Category Archives: View

Wednesday September 14, 2011

The Democrats lost New York Congressional District 9 by a lot. Turner ran against Obama, and it was not a local issue. He wanted this to be a referendum on Obama. He won. Big. In a district that has not gone Republican for a hundred years. Turner is Catholic and pro-life and made no concessions on the subject.

Take heart. If NY 9 can go anti-Obama, so can the nation.

I have a dental appointment. Back this afternoon. I’ll have a new View rather than add to this one.

View 692 Tuesday, September 13, 2011

· The Debates

· The Vaccination Issue

· Ponzi scheme

Blitzer 2, Bachman 0

We need to examine the whole question of compulsory vaccination, but it’s not really an issue in a Presidential election.

What is important is that Michelle Bachman fell for Wolf Blitzer’s offer to assist her in political suicide, not only taking the bait hook, line, and sinker, but then coming back for more. Up to that point my impression of the debate was that Newt, as usual, was the most impressive on the issues but not as a candidate, while Cain and Bachman moved out of the field and up into the group of front runners. Cain stayed there. Bachman did herself considerable harm,

The harm is not her indignation about compulsory vaccination against a sexually transmitted disease. It’s her taking the bait from Blitzer, whose sole task up there was to try to get Republican candidates to slaughter each other and turn attention away from President Obama and the Democrats. If the issue is personal freedom and limited government, is there anyone left in the US who has doubts about which party is more trustworthy on the issue? The Republicans had their experiment with big government as the solution and were so thoroughly burned that they are apologetic about supporting government programs we had for generations. It won’t be Republicans who institute a national program of compulsory vaccination against cervical cancer, and it won’t be Republicans who decide that if girls must be vaccinated, then boys – who after all can get HPV – must be vaccinated as well. President Perry would be no more likely to implement a federal HPV vaccination program than President Bachman or President Cain or anyone else on that platform.

Surely Bachman knows that? But she let herself be goaded into an all-out attack on Perry without any attempt at discussion of the real issue of compulsory vaccination and state’s rights. She made it purely personal. She pounded on it again and again. And when Perry conceded the issue and in effect admitted a mistake, she wouldn’t let that go: she screamed and leaped, accusing him of trying to implement the policy because Merck gave him a $5.000 campaign contribution. Perry didn’t handle that one very well, but it’s pretty hard to think of what to say when someone accuses you of a felony. I thought he was pretty restrained.

Now why is any of this important? Neither President Bachman nor President Perry will ever face the question if elected. What this did show is the candidates’ abilities to be manipulated by a hostile press. Perry came off without great harm. I do not think Bachman did.

Primary debates ought to be about issues. There are no substantial issue differences between the Republican candidates. That leaves leadership and implementation. The purpose of the debates is to allow the candidates to show leadership. Of those on that stage, Cain and Gingrich have stood out as understanding the problems and focusing on solutions, not on belittling their supposed fellow party members. Those who value political office more than principle got us into this mess in the first place. I don’t have a great deal of confidence in candidates who do not seem to understand that.

The Vaccination Issue

Public health issues involving compulsory measures divide conservatives and libertarians. They have for a long time. Do you have the right to go out in public after you know you have TB? Does the government have the right to compel vaccination against smallpox? What about diphtheria? Do you have the right to keep a bucket of stagnant water in your back yard? What about a fruit tree that you keep “organic” and which is infested with Mediterranean fruit flies? Does the state have the right to spray your organic fruit tree?

These are not trivial questions. They aren’t going to be settled here. The Constitutional solution to this is the same as for abortion and many other such issues: leave it to the states. That’s the general answer for those who believe that governments derive their just powers from the consent of the governed.

The vaccination issue has a long history. I do know that in Tennessee in the 1930’s every school child had to get vaccinated, boys generally on the left arm, girls often elsewhere in places we weren’t supposed to see. Whether that was a federal or a state program I don’t know. I vaguely recall there were a few kids whose parents had a religious objection to vaccination, but I didn’t know any of them and it was never thought of as a big deal. Everyone I knew had also been vaccinated for diphtheria, whooping cough, and tetanus, but I think that was privately done; and of course you always got a tetanus shot if you got a puncture wound. Then when we went into the Army there was a new smallpox vaccination and a whole battery of shots including a particularly painful one we called Japanese Beetle (Japanese Type B Encephalitis).

Over time things changed, and more and more vaccinations became mandatory. Just after my kids got past the age of vaccination – all done as I recall by our pediatrician who so approved of what I was writing that he was taking care of them for free – the list of mandatory vaccinations became so long that the whole process was being questioned. How many? All at once? At what age? All questions of importance.

While I was growing up there was no vaccination for polio, and every polio season was a season of mild fear. When Salk developed his vaccine I rushed to get it. One of the members of my fencing club in Seattle waited a year. The last time I saw him he was in an iron lung.

To repeat: These are not trivial questions. They aren’t going to be settled here. The Constitutional solution to this is the same as for many other such issues: leave it to the states. That’s the general answer for those who believe that governments derive their just powers from the consent of the governed.

The argument for compulsory vaccination against polio and smallpox is one of public health. It’s less compelling regarding sexually transmitted diseases – depending of course on your beliefs regarding adolescent self control, guilt, and morality. Is it compassionate to require vaccination against HPV? Try this for a reasonable discussion: http://www.i-sis.org.uk/HPV_Vaccine_Controversy.php

Now what happens if we discover a vaccination for AIDS? Should that be compulsory as a condition of attending school? For everyone?

What I tell you three times is true: these are not trivial questions, and we are not going to settle them here. Good people can differ.

From Chesley Bonestell’s Imagination?

Jerry,

It seems that the Cassini spacecraft continues to channel Chesley Bonnestell!

Regards, Charles Adams, Bellevue, NE

Release & Picture:

A Quintet of Moons

http://photojournal.jpl.nasa.gov/catalog/PIA14573

Ponzi schemes

A while back, libertarian Peter Schiff had one of the trustees of the Social Security program on his radio show. He asked him to describe the difference between the system and a Ponzi scheme. He couldn’t do it — http://www.youtube.com/watch?v=ITMEZImvNio&feature=results_video&playnext=1&list=PL6610F55F8E810620

It’s an amusing listen.

Ed Armstrong

I think we have established that Social Security as configured at present meets all the criteria of a Ponzi scheme. The question now is how it can be fixed. Assuming that requiring compulsory savings is a good idea – and there is a lot to be said for that – the morality of transferring money from those who work to those who don’t work needs discussion. Supporting those who paid into a fund all their lives and now expect to be paid back is easy; supporting those who have been supported on disability all their lives and now expect to be paid after they reach the age at which they would have retired had they ever worked in the first place, by taxing those just joining the work force is perhaps another matter.

If Social Security were a real investment at compound interest it might be a different discussion, but the morality of taxing those who work to support those who don’t certainly needs at least discussion.

View 692 Monday, September 12, 2011

It’s still a Ponzi Scheme, and the media are still crucifying Perry for calling it that. Doubtless all this will come up in the Republican debates this evening (1700 PDT), and I presume that Perry is prepared for it.

If the Social Security funds were actually put into a Trust Fund, it would still be a Ponzi scheme even if it only promised to give everyone who contributed their money back, because a great number of people who never paid into Social Security are entitled to benefits. Those benefits have been ever-growing from the day Social Security was founded. Assuming that is true, there are still more future obligations not only to those who paid into Social Security but to others on Disability who never paid into it at all than there is money coming into the system. Everything previously paid into the Social Security System has gone into the general fund which was spent on armies and civil servants and cannon and roads and bunny inspectors, SEALS and Department of Education SWAT teams, Air Force One and a jet fleet for Speaker Pelosi, the Capitol Police and the District of Columbia Education System, and a ton of benefits to anyone who could afford a lobbyist and the minimum pay to play fees. That money is gone, and it can only be replaced by taxes, which just at the moment don’t cover current expenses – the US is running at a deficit. It’s as if Madoff ran out of money and was borrowing heavily as he continued to persuade people to invest in his funds with promises of lavish payouts.

That’s a Ponzi scheme.

Madoff pretended that the funds he took in were invested cleverly at compound interest, and that was how he would get the money to pay out more than he took in.

Social Security doesn’t even pretend to invest the funds at compound interest. It puts the money in the general fund and replaces it with a Treasury bond. I don’t know, but I presume that the interest from the bond would go to the Fund (although I don’t think Treasury bonds actually have coupons and interest payments) but since any income to the Fund would immediately go to pay bunny inspectors and people to raid Gibson Guitar, that doesn’t solve the problem. The only ways Social Security can generate more money for the Fund would be to increase the number of people paying into it, to raise the rate at which the contributors pay, or to find ways to tax people not eligible to draw from it. One proposal is to require everyone to pay the FICA tax on every cent of wage income; another is to add interest and other non-wage income to the income eligible for Social Security tax. These are the fixes that will make Social Security less of a Ponzi scheme. Think of Madoff: suppose he could get more out of his investors, while finding ways actually to invest the money at compound interest.

We will have to “fix” Social Security by lowering benefits, changing eligibility ages, eliminating some benefits for those not taxed (possibly placing them on welfare rolls, which doesn’t lower the total spending, but at least helps “save” Social Security) and eventually finding a way actually to invest some of the income at compound interest; and eventually, perhaps, Social Security won’t be a Ponzi Scheme. But it is one now, it always has been, and this has been known from the day of its inception. To say that Perry is not competent to be President because he actually says it is a Ponzi Scheme says a very great deal about the media and the political analysts, and the whole political system, and nothing it says is good.

When you are in a hole, it may be that you can’t stop digging. You may need to turn it into a tunnel. But you darned well better recognize that you are in a hole.

Of course there is another approach:

Subj: Can government lies calm the markets?

http://finance.townhall.com/columnists/mikeshedlock/2011/09/11/will_markets_buy_government_lies/print

Jerry,

About 10 years ago, I went to send a letter to all my clients and I called Social Security a ponzi shemem and the legal department at my firm would not let me send out the letter; the head of compliance agreed with me but would not let me put it in writing!

So, will the debate be televised tonight? I tried to find the last one before Obama’s big important speach and could not find it.

Oh, and have you seen any details on the important, urgent bill we need to pass for him so he can fix everything? I saw on yahoo that President Obama was brandishing his bill, but I could find no links to an actual bill.

Hope you, your family and Sable are all well.

Alan

A show with everything but Yul Brynner

Murray Head

Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.

Winston Churchill <http://www.brainyquote.com/quotes/quotes/w/winstonchu164131.html>

The debate: http://cnnpressroom.blogs.cnn.com/2011/09/12/tune-in-first-ever-cnn-tea-party-republican-debate/

I have not seen the American Jobs Act, nor have I any reliable communication from anyone who has seen it. I think it’s coming Real Soon Now, but I can’t be sure. I find it interesting that Congress is being chided for not passing it immediately when, to the best I know, no one including President Obama has actually seen the bill. Perhaps I am mistaken.

Social Security and Ponzi Schemes

But Jerry… Social Security can’t be a Ponzi scheme… ‘Cause the Social Security Administration tells us so!

http://www.ssa.gov/history/ponzi.htm

Karl

They certainly do, and conclude that Social Security is sound and permanent and wonderful. They also leave out a great deal about tax raises, benefit growth, and repeated crises as they hasten to tell you that Social Security isn’t a Ponzi Scheme because, because, well because it just isn’t…

View 691 Friday, September 09, 2011

I watched the President’s address to a Joint Session of Congress yesterday. It was a great speech complete with urgent appeals to the Congress to pass the American Jobs Act immediately. They can’t act too fast. The crisis is real. But when I went to examine the American Jobs Act of 2011, I couldn’t find it. I called a friend in Congress. He’s more into defense and space than economic wonkery, but he hasn’t seen it and doesn’t believe the Speaker has either. A Google search directs me to the Daily KOS, which seems quite enthusiastic about the Act, but doesn’t have the text, and refers me to the White House. At the White House I get to see the President’s speech repeated, but I don’t see the text of the Act.

In economic wonkery the devil is always in the details. The American Jobs Act is long on promises of spending cuts to take place Real Soon Now, but short on specifics of what will be cut. The White House Summary is enthusiastic about the effects this will have on the economy, but it does not indicate what is in the Act that could not have been proposed months or even years ago.

It’s pretty hard to analyze a Bill before it has been written, but perhaps that is the intention. More when we know more. The President has promised us that this Bill, which will be paid for eventually but will require borrowing more money now, will be our salvation and will get this country moving again. This is the Bill we have been waiting for. He did not explain why we had to wait this long to hear about it, or how long we will have to wait until we know what is in the Bill.

Washington (CNN) — Facing low approval ratings and constant Republican criticism as his re-election campaign starts up, President Barack Obama challenged Congress on Thursday night to put the good of the nation over political benefit and pass a huge jobs plan he proposed.

In a speech to a joint session of Congress, Obama told the legislators to "stop the political circus and actually do something to help the economy" by quickly approving the $447 billion package of measures so he can sign it into law.

"The people of this country work hard to meet their responsibilities. The question tonight is whether we’ll meet ours," Obama said to applause. "The question is whether, in the face of an ongoing national crisis, we can stop the political circus and actually do something to help the economy. The question is whether we can restore some of the fairness and security that has defined this nation since our beginning."

Obama also told legislators that they should quickly pass his plan, called the American Jobs Act.

http://www.cnn.com/2011/POLITICS/09/08/obama.jobs.plan/index.html

Other analysts have not been so enthusiastic. No one seems to have found anything new in the proposals, although without the specifics of the Act that is hard to discern. Some have said it’s just a new version of the stimulus, complete with paying people to remain unemployed, but again, it is difficult to know since we don’t have the details of the legislation.

The original American Recovery and Reinvestment Act of 2009 included approximately $82Bn worth of spending on social welfare programs. This was targeted to favor the recently unemployed. The new American Jobs Act extends the welfare expansion for yet another year. The motives here are decent and noble, but these continued extensions have turned the necessary societal safety net into a hammock for the ne’er-do-wells. The the real-world results are a disincentive for low-skilled individuals to seek gainful employment. Decent intentions do not insure a successful policy outcome and this also will fail.

The 2009 American Recovery and Reinvestment Act attempted to put spending money in the pockets of consumers by reducing the rate of payroll tax collections. It also included targeted tax breaks for education, home purchases and some remodeling and incentives to buy new cars. This was supposed to goose aggregate demand and convince people drowning in personal debt to buy more big-ticket items on credit. The American Jobs Act will extend these tax breaks.

Thus, the American Jobs Act is remarkably similar to the failed 2009 American Reinvestment and Recovery Act. All our President seems to have in his toolkit is a hammer. He will use it to pound away at the current Phillips’ Head Screw and wonder why he can’t drive it through the board with significant success. It’s the sequel to a Hollywood Movie that bombed in its original run. We could call it Stimulus – Smaller, Shorter and Regrettably Un-Cut!

http://www.redstate.com/repair_man_jack/2011/09/09/the-american-jobs-act-of-2011-lather-rinse-repeat-and-fail/

President Obama is telling us of the wonders of the Act. Congress members are asking how it will be paid for. The President has replied that next week he will make a speech that will tell us how to reduce the deficit. We’ll have to wait to find out how that will be done.

Given past proposals from President Obama, we can expect that one key to his vision of recovery will be the expansion of green jobs.

The F.B.I. on Thursday raided the office of a California solar company that borrowed $528 million from the federal government before filing for bankruptcy, as House Republicans announced that they would call two top Obama administration officials to testify about the case next week.

The federal agents, acting in a joint investigation with the inspector general of the Department of Energy, served search warrants on Solyndra, which announced last week that it was filing for bankruptcy protection. The search was part of an investigation into the loans Solyndra received from the Treasury Department that were guaranteed by the Department of Energy under a highly promoted federal stimulus program. http://www.nytimes.com/2011/09/09/business/solar-company-is-searched-by-fbi.html?_r=1

Michael Stern Hart, RIP

Michael Stern Hart, a burly rebel whose vision of a literate society led him to pioneer the electronic book decades before the spread of the Internet, has died. He was 64.
The founder of the online library Project Gutenberg, Hart had been in poor health and was found Tuesday at his Urbana, Ill., home, said Project Gutenberg Chief Executive Gregory B. Newby. An autopsy is underway to determine the cause of death. http://www.latimes.com/news/obituaries/la-me-michael-hart-20110909,0,7536729.story

Management Question for Your Amusement

The UK Government is getting on the case of UK universities about inefficiency. http://www.bbc.co.uk/news/education-14836196 They may have a point…

Student fees in the UK: £8500/year ($13600/year)

Student fees at Cal: £9000/year ($15000/year)

Number of teaching weeks in the UK: 24/year

Number of teaching weeks at Cal: 30/year

Formal staff contact hours in the UK: about 10/week (excluding labs and discussion sections)

Formal staff contact hours at Cal: about 15/week (excluding labs and discussion sections)

Contact hours/year in the UK: about 240

Contact hours/year at Cal: about 450

Contact hours for a degree in the UK: about 720 (costing the students £25500)

Contact hours for a degree at Cal: about 1800 (costing the students £36000)

Additional hours during the second year of A-levels that might be added to the contact hours for a degree in the UK: 300 hours. The corresponding hours for AP classes in high school should then be credited to the degree at Cal.

As far as we can tell, the difference is that the UK uses academics (at $64000/year) for such things as grading assignments, leading discussion and lab sessions, and a couple of days of administrative work per week. Also we have fewer adjuncts, and the average lecture section is 24 students.

How do US colleges and universities manage to keep body and soul together and still deliver twice the hours?

—

"We do not understand how a country,… can produce people who seem to be acting without thinking, let alone making serious efforts to investigate the consequences of their actions." (Mary Evans in the Times Higher Education)

Harry Erwin

I fear I have no answer to that question.

I have been asked where I am getting numbers for the exhaustion of Social Security without some kind of restructuring. I confess I have not spent much time looking into the details, taking as fairly well given the general conclusions that float about the analysis world; but here is the formal report from the Trustees of the SSA.

Social Security

Social Security expenditures exceeded the program’s non-interest income in 2010 for the first time since 1983. The $49 billion deficit last year (excluding interest income) and $46 billion projected deficit in 2011 are in large part due to the weakened economy and to downward income adjustments that correct for excess payroll tax revenue credited to the trust funds in earlier years. This deficit is expected to shrink to about $20 billion for years 2012-2014 as the economy strengthens. After 2014, cash deficits are expected to grow rapidly as the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers. Through 2022, the annual cash deficits will be made up by redeeming trust fund assets from the General Fund of the Treasury. Because these redemptions will be less than interest earnings, trust fund balances will continue to grow. After 2022, trust fund assets will be redeemed in amounts that exceed interest earnings until trust fund reserves are exhausted in 2036, one year earlier than was projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2085.

Under current projections, the annual cost of Social Security benefits expressed as a share of workers’ taxable wages will grow rapidly from 11-1/2 percent in 2007, the last pre-recession year, to roughly 17 percent in 2035, and will then dip slightly before commencing a slow upward march after 2050. Costs display a slightly different pattern when expressed as a share of GDP. Program costs equaled roughly 4.2 percent of GDP in 2007, and are projected to increase gradually to 6.2 percent of GDP in 2035 and then decline to about 6.0 percent of GDP by 2050 and remain at about that level.

The projected 75-year actuarial deficit for the combined Old-Age and Survivors Insurance and Disability Insurance (OASDI) Trust Funds is 2.22 percent of taxable payroll, up from 1.92 percent projected in last year’s report. This deficit amounts to 17 percent of tax receipts, and 14 percent of program outlays.

The 0.30 percentage point increase in the OASDI actuarial deficit and the one-year advance in the exhaustion date for the combined trust funds primarily reflects lower estimates for death rates at advanced ages, a slower economic recovery than was assumed last year, and the one-year advance of the valuation period from 2010-2084 to 2011-2085.

While the combined OASDI program continues to fail the long-range test of close actuarial balance, it does satisfy the conditions for short-range financial adequacy. Combined trust fund assets are projected to exceed one year’s projected benefit payments for more than ten years, through to 2035. However, the Disability Insurance (DI) program satisfies neither the long-range nor short-range tests for financial adequacy. DI costs have exceeded non-interest income since 2005 and trust fund exhaustion is projected for 2018; thus changes to improve the financial status of the DI program are needed soon. http://www.ssa.gov/oact/trsum/index.html

Couple this with the growing deficit in the US budget, and I think it fair to conclude, as I did, that those now receiving Social Security may be fairly confident that they will continue to get their benefits for life. There may be some question about the Disability Insurance program recipients, particularly those who never paid into the fund and began receiving payments at a relatively young age. Those just entering the work force can reasonably doubt that the system will be funded by the time they should expect to receive benefits.

The system can be adjusted. Ages of eligibility can gradually be raised. Eligibility for Disability can be restricted to those who actually have worked and paid into the system (i.e. making it a little more like real insurance rather than an out and out welfare entitlement). Social Security can be salvaged, but at the moment it remains a Ponzi Scheme; but unlike the usual Ponzi Scheme, this one has some ties to the US government and means of using the tax payers to bail it out when it runs out of money.

Note that I have not endorsed any particular scheme for changing or bailing out the SSA, and since I have no idea of what Governor Perry intends to do about Social Security I can’t comment on his plans; what I have said is that he should not be dismissed out of hand as a fool for saying that Social Security is and always was a Ponzi scheme rather than a genuine compulsory savings and investment program. It might have become a savings and investment program, but the SSA income was never invested: it was simply spent for current expenses. The “Trust Fund” was supposedly invested in US Treasury Bonds, but I note tht during the budget deficit controversies the President of the United States said that the Treasury would not have the funds to pay out its Social Security obligations unless the US Debt Limit was raised; this implies to me that the SSA Trust Fund isn’t like any other Trust Fund I know of, since it ought to have more than enough money to pay its obligations for some years to come. Ponzi schemes, of course, never have enough money to pay their obligations.

I will cheerfully admit that I have not done enough analysis to tell when Social Security will run out of money, but it seems clear to me that absent a good bit of fixing it most certainly will before those just joining the work force will be eligible for benefits.