He who builds to every man's advice will have a crooked house.
Danish Proverb
Caroline Heldman: Remake of 'Clueless' in Her Future?
Bill O'Reilly features a number of liberal commentators on his popular O'Reilly Factor, in particular, Alan Colmes, Marc Lamont Hill, and Caroline Heldman.
I find myself starting to tune out Glenn Beck and the FNC primetime lineup. Fox News does do a better job at providing a more balanced viewpoint, but most of the political commentary lineup is repetitious and little more than political spin by either side. I have found myself having to write far more than I would have liked about Shirley Sherrod, the Arizona Immigration Law, and the Ground Zero mosque. I find Fox covering more about the latest alleged cheap shot targeting Sarah Palin than, say, Governor Mitch Daniels' use of citizen-based metrics for government services, e.g., DMV wait times. Of course, Fox News knows if they started focusing more on substantive issues, they would probably approach the numbers of my limited readership....
In fact, I long for the sheer intelligence and wit of a William Buckley or George Will. The next thing I like on Fox after Red Eye and occasional interviews with fellow libertarians John Stossel and Andrew Napolitano (and Chris Wallace of Fox News Sunday gives the best interviews in the business) are the Saturday morning business shows (from 10AM to noon, EDT). You get more of a political free-for-all with unabashed, Kool-aid-drinking Obama supporters. Yesterday I was watching but stunned to find Caroline Heldman, not an economist or businesswoman, as a guest.
Heldman's opinions were predictable as usual, and one particular point of view irritated me enough to write this commentary. The progressive groupthink opinion is that the reserve is estimated to last through the mid-2030's, so the concern about social security solvency is a "manufactured crisis". Ms. Heldman was confused on details of the big picture, so let me rephrase things I've previously stated:
In theory, a pension should throw off enough income to sustain cash flows to current beneficiaries. A similar concept is in play for one's IRA's, 401K, etc. You grow your investments, say through growth stocks, during most of your investment time frame, but ultimately you convert your stock holdings into slower-growing, solid blue chips throwing off dividends and/or the interest income of highly-rated bonds. This is not the case for social security.
Social security basically repackages current contributions from individuals and business matches, gives it to current recipients and banks the rest in Treasury IOU's in a reserve fund. These Treasury IOU's throw off a trivial amount of interest income.
Because of drops of payroll contributions as a result of unemployment and accelerated enrollments in social security (e.g., at 62 versus 65), we are now (at least for two fiscal years, inclusive) drawing down on that reserve.
This is not a legitimate pension plan. It depends on contributions of current workers to pay existing beneficiaries. That money is not being invested for the retirements of current workers. So when Ms. Heldman says there is no crisis, she's referring to the fact that the reserve is melting away, never mind the fact that Democrats can no longer depend on captive Treasury bills to paper over current fiscal overspending. The reserve melting away is a huge problem--because the end result, say if workers in the late 2030's only contribute enough to cover 60% of social security outlays, that 40% have to be made up by other means--e.g., an on-budget expenditure, increased payroll taxes, new federal debt and/or Draconian benefit cuts to recipients.
It is just incredible that Ms. Heldman is so oblivious to recent economic crises in Greece and other European countries, almost all of which are looking, unlike the US progressives, to defer retirement eligibility and other measures meant to shore up shaky finances. I enjoy the give and take of legitimate academic debate, but when you get Kool-Aid drinkers whom simply dismiss a serious issue, it's time to cut off the mike.
Did the Stimulus Bill Help the Economy?
David Lynch of USA Today writes of a comprehensive study on the stimulus by two prominent economists, Mark Zandi of Moody's Analytics, and Alan Blinder, not liberal economists (in fact, Zandi supported McCain). The study argues that stimulus act created 2.7 million job, added nearly half a trillion to the GDP and probably kept unemployment down by 1.5 percentage points than it would have been otherwise. (However, it should be noted that they correctly noted that the majority effect had more to do with efforts by the Fed to keep liquidity in the banking system; they estimate that without the unpopular bank measures that unemployment could have exceeded 16% by now.)
I can predict that Robert Gibbs and other Obama Administration officials will try to promote any attempts by economists to support the $860B (estimates vary over more recent costs of the original $787B measure) and their assertions of the efficacy of the so-called recovery act's mish-mash of stretched-out minor tax cuts, unemployment compensation, state bailouts, and certain infrastructure investments.
I don't think much of this exercise of economists arguing over how many angels can dance on the head of a pin. I have not performed academic research in the area of economics, but I've done interdisciplinary research and follow a number of relevant disputes. The basic idea behind a stimulus is that government can stoke a lackluster economy with a carefully cultivated spark, which ripples through the economy with larger effect than the original stimulus.
One of these disputes is over the multiplier factor, which I've cited in a few past posts. Anyone who follows this blog on a regular basis knows I am sympathetic with the viewpoint of Professor John Taylor, whom is skeptical of the alleged multiplier effect by most government efforts during the Great Depression and in last year's stimulus bill. (Taylor attributes most of the recovery we've seen mostly to a pickup in business investment, something that certainly wasn't a focus of the stimulus bill.) Zandi counters that government spending has more of a multiplier effect given low interest rates and slack resources.
We ultimately can't argue counterfactuals: would the sky have fallen down if we had taken an alternative approach to Ben Bernanke of the Fed, Bush Treasury Secretary Henry Paulson and others? To be honest, I'm convinced that government was part of the problem, not the solution. It wasn't clear to me during the crisis why Lehman Brothers was allowed to fail while others were given a lifeline. "Seat of the pants" firefighting contributes to fear, uncertainty and doubt clouding the perspective of business leaders.
But the fact is, we have to make an assessment based on the nature of the stimulus. Since when is rewarding bloated state governments spending beyond their means virtuous? What about all the companies that went bankrupt during the recession? Are their workers less worthy than government workers? As to the tax cuts, what about the evidence that consumers were mostly banking their tax cuts, which did zero to stimulate the two-thirds of the economy based on consumer spending? You could make more of an argument for infrastructure spending, but the fact of the matter is that over a year since the passing of the stimulus package, just under two-thirds of the allocated money has been spent. The economic value of infrastructure spending is in the details. For example, expansions of crowded beltways around DC or Los Angeles or the construction of new power plants would be better than, say, high-speed railways.
I have been arguing for some time that a truly effective stimulus plan would have been smaller, more focused, balanced (including business incentives to hire and invest) and broad-based, not this eclectic cherrypicking strategy focusing chiefly on funding policies aimed at key Democratic talking points and constituencies, e.g., teacher and other public employee unions and environmentalists. A broad-based approach would have provided unemployed people the best chance to find work similar in nature to what they had been doing. That's my point of view, and I'm sticking to it.
Political Cartoon
More originals:
- How did the baker keep other House Democrats from sneaking an early piece of Speaker Pelosi's birthday cake? The top of the cake read "Government Spending"...
- What do you call a schoolyard bully whom steals other kids' lunch money to spend as he wishes? A future Democrat.
Musical Interlude: The American Songbook Series
Bing Crosby, "Swing On A Star"
