WASHINGTON, Jan. 16 (UPI) -- The UPI think tank wrap-up is a daily digest covering opinion pieces, reactions to recent news events and position statements released by various think tanks. This is the first of several wrap-ups for Jan. 16.
The Institute for Public Accuracy
(The IPA is a nationwide consortium of policy researchers that seeks to broaden public discourse by gaining media access for experts whose perspectives are often overshadowed by major think tanks and other influential institutions.)
WASHINGTON -- North Korea and nonproliferation treaty; Venezuela oil strike
-- John Burroughs is executive director of the New York-based Lawyers' Committee on Nuclear Policy and co-editor of "Rule of Power or Rule of Law? -- An Assessment of
U.S. Policies and Actions Regarding Security-Related Treaties."
"Like North Korea, the United States is violating its obligations under the nuclear nonproliferation treaty. The United States promised not to use nuclear arms against non-nuclear states that have signed the NPT, but the Bush administration's 2002 Nuclear Posture Review includes a scenario for U.S. nuclear use against a non-nuclear North Korean attack. The administration treats the NPT Article VI obligation of good-faith negotiation of nuclear disarmament with contempt. It opposes the Comprehensive Nuclear Test Ban Treaty, negotiated a nuclear arms reduction 'treaty' with Russia that does not require the destruction of a single nuclear warhead or delivery system, and peremptorily withdrew from the ABM (Anti-Ballistic Missile) Treaty over the virtually unanimous opposition of the world's nations. The Bush administration has acted like a rogue regime with respect to other disarmament and security agreements as well, disrupting negotiations on a verification protocol for the Biological Weapons Convention, refusing to commence negotiations on a treaty preventing weaponization of outer space, and undermining the agreement establishing the International Criminal Court."
-- Mark Weisbrot, co-director of the Center for Economic and Policy Research, recently has returned from eight days in Caracas. His latest article on Venezuela appeared in Sunday's Washington Post.
"Venezuela is in turmoil primarily because the opposition refuses to accept the results of democratic elections. President Chavez's government has won five elections since 1998, including the referendum on the country's 1999 constitution. Although the opposition can organize large demonstrations, they have been unable to put together an electoral majority. So they have tried to remove the government by extra-legal means. In April they tried a military coup; now they are trying to make the country ungovernable, by crippling the economy with an oil strike. (Although there are numerous references to a general strike, outside of the 30,000 employees on strike in the oil industry there are not many workers actually on strike; some are locked out because the business owners have shut down.) The Bush administration shares the opposition's goals of overthrowing the elected government and has supported them, although lately it has had some reservations about the cutoff of Venezuelan oil and gasoline, and the effect of that on oil prices and markets, and the economy."
The National Center for Policy Analysis
(NCPA is a public policy research institute that seeks innovative private sector solutions to public policy problems.)
DALLAS, Texas -- How not to be poor
by Blake Bailey
About 31 million Americans live in households with incomes below the poverty level, according to the latest U.S. Census data. Poverty is more than a lack of income. It is also the consequence of specific behaviors and decisions. The 2001 Census data clearly show that dropping out of high school, staying single, having children without a spouse and working only part time or not working at all substantially increase the chances of long-term poverty. Certain behaviors are a recipe for success.
1) Finish school. Among those who finish high school, get married, have children only within a marriage and go to work, the odds of long-term poverty are virtually nil.
Simply completing high school greatly increases a person's chances of not being poor. The Census Bureau reports that only 9.6 percent of high school graduates are poor, compared to 22.2 percent of those without a diploma. Of those people who complete some college, only 6.6 percent fall below the poverty line. This drops to 3.3 percent of those with a bachelor's degree or higher.
Furthermore, these lower propensities for poverty last throughout a person's life. In every adult age group, people who fail to obtain a high school degree are more than twice as likely to fall into poverty. People ages 25 to 54 are nearly three times as likely.
The numbers are worse for long-term poverty -- poverty that lasts for years. An Organization for Economic Cooperation and Development report found that in the United States, high school dropouts suffer a long-term poverty rate of 14.2 percent, while high school grads have only a 3.8 percent long-term poverty rate. Only 1.2 percent of adults receiving some education beyond high school are poor long-term.
2) Get a job. Despite concerns about the working poor, most people who work full time, even at minimum wage jobs, avoid poverty. Only 2.6 percent of people 16 years or older with full-time jobs are poor, according to Census data. By contrast, 11.4 percent of part-time workers fall under the poverty line, and 20.8 percent of those who do not work fall below the poverty line.
The advantages of work hold true even for at-risk groups, such as single mothers: About 83 percent of single mothers who do not work are in poverty, compared to nearly 60 percent who work part time, but less than 18 percent of single mothers who work full time are in poverty.
Working also significantly reduces long-term poverty. According to an analysis of the Census Bureau's Survey of Income and Program Participation, 10.8 percent of adults who do not work are poor over the long term. In contrast, only 1.7 percent of those employed part time stay poor for extended periods. People employed full time have a 0.4 percent chance of long-term poverty.
Moreover, the government can encourage behavioral changes. Research shows that between one-third and one-half of the fall in poverty among single mothers on welfare after 1994 was due to the 1996 welfare reforms that encouraged work.
3) Get married. Marriage is also a strong deterrent to poverty. Only 4 percent of married couples without children are in poverty, according to Census data. In contrast, the poverty rate for singles without children is 8.6 percent.
Moreover, married couples are less likely to experience long-term poverty. According to the OECD report, married couples without children have a long-term poverty rate of only 1.3 percent. By contrast, 7.9 percent of single adults experience long-term poverty.
Marriage promotes economic advancement. One study found that married men earn 22 percent more than their unmarried counterparts. The OECD reports that a woman head of household who marries increases her chances of exiting poverty by 23 percent. A single person who marries and finds employment increases his or her chances of leaving poverty by over 50 percentage points.
4) Don't have children out of wedlock. Having children outside of marriage is costly for both the individual and the child. The Census Bureau reports that of those households with two or more children under the age of 18, 7.9 percent of married households were poor, while 51.6 percent of never-married households were poor.
Of those households with two or more children under the age of six, 11.5 percent of married households were poor, while 62.4 percent of never-married households were poor. According to the OECD study, spells of poverty are 12.6 percent shorter for married households compared to female-headed households.
Similarly, married households with children are much more likely to avoid long-term poverty than single-parent households. Only 1.7 percent of married households with children suffer long-term poverty, while 26 percent of single parent households are poor long term.
Child poverty is dependent on the behavior of parents. Using data from the National Longitudinal Survey of Youth, a Heritage Foundation study found that on average, a child raised by a never-married mother is nine times more likely to live in poverty than a child raised by two parents in an intact marriage. Nearly 80 percent of children in long-term poverty live in some type of broken family or with a never-married parent. Children born to parents who do not marry spend, on average, 56.7 percent of their lives in poverty as opposed to just 6.3 percent for children in married families.
Poverty is most often a consequence of specific behavior. By engaging in other behaviors, people can avoid poverty. To help people escape poverty, government programs should encourage these behaviors. The 1996 welfare reforms encouraged work -- and the rate of poverty fell. Proposals to encourage marriage, like President Bush's plan to eliminate the marriage penalty, could have similar benefits.
(Blake Bailey is an intern with the National Center for Policy Analysis.)
LOS ANGELES -- Social security and stock market risk
by Matt Moore
Social Security reform is one of the nation's most prominent domestic policy issues. A common feature of many leading Social Security reform plans is that they would pre-fund benefits by integrating personal retirement accounts into the current system. Personal accounts would allow younger workers to invest some of their Social Security taxes in stocks and bonds, which would earn a compounded rate of return over the worker's life and supply a portion of the worker's retirement benefit.
Critics of personal accounts say the stock market is too risky for retirement savings. They also claim workers will fare better with today's pay-as-you-go Social Security than with personal retirement accounts. But they are wrong.
Stock markets have been volatile in recent years. The Dow Jones Industrial Average of major corporate stocks was as high as 12,000 in 1999, but fell below 8,000 last year, a five-year low. The average share price of tech-heavy NASDAQ stocks fell about 40 percent and is near a six-year low.
While the market is volatile from day to day and sometimes year to year, over longer periods the market trends upward. A worker saving for retirement will typically invest for 35 to 40 years or more. Using data from the Center for Research in Security Prices at the University of Chicago, we can calculate the return on $1 invested each month, plus reinvested earnings for any 35-year period:
-- The average annual real rate of return over each of the 35-year periods ending between 1961 and 2002 was 7.3 percent after inflation.
-- The lowest earning 35-year period, which ended in 1982, generated a 3.6 percent average annual real rate of return.
Thus, even over the leanest recent 35-year period, investors would have gained. In fact, throughout the 20th century, investments that tracked a broad stock market index would have been profitable. An analysis of return on investment in Standard and Poor's 500 Index by economists at the Texas A&M Research Foundation shows that:
-- Over any 35-year period ending between 1872 and 2000, the market provided an average annual return of 6.4 percent after inflation.
-- There were positive gains in every 35-year period, and each outperformed what Social Security will pay in return for workers' payroll taxes.
Even if a worker retires during a sluggish market year, the compounded value of all the gains will more than offset the losses. For example, the market declined by roughly 43 percent between January 1973 and September 1974. Imagine a worker who retired in 1974, having saved and invested each year of his 35-year working life in a balanced, diversified portfolio. According to Texas A&M Research Foundation data, this worker would have averaged a 6.2 percent return each year.
Critics suggest that if personal retirement accounts had been invested during the late-1990s market peak, they would have lost tens of millions of dollars. They claim this would have put retirees' security at risk. But are they correct? Imagine a worker retiring in 2002 who invested over his entire working life in a broad, diversified portfolio.
The market has declined by about 40 percent since 1999. However, our hypothetical investor would have earned an average annual return of 7.3 percent on his investment because of the higher returns in other years over his 35-year working life.
Of course, personal accounts need not be invested in stocks. Workers could instead invest in government or corporate bonds, which hold less risk but yield smaller returns.
If account holders invest in broad, diversified portfolios that reflect the market as a whole -- and stay the course over their entire working lives -- they can expect to gain by doing so. We can help workers who are inexperienced investors to properly diversify their accounts and avoid undue risk or unwise investments.
Most reform plans would limit workers' options. Workers would not pick and choose individual stocks. Like many 401(k) retirement plans, workers would choose between a limited number of competing, pre-constructed broad-based portfolios, managed by a professional fund manager.
The most prominent Social Security reform plan is one of the three options proposed by President George W. Bush's Social Security reform commission. The commission's plan would allow workers to invest 4 percentage points of their Social Security payroll taxes in an individual account, up to $1,000 per year. If the account earns a minimal 2 percent average real rate of return each year, the account holder would receive a pension equal to that of today's retirees, adjusted for inflation. If the account earns more, the worker gets a bonus.
A recent analysis by the Social Security Administration's independent Office of the Chief Actuary found that a personal account plan like the commission's would pay higher benefits than the current system. However, the current system cannot pay all the benefits promised, even if it receives the same general revenue transfers required under the commission's plan to fund the transition to personal accounts -- about $1 trillion in present value dollars.
In most cases, low-wage workers in particular would earn substantially higher benefits than the current system promises, and much more than the current system can afford to pay. Low-income workers entering the workforce today could expect benefits up to 25 percent higher from the commission's personal account proposal than from the current program.
Over the long term, stock market investment can provide the foundation for a safe and secure retirement. Over the lowest-earning 35-year period in history, the market's average annual rate of return was 2.7 percent per year. Even workers retiring in a year equal to this worst-of-times scenario would receive benefits greater than the current Social Security system can afford to pay them.
(Matt Moore is a policy analyst with the National Center for Policy Analysis.)
