Kevin Drum

Who's To Blame For the Pension Crisis?

| Tue Aug. 10, 2010 1:04 PM EDT

So who's really to blame for the underfunding crisis in state and local pensions? Dean Baker, no fan of his fellow economists, says they need to man up and shoulder the responsibility:

The real culprits of the underfunded pension funds are the country's leading economists. Economists from across the political spectrum told the country that we could assume that stocks would provide an average return of 10 percent a year even when the stock bubble was at its peak in 2000. This consensus included the center-left economists in the Clinton administration as well conservative economists. It was treated as absolute gospel in all the plans to privatize Social Security. Both the Congressional Budget Office and the Social Security Administration assumed that the market would give an average of 10 percent nominal returns in their analysis of Social Security privatization proposals.

Given the consensus within the economics profession, who could blame the managers of state and local pension funds for using the same assumption? After all, were they supposed to question the assessments of economists teaching at Harvard and M.I.T.?

And, it does make a difference. If the economists' projections had been right, $1 billion held in the stock market in 2000 would be worth about $2.5 billion today. Instead, it is worth about $1 billion. In short, if the economists had been right, most of the troubled pension funds would be just fine today.

I don't think this gets politicians off the hook entirely, but it's a good point. Economists largely missed the dotcom bust, missed the housing bust, and were wildly wrong about the long-term growth of the bond and equity markets. Maybe we should make up the pension shortfall with a tax on economists?

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Should Liberals Compromise on Birthright Citizenship?

| Tue Aug. 10, 2010 12:08 PM EDT

Will Wilkinson argues that if liberals gave in on birthright citizenship, it might take some of the steam out of the anti-immigration movement:

I believe the international evidence supports the idea that ending pure jus soli [that's Latin for "birthright citizenship" –ed] softens opposition to immigration. Even if nativists and xenophobes shift to another argument with undiminished energy, the evidence suggests that worries about the fairness and distributive consequences of birthright citizenship harbored by more moderate voters would weaken, shifting the position of the median voter toward greater openness to immigration.

At first, this seems persuasive. But international evidence aside, how about U.S. evidence? I remember back in the thumbsucking years of the blogosphere we had a similar argument about gun control. The argument went like this: gun nuts are all afraid that the government is going to come and take away their guns. Sure, this is crazy, but it's what they think. So what if the Supreme Court ruled that gun ownership is an individual right under the Second Amendment? That would assure the gun folks that no one could take away their guns and might make them more amenable to some of the softer forms of firearm regulation that liberals support.

I hardly need to tell you that this didn't happen. In fact, I'm not sure you can find any example of that happening among either liberals or conservatives. Roe v. Wade didn't settle the abortion issue, the passage of Medicare didn't settle the healthcare issue, Reagan's tax cuts didn't satisfy the supply siders, etc. etc. Likewise, I don't think the end of birthright citizenship would slow down the immigration brawl even slightly, especially since I've long been convinced that the real hot button issue is cultural resentment and language angst, not anchor babies or low paid field workers. Beyond that, though, Tim Lee offers a positive case for birthright citizenship here and Jason Kuznicki agrees with him here:

I’d give the nod to Tim, because I don’t imagine that anti-immigration activists are going to be bought off so easily. Instead, a permanent, multi-generational class of non-citizens would just be fuel for the fire. Twenty years on, immigration foes will look at all the second- and third-generation non-citizens we’ve created, and the mass arrests and deportations will really begin in earnest. Not a problem I’d want to create.

Worse, by then the anti- side may even have a point. A permanently alienated underclass isn’t going to be so loyal or so invested in the American polity. They wouldn’t have any reason or need to be. The genius of birthright citizenship is that it changes the incentives for everyone involved. It says to all populations: You’ve got roughly twenty years to figure out how to live with one another, as citizens. Now get to work.

One of the things that always astonishes me about immigration hardliners is their blindness to the fact that, partly by chance and partly by design, the U.S. has been one of the most successful countries in history at assimilating immigrants. Jason is right: birthright citizenship, regardless of whether or not the framers of the 14th Amendment intended it to operate the way it does, works. The American version of immigration works. Mexican immigrants have kids who speak English, Muslim immigrants build mosques and hate Osama bin Laden, and Vietnamese immigrants settle down in the middle of Orange County and build prosperous businesses. Sure, it's messy. Life is messy. But what country does it better? I'll take our version over the European version any day.

I'm all in favor of immigration reform that makes it easier to get in legally and harder to get in illegally. That includes crackdowns on employers who knowingly employ undocumented workers and support for E-Verify, imperfect though it is. Beyond that, though, count me out. We need to regulate, not demonize, and a large, permanent class of resentful noncitizens is something nobody should be pining for.

Pandering to the Center

| Tue Aug. 10, 2010 10:39 AM EDT

The liberal twittersphere is all atwitter over the latest outburst against liberal critics from White House press secretary Robert Gibbs:

“I hear these people saying he’s like George Bush. Those people ought to be drug tested,” Gibbs said. “I mean, it’s crazy.” The press secretary dismissed the “professional left” in terms very similar to those used by their opponents on the ideological right, saying, “They will be satisfied when we have Canadian healthcare and we’ve eliminated the Pentagon. That’s not reality.”

....Gibbs said the professional left is not representative of the progressives who organized, campaigned, raised money and ultimately voted for Obama. Progressives, Gibbs said, are the liberals outside of Washington “in America,” and they are grateful for what Obama has accomplished in a shattered economy with uniform Republican opposition and a short amount of time.

Once again, we see the fundamental difference between left and right when it comes to practical politics. A third of the country self-identifies as conservative, so it makes sense for Republicans to pander to them at all times. Conversely, only about 20% of the country self-identifies as liberal, so Democrats are better off pandering to the center — and one way to do that is to make sure that centrists understand in no uncertain terms that Democrats aren't part of the fringe left.

It's a bitch. And lefties are right to be pissed off at Gibbs for talking like this. But it's not likely to change until the number of self-identified liberals goes up a lot. So far, there's not really any sign of that happening.

The Ground Zero Gay Bar

| Tue Aug. 10, 2010 10:02 AM EDT

Conservative humorist/provocateur Greg Gutfeld has announced that he intends to build a gay bar next door to the planned Islamic center on Manhattan's Park Place that's become known as the Ground Zero mosque. "This is not a joke," he says mockingly. "I’ve already spoken to a number of investors, who have pledged their support in this bipartisan bid for understanding and tolerance." James Joyner calls it "an inspired idea" and Megan McArdle says:

I am hoping that at least one person will attempt to explain why we should support the mosque near Ground Zero, but not the gay bar next to the mosque near Ground Zero. I would find that very entertaining.

Well, it's a big country. There's bound to be someone who will give it a try. But I doubt there are going to be any serious takers, and I'm willing to bet that mosques and churches all over Manhattan have long since reconciled themselves to being within a stone's throw of all sorts of establishments they consider less than savory. They'll take this in stride.

At the same time, we're grownups around here, right? We do understand the difference between something that genuinely isn't meant as a provocation and something that is, don't we? The law might not take that into account, but as ordinary human beings surely we can. The campaign against the Park Place mosque has been a demagogic nightmare from the start, and I think it's safe to say that a few years from now the conservative movement is not going to look back at this as one of their finest hours. After all, we're supposed to be fighting violent Islamic radicals like Osama bin Laden, not helping their cause.

UPDATE: From comments:

actor212: There's already a bar next door. I think it's called "Dakota North" or something like that. Anyway, my recollection is, it's not exactly the, um, most hetero place in TriBeCa anyways. Hope Gutfeld's got a marketing budget.

TrustNoOne: Dakota Roadhouse. Total dive. My co-workers love the place.

And from one of Andrew Sullivan's readers:

You are aware that there is already a New York Dolls strip club on 55 Murray Street (which will be just around the corner from the Cordoba Institute)? So haven’t we already crossed the bridge of allowing Ground Zero ‘gentlemens’ entertainment? And if we’re OK with adult entertainment of the heterosexual variety we can’t then reject entertainment of the homosexual nature in the same area.

OK then. Glad we got that settled.

Data Point of the Day

| Tue Aug. 10, 2010 12:17 AM EDT

From McClatchy's Warren Strobel, reporting on the State Department's 2009 Country Reports on Terrorism:

There were just 25 U.S. noncombatant fatalities from terrorism worldwide. (The US government definition of terrorism excludes attacks on U.S. military personnel). While we don't have the figures at hand, undoubtedly more American citizens died overseas from traffic accidents or intestinal illnesses than from terrorism.

Make of that what you will.

The Wall Street Journal Editorial Page Outdoes Itself

| Mon Aug. 9, 2010 11:55 PM EDT

In the Wall Street Journal today, a guy named Michael Fleischer has an op-ed making the entirely non-original point that when his company pays someone, say, $59,000 per year, that person actually takes home less than that (taxes, you see) while his total compensation costs are higher than that. This, of course, is not news. It's what's known to every HR person in the country as the "burdened cost" of an employee, and it's always higher than the number on the offer letter. As a rule of thumb for middle-income employees, burdened cost is usually about 50% higher than nominal salary.

For some reason, Fleischer was trying to blame his unwillingness to hire new people on all this extra cost, even though there's nothing new about it. He also complained that someone has (apparently) held a gun to his head and forced him to provide health insurance for his employees. And finally, for reasons that are obscure, he blamed next year's increase in his health insurance bill on Barack Obama. "A life in business is filled with uncertainties," he wrote, "but I can be quite sure that every time I hire someone my obligations to the government go up. From where I sit, the government's message is unmistakable: Creating a new job carries a punishing price."

It was all very peculiar, but not really worth commenting on. It's the Journal, after all. What do you expect? But guess what? It turns out that Michael Fleischer isn't just some random small company president. He's Ari Fleischer's brother. You know, the Ari Fleischer who was George Bush's former press secretary. You'd think even the Journal might think that worth pointing out. And there's more! Michael, thanks to his White House connections, was one of the squadron of free market evangelizers who parachuted into Baghdad to privatize Iraqi industry after the war. We all know how well that went, which is probably what qualifies him to write op-eds about creeping Obama-ism for the Wall Street Journal.

But wait! There's even yet more! Via John Cole, here's a comment from a reader over at Outside the Beltway about Fleischer's management prowess at Bogen Communications:

The fact is that if Mr. Fleisher’s company has to buy an extra box of paper clips it will cause them to go belly up. He’s in no position to hire anyone regardless of tax policy.

The reason Mr. Fleischer’s company isn’t hiring has nothing to do with taxes or the policies of any administration. It’s because his business has been in decline for a decade. As the CEO, that decline is his fault. All his complaining about taxes and benefits is just a smokescreen for his own incompetence.

The world changed around them a decade ago and they failed to adapt. In 2000, their annual sales were 66 million dollars with cash on hand of 12 million. By 2003, sales were down to 55 million and cash was down to 6 million. That was before the financial crisis and under the allegedly pro business policies of the previous administration. In 2009, sales were down to 44 million and cash was down to 2 million. They managed to lose 17 million dollars that year and got a carry back refund of some 5 million dollar. Mr. Fleischer should spend less time complaining about taxes and more time thinking about how he can correct 10 years of mismanagement.

Don’t take my word for it, read the balance sheets yourself.

This is quite the trifecta for the Journal. And, yes, it's not nice to be mocking poor Michael. Still, a guy with Bush White House connections who's managed to screw up both privatization in Iraq and management of his own company during the most business friendly administration in recent memory — well, that's the kind of guy I think deserves real estate on the Journal op-ed page. I'm glad the editors agree.

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Converting Digital Photos Into Tea

| Mon Aug. 9, 2010 7:43 PM EDT

Over on the right, Kiera Butler asks "Are email attachments bad for the environment?" That seemed easy: no. Next question?

But Kiera says yes!

According to Matthew Yeager, a data storage expert who works for the UK data storage company Computacenter, emails — especially those with attachments — still use energy and create greenhouse gas emissions, even if you don't print them. Last month, Yeager told the BBC that sending an email attachment of 4.7 megabytes—the equivalent of about 4 photos taken on a point-and-shoot digital camera — creates as much greenhouse gas as boiling your tea kettle 17.5 times. I called Yeager to find out the whole story.

Sadly, Yeager didn't give her the whole story. Over at this blog, however, he credits this figure to a "Life-cycle analysis carried out by [Mark] Mills of Digital Power Group, translated into kettle boilings with help from the Energy Savings Trust [UK]." I tried emailing DPG to get their take on this, but no dice. I haven't heard back.

But the more I thought about, the more sense it made anyway. Here's a wild-ass guess at the arithmetic:

  • Let's figure the average email attachment is sent to ten people and therefore saved ten times. So the total storage used is 47 megabytes, or .047 gigabytes.
  • After surfing around the web, I'd guess that the average power consumption for a storage server is about .2 watts per gigabyte. Big server farms like Google's use less, your home PC uses more. Older systems use more energy than newer systems. But .2 watts/GB probably isn't horribly far off.
  • So the power requirement for .047 GB of attachments is .0094 watts.
  • How long are attachments retained? That's all over the map. Some are deleted instantly, some are saved for a few months, others sit around forever. It all depends on how you (or your corporation) manage email and how it's backed up. At a guess, let's say that attachments end up getting saved an average of 3 years.
  • That's 26,000 hours, so the total energy consumption of our attachments comes to about 247 watt-hours.
  • According to these guys, it takes an electric kettle about 25 watt-hours to boil a cup of water.

So I come up with about 10 kettles, not 17.5. But then again, I didn't take into account the energy it takes to build and ship the storage servers in the first place. What's more, when you're just spitballing like this a difference of 2x isn't bad. Basically, it shows that the energy consumption of a single email with a few attachments really does add up. Thrilling news, isn't it?

And one more thing: one of the best arguments for a carbon tax of some kind is that we could stop doing ridiculous exercises like this. The energy externalities would be automatically included in the cost of everything we buy or do, so we wouldn't have to worry about trying to figure out the most eco-friendly alternative for everything. Wouldn't that be great?

The Bonfire of Public Opinion

| Mon Aug. 9, 2010 1:40 PM EDT

The dream never dies:

Senate Republicans are planning a new push for a balanced budget amendment to the Constitution when lawmakers return to Washington after the August recess.

....“In the last week there’s been a lot of movement in terms of Republican senators saying we need to press this issue,” said a Senate GOP aide. The amendment would bar the federal government from spending more than it collects in revenues each year. It would also require a two-thirds majority vote in each chamber to raise taxes.

Put aside the fact that this is a spectacularly stupid idea that could only be supported by economic illiterates. That hardly matters, because the cosponsors admit they have no chance of passing it anyway. They just want some publicity.

Which is fine. That's what politics is all about. But I've got two questions. First, even if it's a publicity stunt, the press should give it coverage only if the sponsors are willing to propose an actual balanced budget to go along with it. Let's see the cuts, boys. If they aren't willing to go even that far, they should be ignored.

Second, why don't Democrats do this kind of thing more often? Republicans, I think, tend to be so-so at long-term strategy but really good at lobbing short term tactical hand grenades. So we get the New Black Panthers one week, followed by the Ground Zero mosque and Shirley Sherrod and birthright citizenship and Michelle's vacation in France and now a balanced budget amendment. All of these things eat up oxygen and keep Democrats off balance, and aside from the fact that they're really destructive to civil society they're probably pretty good for Republican electoral chances. So how come Democrats don't do more of this kind of thing? It would be nice to think that we just refuse to take the low road the way Republicans do, but I kinda doubt that. Democratic consultants can sling smears and fears with the best of them when they have to.

So what's the deal? Aren't there plenty of bullshit memes available for liberals to throw onto the bonfire of public opinion? Or have I just missed them? What's up?

Marriage Is Not a Zero Sum Game

| Mon Aug. 9, 2010 12:25 PM EDT

Last night I tweeted this:

Willing to bet Ross had to spend hours painfully crafting paragraphs 6 & 7 of this column. Obviously tortured over this.

And just what are paragraphs six and seven of Ross Douthat's column today? They're an explanation of the "sexual ideal" he believes we're holding up when we ban gay unions and allow only traditional marriage:

This ideal holds up the commitment to lifelong fidelity and support by two sexually different human beings — a commitment that involves the mutual surrender, arguably, of their reproductive self-interest — as a uniquely admirable kind of relationship. It holds up the domestic life that can be created only by such unions, in which children grow up in intimate contact with both of their biological parents, as a uniquely admirable approach to child-rearing. And recognizing the difficulty of achieving these goals, it surrounds wedlock with a distinctive set of rituals, sanctions and taboos.

The point of this ideal is not that other relationships have no value, or that only nuclear families can rear children successfully. Rather, it’s that lifelong heterosexual monogamy at its best can offer something distinctive and remarkable — a microcosm of civilization, and an organic connection between human generations — that makes it worthy of distinctive recognition and support.

I think you can sometimes tell if someone really believes something by how easily the arguments come, and these paragraphs pretty obviously didn't come easily. Why are hetero marriages "uniquely admirable"? Why is the hetero version of domestic life superior? Why is lifelong heterosexual monogamy a microcosm of civilization? These questions aren't answered because, really, they can't be answered. Ross obviously wants to construct a secular argument here, and he doesn't want to pretend that gays are evil, or destructive, or unable to create good families. So what's left? A tortured attempt to pick and choose words that seem to say something but really don't.

We can recognize and honor same-sex marriages without changing even slightly the recognition and honor we give to hetero marriages. This is not a zero sum game. We all end up better off when we allow everyone to form stable, lifelong marriages that are honored and cherished. This is, quite simply, a very, very positive sum game on a whole bunch of different levels. Conservatives have no trouble understanding this when the human system under discussion is the free market. So why so much trouble when the human system under discussion is the structure of family life?

Pensions and the Public

| Mon Aug. 9, 2010 11:59 AM EDT

One of the conservative causes du jour is the parlous state of public employee pensions these days. And there's no question that this really is a problem. Thanks to years of overoptimistic economic projections and the habit of politicians to prefer future cost increases to current cost increases, public pension funds are pretty seriously underfunded right now. That means taxpayers are going to have to come up with many billions of additional dollars to fund pensions at the levels that have been promised to public workers.

Now, there are a few things to say about this. First, the really sky high pensions you hear horror stories about tend to be limited to public safety workers: police, fire, sheriff's deputies, etc. (Here in California, the really egregious salary/pension issue is with state prison guards, for reasons I won't bore you with, but for the most part we're talking about police and fire workers.) The reason this matters isn't that money spent on public safety "doesn't count," but that most people — including most conservatives — are OK with paying generously in order to maintain high public safety standards. So it's worth keeping in mind that this is largely what we're talking about.

Other public workers often get good but not great pensions. But even at that, they mostly get these pensions in lieu of Social Security, and they get them to make up for generally lower pay than in the private sector. There's some question about whether public workers continue to be paid less than comparable private sector workers, but in the past, when these pension funds were set up, there's not much question that they were.

Beyond that, though, Jon Cohn raises a key point about the role of public sector unions in bargaining for decent pensions for its workers:

To what extent is the problem that the retirement benefits for unionized public sector workers have become too generous? And to what extent is the problem that retirement benefits for everybody else have become too stingy?

I would suggest it's more the latter than the former. The promise of stable retirement — one not overly dependent on the ups and downs of the stock market — used to be part of the social contract. If you got an education and worked a steady job, then you got to live out the rest of your life comfortably. You might not be rich, but you wouldn't be poor, either.

Unions, whatever their flaws, have delivered on that for their members. (In theory, retirement was supposed to rest on a "three-legged stool" of Social Security, pensions, and private benefits.) But unions have not been able to secure similar benefits for everybody else. That's why the gap exists, although perhaps not for long.

I should confess here that I'm not a big fan of public employee unions. On my own personal scale of sympathy, I strongly support private sector service unions, I moderately support private sector industrial unions, and I only barely support public sector unions. So no one should expect me to go to the mattresses for public sector benefits. Still, Jon is right: one of the favorite tactics of conservatives is to set the middle class at war with itself. It's sort of the mirror image of corporate compensation committees, which keep CEO pay forever rising because no one wants their CEO to be paid less than average. With middle-income workers, by contrast, the CEO class exploits jealousy toward better compensated unionized workers in order to ratchet things down. The grocery clerks don't want to accept an insurance copay? Well, I have an insurance copay, so why shouldn't they? The truckers don't want to switch their pensions to a 401(k)? Well, I have a 401(k), so why shouldn't they? Etc., etc., ever more disheartening etc.

This is a tactic that works pretty well. As union density has shriveled in the private sector, workers don't really aspire anymore to getting a "good union job," as they often did in the past. It's not even on their radar. Instead, they see a small and privileged group of workers who are better off than them even though they don't work any harder, and instead of wondering why their own pay and benefits are so low, they simply become resentful of this coddled class.

Private sector union density has gotten so low that it's not clear how much they can do about this attitude — and the odds of increasing union density more than a point or two seem cosmically slim. So now it's going to be a war of taxpayers against unionized public employees. It won't be hard, especially in lousy economic times, to convince envious clerks and factory workers that these guys need to be brought down a peg or two. It's just human nature. But wouldn't it be better if all these envious clerks and factory workers were instead asking why their pay and benefits haven't kept up with overall economic growth — which, after all, is all that public sector workers have accomplished? I don't know what the future of unions is in America, but for now they're really the only ones who are asking that question and putting some muscle behind it. Until someone else starts doing a better job of it, we still need them.