 3 million years. This rapid a change in CO2 concentrations has probably not occurred for tens of millions of years.

The point here is that we are undertaking a colossal planet-wide experiment of injecting CO2 into the atmosphere that goes extraordinarily further and faster than anything within the range of natural CO2 fluctuations for tens of millions of years. The result is a great deal of uncertainty about the possible outcomes of this experiment. The higher the concentrations of CO2, the further outside the range of normal fluctuations is the planet, and the more unsure are we about the consequences.

How Much Warmer Will It Get?

Carbon dioxide is a greenhouse gas. It is by now (and for some considerable time has been) beyond any reasonable doubt that increased levels of atmospheric CO2 lead to increased average temperatures. What is still uncertain and the subject of legitimate debate is the magnitude of this effect: how much CO2 leads to how much warming? Scientists do their best to give a number, but every scientist knows that his or her best number is uncertain.

Because global warming is uncertain, scientists use a formula to represent both the average degree of global warming and its likely range, as an eventual consequence of some given steady concentration of CO2. The trouble is, each scientist has his or her own favorite variant of the formula. In what follows, I use the "consensus" formula given in the last report of the Intergovernmental Panel on Climate Change (IPCC), an organization established by the United Nations Environment Programme (UNEP) and the World Meteorological Organization (WMO).

For CO2 at the current concentration of 400 ppm, the IPCC formula translates eventually into an average temperature change of 1.5 degrees Celsius (2.7 degrees Fahrenheit) with a likely range between 1 C (1.8 F) and 2.2 C (4 F). Global average temperatures have already increased by .8 C (1.4 F), so these ultimate temperature values do not look so very scary. Therefore 400 ppm of CO2 maybe does not look catastrophic by itself -- if only we could stay at 400 ppm. What does look very scary, and maybe even catastrophic, is the speed at which we blew right past 400 ppm of CO2, with no visible end in sight -- and what that might portend for ultimate global warming.

If we were to continue CO2 emissions up to an atmospheric concentration of 600 ppm of CO2, the IPCC formula translates into an ultimate average temperature change of 3.3 C (5.9 F) with a likely range between 1.1 C (2 F) and 5 C (8.9 F).

If we were to continue CO2 emissions to an atmospheric concentration of 800 ppm of CO2, the IPCC formula translates into an ultimate average temperature change of 4.5 C (8.2 F) with a likely range between 3 C (5.4 F) and 6.8 C (12.3 F). The world has not seen this level of CO2 concentrations for some 50 million years, when crocodiles and palm trees thrived in the Arctic Circle, Greenland and Antarctica were ice-free, and sea levels were many thousands of feet higher than today.

So, 600 ppm of CO2 looks a lot more worrisome than 400 ppm of CO2, and 800 ppm of CO2 looks a lot more worrisome than 600 ppm of CO2. The significance of just having blown past 400 ppm is that we seem to be on a business-as-usual growth trajectory that brings us to 800 ppm (or maybe even more) within a century from now.

The key links in the chain connecting increased atmospheric CO2 concentrations to global well-being are the following. Increased CO2 concentrations lead to increased global average temperatures. Increased global average temperatures lead to increased climate changes (and planetary changes, like higher sea levels). Increased climate (and planetary) changes eventually result in increased damages to humans and the planet.

It is critical to recognize that every link of this chain is full of deep uncertainty that makes it very difficult to answer the question: by how much?

We have already discussed the first uncertain link from ultimate CO2 concentrations to ultimate global temperature changes.

As for the second link, there is yet greater uncertainty. What will be the effects of higher temperatures on precipitation patterns? Will monsoon rains be greatly altered? What will happen to Indian or Bangladeshi agriculture? Will dry places in Africa become even drier? Will tropical storms intensify? When will the ice sheets covering Greenland and West Antarctica begin to melt seriously, thereby sharply raising worldwide sea levels? Will basic essential patterns of ocean circulation currents be changed? Will the Amazon rain forest dry out or die back? Will there be large-scale releases of currently contained CO2 and methane (an even more potent greenhouse gas) under melting permafrost, thereby accelerating the process of global warming itself? What about the truly stupendous amounts of methane trapped inside the offshore continental shelves by low temperatures -- might they start to become unstuck by higher ocean temperatures, thereby triggering a vicious global warming circle? What will be the effects of large-scale rapid melting of ice in the Arctic Ocean? What about the unknown unknowns we have not even thought of?

The Link Between Carbon Dioxide Concentrations and Damages

The third link, connecting to damages, is even messier to deal with. The higher the temperatures, the more difficult it is to quantify the resulting damages. No one can say with any assurance what would be the dollar value of damages from the highly uncertain climate changes that might accompany a planet earth warmed by an average of more than 3 C (5.4 F). Economists do their best, but such estimates are mostly wild extrapolations from lower temperatures, or are just plain made up. And the higher the degree of global warming, the wilder and woollier are the numbers attempting to represent estimated damages.

So what is the overall relationship between CO2 concentrations and damages? This is, after all, the ultimate welfare connection we are interested in, but it consists of three highly uncertain links, where the uncertainty in each link increases dramatically with higher CO2 levels. The point is that for higher CO2 concentrations, the relationship to ultimate damages is enormously uncertain. Suppose we tried to express uncertain damages in the same language that we used to express uncertain global warming -- a central average value and a likely range. Then, no matter how it were to be calculated, the likely range of damages would be enormously wide for high CO2 concentrations. For high CO2 concentrations, the upper range of climate damages would represent genuine climate catastrophe.

Relying on averages may be OK for small amounts of uncertainty. But climate change damages from high levels of greenhouse gas concentrations are enormously uncertain. In this kind of situation, for an economist, abating CO2 emissions is like buying insurance against a catastrophe. We should cut back on CO2 emissions not only to lower the average damages, but, perhaps more importantly, to lower the probability of catastrophic damages. That could imply a lot more CO2 emissions abatement than if we were concerned only about the most likely or average damages.

Discounting the Costs of Climate Change in the Future

To add to the complexities and uncertainties, there is the fact that long periods of time are involved. The really high temperatures would likely materialize, if at all, only in the course of centuries. The worse the magnitude of the climate disaster, the more likely is it to occur at a further-off future time.

One premise of modern economics is that we humans discount the future. This simply means that we value something that happens in the here-and-now -- the present -- more than we value it, right now, if we will only get it in the future. A dollar today is worth more than a dollar a year from now, for example. And that means that a dollar a year from now is worth less, in today's money, than the dollar today.

We use a discount rate to compare the two -- which is, in the case of money an interest rate. So if the discount or interest rate were 3 percent a year, a dollar a year from now would be worth 3 percent less -- only 97 cents -- than a dollar today. At a 3 percent discount rate, that is the so-called "present value" of a dollar you wait a year to get and spend. And indeed, 3 percent a year is a commonly used discount rate for rewards in the future compared to rewards today.

It's important to notice that if an ordinary interest rate like 3 percent were used to discount the distant future, the power of compound interest is such that the present value of even very large damages could be made to appear small. A dollar today is worth 3 percent less than a dollar a year from now: 97 cents. Discount that 97 cents by another 3 percent to wait yet another year, and so on, and by the time you repeat the process for about 24 years, a dollar is worth just half what it is today. Wait 50 years and it's worth 22 cents. Wait a hundred years and a 2113 dollar would be worth barely 3 cents to someone living in the present.

There is a vigorous debate among economists about what interest rates should be used to discount the inter-generational damages from climate change. If we value highly the climate-associated welfare of future generations then we should be using low discount rates -- say 1 percent or less -- which would register the present value of their catastrophic damages as if it were equivalent to a very high level of present damages -- something that must be avoided by action now. If we used market interest rates, which are usually much higher, it could still be the case that catastrophic damages should be avoided by action now if the magnitude of the future catastrophic damages were high enough. So time and discounting introduce new wrinkles, but it could still be the case that what is most worrisome about climate damages is not their average or expected or most-likely mid-range value, but the extreme upper-end values associated with various sorts of catastrophe.

Once it is in the atmosphere, CO2 remains there for a very long time. Even if CO2 emissions were cut to zero at some point in the future (a very drastic assumption), about 70 percent of CO2 concentrations over the pre-industrial level of 280 ppm would remain in the atmosphere for the following one hundred years, while about 40 percent would remain in the atmosphere for the following one thousand years. This, along with the possibility of bad outcomes, is the argument for keeping CO2 concentrations from reaching very high levels.

Most people do not realize how difficult it is to stabilize CO2 concentrations. It is not nearly enough to stabilize CO2 emissions, which would cause CO2 concentrations to keep on increasing at the same rate as before. (This is because changes in concentrations are proportional to emissions.) The problem is that if you want to stabilize CO2 concentrations, you have to make drastic cuts in CO2 emissions. This is no easy feat. Yet, unless it is done, we are liable to reach very high levels of CO2 concentrations.

Global warming skeptics would dispute or minimize the link between CO2 concentrations and temperature increases. Here is yet another uncertainty -- are they or the mainstream climate scientists more right than wrong? But can we afford the luxury of assuming that a small minority of climate skeptics are more correct than the vast majority of mainstream climate scientists? What is the probability of that?

Admittedly, almost all of the relevant probabilities in this kind of rough analysis are uncomfortably indeterminate. But that is the nature of the beast here and shouldn't be an excuse for inaction. The bottom line is that if we continue on a business-as-usual trajectory, then there is some non-trivial probability of a catastrophic climate outcome materializing at some future time. Prudence would seem to dictate taking action to cut back greenhouse gas emissions significantly. If we don't start buying into this insurance policy soon, the human race could end up being very sorry should a future climate catastrophe rear its ugly head.

Martin L. Weitzman is Professor of Economics at Harvard University. Previously he was on the faculties of MIT and Yale. He has been elected as a fellow of the Econometric Society and the American Academy of Arts and Sciences.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow @paulsolman

5/23/2013 2:54:00 PM

By Paul Solman

The relationship between unemployment and suicide is well established. But is the persistence of long-term unemployment an added factor in the rising suicide rate these days, especially for older workers? Paul Solman responds to a viewer's comment relating to this PBS NewsHour story originally broadcast on May 3.

Paul Solman: Amidst a cascade of correspondence in reaction to our recent broadcast story on age discrimination and long-term unemployment, we received this email from "Karen" in Tennessee:

Why aren't people talking about age discrimination at a major level? I have been unemployed for more than five years. I have had training to add new skills to two degrees. Training and education mean nothing if no one will hire you. I live in a "right to work" state where corporations can do anything and government is in collusion in perpetrating this endemic discrimination ...

Companies aren't afraid of older workers -- they can and do anything they want. I have done everything a person can do to get a job and survive. I'm a woman alone and nobody cares. That's why the suicides have gone up drastically.

Karen's email, and particularly her last sentence, reminded me of a host of data, both old and new.

The U.S. ranks near the middle of the global suicide listings, according to the World Health Organization and consistently comes in around 10th when it comes to self-reported happiness, behind only the Scandinavian countries, Canada, Switzerland and Holland

But the suicide rate is rising in the United States, up by something like a sixth since the late '90s. (See the bottom half of Figure 1 on page six of the paper we linked to.)

In the latest year for which there are good numbers, 2011, there were about 38,000 suicides in America, compared to 32,000 motor vehicle deaths and 15,000 homicides.

A 2011 study by the Centers for Disease Control and Prevention reported that the suicide rate from 1928 to 2007 rose and fell with the economy, spiking when the Great Depression began and reaching its all-time high in 1933, plummeting during World War II, rising again during the deep recession of the 1974-75 and the recession of the early '80s, though peaking a few years after unemployment hit its post-war peak in 1982. The suicide rate dropped to its lowest level ever in the year 2000, when the dot-com boom was at its zenith and unemployment had bottomed out at 4 percent.

But ever since the dot-com collapse, as the chart above illustrates, America's suicide rate has been rising. And just 10 days ago in The New York Times, researchers David Stuckler of Oxford and Sanjay Basu of Stanford summarized the findings of their new book, "The Body Economic: Why Austerity Kills." They wrote in part:

"People looking for work are about twice as likely to end their lives as those who have jobs. In the United States, the suicide rate, which had slowly risen since 2000, jumped during and after the 2007-09 recession. In a new book, we estimate that 4,750 'excess' suicides -- that is, deaths above what pre-existing trends would predict -- occurred from 2007 to 2010. Rates of such suicides were significantly greater in the states that experienced the greatest job losses. Deaths from suicide overtook deaths from car crashes in 2009."

For the purposes of this post, the most salient fact may be that of all segments of the population during the span of time between 1928 and 2007, suicide rates of Americans aged 55-64 experienced the most significant decline.

A few weeks ago, a Centers for Disease Prevention and Control (CDC) study reported a startling reverse of the long-term trend with regard to suicide and age; among men and women age 55-64, there was a dramatic increase in rate of suicides from 1999 to 2010.

The question, then: what has changed to reverse this trend?

As Stuckler and Basu pointed out in the Times:

"The correlation between unemployment and suicide has been observed since the 19th century. People looking for work are about twice as likely to end their lives as those who have jobs."

But why, suddenly, has suicide risen among people age 55-64? As a journalist, my answer relies on what I call anecdata.

After doing a story in 2010 on the "99ers" - Americans out of work for 99 weeks or more -- here is a relevant quote from an email we received:

"It would be dishonest of me to say that I have not considered that suicide may be my only way out if I cannot soon find work. I and millions of others have few other options."

And here's another:

"Although I can't consider suicide, I understand where these people are at!"

As regular readers of this page know, we've been chronicling the fate of the unemployed and underemployed since January of 2011, when we introduced our own measure, "U-7". And U-7 has indeed come down some, from 16.7 percent back then to 16 percent last month. But compare "average weeks unemployed," then to now. The number has actually risen-- from 33.8 weeks in January of 2011 to 36.5 weeks in April of 2013.

And, as we reported in the broadcast story mentioned at the top of this post, for Americans 55 and older, it takes about a year on average to find work, longer than for any other age group. Nick Corcodilos, who answers questions on this page's Tuesday "Ask the Headhunter" column, also has elaborated on the issue of older worker unemployment and blatant age discrimination.

One of the unforgettable lessons of statistics is that correlation does not equal causation. But when the data show older (but not old) Americans out of work longer than others and older (but not old) Americans committing suicide at a higher rate than they have in almost a century, how can you help but wonder if the frustration of the former isn't contributing to the latter?

Finally, a few excerpts from viewer emails from to the story that occasioned this post:

Anonymous: The Friday May 3 show about workers 50 or older who are unemployed resonated with me ... My heart breaks for all of us unemployed and underemployed.

Dale Kurow -- New York, N.Y.: Is there a fund that is helping the older long term unemployed?

Cindy Grossman -- Newton, Mass.: I was thrilled to see your segment about age discrimination. Finally, the truth on national TV. However, that story needs to tie into the unending comments by so-called experts that people need to keep working until long after age 65. The fact is that even if people are healthy enough to work longer, they cannot get jobs due to age discrimination ... "Expert" after "expert" on NPR and on other media ignore this ugly truth when they go on about people needing to work far past age 65.

Lili Pintea-Reed -- Jamestown, N.Y.: Paul, In reference to your slough off of the question "are people unemployed due to age discrimination."

Here are two interviews I had over the last year:

Example No. 1: I was asked outright by the interviewer, "Why are you trying to take a job away from someone who needs it? Don't you have a pension or something?" Answer: No I don't have a pension, etc., and why would that matter?

Example No. 2: As I was waiting to be interviewed for a job I overheard my interviewer say to her boss, "There [is] someone out there that should be your boss." I just got up and left I was so angry.

I am 58 and need a job like everyone else. I figure to work until 70. What on earth are we older workers to do?

Flo Samuels -- Hayward, Calif.: I agree that employers should want an employee who will make their business more profitable. Unfortunately that approach, at least in my experience, also makes them feel they have been inadequate as a manager and they certainly don't want someone new showing them up. Been interviewed and not hired, been hired and not allowed to do what got me hired. Explain how to overcome that.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow @paulsolman

5/22/2013 5:01:00 PM

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JEFFREY BROWN: And next: tech giant Apple on the hot seat on Capitol Hill for tax practices that saved the company billions.

Margaret Warner has that story.

SEN. CARL LEVIN, D-Mich.: Now, Apple executives want the public to focus on the U.S. taxes the company has paid, but the real issue is the billions in taxes that it has not paid.

MARGARET WARNER: Chairman Carl Levin laid out the findings of his Senate panel's investigative report today, that giant Apple, maker of the iPhone, iPad and other popular devices, has for years used a complex web of Irish subsidiaries to avoid paying billions of dollars in taxes to the U.S. or any other country.

That strategy meant Apple paid little or no corporate taxes on at least $74 billion dollars in the past four years, according to the report.

Ranking member John McCain showed the outrage was bipartisan.

SEN. JOHN MCCAIN, R-Ariz.: Today, Apple has over $100 billion dollars, more than two-thirds of its total profits, stashed away in an offshore account. That's over $100 billion dollars that are not currently subject to U.S. corporate income taxes and therefore cannot be used to ease the deficit or help invigorate the same American economy that fostered the creation of this large corporation in the first place.

MARGARET WARNER: After being sworn in, Apple CEO Tim Cook said his company is America's largest corporate taxpayer, and he offered a vigorous defense of the company's practices.

TIM COOK, Apple: We pay all the taxes we owe, every single dollar. We not only comply with the laws, but we comply with the spirit of the laws. We don't depend on tax gimmicks.

MARGARET WARNER: Nobody was alleging that Apple has done anything illegal, and Apple's overseas sales now outstrip its revenues from sales at home. Rather, today's hearing was meant to spotlight how Apple and other multinational corporations exploit loopholes in U.S. tax laws, loopholes Cook said he believes need to be fixed.

TIM COOK: Apple has always believed in the simple, not the complex. It is in this spirit that we recommend a dramatic simplification of the corporate tax code.

MARGARET WARNER: Levin closed the hearing, the second to examine this issue, by saying one way or another the current loopholes cannot remain in place.

And more now on the Apple tax story and the wider report.

Charles Duhigg has been covering all this for The New York Times and joins me now.

And, Charles, welcome back.

First, explain to us, how did Apple structure itself so that it could avoid paying taxes on its overseas income to any government? I mean, Sen. Levin accused Apple of using ghost companies.

CHARLES DUHIGG, The New York Times: Apple took advantage of loopholes that exist in our tax system and every tax system.

For instance, the United States says that a company should be taxed where it's based. For instance, if you have a subsidiary in Ireland, then Ireland should collect taxes on your revenue. Ireland, on the other hand, says that a company should be taxed based on where it's controlled out of. So, even it's a company in Ireland, incorporated in Ireland, if it's run by people in California, then the United States should tax you.

Apple was able to take advantage of these conflicting philosophies and say, we have got a company that's technically incorporated in Ireland, it's run by people out of California, and so there's no taxing authority. And, as a result, many of its -- many of its subsidiaries don't pay any taxes on tens of billions of dollars of revenue, and, in fact, don't even file tax returns to anyone on Earth, because they slip through these cracks.

MARGARET WARNER: Now, the atmosphere at that hearing with a couple of -- I think one exception was pretty much very critical of Apple. What was Apple's defense, Tim Cook's defense, other than, we do everything -- we pay what we legally owe?

CHARLES DUHIGG: Well, that's exactly Tim Cook's defense and Apple's defense is to say, listen, we follow the law. We pay what we're supposed to in every country. It's not our fault if you don't like how the law is written.

Secondarily, what Mr. Cook and others say is, listen, when companies make money, when they get these revenues, they use them to create jobs and to create new products and to make the world a better place. And so we deserve to have that money so we can use it.

And finally what Mr. Cook says is that, at this point, a majority of Apple's sales occur outside of the United States. And so as a result, it shouldn't be subject to U.S. taxation. Now, that's significantly different from what, for instance, the congressional panel, as well as the law of the United States says, which is that we -- the U.S. believes that we should tax where economic value is created.

So if you buy an iTunes song in Portugal and it's downloaded from a server that is in Greece and it's created by a recording artist that lives in New York, and the program that made it work is by someone in California, the U.S. says, well, wherever that value was created -- in this case, the United States -- that's where taxation should occur.

And there's a fundamental difference of opinion on how that law should be interpreted.

MARGARET WARNER: Is it clear that all the money in, like, these three big Irish subsidiaries was, in fact, all at least earned overseas in terms of the sales occurred overseas?

CHARLES DUHIGG: I think it's pretty clear that the sales occurred overseas. No one is saying that Apple is misleading about where the sales themselves occur.

The question is how that revenue is passed between subsidiaries. So one of the things that Apple does, as well as almost every other tech company, is that they sell their own intellectual property to one of their subsidiaries.

So Apple might invent iTunes in California, but then sell the intellectual property, the patents around it, to a subsidiary in Ireland. And then Ireland charges other parts of Apple for the use of the iTunes technology. And so, as a result, the money ends up in Ireland, in theory. And that's where it's either taxed or not taxed, depending upon how the laws are restructured.

MARGARET WARNER: Now, this is this isn't the only company that this -- that this committee has focused on. How widespread is the practice of -- with overseas subsidiaries somehow avoiding U.S. taxes?

CHARLES DUHIGG: It's incredibly widespread.

Now, what the congressional panel, as well as our own reporting, has indicated is that Apple is for more aggressive in this and uses either pioneers and creates tactics or uses tactics that we're not aware of any other company using.

But, that being said, there's general policy of particular tech companies trying to lower their tax bill by moving intellectual property and revenues around the world. Almost every single company does this. No CEO wants to say, I'm the one who volunteered the pay the most taxes.

And part of the problem here is that we have a tax system that was written -- the last time it was really overhauled was in the 1980s, when the Internet basically hardly even existed, right?

It was written for an economy where you build machines and you sell cars, things that are hard to move across national borders. Today's economy, the digital economy, deals in many ways and particularly Apple in things that don't actually exist, computer programs, songs that you download, intellectual property.

And those things can flirt across borders without leaving a trace, which creates a challenge for today's tax system.

MARGARET WARNER: So, Charles, briefly, is there consensus on the Hill that the tax code needs another overhaul in this area? And if so, is there any consensus on what the fix might be?

CHARLES DUHIGG: There's absolutely consensus.

No one say that the tax system is -- corporate tax system is working right now. Everything agrees that it needs to be changed. The big debate is over how it should be changed. There are some people on Capitol Hill, within the business community who say, listen, not only do taxes need to come down, but companies should hold onto a great deal of that money because companies use it much more efficiently than the government does.

We saw Rand Paul saying that today in the congressional hearing. There's a number of others who say, listen, companies like Apple, they succeed because they're in a country where they get to hire our university graduates. And those universities are funded by taxpayer dollars. They get to live in cities like Cupertino, which are these beautiful places, because the roads and the fire departments are maintained by our tax dollars, that the patent system that is funded by public taxpayer dollars supports their intellectual property, and that companies needs to pay a fair share.

There's a big debate that is going to happen. Change is going to occur, but there's a big debate over what a fair share means and who should be paying it.

MARGARET WARNER: Well, Charles Duhigg, New York Times, thank you.

CHARLES DUHIGG: Thank you.

GWEN IFILL: You can watch all of Apple CEO Tim Cook's testimony on our YouTube page. 

5/21/2013 6:37:00 PM

Watch Video

Apple Inc. CEO Tim Cook testifies on Capitol Hill to explain the company's tax strategy.

WASHINGTON -- A Senate panel says Apple Inc. is avoiding billions of dollars in U.S. taxes by shifting profits to foreign affiliates and is prepared to question the company's chief executive Tuesday about the "loopholes."

Apple CEO Tim Cook is expected to explain the company's tax strategy to the Senate Permanent Subcommittee on Investigations, which released a detailed report Monday on the company's practices.

The world's most valuable company says it complies with the laws and pays "an extraordinary amount" in U.S. taxes.

Sen. Carl Levin, D-Mich., the panel's chairman, says Apple's use of loopholes in the U.S. tax code is unique among multinational corporations.

"Apple is exploiting an absurdity," Levin said at the start of the hearing.

The tone of the hearing turned tense before the Apple executives were scheduled to appear, as Sen. Rand Paul, R-Ky., an anti-tax hawk who reflects tea party sentiment, insisted that the subcommittee apologize to Apple for unfair scapegoating.

"If anyone should be on trial here it should be Congress ... for creating a bizarre and byzantine tax code," said Paul. "If you want to assign blame, this committee needs to look in the mirror and see who created that mess."

Levin countered angrily that no such apology would be forthcoming. "Apple's a great company, but no company should be able to determine how much it's going to pay in taxes ..... by using gimmicks," he said.

The spotlight on Apple's tax strategy comes at a time of fevered debate in Washington over whether and how to raise revenues to help reduce the federal deficit. Many Democrats complain that the government is missing out on billions of dollars because companies are stashing profits abroad and avoiding taxes. Republicans want to cut the corporate tax rate of 35 percent and ease the tax burden on money that U.S. companies make abroad. They say the move would encourage companies to invest at home.

Cook and the other Apple executives are expected to face tough questions. Levin and other panel members could hold up Apple as an example of a powerful company using its privileged position to avoid taxes while ordinary Americans must pay them. The subcommittee last fall derided executives from other technology giants over similar allegations.

Apple is holding overseas some $102 billion of its $145 billion in cash, according to the subcommittee's report.

Apple's strategies are legal, and many other multinational corporations use similar tax techniques to avoid paying U.S. taxes on profits they reap overseas. But Apple uses a unique twist, the report found. The company's tactics raise questions about loopholes in the U.S. tax code, lawmakers say.

Apple refuted the subcommittee's assertions in testimony prepared for the hearing. Apple said it employs tens of thousands of Americans and pays "an extraordinary amount" in U.S. taxes, citing the roughly $6 billion it paid in fiscal 2012.

Apple "complies fully with both the laws and the spirit of the laws," the testimony says. "And Apple pays all its required taxes, both in this country and abroad."

"Apple does not use tax gimmicks," the statement says.

The company has made clear that given current U.S. tax rates, it has no intention of repatriating its overseas profits to the U.S. Apple reiterated in its testimony its support for comprehensive tax reform as a way to support economic growth and boost U.S. companies' competitiveness.

Apple CEO Tim Cook at Senate Hearings (part 2)

The subcommittee also has examined the tax strategies of Microsoft Corp., Hewlett-Packard Co. and other multinational companies, finding that they too have avoided billions in U.S. taxes by shifting profits offshore and exploiting weak, ambiguous sections of the tax code. Microsoft has used "aggressive" transactions to shift assets to subsidiaries in Puerto Rico, Ireland and Singapore, in part to avoid taxes. HP has used complex offshore loan transactions worth billions while using the money to run its U.S. operations, according to the panel.

The subcommittee's report estimates that Apple avoided at least $3.5 billion in U.S. federal taxes in 2011 and $9 billion in 2012 by using the strategy. The company, based in Cupertino, Calif., paid $2.5 billion in federal taxes in 2011 and $6 billion in 2012.

Apple uses five companies located in Ireland to carry out its tax strategy, according to the report. The companies are located at the same address in Cork, Ireland, and they share members of their boards of directors. While all five companies were incorporated in Ireland, only two of them also have tax residency in that country. That means the other three aren't legally required to pay taxes in Ireland because they aren't managed or controlled in that country, in Apple's view.

The report says Apple capitalizes on a difference between U.S. and Irish rules regarding tax residency. In Ireland, a company must be managed and controlled in the country to be a tax resident. Under U.S. law, a company is a tax resident of the country in which it was established. Therefore, the Apple companies aren't tax residents of Ireland nor of the U.S., since they weren't incorporated in the U.S., in Apple's view.

The subcommittee said Apple's strategy of not declaring tax residency in any country could be unique among corporations.

Levin and Sen. John McCain of Arizona, the subcommittee's senior Republican, are proposing legislation to close loopholes in the tax code.

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5/21/2013 11:42:00 AM

By Nick Corcodilos

Have you ever been skeptical of headhunter Nick Corcodilos' unconventional advice? One job seeker decided to put some Ask The Headhunter methods to the test and the results were extremely successful. Photo by Flickr user SalFalko/Creative Commons.

Nick Corcodilos started headhunting in Silicon Valley in 1979, and has answered over 30,000 questions from the Ask The Headhunter community over the past decade.

In this special Making Sense edition of Ask The Headhunter, Nick shares insider advice and contrarian methods about winning and keeping the right job, on one condition: that you, dear Making Sense reader, send Nick your questions about your personal challenges with job hunting, interviewing, networking, resumes, job boards, or salary negotiations. No guarantees -- just a promise to do his best to offer useful advice.

Nick Corcodilos: Once in a while, I like to publish a success story from a reader. It helps people see that others are using the methods we discuss -- and that the approach works. Here's one that just came in.

Andy H.: I just wanted to tell you that I got a new job. Though I got this job by responding to a posting on LinkedIn, I used some of your methods during the process. (See "The Basics.")

This employer required a personality test, a cognitive test, a panel interview during which I had to figure out a problem, and a puzzle test. I also had one extra interview with the vice president. Your typical HR-centric process.

So, what did I do to follow your advice? I made a package, which I sent to the VP, showing how I would do the job.

I was offered the job with a slight raise and twice as much vacation time as my previous employer. (I should have gotten your salary book to help me with negotiations!)

I don't think this is my "it" job. It is a "for now" job.

Meanwhile, I am going to start networking and doing the other things you recommend. (See "I don't know anybody.") I like the point you make in [the PDF book] How Can I Change Careers? that a person should be doing this all the time. When I need to move on, I will be ready.

To put this all in context, I was laid off from my job on March 22. I contacted these people on April 9, and got a formal offer on April 30. I just want to thank you so much. I will continue to follow you online and via subscription. I am not expecting a response. I just want you to know that on this pass I was only a fair disciple of your methods. I promise next time I will do better. Thanks again.

P.S. Sept.14 is my 59th birthday!

Nick Corcodilos: Your story needs no reply and no advice from me. Just a hearty congratulations!

Readers sometimes ask me for a 'template" they can use to implement the job hunting methods we discuss in this column. You're 58 -- theoretically almost unemployable. (Isn't it bizarre that extensive experience and acumen brand people as unhireable?) Your template works because you delivered a clear plan to the employer about how you'd do the job. While age discrimination is very real, so is the promise of doing a great job. Sometimes, to help employers look past the grey (and their silly preconceived notions), you have to show them the green: How you will contribute more to their bottom line. And you've clearly done that. Thanks for sharing your experience.

(If you're running into problematic employment tests, please see Erica Klein's excellent article, "Employment Tests: Get an edge.")

I'd love to hear from job hunters who use approaches similar to this reader's. The steps closely follow what we discuss on Ask The Headhunter. This individual showed how he'd do the job! Please post your comments below -- Is this approach really so difficult?

Nick Corcodilos invites Making Sense readers to subscribe to his free weekly Ask The Headhunter© Newsletter. His in-depth "how to" PDF books are available on his website: "How to Work With Headhunters...and how to make headhunters work for you," "How Can I Change Careers?" and "Keep Your Salary Under Wraps."

Send your questions to Nick, and join him for discussion every week here on Making Sense. Thanks for participating!

Copyright © 2013 Nick Corcodilos. All rights reserved in all media. Ask the Headhunter® is a registered trademark. This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow Paul on Twitter. Follow @PaulSolman

Watch Video | Listen to the Audio

JEFFREY BROWN: And we turn to the blockbuster deal announced today in the tech world: giant, but troubled Yahoo buying the popular blogging site Tumblr. The purchasing price: $1.1 billion dollars. The prize: a fast-growing social media site that features more than 100 million blogs in its network and reaches several hundred million people worldwide.

It was started just six years ago by David Karp, who dropped out of high school to work in the tech field. He will remain as head of Tumblr.

This is the biggest move yet by Yahoo CEO Marissa Mayer, who joined the company just 10 months ago from Google. Today, she wrote on a Tumblr post, "We promise not to screw it up."

Rebecca Lieb is research analyst of digital advertising and media for the Altimeter Group and joins us now.

Welcome to you.

So, why does Yahoo want to buy Tumblr? What's the appeal?

REBECCA LIEB, Altimeter Group: There are several appealing things about Tumblr. There's certainly the size of the audience, as you just mentioned, but also, perhaps more than that, the demographics of Tumblr's audience.

Yahoo has been losing users, losing eyeballs for years now. Tumblr represents the millennials, those 20-somethings who didn't abandon Yahoo because they probably never aligned with the platform in the first place.

JEFFREY BROWN: Well ...

REBECCA LIEB: This is a group that is incredibly important to the advertisers Yahoo is trying to attract.

JEFFREY BROWN: Explain for our non-Tumblr users in the audience what it is. How has it been able to rise so fast and appeal to so many people?

REBECCA LIEB: Tumblr is a blogging platform that is very, very image-centric. It's very focused on users uploading photographs.

And this younger demographic is a very, very mobile demographic. These are people who have their smartphones with them at all times. And as anybody with a smartphone knows, it's much easier to update your status with a quick photo of what you're doing or what you're eating or what you're seeing than it is typing with your thumbs.

We saw a very recent move like this when Facebook acquired Instagram last year, also for a billion dollars, which raised some eyebrows at the time. And Facebook has subsequently redesigned its news stream to focus more on these images, as its users migrate to mobile platforms.

I believe that Yahoo is trying to do very much the same thing. And, in fact, since the announcement of the Tumblr acquisition, Yahoo has announced that they will be giving users substantially more free space on Flickr, also a Yahoo property.

So we're seeing a big move towards images and a big move towards mobile on Yahoo's part.

JEFFREY BROWN: In all of these new deals, and this one in particular, the question is still, how do you make money out of it, right? I mean, what would happen in this case? Is it likely we'd see money made through the advertising on Tumblr or what?

REBECCA LIEB: I think that this is a very interesting two-way street.

Yahoo, of course, is a traditional new media company, if you can -- to coin a phrase. In other words, they have very interruptive display advertising, the "click here, buy this now" type. Tumblr has been experimenting with what's called “content marketing” and forms of what's known as “native advertising.”

This is -- these are marketing messages, but they're more subtly integrated into the interface. They don't shout at the user. They don't interrupt the user. They're part of the stream and they're meant to attract, rather than to interrupt.

Yahoo for the time being will leave Tumblr alone. If they slap these interactive ads up on Tumblr, the users will probably abandon the property. At the same time, Yahoo is going to learn from these Tumblr products and try and incorporate them into Yahoo's more traditional properties.

JEFFREY BROWN: When you -- go ahead.

REBECCA LIEB: At the same time, Yahoo can introduce Tumblr to larger brands and more traditional advertisers, the P&Gs of the world, the McDonald's of the world. So, this does have the potential to benefit both parties monetarily.

JEFFREY BROWN: I was thinking, when you were referring to the possibility of users migrating or leaving, apparently, there's reports that already some of that is happening. But that just shows how fragile this whole system is, right, this ecosystem of companies and where users go.

REBECCA LIEB: Absolutely.

You know, we have seen companies like Yahoo stumble and lose their luster, AOL, MySpace, in periods of times that are less than a decade. It took companies like Pan American Airlines or Ford Motor companies perhaps a century to rise to ascendance and then to lose their luster.

Internet companies can do it seemingly overnight. Marissa Mayer is trying to bring Yahoo back from the brink, as her former Google colleague Tim Armstrong is similarly trying over at AOL.

JEFFREY BROWN: And just briefly, when she writes that post, "We won't screw it up," she is writing that because she knows a lot of people remember Yahoo apparently just -- doing just that, right, with other acquisitions.

REBECCA LIEB: Not on Marissa Mayer's watch.

JEFFREY BROWN: Right.

REBECCA LIEB: She is relatively new at the company. She's been there less than a year.

But, indeed, Yahoo has made acquisitions and screwed them up. So did News Corp. when it acquired MySpace. One of Yahoo's real challenges is going to be how to keep Tumblr cool when it's owned by what is very easily perceived by its very young, very hip user base to be a corporate overlord.

JEFFREY BROWN: Rebecca Lieb, thanks so much. 

5/20/2013 6:15:00 PM

By Larry Kotlikoff

Fifty-two percent of women over 60 aren't married and nearly 70 percent of those over 75. What Social Security benefits are they entitled to? And what about single or divorced men? Photo by Jim McGuire via Getty Images.

Larry Kotlikoff's Social Security original 34 "secrets", his additional secrets, his Social Security "mistakes" and his Social Security gotchas have prompted so many of you to write in that we now feature "Ask Larry" every Monday.

We are determined to continue it until the queries stop or we run through the particular problems of all 78 million Baby Boomers, whichever comes first. Kotlikoff's state-of-the-art retirement software is available, for free, in its "basic" version. His considerable and often very useful output is available on his website.

A. Price: One or two of us Americans are single or divorced [and we are also] eligible for Social Security benefits now or in the near future. Are you ever going to address the questions of this "fringe" population?

Larry Kotlikoff: Glad you asked. I've addressed Social Security's treatment of singles, but you're right. Questions about married couples have taken up most of the space.

Older America's single population is, in fact, anything but "fringe." Some 30 percent of males and 52 percent of females over 60 aren't married. Past age 75, the number increases to almost 70 percent of females not married, the majority of them widowed.

These figures also tell us that many currently "non-fringe" married people, particularly women, are likely to end up on the fringe. Hence, it's important for almost everyone to understand Social Security's treatment of single people and how single people can take Social Security's best deal.

If you were never married, the way to maximize your lifetime benefits is simple: Just wait until 70 to start taking benefits at their highest possible value. They will be as much as 76 percent higher than if you start taking benefits at age 62.

But most of you on the fringe were married at some point. It is to you that the rest of this answer is addressed.

If you are single and divorced and were married for 10 years, both you and your ex are entitled to a pair of benefits: survivor benefits and spousal benefits. Both are based on the other's covered earnings record. For example, you can both wait until 70 to take your own retirement benefits, but each of you, upon reaching full retirement age, can apply just for a spousal benefit and thereby receive half of your ex's full retirement benefit. If your ex is a high earner, this spousal benefit could amount to $15,000 per year for the four years you wait to take your own retirement.

Indeed, it's this Get-a-Free-Spousal-Benefit strategy that led to the "Ask Larry" column not long after I explained it to this page's supposedly sophisticated proprietor several years ago. Paul Solman was eligible, but amazed that he knew nothing about this benefit. He realized that his audience would be similarly in the dark.

Turning next to survivor benefits, you can start collecting as early as age 60. The amount of the benefits will be based on your deceased ex's earnings record. When to start? The decision hinges on how long you think your ex will live, with the qualification that you could be wrong and your ex could survive even a hospice stay.

The point is, if your ex is the much higher earner, and is highly unlikely to survive until you turn 70, it may be best to take your retirement benefit as early as possible. That's because you're going to end up with your ex's survivor benefit instead of your own retirement benefit, because your ex earned so much more that your own retirement benefit will be wiped out by it. You get the higher of the two benefits, but not both.

But for you divorcees, here's the rub. You need to get your ex's past and projected future covered earnings record to make a proper decision about when to take your own retirement and spousal benefit and then when to plan to collect your survivor benefit.

Unfortunately, Social Security doesn't give divorcees access to the earnings records of their ex's. This is really unfair, since the knowledge is so important in making a sound decision. Perhaps the males who no doubt made up this no-access-to-the-ex's-earnings-records-rule were worried that revealing this information would affect alimony payments. But well it should! So, I hereby urge all readers of this column to push their members of Congress to make this information available to divorcees so they can make informed choices.

But let's move on. Suppose you are widowed. You then have to decide when to take your own retirement benefit and when to take your survivor benefit. The path to maximizing your lifetime total is simple in theory, more difficult in practice: take one benefit before the other, based on which will ultimately be the highest.

For example, if you take your survivor benefit at age 60 (assuming you're already a widow or widower at 60), you'll get a reduced survivor benefit, but your own retirement benefit will grow by up to 76 percent, assuming you wait until 70 to take it. But once you start taking both benefits, you'll only get the larger of the two. So if your survivor benefit, even at its reduced level, exceeds your largest possible retirement benefit (what you can collect if you wait until 70), waiting to collect your retirement benefit will be pointless.

Instead, you'll be stuck for the rest of your life with a maximally reduced survivor benefit. In this case, it would likely be better to take your retirement benefit early and wait until full retirement age to take your survivor benefit, when it will be at its largest possible value.

Two final thoughts. First, if you are married, waiting as long as possible to collect your retirement benefit will materially raise your future widow/widower's survivor benefit.

The second thought is offered in jest -- and to make a point about the unintentional perversities of the Social Security system. If you're older and single, you could theoretically arrange a Social Security marriage of convenience. That is, you would get married to someone in a similar situation and within just one year, you would both become eligible for spousal benefits on the other's earnings record, though given Social Security's benefit formulas, you can't both collect spousal benefits at the same time.

Moreover, once you have been married for only nine months, you could collect survivor benefits on your new spouse's earnings record as well, which raises the macabre possibility of the ultimate Social Security "gold digger" strategy: marry someone on their last legs. Like I say, I'm not actually recommending this. But it does reveal one of the many loopholes in the system

Kathleen Nicolai -- Centennial, Colo.: I am 61, my husband is 63. I am retired; he plans to work at least four more years (until I can start receiving Medicare). There's longevity in my family, not so much in his. I've been planning to take my Social Security when I turn 62, assuming (sadly) that he will die before I do, at which time I will start receiving his, which is higher. Do you think this is a wise move? What other things should we consider in our decision? My payment at 62 will be $1,430 a month; at 70, it would be $2,504 a month. His at 66 will be $2,135 a month; at 70 $2,825. I would really appreciate your input.

Larry Kotlikoff: Time for another of my mantras: We can't count on dying on time. A corollary: Nor can we count on our spouses dying on time (not to suggest that you are hoping for that). Also, you really need to focus not on your husband's life expectancy, but on his maximum age of life. Unfortunately, the downside scenario, economically speaking, is that you both live to 100. If that happens, you'd be cursing me were I to have advised you not to wait to collect much higher Social Security retirement as well as spousal and survivor benefits.

So, your path to getting the most lifetime benefits from Social Security is to A., wait to collect, B., make sure you collect all available benefits, and C., make sure doing A. doesn't undermine doing B. and doing B. doesn't undermine doing A.

And trust me, Social Security's rules can lead to mistakes -- not that they're intentionally designed to do so, mind you; rather, it's due to the system's truly crazy complexity.

But back to your situation. I think that if your husband could live to a very ripe old age, you should A., have your husband file for his retirement benefit at 68 and suspend its collection, B., have your husband activate his retirement benefit at 70, C., wait until full retirement age -- 66 in your case -- to take just your full spousal benefit, and D., wait until 70 to collect your own retirement benefit.

This is my guess of what might be optimal. But to know for sure, you should run yourself through a software program that calculates your lifetime benefits for different maximum ages of life for both yourself and your husband.

By the way, by having your husband wait until 70 to collect, your survivor benefit will be as large as possible if he does pass away before you. The reason is that your survivor benefit will equal 100 percent of what he was collecting when he died or, if he dies between full retirement age and age 70, what he would have collected had he applied at the time he died. If he were to die before full retirement age, without having collected his retirement benefit, the survivor benefit will equal his full retirement benefit.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow @paulsolman

5/20/2013 12:47:00 PM

By Paul Solman

The entrance at the 1912 Democratic National Convention held in Baltimore, Md. The theme of the presidential campaign of 1912 was economic inequality, but looking at the data, the problem is worse today than it was more than 100 years ago. Photo courtesy of the Library of Congress/Wikimedia Commons.

*Paul Solman answers questions from the NewsHour audience on business and economic news here on his Making Sense Business Desk page.

Here's a question from Carolyn of Chicago, Ill., who writes:

"There is a lot of talk about income disparity between rich and poor today. How does it compare to the disparity 100 years ago?"

One hundred years ago? How about 101? Economic inequality is often cited as the key issue in the 1912 presidential election that pitted William Howard Taft (Republican) against Woodrow Wilson (Democrat), ex-Republican Theodore Roosevelt (Bull Moose Party), Eugene V. Debs (Socialist Party) and Eugene Chafin (Prohibition Party).

Roosevelt said around that time in a famous speech that the struggle for liberty "appears as the struggle of freemen to gain and hold the right of self-government as against the special interests, who twist the methods of free government into machinery for defeating the popular will. At every stage, and under all circumstances, the essence of the struggle is to equalize opportunity, destroy privilege and give to the life and citizenship of every individual the highest possible value both to himself and to the commonwealth."

Sitting President Taft said in a 1912 campaign speech: "Insofar as inequality of condition can be lessened and equality of opportunity can be promoted by improvement of our educational systems, the betterment of the laws to ensure the quick administration of justice, and by the prevention of the acquisition of privilege without just compensation ... all are in sympathy with the continued effort to remedy injustice and to aid the weak."

Unfortunately, when asked what he would do about high unemployment, he said "God knows." He ran third in the election.

Given these facts, it might be reasonably supposed that inequality a century ago was greater than it is today. Not so, however.

The most definitive published analysis I'm aware of measures the share of pre-tax income going to the top 1 percent of Americans from 1913 through 2008. It comes courtesy of economists Thomas Picketty and Emmanuel Saez and looks like this:

Source: Thomas Piketty and Emmanuel Saez, "Income Inequality in the United States, 1913-1998," Quarterly Journal of Economics, 118(1), 2003. Updated to 2008.

This picture suggests that, looking only at the 1 percent-99 percent split, we're back near the income inequality high of 1929 and above the gap in 1913 when a Socialist got 6 percent of the vote to the Republican incumbent's 23 percent. As I wrote in a post on the centennial of the income tax in April, it was originally established, in 1913, as a way to "soak the rich," so far above the common man were they thought to be perched.

(Incidentally, unemployment in 1912, best guess, from table 1 on page 215 of a paper from the National Bureau of Economic Research was at 7.9 percent, just about what it is in 2013.)

Making Sense reader Carolyn writes that there's "been a lot of talk" about inequality. I'd like to remind readers, and especially new ones, that some of that talk has been ours. Indeed, I first reported on growing economic inequality for the NewsHour in 1987, not long after starting to work for the program, and have reported on the issue again and again. Here's a compendium of many of our inequality stories and a Making Sense Business Desk post chronicling our inequality coverage.

Those who just can't get enough inequality might enjoy taking this online inequality quiz run last year by the Christian Science Monitor.

Finally, anyone who hasn't yet seen the viral animated inequality video on YouTube should do so, if for no other reason than to keep pace with the more than 6 million people who already have.

Here is a more personal question about my hats.

Jim - Oklahoma City: Paul, I too have a cranium free of unsightly hair but my doc advised me to simply apply lotion with 55 SPF sunscreen and everyone gets to admire my scalp. Et tu?

Paul Solman: Jim, a woman once said she admired my scalp at Prairie View A&M University in the early '90s. The reason I remember is that's the only scalp admiration I ever got and even her comment was, I thought, more consolation than approval. "Grass doesn't grow on a busy street," she reassured me.

The truth to tell, though is I like hats. I even wore them in the early '70s, when I had enough hair for the two of us. Then, they were perhaps an affectation. But by now, they've become a signature.

Last item is this remarkable video of high-frequency trading (HFT), slowing down one half-second of trading to 10 minutes, so that you can actually see the action in milliseconds. Amazing.

And here's an article from the New York Times from Tuesday reporting on stratospheric real estate rental rates in northern New Jersey "because it is also where data centers house the digital guts of the New York Stock Exchange and other markets. Bankers and high-frequency traders are vying to have their computers or servers, as close as possible to those markets."

Watch my explanation of HFT that aired on PBS NewsHour in March 2012.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow @PaulSolman

By Michael Chwe

Economist Michael Chwe has written a book called "Jane Austen: Game Theorist." Do you need more of a reason to read this post? Video from Michael Chwe's YouTube channel.

I'm a specialist in game theory, the mathematical analysis of strategic thinking. Probably the best-known game theorist is John Nash, who received the Nobel Prize in economics and was featured in the movie "A Beautiful Mind."

I have published mathematical economics papers in journals such as the "Journal of Economic Theory." But my latest book is built around the theoretical insights of Jane Austen. This popular and beloved writer used little mathematics or economics. But Austen's novels, written in the early 1800s, anticipated by more than a century the most fundamental game-theoretic concepts, including the emphasis on choice, the theory of utility, and the theoretical analysis of strategic thinking. In fact, Austen's novels contain game-theoretic insights not yet superseded by modern social science.

Before going into Austen's theoretical contributions, let me briefly introduce how game theory is used in economics.

How Game Theory Is Used in Economics

For most of its history, economics concentrated on the analysis of what it calls "perfectly competitive" markets: markets with a multitude of buyers and a multitude of sellers, with no single firm having any influence over market prices.

But even back in the 19th century, economists realized how imperfect markets were becoming. This was the era of "oligopoly" -- a "market situation in which producers are so few that the actions of each of them have an impact on price and on competitors." The oligopolists of the era were the industrial giants like Rockefeller's Standard Oil, the American Tobacco Company, and U.S. Steel. Some oligopolies, like Rockefeller's, were partially dismantled, but many oligopolies, old and new, exist today.

Economists today routinely analyze oligopolies using game theory, once described as the discipline of looking ahead (to what others will do) and reasoning backward (to figure out what you should do in anticipation of what others will do). Game theory's popularity is relatively recent. Its mathematical techniques were pioneered in the 1940s and 1950s by John Nash, John von Neumann and Oskar Morgenstern, although one of the earliest game-theoretic analyses of oligopoly was by Antoine Augustine Cournot in 1838.

Most economics students are taught first about monopolies and perfectly competitive markets because they are easier to analyze. Analyzing monopolies is not difficult: since there is only one firm, it simply acts in order to maximize its profits.

Analyzing perfectly competitive markets is not difficult either: each firm only worries about overall market conditions and not specific competitors because no single competitor is big enough to change market conditions by itself. For example, among taco trucks in Los Angeles, each taco truck worries only about the going price for tacos, not about the decisions of any other particular truck; each truck is a "price taker" and takes the going price of tacos as given.

In oligopolies, however, the situation is more complicated. Each firm must think carefully about its competitors: for example, before releasing a low-cost iPhone for emerging markets, Apple must consider whether its major competitors, Samsung and Huawei, will respond by making smartphones that are even cheaper. Apple must anticipate what Samsung and Huawei will do.

Of course, many markets are perfectly competitive (the restaurant business is a common example). But I suspect that today most economists would say that oligopolies, in which each firm must worry about each of its competitors, are more typical, or at least more interesting.

In other words, competition (and cooperation) among firms these days is usually not a matter of "price taking" -- accepting the price that a perfectly competitive market determines by the interplay of supply and demand - but of "price making," a situation that demands strategy. This is where game theory, the mathematical analysis of strategic thinking, comes in.

How Jane Austen Used Game Theory in her Books

Might it be useful in understanding Jane Austen? I am not the first to use game theory to approach literature. In 1980, Steve Brams wrote a book using game theory to interpret the Bible. The economists Bertrand Crettez and Régis Deloche have written on coordination in Molière's play "Tartuffe." Ilias Chrissochoidis and Steffen Huck have analyzed the mythic plots of Richard Wagner's operas "Lohengrin" and "Tannhauser."

But let's stick with Austen. Maybe it's just me, but as a game theorist, I am sensitive to how her characters act strategically in anticipation of the actions of others. For example, Marianne Dashwood in "Sense and Sensibility" seems to indulge in emotional paroxysms, in one case not changing out of her wet clothes, falling ill and almost dying. But, hearing that she is close to death, her one-time suitor Willoughby abruptly visits to tell her that he did indeed have true affection for her, and married someone else only because of money.

A game theorist might suspect that Marianne broadcasts her suffering anticipating that Willoughby would come back to her or at least acknowledge that he had loved her. Later, Marianne tells her sister Elinor: "My illness, I well knew, had been entirely brought on by myself."

I believe that Austen is a game theorist herself, interested in how people make choices and how people anticipate the choices of others. Like any game theorist, Austen's interest is both practical and theoretical.

For example, what distinguishes game theory, and economics generally, from other social science approaches is its emphasis on individual choice. That's how economists explain behavior. For Austen, choice is an obsession.

She mentions "the power of choice" and states that it is "a great deal better to chuse than to be chosen." When Fanny Price, in "Mansfield Park," receives the proposal of the rich but smarmy Henry Crawford, her entire adoptive family pressures her to accept, but Fanny heroically resists, telling her uncle Sir Thomas that it is simply her choice: "I -- I cannot like him, sir, well enough to marry him."

Economists love results that are not intuitive. One such result, which still gives people pause, is that a country technologically worse at producing everything should still trade with a technologically superior country -- as long as it has a comparative advantage in producing one good relative to another.

Austen loves non-intuitive results too. Fanny Price has an amber cross ornament, a gift from her beloved brother William, but has nothing to wear it with for the upcoming ball. Mary Crawford, Henry Crawford's sister, gives Fanny a gold necklace. Edmund Bertram, the young man whom Fanny really likes, gives Fanny a gold chain. Fanny must choose between Mary's necklace and Edmund's chain. This choice is difficult because Edmund likes Mary, and thus Edmund asks Fanny to wear Mary's necklace in order to show gratitude toward Mary. But Fanny would much rather wear Edmund's chain.

Fanny is relieved to find that "upon trial the one given her by Miss Crawford would by no means go through the ring of the cross. She had, to oblige Edmund, resolved to wear it -- but it was too large for the purpose. His therefore must be worn; and having, with delightful feelings, joined the chain and the cross, those memorials of the two most beloved of her heart ... she was able, without an effort, to resolve on wearing Miss Crawford's necklace too."

With this episode, Austen illustrates how in some situations, not having a choice can be better. This is a nonintuitive result well known in game theory. But Austen does it one better. She is so committed to individual choice that she cannot leave it at this: she has Fanny choose to wear Mary's necklace too. Even when it seems better not to have to make a choice, Austen shows that another choice can make things better still.

Essential to economic theory is the idea of utility: when a person chooses among several alternatives, the economist models this by assigning to each alternative a number corresponding to that alternative's "utility."

For example, if a person chooses between two houses, one house might be in a better location but have fewer bathrooms, while the other might have a quieter backyard but have higher maintenance costs. Economists assume that when a person chooses among houses, the many aspects of a house in the end reduce to a single utility number.

People who are not economists might find this strange, but not Jane Austen. Austen consistently argues for commensurability: the many aspects of an alternative are in the end reducible to a single feeling. In "Northanger Abbey," Catherine Morland plans a walk with Henry and Eleanor Tilney but they do not show up, perhaps because of the rain. Thus she decides to go with her brother and John and Isabella Thorpe on a carriage ride. "Catherine's feelings ... were in a very unsettled state; divided between regret for the loss of one great pleasure, and the hope of enjoying another, almost its equal in degree, however unlike in kind.... To feel herself slighted by [the Tilneys] was very painful. On the other hand, the delight of [the carriage ride] ... was such a counterpoise of good as might console her for almost any thing."

Austen even sometimes uses numbers to quantify feelings: in "Pride and Prejudice," when her sister Lydia runs off unmarried with Wickham, Elizabeth Bennet worries that her love interest Mr. Darcy's opinion of their family will further decrease, and thus "had she known nothing of Darcy, she could have borne the dread of Lydia's infamy somewhat better. It would have spared her, she thought, one sleepless night out of two."

Non-economists often object that real people surely do not calculate as economists do in complicated mathematical models. But for Austen, calculation is not the least bit unnatural. For example, in "Emma," after Emma and Mr. Knightley reveal the news of their engagement to their friends, they predict together how quickly the news will spread through the town: "they had calculated from the time of its being known ... how soon it would be over Highbury ... with great sagacity."

Austen has several names for strategic thinking, including "foresight" and "penetration." For example, Mr. John Knightley warns Emma that Mr. Elton might be interested in her, but Emma is certain that Mr. Elton is interested in Harriet Smith. Mr. George Knightley had earlier warned Emma that Mr. Elton would never marry Harriet because of her lack of wealth. After Mr. Elton drunkenly proposes to Emma in a carriage, however, Emma admits to herself, "There was no denying that those brothers had penetration."

Game theory assumes that a person thinks strategically about others. However, sometimes a person clearly does not. The conspicuous absence of strategic thinking, what I call "cluelessness," is not something modern game theory tries to explain. But Austen does.

For example, in "Northanger Abbey," General Tilney thinks that Catherine Morland is an heiress and thus invites her to Northanger Abbey to encourage her progress with his son Henry. When General Tilney finds out that Catherine is not wealthy at all, he ritually expels her, sending Catherine home without even a servant to accompany her.

But this move backfires badly: "Henry's indignation on hearing how Catherine had been treated ... had been open and bold ... He felt himself bound as much in honour as in affection to Miss Morland."

General Tilney's action only increases Henry's attachment to Catherine, and his sending Catherine home without an escort provides the perfect excuse for Henry to visit her to see if she arrived home safely. During this visit, Henry proposes.

General Tilney could have foreseen all this if he weren't clueless. He did not think strategically about Henry; he did not consider how Henry would react. "The General, accustomed on every ordinary occasion to give the law in his family, prepared for no reluctance."

What explains General Tilney's lack of strategic thinking, his cluelessness? Austen offers several explanations. One is that high-status people believe that they should not have to enter into the minds of low-status people, and in fact, not doing so is a mark of their higher status.

Thus, when a high-status person interacts with a low-status person, the high-status person has difficulty understanding the low-status person as strategic. This is an advantage that the low-status person can exploit. This can help us understand why, for example, after the U.S. invaded Iraq, the resulting Iraqi insurgency came as a complete surprise to U.S. leaders, even though anyone who puts himself in the shoes of an Iraqi commander would easily see the futility of engaging U.S. forces conventionally.

For a possible example in economics, Clayton Christensen finds that companies that are industry leaders often underestimate the disruptive potential of low-status competitors that start by producing cheap, low-quality goods but gradually improve.

It might be a while before we know how useful game theory is for studying literature in general. After all, game theory was around for 20 to 30 years before economics fully embraced it. In the meantime, I look forward to more conversations between the social sciences and the humanities. Perhaps in the future, the connections between economics and the study of literature will no longer be considered surprising.

Michael Chwe is a professor at University of California, Los Angeles who teaches courses on game theory to graduate and undergraduate students. His books include "Rational Ritual: Culture, Coordination, and Common Knowledge" and now "Jane Austen: Game Theorist.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight. Follow @PaulSolman

By Benn Steil

Britain's chancellor of the Exchequer George Osborne, center right, at the start of the G7 finance ministers and central bank governors meeting on Friday, May 10 in Aylesbury, England. The role of central banks in shoring up the global economic recovery is set to be a key point of discussion among top financial officials from the world's seven leading economies when they gather in the UK this weekend.Photo by Alastair Grant - WPA Pool / Getty Images.

A note Paul Solman: The G7 finance ministers met in England last week and had "intense discussions," said Reuters, about international monetary policy and currency exchange rates, a source of tension in the world economy for, oh, about 100 years now.

According to the economic history books, the one great conference that resolved that tension -- for a quarter century -- was "Bretton Woods," a convocation of 44 countries in the White Mountains of New Hampshire less than a month after D-Day and the beginning of the end for the axis powers in World War II. What would the post-war world economy look like? That was the question in July of 1944. The answers were a loosely dollar-based world currency regime, the International Monetary Fund and what was to become the World Bank.

So, do we need another Bretton Woods today? Benn Steil, editor of the scholarly journal "International Finance," has written a book that ponders this and other questions: "The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order." Paul Volcker has called it "full of lessons relevant today." Alan Greenspan said it's "a must-read work of economic and diplomatic history" and The New York Times wrote that "it should become the gold standard on its topic."

Critics like history professor Eric Rauchway, by contrast, take Steil to taskfor for overemphasizing Bretton Woods' weaknesses and the Soviet connections of its chief American negotiator, Harry Dexter White.

Benn Steil: In the wake of the great financial crisis of 2008, world leaders, from French President Nicolas Sarkozy to British Prime Minister Gordon Brown, began calling for "a new Bretton Woods" to restore discipline and calm to world financial markets. The very words "Bretton Woods," it seemed, had become shorthand for enlightened globalization. Simply invoking the name of the remote New Hampshire town, where representatives of 44 allied nations came together 65 years earlier, in the midst of the century's second great war, was to put oneself on the side of order, stability, vision, cooperation, and peace. But was the actual 1944 Bretton Woods conference, the most important international gathering since the Paris peace talks a quarter century earlier, really such a kumbaya moment? Could we recreate it? And if we could, would we want to?

Consider the conference itself -- the men who drove it and its goals.

President Franklin Roosevelt told the assembled that their agenda marked "a vital phase" among "the arrangements which must be made between nations to ensure an orderly, harmonious world." He hoped it would speed the war's conclusion by sending the enemy Axis powers the message that it was America and its allies that had the compelling postwar vision.

But FDR had little interest in the actual ins and outs of international economic affairs, and it was his Treasury -- led by Sec. Henry Morgenthau, but powered by his ambitious, temperamental deputy, Harry Dexter White -- which scripted its details.

Morgenthau years later told President Harry Truman that his ambition at Bretton Woods had been "to move the financial center of the world from London and Wall Street to the United States Treasury and to create a new concept between the nations of international finance." That concept was given its flesh by Harry White, and its centerpiece was to be a dollar-based international monetary system overseen by a new U.S.-dominated International Monetary Fund.

With the exception of two delegations, the Soviet and the British, the governments represented at Bretton Woods bowed to this concept with only modest grumbling because they felt they had no choice. The United States controlled nearly 80 percent of the world's monetary gold stock at the time, and U.S. dollars were the only credible surrogate for gold. Without American monetary and financial support, barter was the only way to trade, and therefore to survive.

The Soviets, whose trade with the world was entirely state-controlled, had no practical use for the American scheme, and signed on for reasons which were transparent, but to which White was willfully blind: Stalin had hoped to get cheap American loans, that he could repudiate at his convenience, and liked the idea of the world fixing currencies to a gold-backed dollar because it would boost the value of Russia's large gold stocks. (When the loans were not forthcoming, the Soviets refused to ratify the agreements.)

The British delegation head, the storied John Maynard Keynes, tussled with White for two years in the run-up to the conference, trying with increasing desperation to sustain some remnant of an international role for the pound sterling, which functioned as the monetary foundation of Britain's fraying global empire.

The world's first-ever celebrity economist, Keynes was an unlikely diplomat: he was eloquent and quick-witted, yet also irascible and condescending. But with war-torn Britain on the verge of bankruptcy, its colonies braying for London to start paying its way in dollars, Keynes emerged as London's last-ditch financial ambassador because he had what the Americans respected: star power.

For his part, White had a longstanding obsession with Britain and its currency, having as early as 1935, nine years before Bretton Woods, begun working actively to undermine the sterling's status by, for example, forcing China to unpeg its currency from sterling in favor of a peg to the dollar. All this was to pave the way for an international conference at which the dollar would be enthroned as the world's unrivaled monetary standard.

Bretton Woods was ultimately part of a Faustian bargain that Britain was obliged to make with FDR's Treasury. In return for American [Lend-Lease] (http://www.ourdocuments.gov/doc.php?flash=true&doc=71) aid to survive the war, and a transitional loan to get through the immediate post-war period, Britain was told to:

The Americans triumphed at Bretton Woods. Yet, looking back nearly 70 years later, it is clear that it was a pyrrhic victory.

There had been four pillars to White and Morgenthau's postwar vision:

These beliefs, it turned out, had been based on "misconceptions of the state of the world around us." Future secretary of State Dean Acheson later reflected, "both in anticipating postwar conditions and in recognizing what they actually were when we came face to face with them ... Only slowly did it dawn upon us that the whole world structure and order that we had inherited from the nineteenth century was gone and that the struggle to replace it would be directed from two bitterly opposed and ideologically irreconcilable power centers."

By early 1947, Britain was no longer seen as a political and economic rival but as a desperate ally that needed to be saved from communism and collapse. The Soviets could not be co-opted, and needed now to be contained (in George Kennan's famous word). West Germany had to be built into a vital bulwark against Soviet expansion -- this through rehabilitation and resurrection as the industrial engine of a new integrated Western Europe ("Western Europe" being an American conception). Finally, the IMF, together with its loan-based salvation mechanism, would be mothballed in favor of massive U.S. grants-in-aid to its allies.

(Note to Angela Merkel, Germany's iron chancellor: do you not see parallels with your handling of today's eurozone crisis?)

Although the quarter-century period from 1945-1971 is typically referred to as "the Bretton Woods era," the monetary regime called for in the conference agreements could not be said to have become operative until 1961, when the first nine European countries met the requirement that their currencies be convertible into dollars. By this time, however, the system was already coming under strain owing to a deteriorating U.S. balance of payments and corresponding loss of gold reserves.

"There is no likelihood," White had insisted when urging congressional ratification of Bretton Woods in 1945. "The United States will, at any time, be faced with the difficulty of buying and selling gold at a fixed price freely." Yet this is precisely what transpired after his system entered into normal operation in the 1960s.

On Aug. 15, 1971, President Richard Nixon made a dramatic announcement. Following on the heels of a French battleship arriving in New York to take home its gold from the New York Federal Reserve, Nixon announced the closing of the American "gold window." Facing imminent depletion of the once-vast U.S. gold stock, Nixon would remove the foundation of the Bretton Woods international monetary system - never again would the dollar be convertible into gold.

One strange and fascinating legacy of the 1940s that lives on at the IMF today is one which no one present at Bretton Woods could ever have imagined. My archival research uncovered some remarkable new evidence that the Fund's architect, Harry White, despite being a staunch American monetary nationalist, was a passionate believer in the success of Soviet socialist economics, and was bitterly critical of what he saw as western hypocrisy towards Soviet Russia. President Truman was certainly unaware of this when he nominated White to be the first American executive director of the IMF in 1946. He was also on the verge of nominating him to be the first head (managing director) of the Fund when he received a long memorandum from FBI director J. Edgar Hoover warning him not to. Hoover charged that White was actually a Soviet spy.

Truman did not trust Hoover, but knew he had a political problem on his hands. In order to avoid the questioning that would follow appointing another American above White at the IMF, he had his Treasury secretary, Fred Vinson, tell Keynes that, despite White being a "natural" for the Fund's top post, the administration had decided to back an American for the top World Bank post instead. And it would not be "proper," they had concluded with uncharacteristic fair-mindedness, "to have Americans as the heads of both bodies."

In 1997, after exhaustively reviewing a trove of recently declassified Soviet intelligence cables from the 1940s, intercepted and decrypted by wartime U.S. military intelligence, a Senate commission headed by the late Democrat Daniel Patrick Moynihan declared that "the complicity of Alger Hiss of the State Department seems settled. As does that of Harry Dexter White of the Treasury Department."

To this day it is a European, and not an American, who runs the IMF.

Bretton Woods was truly a fascinating saga, but it was most surely not the triumph of economic thinking and international comity it is often painted to be. An ascendant anti-colonial superpower, the United States, used its economic leverage over an insolvent allied imperial power, Great Britain, to set the terms by which the latter would cede its dwindling dominion over the rules and norms of foreign trade and finance. Britain cooperated because the overriding aim of survival seemed to dictate the course.

The monetary architecture that Harry White designed, and powered through an international gathering of dollar-starved allies, ultimately fell of its own contradictions: The United States could not simultaneously keep the world adequately supplied with dollars and sustain the large gold reserves required by its gold-convertibility commitment. The IMF, the institution through which it was launched, though, endures -- however much its objectives have metamorphosed -- and many hope that it can be a catalyst for a new and more enduring "Bretton Woods."

Yet history suggests that a new cooperative monetary architecture will not emerge until the United States, the world's largest creditor nation in the 1940s, but now the world's largest debtor, and China, today's dominant creditor nation, each comes to the conclusion that the consequences of muddling on, without the prospect of correcting the endemic imbalances between them, are too great. Even more daunting are the requirements for building an enduring system; monetary nationalism was the downfall of the last great effort in 1944.

Benn Steil is Director of International Economics at the Council on Foreign Relations in New York.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight. Follow @PaulSolman

Headhunter Nick Corcodilos explains how to approach your employer when negotiating a raise. Image by Ojo Images.

Nick Corcodilos started headhunting in Silicon Valley in 1979, and has answered over 30,000 questions from the Ask The Headhunter community over the past decade.

In this special Making Sense edition of Ask The Headhunter, Nick shares insider advice and contrarian methods about winning and keeping the right job, on one condition: that you, dear Making Sense reader, send Nick your questions about your personal challenges with job hunting, interviewing, networking, resumes, job boards, or salary negotiations. No guarantees -- just a promise to do his best to offer useful advice.

Question: I have been a debt collector for over 14 years and have worked at the same law firm for five years. I was promoted to team leader with no increase in pay. The year after that I was promoted to supervisor with a 4.5 percent pay increase.

Fast forward to last Friday, when my manager accidentally sent out an email that showed everyone's pay. I am one of the lowest paid employees even though I have more experience in the industry than 90 percent of my co-workers.

My general manager said this is always the case in business, that new people hired with less experience get paid more. I'm always in the top 5 percent of money collected, and I spend five to six hours each week coaching, training, motivating, molding four to five people who all have minimal experience -- but they make more money than I do. I have my annual review in 30 days. I want to know how to handle the conversation without sounding angry or rude.

Nick Corcodilos: That's an interesting bit of double talk from your general manager, who has already told you what the problem is. The firm pays more to get new hires, and less to seasoned employees who train new employees. In other words, they're taking advantage of you. There's nothing illegal about it. This is how employers can lose their best workers.

I know you want something magical to tell your boss so that he or she will raise your salary to reflect your contributions. And I'll offer some advice about how to do that. But first you need to establish leverage. My first advice is to decide whether it's time to leave your employer. (See "The Wall Says It's Time to Go.") Then immediately start looking for another job, even if you can solve your problem at your current firm.

If your boss rejects your request, you must be ready to live with lower pay, or you must be ready to move on. Having another job to go to will make you a more powerful negotiator and it will give you control over your future, which is the real objective here.

I would prepare two things for your meeting. First, a very brief outline of your accomplishments during the past year. You've already outlined these, so it should be easy. Second, outline three things you plan to accomplish in the next year. These must be easily measurable so there's no question whether you have achieved them. This demonstrates clearly what you have done, and what you commit to doing to justify your salary request. (For some added perspective, see "How to Decide how Much you Want.")

Finally, show your boss the email you received that shows the salary disparity. Now, keep in mind -- it's your boss's right to pay you anything he or she sees fit. But it's your prerogative to decline unfair pay. Now you see why you need leverage.

Another job offer will give you that. My guess is, if you can show your boss why you're worth more, you can do the same with another employer that needs the top-quality services you offer. Find another employer first, or you'll have no control over negotiations with your boss.

If your boss declines to pay you fairly, don't argue. Don't get angry. Be respectful. But be ready to resign. Just don't do it during that meeting. Take time to collect yourself and your thoughts. Plan your exit so it's on your terms and on your schedule.

The best way to negotiate for what you want is to prove what you've done, commit to what you will do next, and have somewhere else to go immediately if you can't negotiate a deal that makes you happy. This is not just about getting more pay. It's about taking control of your career and your future. I wish you the best.

Nick Corcodilos invites Making Sense readers to subscribe to his free weekly Ask The Headhunter© Newsletter. His in-depth "how to" PDF books are available on his website: "How to Work With Headhunters...and how to make headhunters work for you," "How Can I Change Careers?" and "Keep Your Salary Under Wraps."

Send your questions to Nick, and join him for discussion every week here on Making Sense. Thanks for participating!

Copyright © 2013 Nick Corcodilos. All rights reserved in all media. Ask the Headhunter® is a registered trademark. This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow Paul on Twitter. Follow @PaulSolman

By Larry Kotlikoff

If Social Security benefits increase, will they rise enough to give beneficiaries more money in hand? Expert Larry Kotlikoff answers this question, along with others from readers. Photo by Flickr user 401(K) 2012.

Larry Kotlikoff's Social Security original 34 "secrets", his additional secrets, his Social Security "mistakes" and his Social Security gotchas have prompted so many of you to write in that we now feature "Ask Larry" every Monday.

We are determined to continue it until the queries stop or we run through the particular problems of all 78 million Baby Boomers, whichever comes first. Kotlikoff's state-of-the-art retirement software is available, for free, in its "basic" version. His considerable and often very useful output is available on his website.

Gwendolyn Miller -- Wilmington, Del.: I am 73 years old, still working, and have been collecting my Social Security since age 65. I plan to fully retire this year and want to know: will my Social Security monthly amount increase?

Larry Kotlikoff: If your highest 35 years of covered earnings have continued to rise because you've continued to work and get raises, as I recently urged, your benefits have increased. But once you retire, you will no longer be raising what's called your Average Indexed Monthly Earnings (AIME) computed (as I said) on the basis of your 35 highest years of covered earnings.

Your monthly check will, however, continue to go up if the Consumer Price Index does. That's because of the automatic inflation adjustment that's part of the Social Security formula, the inflation adjustment President Obama has recently offered to make less generous by tweaking the formula to account for consumers substituting cheaper goods and services for more expensive ones. As of Jan. 1, 2013, your Social Security check increased by 1.7 percent to reflect inflation.

Currently, inflation is running at an annual rate of 1.5 percent over the past 12 months; 1.4 percent if the President's proposal of the so-called "chained" consumer price index (CPI) is used instead. If it remains at the current rate of inflation, you will get another cost-of-living adjustment (COLA) of 1.5 percent in 2014 -- or 1.4 percent if the chained CPI should by some chance become the measure.

Bob D. -- Southport, Maine: I'm 59. My wife of 16 years died four years ago at 68. I'm still working and plan to continue, though making less than $15,000 a year. Can I apply for survivors benefits? How do I do it, and what percentage of her benefit would I receive?

Larry Kotlikoff: First, I'm sorry for your loss. Second, you can apply for survivor benefits starting at age 60. But take heed of what has come to be my almost weekly warning in this column: survivors benefits will be permanently reduced if you take them prior to full retirement age.

At your full retirement age, your survivors benefits will equal your wife's full retirement benefit, assuming she died prior to full retirement age, but before taking benefits. If she was taking benefits and you wait until 66, you'll get what she was getting, adjusted for inflation. If you wait until 66 and she was beyond full retirement age but hadn't taken her retirement benefit yet when she passed, you'll get her full retirement benefit, adjusted for the delayed retirement credit.

But, if you take your own retirement benefit while also taking your survivors benefit, you'll only get the larger of the two. So, by taking both benefits simultaneously, you can wipe out your survivors benefit entirely.

What's the smart move here? To take one benefit first and let the other grow. For example, Social Security benefit maximization software might show that taking your survivors benefit at 60 and your own retirement benefit at 70 is best. Or it might show that taking your own retirement benefit starting at 62 and your survivors benefit at full retirement age -- 66 in your case -- is best. Given the complexity of Social Security's rules, what's best for people in your situation depends on both their own earnings record and the size of the survivors benefit to which they are entitled.

Marie -- San Diego, Calif.: In my mid 70s. How to arrange my money so that it goes to two kids in "stages," not all at once, when I die?

Larry Kotlikoff: This question ventures beyond, Social Security, the usual compass of this column. But as I've devoted a fair portion of my career to retirement planning and the NewsHour's Making Sense page has offered my free ESPlanner Basic software for years, I suppose I'm as qualified as anyone to answer your question.

One approach is to buy your children simple, single-life, inflation-indexed annuities. Annuities will continue to make payments that will be adjusted for inflation throughout your children's entire lives. Make sure you trust the insurance company. Better yet, buy from multiple companies to spread the risk that any given company might fold.

Carolyn Weinzapfel -- Wilmington, N.C.: My husband is 62 and just started collecting Social Security. I am 54. When I turn 66, can I collect a spousal benefit even though I make a lot more than my husband? His Social Security benefit is $1,572 a month. My projected Social Security benefit is $2,465 a month if I take it at 66 or $3,150 if I wait until 70. If I can get a spousal benefit, would it be half of what my husband would have received if he had waited to take his Social Security? I'm assuming -- from reading some of your other answers -- that I can't do this at 62.

Larry Kotlikoff: You are correct. If you wait until full retirement age, you can apply just for a spousal benefit and receive half of his full retirement benefit. Then at 70, you can apply for your own retirement benefit.

Don B. -- Northport, N.Y.: I started receiving reduced Social Security benefits at age 63 and 5 months. My wife stopped working this year, 2013, and will turn 63 in June. Is it better for her to apply for spousal benefits on my Social Security retirement benefit or to apply for her own reduced benefit? Thanks for your time.

Larry Kotlikoff: Since you have already filed for your retirement benefit, if your wife applies for either a spousal or a retirement benefit before full retirement age, she'll be deemed to be applying for both. In this case, she'll get the sum of her own reduced retirement benefit and her reduced excess spousal benefit, which could be zero. The excess spousal benefit is the difference, if positive, between half of your full retirement benefit and 100 percent of her full retirement benefit.

A better strategy may be for her to wait until full retirement age (66) to start collecting her full spousal benefit and then wait until age 70 to collect her retirement benefit, when it will start at its largest possible level, a strategy that I have urged again and again.

A full spousal benefit is available for someone who hasn't filed or been forced to file, via Social Security's deeming provisions, for her retirement benefits. And the full spousal benefit is calculated as 50 percent of your full retirement benefit, so it's clearly larger than the excess spousal benefit.

Rosemarie Smith -- Eugene, Ore.: My husband is 61 and receiving Social Security Disability Insurance (SSDI). I am 59 and working. How does SSDI work in terms of spousal benefits when I turn 62?

Larry Kotlikoff: When you turn 62, you can collect spousal benefits, but they will be reduced for every month you start collecting them prior to full retirement. Also, due to Social Security's deeming provisions, you will be forced to apply early for your own retirement benefit, which will be permanently reduced.

And because you are going to be forced to file for a retirement benefit, your spousal benefit will be calculated as an excess spousal benefit and then reduced because you are taking it early. The excess spousal benefit is the larger of A., the difference between half your husband's disability insurance benefit and B., 100 percent of your full retirement benefit.

So, I don't think collecting at 62 is likely to be your best strategy. Software would likely suggest that you wait until full retirement age, take just your spousal benefit at that point, and then go for your full retirement benefit age 70, at which point it will start at an inflation-adjusted value that's up to 76 percent larger than if you start it at 62.

Also, your spousal benefit will be calculated as your full spousal benefit, which is half of your husband's disability benefit. And there will be no reduction, since you are starting to take your spousal benefit at full retirement age. The reason that you get the full spousal benefit and not the excess spousal benefit under this strategy is that the excess spousal benefit formula is only used if you have filed or, via the deeming rules, been forced to file for your own retirement benefit.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow @paulsolman

5/13/2013 1:53:00 PM

By Zvi Bodie

Economist Zvi Bodie, perhaps the country's foremost expert on pension finance, insists that every American at least consider an investment that financial advisors almost never mention.

Photo by Peter Gridley/Getty Images.

A note from Paul Solman: Zvi Bodie has influenced my thinking about financial economics for 20 years. He has also been my trusted -- and extremely wise -- financial advisor for most of that time. And we have featured him often in stories about America's pension crisis on PBS NewsHour: corporate pension sleight-of-hand and public pension mismanagement, though my favorite Bodie appearance came when he helped us explain the housing Crash of '08, many months before the eventual Lehman collapse.

I regularly beseech Zvi to contribute to this page. Occasionally, he deigns to do so. Today is one of those occasions.

Zvi Bodie: Recently, Paul Sullivan wrote in his Wealth Matters column about financial advisors' increasing interest in technology. He raises two questions about expanded use of technology: Will it help advisers do their job better? And will it be better for clients or confuse and frustrate them? A friend asked me how I would answer those questions. I thought Making Sense readers might be interested too.

Remember the old saw about computer forecasting models? GIGO -- Garbage In, Garbage Out. Technology can make good advice more accessible and less costly, but it cannot turn bad advice into good advice. If the technology is designed to pitch some investment service that is not in the best interest of clients, employing sophisticated technology and interactive software will only serve to deceive the client more efficiently. Fancy software is not a substitute for trustworthiness and good science.

Let me give an example to make clear what I mean. As many of you know if you've read earlier posts of mine on I Bonds or how to pick a financial advisor, I recommend that for people concerned about preserving the purchasing power of their savings, an investment program should start with the purchase of US Treasury Series I Savings Bonds, of which you can purchase up to $10,000 per year per person.

To quote the Treasury Department's write-up online, which I urge everyone to read in full:

"You can cash them in after one year. But if you cash them in before five years, you lose the last three months of interest. (If you cash in an I Bond after 18 months, you get the first 15 months of interest.)"

I Bonds provide the ultimate in long-run liquid financial security to residents of the U.S. An investor in these bonds cannot lose any money or any purchasing power for up to 30 years, despite either inflation or deflation. They provide a return at least equal to the rate of inflation and, often, have paid a "premium" of interest above and beyond inflation.

At the moment, because of historically low interest rates, that premium is zero, but it is reset every six months. If, in September (or the following March or a year from September, etc.), new I Bonds do offer a premium, you can sell the current ones and use the money to buy the new ones. The U.S. Treasury started issuing I Bonds in 1998, and over the intervening 15 years technological improvements have made it easier than ever for people of modest means to purchase them online through TreasuryDirect.gov and keep track of their increasing value, a value that by the terms of the bonds keeps pace with inflation.

You might wonder why a bond that pays, at the moment, only the rate of inflation, is a good investment. The answer is simple. Compare it to an equivalent investment, issued by the very same U.S. Treasury, that is not inflation-protected. The equivalent would be a six-month Treasury "bill." It is paying less than 1/100th of a percent at the moment. Since inflation is running at 1.8 percent right now and an I Bond automatically pays you the inflation rate, the I Bond would seem to be rather obviously the debt instrument of choice.

Yet despite their clear value as a safe and liquid anchor for any investment portfolio, few clients of investment advisors even know of the existence of I Bonds. Bona fide advisors who are truly fiduciaries serving the best interest of their clients would inform them about I Bonds, direct them to the U.S. Treasury's TreasuryDirect.gov website, and assist them in setting up accounts for themselves and their children. To the best of my knowledge, no major investment advisory firm in the U.S. does this.

When the chief financial officer of a West Coast nonprofit followed my counsel on this page (see "How to Find a Financial Advisor, Step by Step") he asked the several financial advisors he auditioned if I Bonds were part of their advice. He told Paul Solman that not one of the advisors said they were. That is not a function of their mastery -- or lack of mastery -- of technology. It can only be explained in terms of self-interest or ignorance. There is no profit margin in advising clients to purchase I Bonds. And of course, if you don't know about them, how can you suggest them?

Instead of practicing prudence, however, investment advisors tend to deploy the latest innovations in digital technology to promote the products of those with an even greater incentive to steer you wrong -- members of the financial services industry. That industry specializes in pushing the product with the highest profit margin, stocks. The content of financial services materials is often deceptive and in some cases flatly contradicts what financial economists recommend as sound.

As I have shown repeatedly on this website and Making Sense broadcasts, no matter how broadly diversified a portfolio of stocks, conventional bonds, and cash may be, it cannot offer the protection afforded by I Bonds. The proposition that the risk of stocks diminishes with the length of one's time horizon is a fallacy, as is the notion that stocks are a hedge against the risk of inflation. I figure it's about time for every American to be told -- or in the case of the Making Sense audience, told again -- about I Bonds.

Zvi Bodie appeared in this 2011 story on assumptions used for public pension funds.

Zvi Bodie is a professor of management at Boston University. His books include "The Future of Life Cycle Saving" and "Investing and Foundations of Pension Finance." For more, see his website. Zvi's videos are on his YouTube Channel.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight. Follow @PaulSolman

By Judi Henderson-Townsend and Cynthia Mackey

Two "senior" entrepreneurs (women in their 50s) explain how to overcome the reluctance to start your own business when you're older. These days, entrepreneurship is simply self-reliance, they explain.

NewsHour economics correspondent Paul Solman reports on late bloomers who decided to take the plunge into self-employment. Read the full transcript.

A note from Paul Solman: Judi Henderson-Townsend is the 55-year-old mannequin entrepreneur who, with her social media consultant Cynthia Mackey, fascinated NewsHour viewers a few weeks ago by extolling the virtues of "senior entrepreneurship." Graciously responding to my request, she and Mackey then offered readers of this page "Ten Tips for Senior Entrepreneurs". A further excerpt from my original interview with Townsend soon followed and high tech entrepreneur Vivek Wadhwa joined the discussion by explaining "Why Older Entrepreneurs Are Crucial, Even in Silicon Valley".

In Thursday's Making Sense post, Judi Henderson-Townsend and Cynthia Mackey address a familiar figure in America's latest "jobless recovery": the reluctant senior entrepreneur. They were plenty reluctant themselves, they write.

Judi Henderson-Townsend and Cynthia Mackey: Senior entrepreneurship is a trending topic. Yet for every senior who sees entrepreneurship as an exciting opportunity, there is another senior who sees entrepreneurship as an intimidating option of last resort.

Age discrimination, job layoffs, dwindling 401(k) accounts and the potential erosion of Social Security benefits are a few of the reasons why seniors are turning to entrepreneurship in large numbers. In our previous blog post we listed 10 tips for senior entrepreneurs looking to start a business. But owning a business can be an anxiety-ridden experience, and the anxiety is magnified if you are an entrepreneur because you "have to" vs. "want to."

As two senior entrepreneurs who were once reluctant to take the plunge, we want to share some advice that made a difference to us. But first a little background on our entrepreneurial journeys.

Cynthia's story: I enjoyed my corporate experiences but always felt constrained by the bureaucracy. As a consequence, I was always pushing the envelope, often a little too far. My first entrepreneurship experience was working for a small military sub-contractor. I had no desire to start my own company, but wanted to be part of a team. I loved this new opportunity and being part of the decision-making process! Despite the growing number of contracts the company brought in, we were blind to financial decisions of the chief executive that ultimately caused its demise. Similar situations occurred at other small companies I later worked for. I realized that working for others wasn't working out for me. So I figured there was one other thing I hadn't tried -- going out on my own.

Judi's story: An early experience in entrepreneurship when I was in my mid-30s was a disaster for me. I was so emotionally crippled by the experience that I swore I would never do that again. I became an accidental entrepreneur while purchasing a mannequin from someone on craigslist.com. The buyer ran the only mannequin rental service in town and was closing shop. I impulsively bought his entire inventory thinking this would be a fun hobby to do while still working full-time. Granted I had never touched a mannequin before or worked in retail. What began as a sideline business has become my full-time venture for the last 11 years. At 55, I am not thinking about retirement, but how I can further expand my business.

1. Entrepreneurship -- Another Name for Self-Reliance In the days of an agriculturally based economy, if crops didn't grow, one had to find another way to feed the family. Perhaps services were bartered or a product was created and sold. You had to use your talents and resources to solve a need -- which is what an entrepreneur does. However, today's meaning of the word can conjure up images of having to meet payroll, lease a building and deal with human resource issues -- which may seem daunting. It can be less intimidating if you see yourself as fulfilling a need and if you perhaps call yourself a freelancer, consultant, solo-preneur or independent contractor.

2. Lean Into it If possible, don't leap into entrepreneurship, but start gradually. When Judi first started her mannequin business, she still had a full-time job. She eventually negotiated to work there part-time so that she could still have benefits and a steady source of income while investing in and building up her business. When 9/11 put an end to her day job, she already had the foundation laid for her entrepreneurial venture, making the transition much easier. Cynthia put a little money aside for several years, and eventually reduced her personal expenses over time. She also took on extra contractual work to fuel the business and shore up financial resources. There is no specific or right way to do it, but "leaning in" gives you a great way to build as you are able.

3. Create an Ad-hoc Advisory Team Before you launch your venture, conduct informational interviews with senior entrepreneurs to get advice and bolster your confidence. If you don't know anyone in your field, Job Shadow is a website that allows you to conduct online interviews with entrepreneurs from a variety of industries. Walking the path of an entrepreneur can be isolating at times. As much as they love you, family and friends don't fully know what it's like unless they have done it before. So identify a trusted colleague or two, perhaps even an advisory board that supports your vision but is objective enough to be candid with you.

4. It Takes More Than Passion While passion is important, identifying a business that is suited to your personality and skill sets is equally as important. For example, if you have a passion for cooking, that doesn't mean restaurant ownership is for you. Perhaps there are other related ventures that may be a better fit for your skills, personality and finances such as catering or becoming a personal chef, restaurant critic, or instructor. Taking seminars for entrepreneurs can assist you in determining what your strengths are. Organizations such as the Service Corps of Retired Executives (SCORE), Small Business Development Centers and nonprofit organizations focused on developing small businesses can provide consultants, courses and resources at little to no cost. Search the Internet for online courses and free white papers to help you become better informed in your field and the latest technologies that affect it.

5. Monetize Your Expertise If you've developed expertise over the years in a certain discipline, entrepreneurship can be a chance to capitalize on your experience. Judi's 58-year-old bookkeeper worked for a number of years in the finance departments of large corporations. She now works as an independent contractor for several small businesses. The flexible schedule and variety of skills she gets to use fulfill her in a way that working as an employee did not.

6. Turn Your Hobby or Interest Into Your Livelihood Have you ever imagined your hobby providing your entire income? Entrepreneurship can be a chance to explore interests that you could only dabble in when you worked full-time. A friend of Cynthia's worked for many years in retail before starting a bed and breakfast. Stories of seniors who have turned a personal interest into a business, like the therapist who became a perfume maker, can be found on the Senior Entrepreneurship Works website.

7. Avoid Analysis Paralysis Sometimes we can't get started because we are still trying to figure everything out. I mean, everything! Perhaps it's the perfect manufacturing process for your product or the logo that's exactly right for your brand. Often the best way to learn is by doing something, and if a mistake is made, then readjust. A business plan is an organic process not cast in stone.

In Cynthia's case she has pivoted her business based on the needs of clients. She initially provided web design services for a wide variety of clients. But since her clients were uncomfortable using social media, she started offering education and training for baby boomers so they could use social media to grow their business.

Judi initially started out just renting mannequins. But as a result of requests from clients, she expanded her business to include mannequin sales, mannequin recycling, mannequin repairing and even renting her mannequin warehouse out for events.

In other words, sometimes you have to take the first steps and feedback from clients will direct you to the next step.

Judi Henderson-Townsend is the owner of Mannequin Madness, an award-winning small business that rents, sells and recycles mannequins.

Cynthia Mackey is a tech-savvy online marketer and founder of BabyBoomerBusinessOwner.com, a website offering courses on how small business owners can use social media to grow their business.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight. Follow @PaulSolman

Watch Video | Listen to the Audio

JEFFREY BROWN: And now the point man for the Obama administration on what for so many Americans remain the most pressing matters of the day: jobs and economic growth.

Treasury Secretary Jack Lew has been in the post since February.

NewsHour economics correspondent Paul Solman caught up with him on the road yesterday, part of Paul's ongoing reporting on Making Sen$e of financial news.

PAUL SOLMAN: Just outside Cleveland, Ohio, the new factory of one of America's fastest growing manufacturing firms, Vitamix, maker of hot products in haute and not-so-haute cuisine, high-end blenders.

We were here to interview Treasury Secretary Jack Lew, who ran the Office of Management and Budget for both Presidents Clinton and Obama, served for a year as the current president's chief of staff, and took over from Tim Geithner at Treasury in February. You will be seeing the new secretary's name on a bill near you soon, though, after the president joked about Lew's loopy signature, he decided to straighten it out.

As Treasury secretary, Lew is tasked with tackling, among other issues, the sequester, dealing with deficit hawks, mainly in the GOP, who think the sequester doesn't cut government enough, the slow pace of financial reform, the euro slump, and, of course, lackluster job and economic growth, which is what brought him to Vitamix, to trumpet a success story.

But, we asked him, what about nearly 11.5 million Americans officially unemployed, four million of them long-term unemployed? And that rate hasn't budged since 2011.

TREASURY SECRETARY JACK LEW, United States: We see a long-term unemployment rate that's too high, and it's not OK. It's something that we have to be just vigilant about addressing.

We have got to have economic growth creating enough jobs so that we cannot just deal with the new entries into the labor force and people who are in jobs, changing jobs, but creating enough jobs so that people who've been out of the labor force can get back in.

PAUL SOLMAN: But why don't these people, long-term unemployed, older workers -- I have been covering them lately -- why don't they seem to be your top priority?

JACK LEW: Our top priority is growing the economy and creating more jobs. We can't target where those jobs are created. The decisions are made in businesses like this, where, you know, there's economic activity and people are being put to work.

If you look around, all the packages here that are wrapped in red are for export. People are buying U.S. products because they're quality products. And if we make the things the world wants, we will sell things overseas and we will create more jobs.

I think that older workers are facing different challenges than younger workers. For older workers, the skills that they have, they may need some retraining. And we have some proposals that would help deal with retraining.

There are also challenges when people are out of the work force that they expect to lose some of their relationships and connections. You know, we have to use both official and some of the bully pulpit approaches we have to encourage employers to take another look at older workers who've been out of the work force.

PAUL SOLMAN: Is there something you can do?

JACK LEW: For younger workers, for younger workers, you know, we have to make sure that they get the skills training in elementary, secondary school and in post-secondary school, so they can get into the work force.

We have too many young people who are -- there's a hiatus between their graduating and their entering the work force and getting their first job. And we have to create opportunities that cut across these groups.

PAUL SOLMAN: You were in Europe recently. You're going back to the U.K. for the G7.

You have been telling them to ease up on austerity. Should we ease up on austerity here at home by ending the sequester, say?

JACK LEW: I have been going to our partners in Europe and making the case that they need to get the right balance between growth and austerity. They focus too quickly on deficit reduction and not enough on getting their economy moving.

They're looking at our growth rate, and they're, I think, aware of the fact that we have done something more effective than they did to get out of the recession. Here in the United States, we're probably doing more deficit reduction now than anyone really thought we should be. The sequester took effect not because it was designed to take effect. It took effect because Congress failed to enact a balanced long-term deficit reduction package.

We think that's wrong. We think that the sequester is irresponsible and it should be replaced with a more balanced longer-term approach, and we should remove that drag on the economy and also the specific effects, which are very damaging to the economy.

PAUL SOLMAN: But, from what I'm reading, you're credited with having helped concoct the sequester.

JACK LEW: If you go back to the summer of 2011, we were in a very difficult situation, where congressional Republicans were saying, we will not extend the debt limit, we will force a default of the United States unless something is enacted.

We tried every other option. There was no meeting of the minds on short-term policy. So then the question was, what could be put in place that would be so awful that Congress would never let it happen, so that they would then go to work and enact a balanced plan? And sequester was the result.

The thing that I find truly amazing is that there are members of Congress who are calling the sequester a success, a victory, their policy. They can have the policy. Nobody at the time thought it should take effect. It was meant to be something that would spur action on a more balanced basis.

PAUL SOLMAN: But isn't it an administration's job to figure out how to deal with the Congress that it faces?

JACK LEW: I can tell you it takes two parties for it to work. No one party can make it work.

And I think that the notion -- you know, if you look at what the president has done over the last several years, he has shown in -- time and again that he is willing to go more than halfway to make a reasonable agreement. In his budget this year, he put forward proposals that many on our side say, why did the president put that in his budget? And he put it in to establish clearly that there is a reasonable middle ground where we can have a balanced approach, with some more revenues and some serious savings on entitlement programs.

The question now is, will Republicans come forward?

PAUL SOLMAN: We're in Cleveland, where the foreclosure problem really began. Are you proud of the administration's record on foreclosures, given how many Americans lost their homes?

JACK LEW: I think we have made a lot of progress. There's still more progress to be made.

If you look overall, there's like 6.5 million Americans who've been -- managed to refinance their homes either directly because of what the government has done or because of programs where the private sector moved in and kind of followed in kind.

There's millions more who should be able to refinance their homes. There's no excuse for somebody who is in a home where they can pay their mortgage and they're stuck in a mortgage that's at well above current market rates not to be able to refinance.

Now, we think that's something that we ought to be able to get bipartisan agreement on. I actually am still optimistic we can. I wouldn't want to have to explain to a homeowner, whether it's here in Ohio or in Florida or in Nevada, that when interest rates start going up, they were the only -- they were the ones who couldn't get the benefit of lower market rates.

We're working on what whatever we can do administratively. And I think, in the end, it would require legislation to really help a lot of those families.

PAUL SOLMAN: It's three years since the president signed the Dodd-Frank Wall Street Reform Act. Most of it hasn't been implemented. And a lot of people say it’s Wall Street that's been slowing it down, chipping away at it.

Have you stood up to Wall Street?

JACK LEW: First of all, Dodd-Frank was an extremely important piece of legislation. It created powerful new tools, the first time in two generations that we have new tools to deal with a financial system that clearly had gotten out of control, and in 2008 caused a huge economic crisis.

At the beginning, it was difficult to implement Dodd-Frank. We had this enormous effort as soon as it was signed into law to repeal it. That slowed the process down. We're now in a place where I think there is a shared sense of urgency, certainly an urgency I feel as treasury secretary to get Dodd-Frank fully implemented.

PAUL SOLMAN: Last question, should we be ending the era of too big to fail banks?

JACK LEW: Dodd-Frank was enacted to end too big to fail.

It established as a policy that the federal government cannot go in and bail out banks again. So the question is now asked, do those tools work? And I think it's a little premature to answer, because we're still not across the finish line of implementing all of Dodd-Frank. I think you're seeing the regulators are looking at many of the dials that could be turned to make it more costly to be a big bank by raising capital standards, to make it more difficult to get overextended through the leverage requirements.

So I can't sit here today and see into the future and say with 100 percent certainty that we have succeeded, but I can say with 100 percent certainty we are determined to succeed.

PAUL SOLMAN: Mr. Secretary, thank you very much.

JACK LEW: Thank you. 

5/8/2013 6:22:00 PM

By Terry Burnham

A note from Paul Solman: Former Goldman Sachs trader, biotech entrepreneur, money manager and economics professor at Harvard's Business School and Kennedy School of Government (where he taught me microeconomics), Terry Burnham, now teaching at Chapman College, is best known for his books "Mean Genes" and "Mean Markets and Lizard Brains." But he may be better known to NewsHour viewers from his appearances in stories on the dot.com crash, evolution and economics and the neuroscience of economics.

Burnham says we are headed for another stock market crash and Great Depression, due to the wanton printing of money by central banks like the Federal Reserve.

"How can we believe," he asks, "that printing money will make us rich?" Here's his answer. My skeptical response follows.

Terry Burnham: We are hostages to the destructive actions of central banks. Printing money destroys value. The puzzle is not economic, but rather psychological. Why do we allow Central Bankers to make us poorer and endanger us physically?

Patty Hearst holds an M1 carbine during the April 1974 Hibernia bank robbery. Photo by Federal Bureau of Investigation.

The answer lies in our non-rational brains. One aspect of our psychology, labeled the Stockholm Syndrome, is the human propensity to develop positive feelings towards captors in a form of traumatic bonding.

Nils Bejerot coined the phrase after a 1973 Stockholm bank robbery where four hostages were held for close to a week. Even after being released, the hostages showed sympathy for the robber, and blamed the police. The most famous U.S. incident is that of Patty Hearst, who joined the organization that kidnapped her and took part in a bank robbery with her abductors.

The phrase "economy supported by central banks" generates more than half a billion Google hits. Can it really be true that printing money is going to make us rich? No.

Printing money can destroy an economy, or its effects can be close to neutral. Destruction occurs when the money printing severely distorts economic decision-making. My catastrophic view is that printing money by central banks in recent years has had three main impacts: Printing money destroys wealth. We cannot see the full impact yet of recent printing, but we can look at the last round of printing. After the NASDAQ crash in 2000, the Fed funds rate of very short-term (overnight) interest rates was cut from 6.5 percent to 1 percent. The unemployment rate at the time was a little over 5 percent. The subsequent problems created by the Fed were much larger than any short- term benefits during the low-rate periods. Printing money shifts wealth from the prudent to the profligate.The Federal Reserve is specifically trying to drive down interest rates. Borrowers are happy to pay fewer dollars in interest. For every dollar not paid in interest, there is a saver that is made poorer. To the extent that the Fed is able to reduce interest rates, it transfers money from savers to borrowers. Distorting prices leads to bad decisions.Interest rates are prices and incorrect prices lead to bad choices. The most obvious of these are investments in risky assets because lower risk assets have rates close to zero. We will only see the impact of the bad decisions in the future, but we can be sure they are being made now. DAVID STOCKMAN AGREES WITH BURNHAM: What Are the Risks of Low Interest Rates?

Even the supporters of the Fed's creation of money argue that at best, it would be only slightly positive. So we return to the central question. How can we believe that printing money will make us rich?

To repeat, the answer lies in an economic version of the Stockholm Syndrome. Wikipedia states that the syndrome does not require physical kidnapping, but, citing scholars Dutton and Painter, states, "strong emotional ties that develop between two persons where one person intermittently harasses, beats, threatens, abuses, or intimidates the other."

Imagine that you are a retiree with financial assets of $120,000, which is the median wealth of American retirees. If you invest this money as safely as possible - in 3-month Treasury bills -- you will earn a total of $60 a year in interest before taxes and inflation. So you have barely $1 a week to live on. This is the financial version of intimidation and abuse.

Many of us suffer the Stockholm Syndrome and support the central printers (I mean bankers). The outcome will not be pretty and the guilt lies with the bankers, not with the hostages.

If I'm right, the current "boom" will end with a bang, not a whimper. Or more accurately, perhaps, a deafening thud. The stock market is booming because of the Fed printing money and using it to buy U.S. Treasury bonds.

As a result, the Treasury doesn't need to offer much in the way of an interest rate to attract buyers of its debt. Low interest rates on Treasury bonds punish investors, who become desperate for higher returns. They flood the stock market.

In addition, low interest rates allow speculators to gamble, borrowing cheap to chase higher returns. Again, the cheap money fuels the stock market - and all other speculative markets as well. Why not invest in almost anything if you can do so with money you can borrow, short term, at close to zero percent?

Moreover, as long as the Fed continues to create new dollars and use them to buy U.S. bonds, the bond market will be propped up as well.

I don't know when this will end. Neither does anyone else. But end it will. After that, there are no certainties, only probabilities. But I believe there is a substantial probability that the outcome will be worse than the Great Depression. In retrospect, people will feel contrite about having believed in printing our way to prosperity. But, like Patty Hearst, they will probably tell themselves they had no choice. In any case, it will be too late.

Paul Solman responds: Too much money? Too late? Maybe. Then again, maybe not. Maybe the Fed (and other central bankers) are doing what it takes to reinvigorate economies that have been artificially depressed in the wake of the Crash of '08. Maybe they're being careful about how they do it, by paying interest to banks -- the so-called "Interest on Excess Reserves" (IOER) -- so that the money being created doesn't rush out into circulation. IOER is something we've tried to explain here for years. Maybe they're trying to put the tens of millions of unemployed people in the developed world back to work.

How should one assess Terry's doomsday scenario? It's good to remember that even those who cry wolf are sometimes right. So, is there evidence of wild, unsustainable speculation? A stock market bubble, for example? Well, yes, the market is scaling new heights. But compare it to December of 1999, when the Dow Jones hovered near 11,500. With the Dow at 15,000 today, that's a compound rate of return of less than 3 percent a year, just barely keeping pace with the rate of inflation. In other words, by 1999 standards, the Dow hasn't returned a dime in real, inflation-adjusted returns. So is it really at some kind of new speculative high?

Sure, sure, December of 1999 was the height of the dot.com "bubble." And yes, today's price-earnings ratio of American stocks is higher than average. But at a ratio of something like 20:1, today's P/E is less than half what it was 1999.

Mightn't an alternative explanation to Burnham's and David Stockman's bubble hypothesis be that the stock market is expensive because shares of American companies are actually worth more these days than they used to be? Profits, as opposed to wages, account for a historically unprecedented share of corporate income, but is that a one-off bubble-like event or a function of labor's deteriorating bargaining power, a trend likely to continue?

And what about housing? A speculative bubble? Yes, prices are rallying, but they're still 30 percent or more below their levels of 2006-2007.

Meanwhile, the budget deficit is down, unemployment is down (if still stubbornly high), millions of Chinese and others are still leaving the farm for the city, where they keep world inflation in check by working cheap.

And for all the hand-wringing about a productivity slowdown, technology is working wonders. Hey, with the natural gas revolution, America even has excess fuel to burn!

But perhaps most persuasive, as I suggested to David Stockman when he made this same doomsday argument in an interview the other day, is that world interest rates are at historically unprecedented lows. That simply makes no sense if the world's central bankers, like the Fed, are out of control.

If the Fed and friends are "printing" too much money (they're actually creating it electronically), then interest rates would have to reflect the fact.

What is an interest rate composed of?

Three things:

The value of having the use of the money as opposed to someone else having the use of it. In other words, the rental cost of the money; how much you will get paid to wait for its return.

The risk of default: how much you will get paid for taking the chance that you might not get paid back.

The risk of inflation: that you might get paid back, but in dollars (or yen or euro) that are worth a lot less, in buying power, than when you loaned them out.

So, what are world interest rates right now? Give me a moment while I check the Bloomberg app on my iPhone. Let's see. The United States: 1.76 percent to borrow money for 10 years. No, that must be a mistake. The historical price or rental cost of money or risk-free rate of interest is something like 2 percent, at least. The world's collective investors can't be lending Uncle Sam money for a decade as a gesture of good will, can they?

Oh, and wait a second. I forgot about the default risk. That must be worth a few hundredths of a percent, no? And OMG! We all forgot about inflation. (Let me look that up.) Hmm, inflation is running at an annual rate of 1.8 percent at the moment.

In short, the impossible is happening: investors are lending the US money for less -- much less -- than it figures to be worth when they get paid back 10 years from now.

Oh, but that must be because, as economist Douglas Holtz-Eakin famously pointed out, America "is the best horse in the glue factory." That is to say, people are lending us money (by buying our bonds) for safe-keeping; everywhere else in the world is even riskier. So all we have to do is look at interest rates elsewhere to get a true picture of the money printing madness that's taken hold globally.

Okay, how about England? 10-year bond rate: 1.77 percent. France, one of those countries where they take to the streets if you threaten to cut their pensions? 1.81 percent. Italy, totally dysfunctional, where that Silvio Berlusconi character is still a power broker? 3.83 percent. That's not much more than a bank would charge me and my wife for a mortgage and it's got our house as collateral -- a house in which our equity stake is probably 70 percent.

And in case you (and Terry and David Stockman) remain skeptical, I offer you Japan. Ten-year interest rate? 0.6 percent. Japan. The country where they're desperate to create inflation. The country with a ratio of government debt-to-GDP well above 200 percent while people go nuts in America because, by the most generous reckoning, our ratio has reached 100 percent.

Admittedly, things could change quickly. It was suddenly spiraling interest rates that triggered the demise of AIG, of Lehman, the formal government takeover of Fannie Mae and Freddie Mac.

Admittedly, it is a probabilistic universe and disaster could strike at any time. All one can do is place one's bets. I may wind up feeling as bad about what I'm about to write as Patty Hearst must feel about her stick-up attempt but at the moment, I won't be putting my nest egg on double zero.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow Paul on Twitter. Follow @PaulSolman

By Nick Corcodilos

Ever feel like a company wasted your time after an interview because they never got back to you about their hiring decision? Headhunter Nick Corcodilos says that when employers ignore deadlines for hiring decisions, job seekers have a right to be compensated for their time. Photo by Altrendo Images/Getty Images.

Nick Corcodilos started headhunting in Silicon Valley in 1979, and has answered over 30,000 questions from the Ask The Headhunter community over the past decade.

In this special Making Sense edition of Ask The Headhunter, Nick shares insider advice and contrarian methods about winning and keeping the right job, on one condition: that you, dear Making Sense reader, send Nick your questions about your personal challenges with job hunting, interviewing, networking, resumes, job boards, or salary negotiations. No guarantees -- just a promise to do his best to offer useful advice.

Question: The rudeness of employers seems to be pervasive out there. I had interviews with a company recently. The second round involved four finalists meeting 12 employees over eight grueling hours. In mid-March, they said that they would make a choice by April 1. On April 7, I called the HR person and got her voice mail. I said that, based on the timetable she had provided, I wanted to know their decision and asked her to call me. On April 17, I emailed the hiring manager to reinforce my interest and asked if they had made a decision.

The next day the HR manager responded that they had hired a candidate who had started work the last week of March. She said that a formal notice would be sent to other applicants within the week.

April is over. There's been no notice. One of the other three finalists told me she has heard nothing at all. Are manners and simple courtesy totally dead?

Nick Corcodilos: Job applicants appear promptly for interviews, devote hours of unpaid professional time to an employer, and then wait patiently for a hiring decision by the promised date. And yet a company ignores its own timeline without any update or comment to the candidates. Why? Because candidates are free.

You could be bold instead of free. Send the HR manager -- certified mail with a copy to the hiring manager and the CEO of the company -- an invoice for your time.

Am I crazy to suggest this? Would you be crazy to actually do it? Imagine the note:

Dear [name]:

My time for our first interview was free, as it was an exploratory meeting. You requested more time for the second round of meetings, which I provided at no cost, contingent on your company fulfilling its commitment to respond with a decision by the date you chose, April 1. You ignored my calls, emails, and your own deadline, without the courtesy of a notice.

I am thus billing you for the eight hours of my professional time spent in the second round of meetings with your team. As a professional, I would never dream of being irresponsible with the time of my clients, my vendors, or my employer. Time is money. I live by the deadlines I commit to, and I expect others to do the same. Anything less would be irresponsible to our industry and to our profession. None of us could operate with integrity if we ignored our commitments. This is not a joke. I expect payment within 10 days.

Yours truly,

If this seems extreme, why should it? Is there a more polite way to notify a company that it has erred? Sure -- but you've already done that, several times.

Every day, companies ignore these time commitments with impunity. Why is a deadline for a hiring decision any less important than a deadline to deliver a product to a customer? The company's ability to meet either deadline establishes its reputation. (See "Death By Lethal Reputation.") Yet, while companies worry plenty about dissatisfied customers, they don't give a thought to what other professionals in their industry will say about them.

A job applicant treated with disrespect can do as much -- if not more -- damage to a company's business as a dissatisfied customer. Do employers really think word doesn't get around?

Maybe hiring managers assume that their HR departments handle all the necessary niceties with applicants. But just how accountable are HR departments? Does this company's public relations department realize that while it's spending millions on good press, the HR department is scuttling it? If you're a hiring manager, and you're not sure how job candidates are treated after they leave your office, please read "Respecting The Candidate."

Your HR department might explain that processing applicants, job offers, hires, and rejection letters is cumbersome. Tell that to your customer who cancels the order that's a month late, or to the prospect who's waiting for a sales rep to return her call.

The technology to keep candidates informed is here. The will isn't. Why? Because job candidates don't cost anything. Companies can get all your professional time they want, for free, without any obligation to you whatsoever.

That's wrong. Don't you think it's time for employers to put some skin in the game, if only because it would make them think twice about the costs they impose on applicants?

What if employers had to pay for job interviews? Should you really send an invoice if an employer ignores its obligation to you?

Good questions. Would it make any difference if you actually sent in that invoice? It might, if you copy the company's public relations department and three leading industry publications. (Don't forget to add me to your list.) To paraphrase Arlo Guthrie's song, "Alice's Restaurant," can you imagine 50 people a day sending interview invoices to employers? They may think it's a movement. And something might finally change.

You don't want to ask an employer to pay you for an interview? Then consider Conrado Hinojosa's provocative "The No-Nonsense Interview Agreement."

Bad behavior is un-businesslike. I challenge any HR manager to explain why it's okay to ignore even an implied commitment to a job candidate. If your company shines in this regard, I'd like to hear from you, too. In fact, I'll gladly highlight your company in an upcoming column. In the meantime, I think employers should start paying to interview applicants -- perhaps then they'd behave the way they expect applicants to behave.

Nick Corcodilos invites Making Sense readers to subscribe to his free weekly Ask The Headhunter© Newsletter. His in-depth "how to" PDF books are available on his website: "How to Work With Headhunters...and how to make headhunters work for you," "How Can I Change Careers?" and "Keep Your Salary Under Wraps."

Send your questions to Nick, and join him for discussion every week here on Making Sense. Thanks for participating!

Copyright © 2013 Nick Corcodilos. All rights reserved in all media. Ask the Headhunter® is a registered trademark. This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow Paul on Twitter. Follow @PaulSolman

By Larry Kotlikoff

Social Security expert Larry Kotlikoff makes the case that the program is $220 trillion in the hole. Counter-expert Alicia Munnell disagrees, and shows how little it would take to fill the hole.

Photo by Flickr user Fabricator of Useless Articles/Creative Commons.

Larry Kotlikoff's Social Security original 34 "secrets", his additional secrets, his Social Security "mistakes" and his Social Security gotchas have prompted so many of you to write in that we now feature "Ask Larry" every Monday.

We are determined to continue it until the queries stop or we run through the particular problems of all 78 million Baby Boomers, whichever comes first. Kotlikoff's state-of-the-art retirement software is available, for free, in its "basic" version. His considerable and often very useful output is available on his website.

Stephanie Rosen -- Bronx, N.Y.: None of the NewsHour's recent panel of economists seem to consider the most sensible "cure" for Social Security: RAISE the income level on which Social Security is levied (as the New York Times' recent editorial recommended). Isn't this the fairest method?

Those who are fortunate enough to make higher salaries can likely afford to pay Social Security tax on their higher incomes more readily than every worker having a higher percentage deducted from their salaries for Social Security.

Larry Kotlikoff: I assume you're referring to this discussion on the NewsHour in mid-April. I cannot, of course, comment on why the various panelists did not comment on your (and the Times') supposed fix for the huge Social Security shortfall as we move ahead in time.

However, I can comment on it myself -- and have. In fact, your question has been posed before on The Business Desk. Please see this column: "Why Not Raise the Social Security Payroll Ceiling and Other SS Questions".

The essence of my answer was and remains simple: raising the ceiling on taxable earnings for Social Security would cover only about 60 percent of Social Security's long-term funding shortfall, using an infinite time horizon. Also, the system is already more progressive than most people realize due to its highly progressive benefit schedule. So looking just at the highly regressive nature of the tax itself is not quite fair to high earners.

Paul Solman adds: I too answered this question last summer. At the time, I laid out in somewhat greater detail the financial ramifications of raising the ceiling, as I had in a broadcast story in 2005. So too did Jared Bernstein on The Business Desk in his post "Solving for Solvency: A Menu for Closing Social Security's Long-Term Budget Gap."

Whatever one thinks about fairness to high earners, a discrepancy between Larry's numbers and the others' needs to be explained. Most people project the Social Security deficit no further ahead than to 2075; at the outside, to the next 75 years. Larry projects the shortfall from here to eternity. His calculation of the deficit is therefore larger than the number others come up with. As a result, by Larry's reckoning, removing the ceiling on taxable income would presumably (or conceivably) cover less of it.

Recently, I put a question to another great expert on retirement finance and Social Security, economics professor Alicia Munnell, the director of the Center for Retirement Research at Boston College. I asked about the economic implications of Americans working past the traditional age of retirement:

Paul Solman: When Larry Kotlikoff says that we have a shortfall in terms of what we promised and what we are going to take in of something like $220 trillion dollars, if you buy that number or even if it's a lower number, this is still a drop in the bucket?

Alicia Munnell: So when I'm talking about Larry Kotlikoff, whom I love, I need to separate some things that I agree with him on and some things that I don't agree with him on. I agree with him that the effect is small but I think going around and using this $200 trillion dollar number is not very helpful at all because big numbers happen over a long period of time and other stuff also happens over a long period of time.

Paul Solman: Changes, you mean?

Alicia Munnell: We have benefit commitments, but we also have people earning longer and payroll taxes being paid for longer and perhaps at a higher rate. I find the most useful way to think about the deficit to Social Security is in terms of the payroll tax. So, how much would the payroll tax have to be raised to solve the problem for 75 years, which is the Social Security's planning horizon, and how much would it have to be raised to solve it for infinity? And for 75-year time horizon, the number is 2.36 percent.

Paul Solman: So right now the payroll tax for Social Security is 12.5 percent, split between employer and employee. So it would have to up to something like 15 percent?

Alicia Munnell: Yes. Half. Right. So that's 1.2 percent more from you and 1.2 from the employer. Now think about that number. We recently had a payroll tax cut of two percentage points and I couldn't even tell. And then they raised it again by those same two percentage points and again I couldn't tell. I think some low earners felt it, but there wasn't jubilation when it happened and it wasn't cataclysmic when it went back. From the employee's perspective, the change that we're talking about is half of what we just went through in terms of this payroll tax cut and then increase.

And that's if you say I'm going to solve this whole problem just by raising the payroll tax. If you do anything else -- raise the taxable wage base or do any number of things -- the amount you need to raise from the payroll tax becomes smaller. I think that's a more sensible way to think about Social Security's finances than this $200 zillion trillion dollar shortfall.

To be fair, 75 years is only part of the story because we have an increasing ratio of retirees to workers and so when the 75 year period moves forward, you lose a year of surplus, you pick up a year of deficits. So if you just solve the problem for 75 years, it's not enough. To really solve it, you've got to have something like a 4 percent increase in taxes, 2 percent for you, 2 percent for the employer. But it I think solving it for 75 years would be just fine and all those numbers are manageable.

Larry Kotlikoff responds: First, the infinite horizon projection is not my number. It's calculated by Social Security's Office of the Actuary and reported each year in table IVB6 of Social Security's annual Trustees Report.

Second, I love Alicia at least as much as she loves me. But she surely knows that there is no economic basis for looking out any fixed number of years and saying that's far enough.

The reason economic science doesn't let us look out just 75 years is not only that it ignores the benefits Paul's grandchildren are being promised. The real reason is that nothing in economic science pins down how governments must label annual receipts and payments. Consequently they have complete leeway to choose accounting that pushes recognition of the underlying problem into the distant future while not changing the problem whatsoever. The infinite horizon Social Security shortfall does not suffer from this problem. Moreover, looking out just 75 years repeats the sin Alan Greenspan committed back in 1983 when he and his famous Greenspan Commission claimed to fix the system for good. As you may have noticed, they didn't.

Jim, Inglewood, Calif.: My partner's mother is an unemployed 62-year-old divorcee. She is bilingual and used to work as a travel agent and has been trying to find work for the last three years -- without success. She has no income, no savings, no car and no retirement and is currently sleeping on our couch. I was told that she can take early retirement from Social Security based on her earnings, and then, when she turns 67, she can switch to her former husband's Social Security. Her former husband had a much higher income and he is currently 58 with no plans to retire early. Is that a possible solution for her?

Larry Kotlikoff: Not a fun scene. Your partner's mother can begin her retirement benefit now and when her ex reaches age 62, she can collect an excess spousal benefit based on his work record. Given that she is otherwise penniless, this is probably the best strategy.

Herbert King: I will be 62 on Oct. 8, 2013. When can I apply for my Social Security?

Larry Kotlikoff: You can start collecting your retirement benefits when you reach age 62, but please realize: they will be only 75 percent of what their value would be were you to wait until full retirement age, which is 66 in your case. And they will be roughly 57 percent of what they'd be were you to wait until 70 to collect.

(Our other Social Security expert, Jerry Lutz, adds: You would first be entitled to benefits for November 2013. You could apply as early as July 2013, and your first check would be due to arrive on the second Wednesday of December, 2013.)

Laura Kaplan, Northport, N.Y.: My husband and I lost everything during the economic downturn of 2008-2009. He has been sick for a few years and is now residing in a nursing home. He is 77 and I am 59. It took over a year to get him on Medicaid. He was already receiving his Social Security.

The Social Security checks are still being deposited every month into our joint account. I called the nursing home and was told that his costs are now covered by New York Medicaid. Does this mean I can keep receiving his Social Security checks? Why would they keep sending them to our account if they are supposed to go the nursing home?

Larry Kotlikoff: I am terribly sorry for your situation. Life, as we just saw in Boston, is a terrible game of roulette -- Russian or American -- and we can only survive by grasping at momentary joys, no matter how small.

I am surprised that Medicaid is not taking your husband's Social Security check to pay, in part, for his nursing home costs. I think you had better check with Medicaid. I wouldn't advise taking the risk that they'll surprise you one day with an unmanageable bill for past overpayments.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow @paulsolman

5/6/2013 10:43:00 AM

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JEFFREY BROWN: And now back to the jobs picture.

Despite the good news in today's employment report, nearly two million Americans 55 and older are still out of work.

Economics correspondent Paul Solman looks at the continuing struggles of the long-term jobless in their 50s. It's the latest in an occasional series on older workers and part of his ongoing reporting Making Sen$e of financial news.

JOE CARBONE, President, The WorkPlace: I don't want you to think for a minute that I'm somebody who doesn't understand what unemployment is like.

PAUL SOLMAN: Joe Carbone runs the WorkPlace, a job training center in Bridgeport, Connecticut.

JOE CARBONE: I was unemployed once for eight-and-a-half months. I used to drive 20 miles to do a little grocery shopping so I wouldn't meet anybody who would be able to look at me and ask, “Did you get a job yet?” So, I know what it can do.

PAUL SOLMAN: Given the empathy that Carbone and his staff convey, it's no surprise that the unemployed flock here for emotional support.

WOMAN: I have been on the Internet daily, all day, eight hours a day. I can't find anything.

PAUL SOLMAN: These folks have all been unemployed long-term, and as you may have noticed, most are 55 and older. There's been lots of talk about the improving jobs picture of late, and especially today, when the official unemployment rate dropped to 7.5 percent, the lowest since 2008.

Our own more inclusive measure of the un- and under-employed is down to 16 percent, the lowest since we started tracking it in 2010. But in Bridgeport and at job fairs around the country, the reality is brutal for the more than four million Americans who remain out of work six months or more.

For those 55 and older, it takes about a year on average to find work, longer than for any other age group.

JOE CARBONE: They're carrying a double whammy, not just the long-term unemployment, but they're 50 and older. It makes things that are bad even worse.

PAUL SOLMAN: So, how much of a factor is age in explaining the stunning long-term unemployment numbers? We assembled a group of the jobless to ask them bluntly, is your age the reason you can't find work?

FRANK RENDE, Seeking Employment: Beyond a shadow of a doubt. Beyond a shadow of a doubt.

PAUL SOLMAN: Fifty-nine-year-old facilities manager Frank Rende lost his job four years ago.

FRANK RENDE: We got here in the first place because we were in the highest salary range. We were the first to go. We're going to be the last to come back.

PAUL SOLMAN: Software developer Geoffrey Weglarz, 55, has been looking for two years.

GEOFFREY WEGLARZ, Seeking Employment: I have applied for 481 jobs.

PAUL SOLMAN: But none of them have panned out?

GEOFFREY WEGLARZ: None of them have panned out, no. They think that anybody over a certain age is going to be used up.

PAUL SOLMAN: Longtime admin assistant Debora Ducksworth, on the hunt since '09, says that, paradoxically, experience is now a negative.

DEBORA DUCKSWORTH, Seeking Employment: I have 30 years of experience, and you will see something that says, we want you to have X-amount of skills, but we only want you to have no more than two years of experience.

PAUL SOLMAN: And all they're trying to do there is screen you out?

DEBORA DUCKSWORTH: Exactly. And now I'm thinking, I'm going to be 60 in October. Is anyone ever going to hire me?

ALICIA MUNNELL, Boston College: We actually did a survey a few years ago where we asked H.R. types how they viewed older workers.

PAUL SOLMAN: Economist Alicia Munnell says the human resource managers were skeptical of workers like those in Bridgeport.

ALICIA MUNNELL: They said they worried about their ability to learn new things, about their physical stamina and basically how long are they going to stay. And, so, it's -- when you looked at the whole picture of their assessment of older workers, you really wouldn't go out of your way to hire one.

PAUL SOLMAN: And there's another reason an employer might be loath to hire an older worker: If things don't work out, will they be sued?

Mary Corbin thinks age is the reason she was let go a year-and-a-half ago.

MARY CORBIN, Seeking Employment: No one under 50 was laid off, and it was a large amount of people. In the package that they gave everyone, they emphasized, for signing the package, you will not come back and sue us for age discrimination.

PAUL SOLMAN: And you couldn't afford to not take the severance?

MARY CORBIN: Right. I did finally sign the package, because I needed that income to take care of my family.

PAUL SOLMAN: But, according to Alicia Munnell, employers may simply think they're protecting themselves.

ALICIA MUNNELL: We have these age discrimination laws that may have a perverse effect, in the sense that you get -- you're really locked in once you hire an older worker. You can't fire one, so why hire one to begin with?

PAUL SOLMAN: Event planner Patty Ford has been on the market about a year. She's 57, but:

PATTY FORD, Seeking Employment: My resume only has 10 to 12 years of experience on there.

PAUL SOLMAN: Why?

PATTY FORD: Because that was what I was advised to do, because you don't want people to know how old you are.

PAUL SOLMAN: Geoffrey Weglarz does the same thing.

GEOFFREY WEGLARZ: I cut it off at a certain point. Earlier in my career, I was an actor. So, my career in business, in technology starts 15 years later than they would assume just out of college.

PAUL SOLMAN: Are you are you passing for someone younger?

GEOFFREY WEGLARZ: Yes. There was one time when I was coming in for a face-to-face interview. And the H.R. recruiter saw me, assumed who I was, and his face -- I could just see his face almost fall when he saw me and how old I was. After that, I pretty much got pushed through two of the people I was supposed to talk to. The other three got busy, and I couldn't see them.

PAUL SOLMAN: So, as you're saying that, everybody here is nodding. You have all been through that?

FRANK RENDE: You can just sense, you know, that you're losing your audience.

DEBORA DUCKSWORTH: It's like, I'm going to give her maybe a half-an-hour of my time, but, you know, they're stressing because they really don't want to give you that time at all.

PAUL SOLMAN: Recruiter Nick Corcodilos runs a website for job seekers and also writes the weekly "Ask the Headhunter" column for our Making Sen$e site. Look, he says, an employer can have legitimate concerns about older candidates.

NICK CORCODILOS, AsktheHeadHunter.com: The employer's just trying to figure out who can actually get the job done. So, there are some older workers -- probably a lot -- who simply don't have the skills or the wherewithal to do a certain kind of job. There, it's up to the worker to go out and bring themselves up to speed and do it in an aggressive way, do it as quickly as possible.

PAUL SOLMAN: Moreover, from the firm's perspective, says Alicia Munnell, you will probably get more bang for your buck with a younger hire.

ALICIA MUNNELL: People's salaries go up every year for cost of living and some promotions and productivity growth. And they get more expensive on the health care front just because they have more ailments.

And most of the studies show that people's abilities peak around age 40 and then sort of decline gently thereafter. So, you have this mismatch of sort of rise in compensation, steady at best productivity, and it makes older people not look like such a good deal.

PAUL SOLMAN: That may be why so many older workers are given lower pay if and when they are rehired. Bank executive Mike Leahy was unemployed for two years before he finally found work as a branch manager at a small bank. He took a pay cut of 15 percent.

MIKE LEAHY, Bank Executive: That wasn't unexpected. I was so grateful for an opportunity in a job that I had done before because I really was one of those guys, I really wasn't sure what was going to happen.

PAUL SOLMAN: Do you think that once you're out of work for six months, a year in your case, two years, that you're damaged goods?

MIKE LEAHY: I absolutely believe that the fact that you are not working now and you're of a certain age is the issue.

PAUL SOLMAN: Leahy got the job through The WorkPlace program platform to employment, which matches long-term unemployed with firms that have openings.

MIKE LEAHY: I wake up every day and, believe it or not, I am thrilled to be going to work. I don't think I'm going to lose that for some time. I may not lose that for the rest of my working career, because I know now how fragile this is.

PAUL SOLMAN: Fragile, a good word to describe any job these days and the finances of those who for a long time haven't had one, like Geoffrey Weglarz.

GEOFFREY WEGLARZ: I have gone through my savings. I have gone through my 401(k).

PAUL SOLMAN: Completely?

GEOFFREY WEGLARZ: Completely. My unemployment last check is next week. I have about $2,000 dollars to my name, and, after that, I don't know.

PAUL SOLMAN: And you don't know how you're going to make that up?

GEOFFREY WEGLARZ: I have no fallback position. I'm behind on my mortgage. I'm on food stamps, and I'm on financial hardship for both electricity and for gas.

PAUL SOLMAN: And without that, you would be without electricity and gas?

GEOFFREY WEGLARZ: Yes.

PAUL SOLMAN: And without food stamps, you wouldn't have enough to eat?

GEOFFREY WEGLARZ: After the unemployment runs out, probably.

PAUL SOLMAN: When The WorkPlace's Joe Carbone hears stories like this, he wonders why more isn't being done to help.

JOE CARBONE: We have got special programs here for veterans, and we should, for people with disabilities, and we should, you know, for dislocated workers, and we should. We see a new population that are unemployable because of the length of their unemployment occurring during the worst recession since the Great Depression, and we're just ignoring them, ignoring them.

I can't tell you what that does to me. I love this country so much, but I can't imagine that we would ever leave any of our citizens, any of our brothers and sisters, to be part of a process that's declaring them hopeless. And that's what's going on.

PAUL SOLMAN: A grim assessment for the millions of long-term unemployed still looking for work in a growing economy.

JEFFREY BROWN: Online, Geoffrey Weglarz, the man we heard who's gone through his savings and 401(k), talks more about being a jobless single dad. Plus, Paul Solman has his take on today's employment report. You will find that on our Making Sen$e page. 

5/3/2013 6:21:00 PM

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JEFFREY BROWN: Solid job growth in April and positive revisions to previous months. Today's Labor Department figures eased worries about the U.S. economy.

In all, the economy added 165,000 jobs last month, primarily in the private sector, retail, restaurant and health care industries. The stronger-than-expected hiring helped reduce the nation's unemployment rate a modest 0.10 percent to 7.5 percent, the lowest level since December 2008.

A further key element of today's good news: dramatic revisions upward in the number of new jobs created in February and March by a total of 114,000. With the revisions, February payrolls increased to 332,000 jobs, while March gains stood at 138,000.

White House Council of Economic Advisers Chair Alan Krueger said the hiring numbers reflect an improving job market, in spite of federal spending cuts from the sequester, which he took the opportunity to criticize.

ALAN KRUEGER, Chairman, White House Council of Economic Advisers: Today's report and other data coming in shows the resilience of the U.S. economy. The economy is healing from the scars of the great recession, but there's a ways to go. We're not back to full health. And we could put more people back to work more quickly if we had more sensible fiscal policy coming out of Washington.

JEFFREY BROWN: For its part, Wall Street celebrated today's news, with the Dow Jones industrial average crossing at least for awhile the 15,000 mark for the first time ever. By day's end, the Dow had gained 142 points to close just under 14,974, an all-time high. The Nasdaq rose 38 points to close at 3,378. For the week, the Dow gained nearly two percent; the Nasdaq rose three percent.

And for a closer look at today's numbers, we're joined once again by Lisa Lynch, Dean of the Heller School for Social Policy and Management at Brandeis University. She's a former chief economist at the Labor Department.

Well, welcome back.

So, first, a general reaction first to today's numbers? What do you see?

LISA LYNCH, Heller School for Social Policy and Management at Brandeis University: Sure, Jeff.

Well, it was a good report, certainly better than what many had expected and a marked improvement from the report we saw last month. We -- as you summarized in the report leading up to this, we saw the unemployment rate falling, but for all good reasons, because we added more jobs in the economy, as opposed to people dropping out of the labor market.

We saw the percentage of people who are out of work for six months or more dropping down to 37.4 percent. It was over 40 percent a year ago. It's still high, but that was an improvement. We saw wages up 1.9 percent, keeping pace with inflation. That's good news.

And with those monthly revisions to the prior two months, we're now averaging on a three-month moving average basis over 200,000 net new jobs in the economy. That's taken care of people coming into the labor market.

JEFFREY BROWN: Yes. No, I just want to ask you about the revisions, because they're very large revisions, and I think it's hard for people to understand. How and why does that happen?

LISA LYNCH: So, the Bureau of Labor Statistics goes out and contacts a sample of employers around the country and asks them what's happening to their employment numbers.

And then they also realize that when the economy is improving, you're going to have new firms being created that they won't have in their data set. So they model or they impute a value of new jobs for those new employers. And then what happens is that employers get back to them, some with a delay, and they make revisions to the numbers.

For the prior month, they will they release a preliminary number and they will do two revisions of that number in the next few months, and then at the end of the year they will go back and they will have data for all employment, not just a sample, and they will make a final round of revisions.

JEFFREY BROWN: So, does that raise the -- does all that raise the question of how much we should pay attention or trust any one particular monthly number?

LISA LYNCH: Well, that's why every economist you have ever talked to has always said it's important to look at three months' moving averages and never put any -- too much weight on any one employment report.

JEFFREY BROWN: OK, well, that's good advice. We will always take that.

Now, potential downside in these numbers, a lot of jobs were of the low or moderate paying and part-time work as well.

LISA LYNCH: So we saw an increase of over a quarter of a million people that were working in part-time employment who wanted full-time employment.

We also saw the length of the workweek decreasing. And, you know, we saw that a lot of the jobs that were added were in sectors like temporary employment, the retail sector, restaurants and bars that are typically lower paying and less likely to have benefits associated with them.

JEFFREY BROWN: Can you see any discernible evidence of impact from the sequester at this point? What can be said?

LISA LYNCH: A lot of people we're sort of looking for the fingerprints of the sequester in today's report.

JEFFREY BROWN: Yes.

LISA LYNCH: And I think it's hard to sort of say with any kind of certainty that you see the impact of that. The fact that more people were in part-time employment, but who wanted full-time employment, that might reflect something of the furloughs, but many of the furloughs that the government agencies are putting in place won't really come into play until next month's report.

I think what's harder to pull out from this, but is real in the economy, is the fact that the government isn't making as many purchases, for example, in the defense industry. So that means when we see no growth in employment and manufacturing, part of that is linked to the fact that with the sequester the government is not buying as many of those products.

JEFFREY BROWN: Let me just ask you in our last minute to put your college dean hat on, which you probably never take off anyway, right?

LISA LYNCH: That's right.

JEFFREY BROWN: But you got a lot of students. Students are about to graduate or they're about to try to look for a summer job. What are you telling them? What do you see for them?

LISA LYNCH: So, you know, the bad news here is that for the fifth consecutive year in a row, they're walking out into a job market that is still pretty grim.

The youth unemployment rate for 16-to-24-year-olds is over 16 percent. I mean, it was worse in 2010, when it was close to 20 percent. But what I tell our students is that they have to look at the job market as their fifth course that they take every semester. They have to increase the networking that they're doing. They need to be geographically flexible.

They have to take every informational session they can, not miss an opportunity, and it's going to be harder for them to find a job, but there are jobs out there.

JEFFREY BROWN: All right, Lisa Lynch, thanks so much.

LISA LYNCH: Thank you, Jeff. 

5/3/2013 6:02:00 PM

By Paul Solman

More than 4 million Americans remain out of work for more than six months now. And for those 55 and older, it takes at least a year on average to find work, longer than any other age group. Fifty-five-year-old software developer Geoffrey Weglarz, who has been unemployed for two years, explains why being a jobless single dad can be a blessing, but a costly one.

There is no doubt: the economy is "recovering." You see it in the GDP numbers, where growth has reached its long-term trendline: 2.5 percent. You see it in the housing market, characterized as "surging," with prices up in every major city - on average, 9 percent higher than a year ago. You see it in the stock market, as high as its ever been.

With the release Friday of the job numbers for April, you see it in the unemployment numbers. For a change, both monthly surveys -- of employers and of households -- agree: the economy added at least 165,000 jobs last month and 114,000 more jobs than had previously been reported for February and March.

But then how is it, you may ask, that the official unemployment rate, known as "U-3" in government parlance, barely budged and remains at 7.5 percent?

How is it that our own far more inclusive measure of unemployment and underemployment, the "U-7," is down a tick but still weighs in at a whopping 16 percent?

U-7 includes everyone in the government's U-3: everyone who said they wanted a job and had looked for one in the past 4 weeks. It also adds everyone who said they wanted one, hadn't looked in the past 4 weeks, but had in the past year. (These people are included in the government's most inclusive statistic, U-6). But we also add people who hadn't looked in the past year but still said they wanted a job and would take one. Finally, we add people working part-time, but say they are looking for full-time work, like "consultants" I know, who may have worked only one hour in the week the government survey taker came calling, but are still tallied as officially "employed."

Here is my Solman Scale breakdown of the numbers for April:

How can it be that, were we to compare today's number to unemployment as reckoned in the past (by adding working age Americans who would probably be unemployed, but are instead drawing disability -- more than 8 million, or in prison -- more than 2 million) we would still be near historic post-World War II highs? (See our NewsHour report on the undercounting of unemployment).

How can it be that, that in a "recovery," and by the narrowest (U-3) definition, 9 percent of Latinos, 13.2 percent of Afro-Americans, and 24 percent of teenagers are unemployed, meaning they looked for work in the past week but didn't find even one hour's worth?

How can it be, finally, that 4.4 million Americans continue to be out of work for 27 weeks or more and for those 55 or older, it takes a year, on average, to find a job?

That's the topic of our segment on PBS NewsHour on the Friday evening broadcast as we introduce viewers to a range of capable, earnest and articulate older workers who simply haven't been able to find a job. One of them, 55-year-old software developer Geoffrey Weglarz, who has now taught himself video production, has an especially poignant story to tell.

We met Weglarz at "The WorkPlace," a cutting-edge job training center in Bridgeport, Conn. Weglarz told us he'd been unemployed for 711 days. How did he know the exact number? Turns out he keeps a spreadsheet tracking the 481 jobs he's applied for in the last two years. In the top corner is a tally of the days since he lost his job in April 2011.

Weglarz spoke heartrendingly of the financial and emotional challenges of long-term unemployment, as you can see in the excerpt from our interview at the top of this post.

(We contacted Weglarz on Thursday to follow up and see if he had since gained employment. His response: "Still no job, but getting a little freelance video production work.")

Tune in to PBS NewsHour on Friday for the full story. Watch a live stream of the broadcast at 6 p.m. ET on our Ustream channel or check your TV listings for your local PBS station's schedule.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow @PaulSolman

By Paul Solman

When the Federal Reserve buys up Treasury bonds to keep interest rates low, is this risky? Paul Solman answers a reader's question on the potential consequences and explains why this Federal Reserve practice -- known as "quantitative easing" -- may not achieve its goal of lowering long-term or short-term rates. Photo by Paul J. Richards/AFP/GettyImages.

Paul Solman answers questions from the NewsHour audience on business and economic news here on his Making Sense page. Here is Thursday's query.

Ross Snow, San Francisco, Calif.: What are the longer-term consequences of the Fed's policy of buying up Treasury bonds to keep interest rates low? Is there a big risk concerning that in our future?

Paul Solman:All policies entail some risk. Or, to put it another way, the only law absolutely protected from repeal is the law of unintended consequences.

On the other hand, there's no way to avoid risk - in life or in economics. Economics is, at its core, the discipline of decision -- making that rigorously weighs future costs against future benefits. But because ours is a probabilistic world, all projections of the future, no matter how rigorous, entail uncertainty - and thus risk. To slightly paraphrase Mick Jagger, you won't always get what you want.

So, to your question: what happens when one arm of the government -- the Federal Reserve -- creates money (electronically) and then lends it to another arm of the government -- the U.S. Treasury -- to keep interest rates low and thereby stimulate the economy? Shouldn't the creation of money stimulate inflation as well? Isn't that a steep cost? Is this risky?

Well first, there are two classes of interest rates: short-term and long-term. The Fed can manipulate short-term rates. But long-term rates? Not so clear.

Therefore, when someone asks if the Fed is running a "big risk" by keeping interest rates low, the question is: which interest rates, short-term or long-term?

A big risk of bargain basement short-term interest rates is that they encourage speculation. Vehement on this subject is David Stockman, a veteran of Congress, the Reagan Administration and Wall Street, who thinks the Fed's low short-term interest rate policy is not just risky, but -- well -- here's how he put it in an interview I did with him this week that will air on PBS NewsHour soon:

"It's crazy; it's lunacy. You can't have [rock bottom short-term interest rates] for seven years. You know what that does? It is simply a bonanza for speculators who can borrow the overnight money and then buy something that they can speculate on.

You're creating a system of bubble finance where interest rates are so low that people can speculate that an asset value will go up. So you put it up as collateral, you borrow against the collateral, you take the money and you buy more of the asset. You then take the rising asset, you borrow against it again ...This is what's going on in the world."

Meanwhile, Stockman and others say non-speculators who put their money in short-term investments like a bank deposit or money market account are punished with no return at all.

But most investments are made for longer terms such as a mortgage to buy a house, a 10- or 30-year Treasury bond, a student loan, a municipal bond to build a bridge or school, A corporate loan to build a factory or a car loan, even.

These are all long-term loans, subject to long-term interest rates. What's the risk of Fed intervention here? To be blunt, would the Fed be able to keep them low even if it keeps lending the U.S. government money in massive amounts?

The way it does this lending is by creating electronic money and using it to purchase long-term Treasury bonds -- so-called "quantitative easing." "Quantitative" because it's creating such a quantity of new money; "easing" because the purpose is to bring down long-term interest rates and thereby "ease" the ability to borrow money for long-term investments, especially by businesses, who would then hire more people, who would then spend more, etc.

The crucial and usually unreported point is: Long-term interest rates have seemed almost impervious to the Fed and what it's been doing.

Consider this curious fact: When the Fed first announced its first round of "quantitative easing" back in December of 2008, it bought mortgage-backed securities and bonds issued by the quasi-governmental housing agencies, Fannie Mae and Freddie Mac.

The idea was to bring down mortgage rates from their then-current rate of 6 percent (for a 30-year fixed rate loan). If the housing lenders could borrow money more cheaply because lenders like the Fed would provide it, they could pass on lower interest rates to home buyers.

In March of 2010, the Fed finally ended the program. Mortgage rates had indeed come down a bit -- down to 5 percent. So perhaps that was an indication that the Fed's plan had in part succeeded. But the Fed was about to stop buying, presumably figuring the housing market was about to return to normalcy. The risk: that mortgage rates would go up.

"When the Fed stops buying and cedes the playing field to private investors," CNN reported at the time, "they will almost surely demand better return for their risk." "'Rates are going to be higher than they are now,'" said Brinkmann." (CNN was quoting Jay Brinkmann, chief economist for the Mortgage Bankers Association.) "How much higher is the question," concluded CNN. And that was the only question most observers were asking.

So, what happened to mortgage rates after the Fed stopped buying? To the shock of everyone who thinks the Fed determines long-term interest rates -- that is, just about everyone who comments on such matters -- the rates went down. And down. And down some more -- to today's 3 percent or so.

That was the record of QE1 (the policy, not the boat). QE2 began in the fall of 2011. With the economy still a-swoon and unemployment unacceptably high, the Fed announced it would begin buying bonds again. But this time, the Fed would buy not mortgage securities but Treasury bonds: US government debt. Massive amounts of it. Interest rates would go down. The economy would revive.

But again, let's look at the numbers -- what actually happened. In November of 2010, when QE2 kicked off, the interest rate the Treasury paid to lenders in order to borrow money for 10 years was 2.67 percent. So when the "lender of last resort" -- the Fed -- stopped buying Treasuries at the end of June, 2011, the interest rate on the 10-year bond had to be lower, right? Okay, you take a guess: how much lower? What, in other words, was the effect of the Fed buying "Treasuries" to lower U.S. interest rates?

Actually, the effect was, as they say in the world of medicine, "paradoxical." On June 30 of 2011, the interest rate the U.S. Treasury had to pay to borrow money for 10 years was 3.18 percent. The interest rate had not gone down, but up -- it had gone up substantially.

And now, at last, we have QE3. It was formally announced on September 13 of 2012. The 10-year interest rate at the time? 1.75 percent. The 10-year rate today? 1.63 percent. A slight change at best.

The punchline with regard to the all-important long-term interest rates should be clear: the Fed's influence is debatable.

Final question, then: if the Fed isn't determining long-term interest rates, who or what is?

Playing off posts on this page by economic historian Jim Livingston, let me offer this possibility: that the world has what Fed chairman Ben Bernanke dubbed, in 2005, a "global savings glut." In short: too much capital, chasing too few investment opportunities. It's an argument for another day, another post. But think about it.

Maybe the business sector of 2013 doesn't need capital (stored wealth) the way it did in the past. No more railroads. No more steel mills. No more coal mines. In their place, software companies, which require relatively little investment to start and even get up to speed.

Again, this is a thought for another day. But it's worth considering when blaming the Fed for taking undue risks.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow @PaulSolman

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JUDY WOODRUFF: As we mentioned earlier, the Federal Reserve today was critical of current fiscal policy in Washington. In a statement issued after their regular meeting, Fed governors wrote cuts in government spending are -- quote -- "restraining economic growth."

We look at the renewed debate surrounding spending and austerity now. Robert Kuttner is a founder and co-editor of The American Prospect magazine. He's the author of a new book, "Debtors' Prison: The Politics of Austerity vs. Possibility." And Kevin Hassett, an economist who has written papers on this subject. He served in Republican administrations and is now the director of economic policy studies at the American Enterprise Institute.

Welcome to you both.

And, Robert Kuttner, to you first. Let's start with the United States. What are some examples of policy right now in this country that you believe are hurting economic growth?

ROBERT KUTTNER, The American Prospect: Well, we had the New Year's deal that President Obama made with the Republicans that was supposed to head off the so-called fiscal cliff.

That took about $200 billion dollars out of economy. We raised Social Security taxes two points. We raised taxes on the top one percent, and then to compound the damage, we have the sequester, which was executed in March.

So, those two things together, according to the Congressional Budget Office, which is a bipartisan outfit, cut the growth rate by -- in half this year from a projected three percent to a projected 1.5 percent. If you are in a depressed economy and you reduce purchasing power further, you are only going to make the economy more depressed, and far from getting closer to an improvement in debt ratio, you are going to reduce the GDP relative to what it would have been and so the debt ratio is going to get worse.

So, we have had a real-time experiment both in the United States and in Europe in the failure of austerity policies to dig the economies out of the hole they are in.

JUDY WOODRUFF: Kevin Hassett, do you accept his examples as a sign that growth has been cut and this is how?

KEVIN HASSETT, American Enterprise Institute: Sure. Yes.

Absolutely, Robert's numbers are very precise and accurate. I mean, the 1.5 percent is the CBO estimate. I did my own back of the envelope on the car over, and it was about the same. But the fact is, I think that we need to step back and think about what is going on in Europe and all the unrest and put it in a slightly longer-term perspective to understand where we are and what policy decisions we have to make.

The fact is that before the crisis the government spending to GDP in the typical industrialized country all in counting state and local was about 39 percent. Because of expansionary Keynesian policies, but also built-in stabilizers like having to pay more unemployment insurance for folks and so on, it jumped up to about 44.5 percent.

JUDY WOODRUFF: You are saying there's a lot of spending going on?

KEVIN HASSETT: Yes. But it's still way above where it was before the crisis.

So, in the average industrialized country, it's gone from about 44.5 to 42.5, which is still above where it was before the crisis, and so there have been reductions. They have reduced growth relative to the peak. But at some point, you kind of run out of money if you keep spending -- deficit spending up around nine, 10 percent.

And so the governments have had to ratchet back because they had pursued Keynesian policies. And now they're coming back and we're in the hangover period.

JUDY WOODRUFF: Now, you are folding Europe into this conversation. I was trying to keep them separate. But maybe that's not possible.

KEVIN HASSETT: OK. Sure.

JUDY WOODRUFF: Robert Kuttner, what about that, the fact -- his point is pretty clear that the spending was just practically out of control before, and, yes, there have been some cutbacks, but not very much?

ROBERT KUTTNER: You know, it really wasn't out of control.

The biggest single source of the increased deficit was the recession. And let's not forget what caused the recession. It wasn't government spending being out of control. It was a financial collapse made on Wall Street. And if you have a financial collapse, the government collects less revenue and spends a little bit more on things like unemployment compensation and food stamps, and so the deficit goes up.

But it doesn't logically follow that you can get a recovery going by cutting the deficit, because the only thing that is keeping the economy afloat, given the weakness of wages and salaries and private demand and private investment, what is keeping the economy afloat is deficit spending, public spending.

And so the time to get the deficit under control is when the economy is booming. It's not when the economy is in a ditch. And that's why these policies don't work.

JUDY WOODRUFF: What about that? And that is part of what the Federal Reserve said today.

KEVIN HASSETT: Right.

Well, the problem is that a Keynesian policy is well-designed if you can do it right.

JUDY WOODRUFF: And Keynesian plan meaning ...

KEVIN HASSETT: Which means spending, trying to drive up government spending in order to drive growth -- is perfect if you look at the historic recession that lasted about 11 months and then we grew about 6.5 percent the year after.

If we could take some of the government spending from the 6.5 percent year, move it into the year where we have a recession, then of course it's a good idea if you can do it. The problem is that we're in a protracted period of slow growth. And we're trying to build a kind of Keynesian bridge, a government spending bridge to when we're growing stronger.

But the evidence -- the other Reinhart and Rogoff evidence from a different study is that it usually takes about a decade to recover from a financial crisis. And so spending our way out of that is a really, really hard thing to do. And governments haven't been able to sustain it and that's why pretty much across the industrialized world, everybody has been cutting back on spending and increasing taxes to try to get ahead of the curve on deficits.

JUDY WOODRUFF: What about that point? Robert Kuttner, you are shaking your head.

ROBERT KUTTNER: Well, it takes a decade to get out a crisis or it takes a year or two depending on what government does.

What Europe has demonstrated is, if you put the whole economy in a debtor's prison, it is going to take twice as long, three times as long. The reason I call it a debtor's prison is that if you put somebody in a debtor's prison, you ruin their ability to earn a living and they can't help themselves, they can't help their creditors.

There's a terrible double standard in debt. We have done some work on this at Demos, where I'm a senior fellow. A corporation can get out from under debt by declaring Chapter 11. But a student debt carries that student to his or her grave. If the parent co-signs the student loan and the student dies, the parent is still responsible.

We have a trillion dollars of student debt. What a thing, what a gift to give the next generation. Mortgage holders can't declare Chapter 11, but corporations can. So, there are huge double standards here. And Europe just demonstrates that you can't deflate your way to recovery.

The way to get the debt ratio down is to get a recovery going. World War II is history's great example. We went from 12 percent unemployment to zero percent in the course of six months because government spent serious money. And then we grew out way out of that. So, I think the whole view that let's tighten our belts and the economy will recover is just being refuted day by day.

JUDY WOODRUFF: You not only argue, Kevin Hassett, that belts should be tightened. You argue for much deeper cuts in entitlement programs like Social Security, Medicare in this country and the equivalent programs in Europe.

KEVIN HASSETT: That's right.

The economist's language for it is a fiscal consolidation. And there have been many studies of fiscal consolidations that suggest that a country has a better long-term growth prospects if it gets ahead of the curve on debt. But you need to do it in a measured way. You don't want to front-load all the pain right now.

And I would actually agree with Robert. If you look at European nations, for example, they have had a heck of a lot of contraction, of contractionary fiscal policy. And Robert was good to mention the tax increases here in the U.S. They have had tax increases like that in Europe throughout Europe and spending cuts. And they have front-loaded them. So, they really have cast Europe into a recession with this austerity in some pockets.

But don't forget the reason they are doing it is that nobody really wanted to lend to Greece because their deficits were so large, their policies were so unsustainable that the country looked like it might go bankrupt.

JUDY WOODRUFF: Let's end by asking you both what you think needs to be done right now in the United States if you could wave a magic wand and have Congress do it.

Robert Kuttner?

ROBERT KUTTNER: Well, I don't think you should have the kind of grand bargain that President Obama is talking about with the Republicans, where you cut Social Security, you cut Medicare, and in exchange the Republicans agree to raise taxes and you have 10 more years of austerity.

I think, in the next year or two, until the economy gets back on its feet, you need public spending to put people back to work, rebuild the infrastructure that would make the economy more competitive. And then, when you get back to something close to full employment, people have jobs, people are paying taxes, then you can start reducing the debt because you have a higher growth rate, and the debt starts coming down, the debt ratio, that is, of its own accord. That's the time to rebalance.

JUDY WOODRUFF: And would that be your remedy?

KEVIN HASSETT: I think the thing that should be the headline for listeners is not necessarily what I want, but what has already happened.

If you look at the CBO's analysis of what President Obama and the Republicans have already agreed to, then they have stabilized the debt at a pretty reasonable level, about the average of the last 20 years, relatively quickly. And my guess is, given that, there's going to be a lot of posturing in Washington, but in the end, they are probably not going to do much more either way. There won't be more tax increases. There won't be more big spending cuts.

It might be different from what I would want, but I think listeners should know that despite all the rhetoric, they have made a lot of progress already.

JUDY WOODRUFF: Well, the debate -- and it is a debate -- goes on.

Kevin Hassett, Robert Kuttner, thank you both.

ROBERT KUTTNER: Thank you.

KEVIN HASSETT: Thank you. 

5/1/2013 6:14:00 PM

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HARI SREENIVASAN: A wave of bombings across Iraq killed at least 15 people today. Dozens more were wounded. The deadliest incident took place east of Fallujah. A suicide bomber targeted anti-al-Qaida Sunni fighters as they were being paid. Six people died there. The attacks continued a surge of sectarian violence that erupted in late April.

In economic news, the Federal Reserve warned there's evidence that budget cuts and the resumption of higher Social Security taxes are restraining growth. It said it will continue its stimulus measures for now. The Fed statement helped drag Wall Street lower. The Dow Jones industrial average lost nearly 139 points to close below 14,701. The Nasdaq fell 29 points to close at 3,299.

April was a good month for car and truck sales, the best in six years, in fact. Ford's U.S. sales rose 18 percent, while both Chrysler and General Motors saw an 11 percent increase. A rebound in pickup truck sales led the way for the Detroit automakers, partly due to rising demand from home builders and other businesses.

President Obama today nominated a new overseer for two mortgage lending giants and a new chief regulator of the telecommunications industry. North Carolina Democratic Congressman Melvin Watt was the choice to lead the Federal Housing Finance Agency, which governs mortgage giants Fannie Mae and Freddie Mac. Tom Wheeler, a former cable and wireless industry lobbyist, was selected to head the Federal Communications Commission.

The president announced the nominations at a White House ceremony with both men by his side.

PRESIDENT BARACK OBAMA: Mel has led efforts to rein in unscrupulous mortgage lenders. He has helped protect consumers from the kind of reckless risk-taking that led to the financial crisis in the first place, and he has fought to give more Americans in low-income neighborhoods access to affordable housing.

For more than 30 years, Tom has been at the forefront of some of the very dramatic changes that we have seen in the way we communicate and how we live our lives. He was one of the leaders of a company that helped create thousands of good high-tech jobs.

HARI SREENIVASAN: The two nominations are subject to Senate confirmation.

Thirty-two mentally disabled men in Iowa won a jury award of $240 million dollars today from a defunct Texas firm. Starting in the 1970s, the men worked at a turkey processing plant. Investigators testified they were held in virtual enslavement. They were housed in a rundown, rat-infested bunkhouse and paid just $65 dollars a month. The conditions were discovered in a 2009 inspection.

A veteran congressman and a former Navy SEAL will face each other in the race for a U.S. Senate seat in Massachusetts. Rep. Ed Markey won the Democratic nomination in yesterday's primary, and Gabriel Gomez won a three-way Republican primary. They are vying for the Senate seat vacated by John Kerry when he became secretary of state. The election will be held eight weeks from now, on June 25^th.

Those are some of the day's major stories -- now back to Judy.

5/1/2013 6:10:00 PM

By Paul Solman

Is age discrimination a hushed secret or a blatant action by employers filling vacant jobs? Nick Corcodilos explains why the practice continues despite some companies' worries that they are losing out on the institutional knowledge and experience that older workers can bring to the table. Photo from Getty Images.

Paul Solman answers questions from the NewsHour audience on business and economic news here on his Making Sense page.

James -- New York: Why aren't you addressing blatant age discrimination?

We have millions out of work and they are being denied jobs not because of the skill set but because the younger hiring managers won't hire them or pay them.

I had changed careers by 36 and by 38 I was facing agism. What is being done about that? The Equal Employment Opportunity Commission (EEOC) isn't really reaching people with public service announcement about age discrimination either.

Paul Solman: A blatant question about blatant age discrimination deserves a blatant response. Our job expert, Nick "Ask the Headhunter" Corcodilos gave one in an interview for an upcoming story that will run on PBS NewsHour Friday.

Here is the transcript from our discussion.

Paul Solman: How big a problem is age discrimination or are people just using it as an excuse for the fact that they're older and can't get jobs because their skill are obsolete?

Nick Corcodilos: There is age discrimination, but I think there are two kinds. One is when the employer is discriminating for specific reasons and doing it intentionally. For example, I had one human resources (HR) executive explain to me, "Well, older workers just have a shorter shelf life; they're probably not going be on the job as long as a younger one, so we really try to be careful about who we're hiring." It's always with sort of a wink and a nod.

The other is where you have managers who really aren't looking to discriminate but feel a little on edge because the candidate they're talking to is older. Sometimes they can even smell age concern on the part of the candidate and they wind up discriminating almost unconsciously.

Paul Solman: It's obvious that age discrimination hurts older workers. But you have argued that it hurts employers even more.

Nick Corcodilos: I think that the big age problem in the job market today is really on the part of employers and that they don't seem to be calculating the cost of age discrimination to them when they practice it. You'll get companies who on the one hand tell us that they're losing this great institutional knowledge and they worry about baby boomers growing older and retiring and taking all this expertise away. But on the flip side, you see that the recruiting and hiring methods as we've discussed before just make absolutely no sense in that regard.

Nick is talking about our story on the futility of Internet job search, which we chronicled last year.

Nick Corcodilos cont.: The point is, whether they're doing it tacitly or implicitly, employers are discriminating against older workers and then they are actually complaining about the fact that the folks who are working today are growing older, that baby boomers are starting to retire, that they're losing all this institutional knowledge and expertise.

Meanwhile, they're actually recruiting in a way that discourages hiring older workers, turns older workers away.

So there's just a huge disconnect and I think that stems from the fact that HR practices and good business practices just don't walk hand in hand anymore, they're very separate from one another.

Paul Solman: Why would this disjunction be occurring? How can you say, on the one hand, "we need institutional knowledge" and on the other hand be discriminating against older workers by pushing them out or not hiring other older workers with institutional or knowledge or experience? Is it just that they don't think? Is it all subliminal and they don't realize what they're doing?

Nick Corcodilos: Well on a strategic level, employers really are behaving stupidly. Look at how they do recruiting: this automated process under which they will publish a job description chock full of so-called "key words", and then have software algorithms that attempt to match applicants to the resumes against those key words.

So where in the key word collection do we capture institutional knowledge? No one advertises for that. Of course they don't.

The problem is that they are losing candidates through this process; a human being would be able to judge as possessing institutional knowledge. And only a human being would be able to assess whether candidates are capable, personality-wise, of sharing and disseminating that institutional knowledge to help other newer and younger workers.

Paul Solman: But they can't just be stupid can they? This must be a side effect of the technology. People who are looking to the bottom line and trying to maximize their profits, their efficiency, their efficacy, wouldn't continue to behave stupidly if they knew they were.

Nick Corcodilos: I think stupidity in business is really an interesting thing. What winds up happening is a disconnect between your company's strategic management and then your more applied on-the-street management.

I guarantee with you that the board of directors of most companies has no idea what the costs of hiring people really is in the HR department. An online job search seems cheaper. But what HR is doing is turning away valuable candidates. They're experiencing false negatives. That means the right person applies for the job electronically but the algorithm kicks them out so they lose that individual.

Paul Solman: Are you suggesting that the whole push towards maximizing shareholder value of the past few decades is self-defeating for companies because it's made them cut their HR budgets to a point that they just aren't getting good people anymore?

Nick Corcodilos: No. I think what's happening is companies are trying to maximize shareholder value and I think they realized that if they could hire more effectively, they would.

What I'm suggesting, though, is that human resources departments in most companies have become so detached -- have become such a bureaucracy -- that they have become clueless. They don't realize that the processes they have put in place have very little to do with recruiting, retaining and bringing on talent.

So while I agree that that maximizing shareholder value is going on at the board level and at top executive levels I don't think it's going on in the HR department.

I feel sorry for HR people nowadays.

HR is marginalized. No one really pays much attention to what's going on in HR and HR struggles with the fact that what is prevalent in America today is job boards, huge databases that we use to recruit and hire people.

What winds up happening? Last year, one recruiting channel sucked up over a billion dollars worth of money from our employment system. One job board. And the other job boards suck up money too.

When you look at recent surveys, companies that were surveyed say that one company was the source of their hires 1.3 percent of the time. So 1.3 percent of all hires come from this one channel and yet we spent almost a billion dollars recruiting through it. It simply doesn't work and yet HR is basically saddled with using this kind of system.

So when you're not recruiting effectively you're not recruiting properly through a certain channel, like a job board, then what's left of you? I don't believe HR's been able to figure that out. They need to go back to the way they used to do it. They complained that they got so many millions of applicants, they couldn't possibly spend the amount of human time on all those applicants. But they could solve the problem tomorrow if they stopped soliciting millions of applicants through job boards.

If they went back to using personal contacts and having their own employees go out there to find, recruit, bring in good people, they could personalize the process, make it more intelligent, more pragmatic. And guess what? Better for stockholders.

Paul Solman: But does that explain older worker discrimination?

Nick Corcodilos: To a significant extent, but not entirely. I really think you cannot separate the money from the age. When employers discriminate over age, they're also discriminating over money. Older workers tend to make more money, especially the higher up you go, and companies don't want to spend the money. They want to spend less. Peter Capelli, down at Wharton, has done research on this and has demonstrated that companies seem to be looking for employees who can do X, Y and Z, who can hit the ground running immediately, the perfect candidate, but they don't want to pay the market rates.

Paul Solman: So what's an older worker to do? Accept lower pay, I guess. Any strategic advice?

Nick Corcodilos: I really don't think that an older worker can stop age discrimination, but you can successfully distract the employer from that issue if you focus on the reason they really want to hire you and that can make you more successful. It's up to you to demonstrate that.

Realize that there are really two costs to employers of not filling a job promptly. One is the job remains undone, though companies seem to have really lousy accounting practices when it comes to figuring out what it costs to keep a job vacant. They know what it costs to fill a job, they don't know what it costs to keep it vacant for a long time. So they're losing that way.

The other component is they're missing out on phenomenal skills and capabilities of experienced older job hunters: wealth of knowledge, expertise, seasoning, maturity. Companies need to be reminded of that.

But remember, the word "discrimination" isn't always pejorative. When an employer discriminates because an older worker lacks certain kinds of skills that are important in the market today, then it's almost a legitimate form of discrimination because the employer is just trying to figure out who can actually get the job done.

So there are some older workers -- probably a lot -- who simply don't have the skills or the wherewithal to do a certain kind of job. There, it's up to the worker to go out and bring themselves up to speed and do it in an aggressive way, do it as quickly as possible.

Paul Solman: Aren't employers afraid to get rid of older workers because they're afraid the older worker's gonna sue them for age discrimination?

Nick Corcodilos: Sure, some employers are are afraid of letting older workers go because they think they're going to get sued. And they probably will get sued. But the reality is, you could get sued at any time by any kind of worker. I think its incumbent on an employer, if they want to be smart, to figure out what is the benefit of keeping this employee or letting them go. Do the calculation and just go ahead and either keep them or let them go based on what's good for the business. You can't sit there and do calculations based on the legal risk.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow Paul on Twitter. Follow @PaulSolman

By Nick Corcodilos

Photo by David McNew/Getty Images.

Nick Corcodilos started headhunting in Silicon Valley in 1979, and has answered over 30,000 questions from the Ask The Headhunter community over the past decade.

In this special Making Sense edition of Ask The Headhunter, Nick shares insider advice and contrarian methods about winning and keeping the right job, on one condition: that you, dear Making Sense reader, send Nick your questions about your personal challenges with job hunting, interviewing, networking, resumes, job boards, or salary negotiations. No guarantees -- just a promise to do his best to offer useful advice.

Question: Can you please summarize the Ask The Headhunter (ATH) job hunting strategy and explain the main differences between ATH and the traditional approach to job hunting? Thanks.

Nick Corcodilos: I've been holding back this question (and my reply) for a good occasion, and I think this is it.

On Tuesday, April 30 at 1 p.m. ET, I am participating in a live Ask The Headhunter Chat on PBS NewsHour's website. I've invited our audience to pound me with in-your-face questions for an hour, about the most daunting problems and challenges you face when job hunting (and, if you're an employer, when you're recruiting and hiring.)

Let's take your questions one at a time.

Here's Ask The Headhunter in a nutshell. Because I can't explain all these tips in detail in one column, I've included plenty of links to related articles. I hope you find this summary a helpful resource whether you attend today's chat or not.

1. The best way to find a good job opportunity is to go hang out with people who do the work you want to do -- people who are very good at it.

Insiders are the first to know about good opportunities, but they only tell other insiders. To get into an inside circle of people, you must earn your way. It takes time. You can't fake it, and that's good, because who wants to promote (or hire) the unknown? Start by identifying an online (or in-person) professional community where you can meet people who do the work you want to do. Join, participate, and start contributing to the dialogue.

(Here's another angle on how to get in the door: "Meet The Right People."

2. The best way to get a job interview is to be referred by someone the manager trusts.

Between 40 and 70 percent of jobs are filled that way. Yet people and employers fail to capitalize on this simple employment channel. They pretend there's some better system -- like job boards. That's bunk. If companies took more of the money they waste on the big job boards and spent it to cultivate trusted personal contacts, they'd fill more jobs faster with better hires.

There is nothing more powerful than a respected peer who puts her good name on the line to recommend you. Deals close faster when the quality of information is high and the source of information is trusted. There's nothing easy about earning such a referral--you must actively cultivate relationships with people close to the managers you want to work for. Like it or not, you already know that this is how managers select most of their new hires. Be the person an insider recommends. But getting recommended means knowing "The Right Way to Get Coached."

3. The best way to do well in a job interview is to walk in and demonstrate to the manager how you will do the job profitably for him and for you. Everything else is secondary (or a total waste of time).

Don't believe me? Ask any good manager, Would you rather talk to ten job applicants, or meet just one person who explains how she will do the job to boost your company's profitability? I have no doubt what the answer is. But it's up to you to research and study the business (not just the job description) before you approach the boss.

Here's the cold truth: If you can't do that, you have no business in the interview. The good news is, when you're prepared on this level, and when you've chosen a job carefully enough that you are willing to do such preparation, you will have virtually no competition. (For more on this, please see "The New Interview."

4. The best way to get a headhunter's help is to manage your interaction for mutual profit from the start.

Hang up on the unsavory charlatans who are dialing for dollars, and work only with headhunters who treat you with respect from the start. (How can you tell the difference? Read "How to Judge A Headhunter.")

Instead of "pitching" yourself to a good headhunter, hush and listen patiently to understand the headhunter's objective. Proceed only if you really believe you're a match. Then show why you're the headhunter's #1 candidate by outlining how you think you can do the job profitably for his client. Headhunters adopt candidates who make the headhunter's job easier, and who help the headhunter fill the assignment quickly. (Surprise: If you follow suggestions 1-3 carefully, you won't need to rely on a headhunter.)

That's Ask The Headhunter in a nutshell. If you wonder whether it really works, take a look at comments from people who've tried it: "Thank You, Masked Man."

What's the main difference between Ask The Headhunter and the traditional approach?

It's pretty simple. The traditional approach is "scatter shot." You blast away at companies with your resume and wait to hear from someone you don't know who doesn't know you. Lotsa luck. (ATH regulars know that I never actually wish anyone luck, because I don't believe in it. I believe in doing the work required to succeed.)

ATH requires careful aim. You must thoughtfully select and target the companies and jobs you want. It takes a lot of work to accomplish the simple task in item three above. There are no shortcuts. No one can do it for you. If you aren't prepared to do it right, then you have no business applying for the job, and the manager would be a fool to hire you. (This approach is detailed in the PDF book, "How Can I Change Careers?", which does double-duty for anyone who wants to stand out in the job interview. See the link at the end of this column.)

I'll leave you with a scenario that illustrates why the traditional methods don't work well. You walk up to a manager. You hand her your resume -- your credentials, your experience, your accomplishments, your keywords, your carefully crafted "marketing piece." Now, what are you really saying to that manager?

"Here's my resume. Now, you go figure out what the heck to do with me."

Managers stink at figuring that out. You have to explain it to them, if you expect to stand out and to get hired. Do you really expect someone to decipher your resume and figure out what to do with you? America's entire employment system fails you every day because it's based on that passive mindset.

The most potent job candidate keeps the resume in her pocket and says to the manager, "Let me show you what I'm going to do this job to make your business more successful." Then she outlines her plan -- without giving away too much.

Your competition is the person who can do that in a job interview, whether she learned this approach from me or whether it's just her common sense. Long-time ATH subscriber Ray Stoddard puts it like this:

"The great news about your recommendations is that they work. The good news for those of us who use them is that few people are really willing to implement what you recommend, giving those of us who do an edge."

I hope these "nutshell" tips and today's Ask The Headhunter Chat help you get an edge in this difficult job market. We will continue to discuss the details of the methods outlined above in upcoming columns.

Nick Corcodilos invites Making Sense readers to subscribe to his free weekly Ask The Headhunter© Newsletter. His in-depth "how to" PDF books are available on his website: "How to Work With Headhunters...and how to make headhunters work for you," "How Can I Change Careers?" and "Keep Your Salary Under Wraps."

Send your questions to Nick, and join him for discussion every week here on Making Sense. Thanks for participating!

Copyright © 2013 Nick Corcodilos. All rights reserved in all media. Ask the Headhunter® is a registered trademark. This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow Paul on Twitter. Follow @PaulSolman

By Larry Kotlikoff

If you outlive your life expectancy, economist Larry Kotlikoff says you will want the highest possible Social Security check. If you don't, you won't need one.

Image by Tetra Images/Getty Images.

Larry Kotlikoff's Social Security original 34 "secrets", his additional secrets, his Social Security "mistakes" and his Social Security gotchas have prompted so many of you to write in that we now feature "Ask Larry" every Monday.

We are determined to continue it until the queries stop or we run through the particular problems of all 78 million Baby Boomers, whichever comes first. Kotlikoff's state-of-the-art retirement software is available, for free, in its "basic" version. His considerable and often very useful output is available on his website.

Joe Ruthenberg -- Vista, Calif.: How many years will it take me to recover passed over benefits if I wait until age 70? At age 66, I will receive $1,512. At age 70, $2,119 per month.

Larry Kotlikoff: You seem to be thinking something like, "Gee, if it takes me 15 years to break even after waiting until 70 to start collecting and my life expectancy is only 82, it doesn't make sense to wait." This is not the right way to think about waiting to collect. The reason is that you won't die precisely at 82 or whatever your life expectancy happens to be.

Look at the actuarial tables used by Social Security (though they figure to underestimate longevity, since they date from 2007 and life expectancy has grown since).

Here are the 2007 projections for the ages at which you might make a Social Security decision, 62 to 69. The first column is age; the second, the odds of your dying in the next year at that age, if you're a man. The third column lists the number of years of life expectancy left, on average (again, for men). The next two columns provide the same data for women.

62 0.013 19.4 0.008 22.3

63 0.014 18.7 0.009 21.5

64 0.015 17.9 0.010 20.7

65 0.017 17.2 0.011 19.1

66 0.018 16.5 0.012 19.3

67 0.020 15.8 0.013 18.3

68 0.021 15.1 0.014 17.6

69 0.023 14.4 0.016 16.8

In other words, if you are a woman who has just turned 66, the odds of your dying in the next year, knowing nothing else about you, are .012, or about 1 in 80. Your life expectancy is 66+19.3 = 85.3. But that's an average. In other words, half of all 66-year-old women will live to less than 85 but fully half will live to be even older.

Now suppose you live to 100. Here's the line from the Social Security's actuarial table; again, from 2007, the latest year available:

100 0.362 2.1 0.311 2.4

So even a centenarian can be expected to live another two years. Such a person will have lost big time from taking benefits early: as much as several hundred thousand dollars, in today's money.

But, you are probably asking, what if you wait to collect and do happen to die early? The way I think of it, you will be in heaven, where you won't need money. So I just can't see the downside of waiting in order to protect yourself from the worst case scenario, namely, living to your maximum age of life and in the process, out living your savings.

Therefore, unless you have no other sources of income and really can't wait until age 70, please do wait. (By the way, I'm assuming you are single and have no access to spousal benefits from a former spouse. Otherwise, my answer might be different.)

John -- New Hope, Penn.: I am 69 and two months; my wife is 62 and eight months. We have a 22-year-old daughter in college. How can we structure any income from Social Security at this point to help pay for tuition, etc.?

Larry Kotlikoff: Technically, you can file right now for your retirement benefit and suspend its collection, then wait until 70 to start collecting it at its highest value. Doing so would let your wife immediately begin to collect her excess spousal benefit (half of your full retirement benefit less 100 percent of your wife's full retirement benefit), based on your work record -- assuming there is an excess, that is.

BUT, should she do this, your wife would be forced to collect her own retirement benefit as well. Both her excess spousal benefit and her retirement benefit would then be permanently reduced because she would be collecting them before full retirement age.

If your wife waits until full retirement age, however, she can collect her full spousal benefit (equal to half of your full retirement benefit) and then wait until age 70 to collect her own maximum retirement benefit. At 70, it will be roughly 65 percent larger than were she to take it now. So much depends on how badly you need the money now, compared to how worried you are about outliving your savings. You may need to use available software to determine which option is best.

Jim Neal -- Kansas City, Mo.: My wife is the primary earner and is 10 years younger than I am. I just turned 60, so I'm trying to get a handle on the best way for us to deal with Social Security. I haven't worked for about 20 years and the most I ever made was around $50,000 annually. My wife, on the other hand, currently makes nearly double that. We have no children and while I was previously married, it was a long time ago and lasted only a few years. My current marriage is still going strong after 20 years. There are some bills we'd pay off if I were to take Social Security early, but we certainly don't need the money to live on. We just want to figure out the best way to maximize both of our Social Security benefits. Look forward to hearing your advice.

Larry Kotlikoff: You can't collect a spousal benefit until your spouse files for a retirement benefit, which she can't do before reaching age 62. So your best option may be to take your own reduced retirement benefit starting at 62 and then take your spousal benefit starting at 72 or later, when your wife files for her retirement benefit.

Alternatively, waiting until you reach 70 to start your retirement benefit may be best. You need to use software or consult a financial advisor to compare this and other options.

Ken Luedtke -- Richfield, Wis.: Would the little adjustment on Social Security make any difference?

Larry Kotlikoff: I assume by "little adjustment" you mean switching to a chain-weighted index formula to determine Social Security's cost of living adjustment. That one change would probably lower the inflation adjustment by 0.3 percentage points per year: not a big deal in the short run, but it will be significant over time. That's why it's opposed by those who worry about less well-off Americans reliant on Social Security.

J. Post -- San Carlos, Calif.: I started taking Social Security at my full retirement age, 66. My husband started spousal benefits the same year. That was two years ago. He makes more than me but I also make a good living. Should I suspend my benefit now at age 68 and start up again at age 70? Should he suspend and take spousal benefits too?

Larry Kotlikoff: You can't suspend a spousal benefit, so that option is not available. But it does make sense for you to suspend your own retirement benefit and start it up again at 70 at a 16 percent permanently higher level.

Eileen Brieaddy -- Florence, S.C.: I was misinformed about getting benefits when my husband died years ago and now understand I could have gotten widow benefits. Since the Social Security misinformed me, can I still file for back money for me and his stepchildren?

Larry Kotlikoff: From what I understand, if you have documentation of this, you can. Here's what my colleague Jerry Lutz has to say:

She could file a claim now, and request that a deemed filing date be established based on misinformation. If the new claim she files is disallowed, she would have the right to appeal the decision. Here is the reference from Social Security Online.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow @paulsolman

4/29/2013 10:26:00 PM

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GWEN IFILL: Since the earliest days of the Web, buying goods online has often come with one often-not-quite-legal perk: no sales tax. But that may be about to change.

The Senate has cleared the way for a new law that would allow states to collect taxes on transactions conducted across state lines. The bill exempts businesses earning less than a million dollars a year. As it stands now, states can only collect taxes from businesses that have a physical presence in their state.

We look at what's at stake in Congress and the debate surrounding the change with Brian Bieron, senior director of global public policy for eBay, which has actively opposed the legislation, and Rachelle Bernstein, a vice president at the National Retail Federation, which supports the bill.

Rachelle Bernstein, let's start with the basics. What percentage of goods, would you say, of sales are made online at this point?

RACHELLE BERNSTEIN, National Retail Federation: You know, it's a growing percentage. It's not that large. I don't have that exact number, but we do know it has really grown exponentially over time.

And we do know that that number is supposed to double in the next six years. So, if we look sales tax base of the states, it will be greatly eroded if something is not done to even out the tax burden on goods that are purchased from out of state, as well as in state.

GWEN IFILL: So, we're talking basically a difference between way the brick and mortar salespeople, people who actually have a building and a front door and a cash register, and people like you at eBay who look at this and everything exists online.

BRIAN BIERON, eBay: Well, eBay is a marketplace on the Internet actually for all size and all kinds of retailers.

We have thousands and really tens of thousands of entrepreneurs and small businesses who use the Internet on eBay and in other ways. But many of them also actually have physical storefronts and they have physical presence through warehouse.

Really, the thing to think about is that while the Internet right now is around six percent of retail, so it's not an overwhelming amount, that this bill really treats small businesses in a much more negative way than it treats really giant businesses.

GWEN IFILL: How?

BRIAN BIERON: Well, the giant businesses today, because they tend to be in more places, the current law essentially requires them to collect and live under the laws of a large number of states.

Smaller businesses, many of whom are using the Internet, but also let's say might also be in storefronts, no matter how they sell things, they are only required to collect for one state and to essentially be audited or live under the enforcement of just one state's tax collectors.

To take any business when they are really small who today is living under the laws of one state and would ask them to live under the same set of laws that giant businesses, billion-dollar businesses with armies of accountants and tax lawyers, treating them exactly the same we think would be unfair.

We think that it's not that we oppose the idea. We think that these bills should be rejected right now because they are not balanced and they don't treat the small businesses in the right way.

GWEN IFILL: Rachelle Bernstein?

RACHELLE BERNSTEIN: Well, I understand what Brian is saying.

But we have small members that are really the mom and pops in the community, the people that are paying property taxes, employing people there, and they face a lot of competition from the Internet sellers.

And what this ...

GWEN IFILL: Give me an example of that.

RACHELLE BERNSTEIN: Well, we have -- one of our members in Baltimore owns a running shoe store, and it's just one store.

He has a very wide selection of different types of shoes so that you can go in and you can try everything on and figure out exactly which shoes you want. Running shoes are a little bit expensive. People go in there. They will find exactly what they want, maybe -- maybe order two pairs. They will be as bold as to in that store pull out their telephone and order those shoes online after they have identified what they need.

GWEN IFILL: To save the taxes?

RACHELLE BERNSTEIN: To save the taxes.

This man can't compete with that, this owner of the store. So, we have got a real problem here. And I hear what Brian is saying in terms of the burdens of collecting taxes from a state that you are not in. But the legislation said that is -- the Senate is about to pass includes -- requires the states that want to collect these taxes to provide software to the remote sellers that will calculate the tax, collect the tax, and remit it to the states on behalf of those sellers.

GWEN IFILL: You just made an important point. The Senate is about to pass it.

RACHELLE BERNSTEIN: Right.

GWEN IFILL: I said clear the way, but the Senate committee has cleared the way, so it will go to the full Senate and then to the House.

I want to ask you about that, Brian Bieron. Why shouldn't everybody pay the taxes?

BRIAN BIERON: Well, first of all, states all today have the right to require whether it's the businesses in their to collect or the consumers in their states to pay. States have authority to collect their taxes.

And in fact, the Internet doesn't change that.

GWEN IFILL: They have the authority, but it involves individuals going back and saying, oh, this is how much I think I spent on eBay last year.

BRIAN BIERON: But the fact is they're -- when you're shopping on eBay, you are shopping with actual retailers.

Now, on eBay, they are usually very small businesses. But if you buy on the Internet from a business that is in your state, the sales tax is collected. This is about requiring businesses that are far away from a state to live under that state's laws, which Rachelle mentioned software.

If software was all it took to comply with taxes, then giant multibillion-dollar businesses wouldn't have large teams of accountants and teams of tax lawyers to do their tax compliance, because they would replace all that with just software. The reality is that it's a lot more than software.

And the current bill would mean that any small business over a very tiny size who were using the Internet to sell could be audited and face tax enforcement in the tax courts of businesses thousands -- I mean, states thousands of miles away.

GWEN IFILL: Well, let's talk about the states, Rachelle Bernstein.

Do -- how much -- we have any way of knowing or measuring how much money states are losing by people who buy across state lines and don't pay that tax?

RACHELLE BERNSTEIN: The National Council of State Legislatures said that the number is $23 billion dollars this year.

So, yes, that is -- that's a lot of money. The states are -- right now are hurting for funds. This would help them not have to pass new taxes to be able to collect the money that is needed. The other thing is that, again, as -- as the growth of the Internet goes on, if this situation isn't corrected, either state sales taxes are going to have to rise or states are going to have to look to other sources of revenue, increasing income taxes, whatever, to be able to collect the revenue that they are relying on.

GWEN IFILL: The bill calls for that million-dollar cutoff. You are saying it should be higher.

BRIAN BIERON: We're saying it should be higher. We believe that a number more like $10 million dollars, which has been proposed in a bipartisan way -- for example, the Department of Treasury Office of Tax Analysis, they recommend $10 million dollars.

GWEN IFILL: It's not a big business at $10 million dollars?

BRIAN BIERON: Oh, no, it's -- well, their -- they recommend, the Department of Treasury today has a proposal that $10 million dollars would be the number that they would use to measure the difference between small businesses and big businesses -- businesses for tax bills across the board.

Chairman Dave Camp of the House Ways and Means Committee, the lead tax writer on the House side of the Hill, has said that $10 million dollars is a standard for him for deciding where a small business becomes like a midsized business.

GWEN IFILL: I have a very brief final question for you both, which is we know what the debate about taxes is like on Congress -- on the Hill, on Capitol Hill. Why isn't this just a tax increase, pure and simple?

RACHELLE BERNSTEIN: Well, it's not a tax increase because this tax is already due and owing. It's just, as you said before; it's up to the consumer right now to remit it.

But, if I could just make one comment ...

GWEN IFILL: We really ...

RACHELLE BERNSTEIN: ... 99 percent of Internet sellers have less than $1 million dollars of sales.

GWEN IFILL: Very brief response.

BRIAN BIERON: Well, we think that the most balanced answer is to raise that small business number to a realistic level where you balance the interest of the states with revenue and you also keep the Internet open for small business.

GWEN IFILL: Brian Bieron of eBay and Rachelle Bernstein of the National Retail Federation, thank you both very much.

BRIAN BIERON: Thank you very much. 

4/29/2013 6:20:00 PM

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JEFFREY BROWN: And next to the Bangladesh building disaster. It's now the worst ever for the country's booming clothing industry, with more than 300 killed.

Ray Suarez has the story.

RAY SUAREZ: Wailing relatives tried to console one another as the death toll from Wednesday's collapse of an eight-story building kept climbing. This father was left weeping with his son's coffin at his feet. Others held up photos of loved ones still missing.

WOMAN: For the last three days, I have been looking for my sister, but no trace. I want get my sister back, alive or dead.

RAY SUAREZ: So far, rescue crews have pulled more than 80 survivors from the rubble. One government official said 41 of those were found alive in a single room overnight. At a nearby hospital, an 18-year-old worker described her ordeal.

WOMAN: First, a machine fell over my hand and I was crushed under the debris. Then the roof collapsed over me. I was rescued last night, but my hand had to be amputated.

RAY SUAREZ: And with high humidity and daytime temperatures reaching 95 degrees, there are fears that time is running out for those still trapped.

Meanwhile, a local television station released video showing police inspecting the site on Tuesday, a day before the deadly collapse. Large cracks were visible, but garment factories at the site continued running anyway.

Some of them make clothing for several major retailers in North America. Today, thousands of garment workers protested poor conditions and called for the building's owners to be punished. Some demonstrators clashed with police, but the rallies were mostly peaceful. This new disaster came just five months after a garment factory fire in Bangladesh killed 112 workers.

For more on all of this, we get two views. Avedis Seferian is the president and CEO of Worldwide Responsible Accredited Production, or WRAP, an organization created by the American Apparel and Footwear Association, along with buyers and brands around the world. And Scott Nova is executive director of the Worker Rights Consortium, a labor rights monitoring organization.

Avedis Seferian, we saw the terrible carnage coming out of Bangladesh this week, coming right on the heels of that fire a few weeks ago that killed so many who couldn't get out of the building once that fire started. Is there a rule book, a code? Are there guidelines that everybody plays by? Are there standards that garment factories around the world are supposed to follow?

AVEDIS SEFERIAN, Worldwide Responsible Accredited Production: This really is an incredibly, incredibly sad tragedy, and our hearts go out to those who were impacted. Our thoughts and prayers are with those who lost loved ones. And we hope for quick recoveries for those who are injured.

The question on everyone's mind is exactly what you just asked. Is there a set of standards? And the answer is, there are internationally recognized minimum standards for operating manufacturing facilities, whether it be apparel or elsewhere. And organizations like WRAP, what we do is we promulgate those things. We try to foster those standards and we try to encourage factories to put in place the kinds of systems they need to make sure they do meet these standards.

We're out there providing them with resources through training mechanisms and obviously certifying them through audits to make sure they do meet these standards, all in all, trying to create, to your point, that rule book which all manufacturers ought to abide by to ensure that tragedies like this do not happen.

RAY SUAREZ: So, Scott Nova, there are best practices. Are they being complied with?

SCOTT NOVA, Worker Rights Consortium: They are not.

And, indeed, Bangladesh itself has reasonable standards on the books. They have reasonable labor laws on the books. They have a national building code. The problem is the national building codes in Bangladesh, the labor laws are works of fiction. They're completely ignored by the factories who are serving the relentless drive of Western brands and retailers for ever lower prices for apparel.

Bangladesh is the rock-bottom cheapest place in the world to make clothing, wages of 18 cents an hour, ruthless oppression of any attempt by workers to organize a union, and complete disregard for the safety of workers. And brands and retailers in the U.S. and Europe have rewarded Bangladesh for those practices by pouring business into the country, making it the second largest apparel producer on the globe, but at a tremendous cost to workers, as we saw this week.

RAY SUAREZ: Mr. Seferian, if retailers in the United States want to talk to the people who make the clothes that they buy, is it hard now because of the network of not only subcontractors, but even further down the chain, sub-subcontractors and so on, that sometimes mean there are three or four steps before a completed pair of pants or shirt makes it to the United States?

AVEDIS SEFERIAN: Sure. The global supply chain is very complex and becoming even more so day by day.

From our perspective, when you -- however complex the chain may be, however many layers there may be, at the end of the day, what really matters is that the worker at the production facility be able to work in a safe, healthy, ethical environment. So, our work focuses on that level, on the factory level. Our trainings, our certification, our entire organization is geared towards working for the workers and making sure that the standards at the production facility are where they need to be.

RAY SUAREZ: How has that supply chain been for people who just don't want to know a convenient use of the opaque nature of these relationships?

SCOTT NOVA: Indeed.

Part of the purpose of the outsourcing strategy of brands and retailers is to distance themselves from responsibility for the conditions under which their clothing is made. It's a system that works very well for the brands and retailers. They get extremely cheap prices. They get incredibly fast delivery.

The result is factories striving to meet the demands of these brands and retailers by ignoring the rights of workers, by cutting corners on safety. And then when the inevitable disasters result, the brands and retailers throw up their hands and say, my lord, I can't believe that was happening in these facilities.

But the reality is, it's the brands and retailers who have the most power in the system. If they want to ensure their factories are safe, they have the power to ensure their factories are safe. They haven't chosen to exercise that power.

RAY SUAREZ: Well, we have got WRAP here in North America. In Europe, they have the Clean Clothes association, which is trying to do much of the same work.

Can you give us an example of a place or national industry where shining a lot on bad practices actually has improved conditions, actually has saved workers' lives?

AVEDIS SEFERIAN: Well, I think a better example, especially in context of Bangladesh, which is the center of our conversation, is to talk about what efforts are ongoing now to prevent such tragedies.

And you mentioned it in the lead-in to this, the recent factory fires that have been happening. WRAP has been in Bangladesh now for a very long time. We opened our own local office there back in February of 2011. And as of September of 2011, we have had in place a very effective fire safety training program that we have rolled out to hundreds of factories in Bangladesh, with over 600 workers trained and managers trained.

And the idea there is that we don't want to just handle these by creating better escape procedures, better evacuation procedures. We want to train factories on preventing these things from happening itself. So, the kind of best practices that really will be impactful going forward are to get people to understand what are the things you need to do to not let happen in the first place, the management systems approach to ensuring that people understand the kind of working environment you have to create so that you prevent the tragedies, and not then have to deal with them happening after the fact.

RAY SUAREZ: As you mentioned, Scott Nova, there are pressures to lower unit costs, to keep costs of productions low. But are there incentives to play by Mr. Seferian's rules, regular recontracting, reorders? If you want to do well by your workers, can that be profitable to you as well?

SCOTT NOVA: Unfortunately, what the factories have been taught by the decisions of brand and retailers is that what matters to brands and retailers is price and delivery speed, not the rights of workers.

And I have to disagree and say I don't think this is an issue that can be solved by training. The fundamental reason that workers are dying in factories in Bangladesh is because the buildings are structurally unsafe. They do not have fire exists. They are not soundly built.

No amount of training can train a worker to walk through flames or to walk out of a building that is collapsing around her. We need a massive program of renovation and repair of the industry in Bangladesh, which basically consists of 5,000 extremely dangerous factories. And that program of repair and renovation has to be funded by the brand and retailers, who have the resources to pay for it. They have to demand it. They have to compel their suppliers in Bangladesh to implement it.

They have to cover the costs. Then and only then will we see an end to these tragedies.

RAY SUAREZ: Very quickly, because we really are out of time, briefly, yes or no, practically, are American retailers ready to do what Scott Nova just described?

AVEDIS SEFERIAN: I think we're exaggerating by saying that we have 5,000 dangerous factories in Bangladesh.

There are shining examples of good factories out there. We need to make sure that those examples are followed by all of the others, so the industry as a whole gets to where we need it to get to.

RAY SUAREZ: Gentlemen, thank you both.

SCOTT NOVA: Thank you.

AVEDIS SEFERIAN: Thank you. 

4/26/2013 6:23:00 PM