South Dakota Politics

Mendacity, Medicare, & Social Security

Friends and faithful interlocutors A.I. and Donald Pays have been jousting with me over the Social Security System. Contrary to what they may suspect, I find a lot to praise about these institutions. They have virtually eliminated poverty among the elderly, and that is no small achievement. For precisely that reason we ought to be very honest about what is wrong with these systems, and there is a lot wrong.

If I understand my interlocutors, they more or less concede my point that, in fact, the Social Security Trust Fund is not a reserve of wealth that the system can draw on in the future. It is merely a collection of IOU's, or promises of future payment. They think, however, that the "full faith and credit of the United States" is more reliable than any private contract would be.

Given the trillion dollar plus deficits the United States is currently piling up each year, I am less confident than they are. But let us assume, arguendo, that they are right. Privately managed savings always involved a tradeoff between risk and returns. The savings are always invested in something that is expected to hold or increase its value. Someone hoping for a high return on his or her savings will have to accept a greater degree of risk. Someone wanting security will generally accept much lower returns. Privately managed accounts can pay returns because the money invested in a way that creates wealth, enough wealth to cover both the returns and to allow the managers to make a profit.

Almost everyone will expect some return on their savings, so that the money they eventually end up with is more than what they put in. If an "investment" offered no return, you might as well put the money in a pickle jar and keep it behind the wine in the basement. What sensible person would put his money into an account that paid back less than what he put into it?

Apparently, Social Security does exactly that, at least for a lot of investors. Powerline brings to our attention a very revealing article from the Associated Press.

Consider an average-wage, two-earner couple together earning $89,000 a year. Upon retiring in 2011, they…will have paid $614,000 in Social Security taxes, and can expect to collect $555,000 in benefits. They will have paid about 10 percent more into the system than they're likely to get back.

Social Security, being mandatory, is also confiscatory. In return for that full faith guarantee of benefits, it seizes more than it is likely to pay back. Maybe that's a good bargain, but it's not one that would sell in the marketplace. Whether it would sell politically isn't clear, for the average couple doesn't know about this because the system isn't honest.

What does Government do with that extra 10%? As we have established, it doesn't put it aside to pay future benefits. It spends it. The surplus that Social Security has been running for decades goes into the Treasury. Perhaps this ought to be common knowledge.

Medicare, by contrast, pays benefits beyond all reasonable expectations. When our average couple retires in 2001

they would have paid $114,000 in Medicare payroll taxes during their careers. But they can expect to receive medical services — from prescriptions to hospital care — worth $355,000, or about three times what they put in.

Well, that's a good deal! Try getting a 300% return on any market investment. No problem, mon, if you can pick the next Microsoft or Google. Private investments have to create enough wealth to cover all returns. Medicare, by contrast, has to fund payments out of receipts.

The system has worked for 45 years, with occasional fine tuning. But the retirement of the baby boomers, the first of whom become eligible for Medicare in 2011, threatens to push it over the edge.

Medicare covers 46 millions seniors and disabled people now. When the last of the boomers reaches age 65 in about 20 years, Medicare will be covering more than 80 million people. At the same time, the ratio of workers paying taxes to support the program will have plunged from 3.5 for each person receiving benefits currently, to 2.3.

"With Medicare, we are all still making out like bandits, shoving all those costs to future generations," said Steuerle. "At another level, we know that this system is totally unsustainable."

In fact, both Medicare and Social Security are totally unsustainable in their present forms, and for the same reason. The number of retirees drawing out is growing faster than the number of workers paying in. Soon enough Social Security will reach the breaking point. Medicare is approaching that point now.

I can't resist pointing out that ObamaCare is financed in part by hypothetical cuts in Medicare. "Mendacity," Paul Newman said in A Cat on a Hot Tin Roof, is the system we live with." Ain't that the truth. Maybe it's time for all of us to see the system for what it is.

True Grit

I was in my home town, Jonesboro, Arkansas, when I watched the Cohen Brothers version of True Grit. Toward the end of the film I heard that Rooster Cogburn was buried in a Confederate grave yard in Jonesboro, Arkansas. I now speak with some authority.

The 1969 version of True Grit was a good movie, for its time. John Wayne was well overdue for an Oscar, and it is the way of that institution to award not so magnificent performances to make up for past neglect. Conversely, the 69 TG looked pretty good until I saw the 2010 version.

The Cohen Brothers have genius. They did Barton Fink, a movie so utterly terrible that only genius could have produced it. They did Raising Arizona, which might stand as the perfect example of an intelligent comedy. Almost all of their movies have been superb.

This year's True Grit is both truer and grittier than its predecessor. Haillee Steinfeld is brilliant as Mattie Ross. There is a scene in which she sells back the horses her father had purchased in order to fund her crusade against her father's murderer. The language of the exchange, in which she outfoxes a seasoned trader, is worth the admission price to the movie. In a subsequent scene she buys back again a single horse, and the trader says, with exasperation, "are we trading again?" He has recognized that he is no match for her.

Jeff Bridges' Rooster is finely crafted, as fans would expect. The character combines the flaws of an alcoholic wastrel with heroic virtue, and Bridges is up to that challenge. The weakest performance in TG69 was Glen Campbell as LaBoeuf. Matt Damon repairs that defect. LaBoeuf is ridiculously pretentious, but he is steadfast and a good shot with his rifle which is all that really matters. Barry Pepper plays the outlaw Ned Pepper, chiefly because he looks a lot like Robert Duvall. That might be the single bit of homage to the 1969 film.

The Cohen Brothers Grit is superb. The star of the show is the dialogue, Biblical or Shakespearean, take your pick. All Westerns about the same thing: personal virtue and the demands of civilization struggling against a background of lawless violence. The genre of the Western is rare, but it is not played out. Don't miss this one.

The Rich Pay Way More than their Share

I am not at all sure that the recent extension of Bush tax cuts was good policy. I understand the argument that we shouldn't raise taxes during a period of economic stress, but I wonder whether the stress might not be better addressed by serious attempts to put our fiscal house in order.

That said, the argument from the Left that the rich are being coddled is utter nonsense. The top 1% of income earners in the U.S. pay almost 40% of income taxes. The top 2-5% pay another 20%. That means that 5% of U.S. taxpayers pay more than the other 95% combined. The bottom 50% of earners pays just 3.1% of income taxes.

There are all kinds of things wrong with this. One is that it gives the rich an unfair advantage politically. The 5% who pay 60% of the bill are going to figure out how to leverage that financial weight. They didn't get rich by being stupid. Just ask a nephew in a family in which Grandma controls the fortune.

The other problem is that it conceals the cost of government from most of the voters. If my taxes are going down, why should I care if the cost of government is going up? I should care because those costs have to be paid out of the productive economy. It is the latter that produces all the wealth and all the real jobs. It is too much to ask that each citizen should calculate the cost of a government program in terms of all of its effects on the economy. Maybe he should know what it costs in terms of his or her own tax returns.

At any rate, we need to evaluate tax policy in terms of who actually pays what. In the debate over the tax cut extensions, we certainly weren't doing that.

A little voice on a cold, crisp night

While we are all enjoying our Christmas bounty, here a little voice to whisper in our ears. From the New York Times:

PRICHARD, Ala. — This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry.

Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full.

Since then, Nettie Banks, 68, a retired Prichard police and fire dispatcher, has filed for bankruptcy. Alfred Arnold, a 66-year-old retired fire captain, has gone back to work as a shopping mall security guard to try to keep his house. Eddie Ragland, 59, a retired police captain, accepted help from colleagues, bake sales and collection jars after he was shot by a robber, leaving him badly wounded and unable to get to his new job as a police officer at the regional airport.

Far worse was the retired fire marshal who died in June. Like many of the others, he was too young to collect Social Security. "When they found him, he had no electricity and no running water in his house," said David Anders, 58, a retired district fire chief. "He was a proud enough man that he wouldn't accept help."

The situation in Prichard is extremely unusual — the city has sought bankruptcy protection twice — but it proves that the unthinkable can, in fact, sometimes happen. And it stands as a warning to cities like Philadelphia and states like Illinois, whose pension funds are under great strain: if nothing changes, the money eventually does run out, and when that happens, misery and turmoil follow.

Congress has known for decades that Social Security and Medicare would run out of money right about now. Anyone who suggested that something be done about this was accused of wanting to destroy Social Security. Nothing was done.

So tuck your loved ones in, makes sure candles are out, and check the rib roast dry aging in the bottom of the fridge. But don't forget that there really isn't any such person as Santa Claus.

Scrooge & Modern Virtue

Here's a piece I wrote some years ago, but appropriate for the occasion.  Merry Christmas!

http://southdakotapolitics.blogs.com/south_dakota_politics/2007/12/scrooge-and-vir.html

Following Todd Epp's leadership, I am reprinting some Christmas posts of previous seasons.  Here is one I wrote on A Christmas Carol. 

My colleague Professor Schaff weighs in on that basic problem of modern political philosophy and economics: was Scrooge A (pre-Christmas spirit Scrooge) a man of modern virtue?  Modern virtue is here defined in the Machiavellian sense of effective virtue, that is, a set of habits that is efficiently productive.  The answer, within the confines of that definition, is obviously yes.  This is largely the conclusion of Stephen Lansburg's defense of Scrooge A in Slate. Scrooge A was about as efficiently productive as it is possible for a human being to be, as least when it comes to cold, hard, cash. 

Dickens's Christmas Carol is one of the most powerful short stories ever composed.   This is due in large part to his sublimation of Christianity.  The story is, to be sure, full of ghosts; but, apart from the word Christmas itself, I think there is not the slightest mention of the Holy Ghost.  Dickens writes as if he were trying to smuggle the Gospel onto the courthouse grounds under the watchful eyes of our contemporary Supreme Court.  This has the paradoxical effect of making the Christian message of redemption all the more compelling. 

A second aspect of its perfection lies in the marvelous splitting of time into past, present, and future spirits.  All three ghosts are, of course, one and the same ghost: Christmas itself, a religious festival incarnate (or almost incarnate, the ghosts remaining a bit vaporous if no less visible and powerful for that).    But Christmas appears differently from the three temporal points of view, thus grounding itself in the most basic existential fact of human life.  The past and present are history.  Only the future may be redeemed. 

Last, but not least, Dickens shows the fatal flaw in modern virtue without rejecting modern virtue.  Anyone can see that there is something desperately wrong with the way that Scrooge A lives.  Sipping warmed up broth in his cold chambers, without the comforts of love, friends, or family, what is the point of being rich?  On the other hand, it is precisely the efficiency of Scrooge A that makes his transformation so wonderful.  After all, Scrooge B can afford to send the Cratchits a gargantuan turkey.  He can afford to redeem his sister's love by changing his nephew Fred's circumstances.  And he can afford to save poor Tim.  It is worth mentioning that he can also afford to make his place of business and his home a good deal more comfortable.

I have heard it said that Dickens more or less revived and profoundly shaped our later celebration of Christmas.  It is certainly part of an interesting shift in the Christian calendar.  The most important Christian festival ought to be Easter, for Christ's resurrection constitutes the essential promise of the Gospel: as Christ walked out of the tomb, those who believe in Him may do likewise.  But Christmas has overshadowed Easter, even among the most pious Christians in the modern world.  Because of Scrooge A-like modern virtue, we can afford to be very generous when a Scrooge B-like mood hits us.  And say what you want about the evils of capitalism, it has done more to warm the hearths of the poor than dropping alms into collection plates ever did.   The Tiny Tims of the developed world have been saved by the power and prosperity of modern civilization.  But A Christmas Carol is not about their salvation.  It is about Scrooge's salvation. 

I have seen a lot of versions of A Christmas Carol, and I like many of them.  My favorite is the version starring Patrick Stewart.  No one has presented the contrast between the redeemed and unredeemed Scrooge so well.  When he finds himself alive on Christmas morning, he suddenly seems to strangle and cough.  He is trying to laugh, for the first time in so long that he has to remember how to do it.  It also adds a scene in which Scrooge attends a Christmas morning church service.  He is so unaccustomed to the venue that he has to be reminded twice to take off his top hat.  As he squeezes into a pew, he tries to sing but doesn't know the words.  The man next to him kindly shares his hymnal.  When he shows up, very unexpected, at Fred's for Christmas dinner, he knows that the person who has to accept him is not Fred but Fred's wife.  He says to her: "can you forgive a stupid old man who doesn't want to be left out in the cold any more."  I tear up just typing those words. 

All this reminds us that modern virtue, for all its power, would be a very poor thing without Christian virtue.  Merry Christmas. 

 

 

 

Demographics and Destiny

Here's a little news that will cheer some and others not so much.

The U.S. Census Bureau today announced its long-awaited final population and reapportionment numbers. The official population of the U.S. as of April 1, 2010 was 308,745,538, up from 281,421,906 in 2000. The Northeast grew 3.2 percent, the Midwest grew 3.9 percent, the South grew 14.3 percent and the West grew by 13.8 percent. Overall, it was the slowest growth in the country since the 1930s.

The apportionment winners were: Texas (4 seats), Florida (2 seats), Arizona (1 seat), Georgia (1 seat), Nevada (1 seat), South Carolina (1 seat), Utah (1 seat), Washington (1 seat). The losers were: New York (2 seats), Ohio (2 seats), Illinois (1 seat), Iowa (1 seat), Louisiana (1 seat), Massachusetts (1 seat), Michigan (1 seat), Missouri (1 seat), New Jersey (1 seat), Pennsylvania (1 seat).

Overall, this represents a continued shift in the Electoral College from blue-leaning states to red-leaning states. If the 2008 election had been held under these census numbers, President Obama's 365-173 victory over John McCain would have become a 359-179 win. For 2004, the numbers are starker still: Bush's 286-251 victory would become a 292-246 win, meaning that even if Kerry had won Ohio, he still would have lost (in 2004, flipping Ohio would have been sufficient to give Kerry the win).

Merry Christmas to all!

Light Blogging

I am doing Christmas with family.  I will do something in the next couple of days, I hope.  Merry Christmas to all. 

Meanwhile, check out Chanel 12 if you're in the Aberdeen area.  Spotlight@Northern includes an interview on Russia with Professor Steve Usitalo.  We also have a Christmas show that should be running right now.  Check out this link for online access: http://www.northern.edu/About/NSU_TV/Pages/spotlight2010-2011.aspx

 

 

It’s Time to Dump DADT

There is a chance that the Lame Duck Congress will repeal the Don't Ask Don't Tell law, thus allowing homosexuals to serve openly in the American military. I confess two reservations. One is this gives Obama, Reid, and Pelosi a significant victory. That is a purely partisan reaction, hence the confession. Let yea who are prepared to cast the first stone first inspect the content of your own character.

The other is that I don't like major policy decisions being made in this way: hurry up and pass the damn thing while there are still enough Democrats to make it happen. That is clearly an undemocratic maneuver, as the people have spoken regarding the makeup of Congress. But I know too much, I confess, to think that such maneuvers aren't part of politics in a Republic. Laws and sausage.

I turn then to the last resort of political deliberation: considering the wisdom of the policy. I am not much moved by the fact that the big brass has come out in favor of repealing DADT. The American military is, let us count our blessings, firmly under the control of the civilian government. If Congress wants women integrated into the armed forces, the military will go along. If the President wants the Joint Chiefs to endorse repeal, endorse they will.

I am not more impressed by the Pentagon study that found a low risk of disruption if gay and lesbian persons are allowed to serve "openly" in the military. Again, I suspect that the Pentagon knew what the answer was going to be before they spent nine months answering it. Besides, the Democrats in Congress were prepared to push the repeal well before the study was completed. Why should anyone else take the study more seriously?

What does move me is that I have listened to a lot of debates between proponents and opponents of repeal and the latter always seem at a loss for a good argument. The only significant argument I hear against repeal focuses on "unit cohesion". If I understand this right, the fear is that enlisted homosexuals will never be fully accepted by their fellow men and women at arms. Thus the unit with an openly gay member will never be the happy band of brothers imagined by Shakespeare's Henry Five, let alone the band of brothers and sisters imagined by Congress.

This strikes me as a very bad argument. There are all kinds of reasons why one solider might be disinclined to trust another. He's Irish, or a Democrat. She's a privileged White girl, or a Red Sox fan. It is one of the jobs of soldiers, sailors, marines, etc., to judge their fellows by their competence and loyalty and nothing else. We expect our armed forces to do their job in harm's way, which means in the face of a kind of fear that us civilians can scarcely imagine. Compared to that, nervousness about a fellow warrior's sexual orientation seems like pretty small potatoes.

The men and women who serve in our armed forces must be mentally and physically prepared for the job. They must be scrupulously loyal to the Republic and to the chain of command. If they are otherwise law-abiding, that is enough.

The controversy serves only as a proxy for larger cultural tensions. It is a distraction. It's time to get rid of DADT.

The Healthcare Mandate: Necessary but Improper?

The debate over Judge Hudson's ruling against the healthcare mandate at least has the virtue of being interesting. Neither of the two rulings in favor occasioned much debate. Here, I will try to refine the issue a bit more than I did in my last post.

The Constitution grants Congress a number of explicit or enumerated powers. Among these is the power to regulate commerce, by which the Courts understand interstate commerce. The last clause in the enumeration of powers in Article I, Section 8 reads as follows:

The Congress shall have the power… To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.

This potent clause gives Congress a vast realm of implied powers. The effect is to extend the enumerated powers without any obvious limits. For example, what gives Congress the power to set a national minimum wage? The commerce clause does so. Wages in South Dakota have a substantial effect on interstate commerce.

There is no doubt that the Necessary and Proper Clause was intended to enlarge the powers of Congress. Establishing a Post Office and building post roads implies paying the salaries of Post Office employees. This is not only necessary to making the system work as planned. It provides an essential flexibility to the Constitution that allowed it to remain workable over time. No one questions the power of Congress to create an Air Force to go with our Army and Navy, though for some strange reason the 1787 doctrine didn't explicitly mention the former.

Here's the rub: to have any meaning at all, the Necessary and Proper Clause also has to limit the powers of Congress. Otherwise the founders might as well have said that Congress can do anything it damn well pleases.

Unfortunately, the Courts have not had much luck in discovering those limits. The distinction between interstate and intrastate commerce proved largely unworkable, due to the fact that the United States is a very integrated economy. I am not optimistic that the Courts will do better now.

There is in Judge Hudson's opinion a distinction that might put some meaning into the clause. There is plenty of precedent behind Congress's power to regulate virtually any activity, individual or corporate, that is conceivably commercial. Suppose a group of people decide to pool their resources to cover the medical expenses of any member of the group. That can be regulated as insurance.

The healthcare insurance mandate, however, covers inactivity. It penalizes people for not doing something: buying insurance from a private vender. Is it really proper for Congress to compel me to engage in an economic activity against my will, however necessary Congress might deem this to be for some project? So far as I know, all the Court's jurisprudence on such matters has been confined to the regulation of activity.

This might be the place to draw the line. Can Congress compel me to join a union? Can it compel me to go on a diet? If I am goofy enough to believe that vitamins can prevent HIV infection, Congress can stop me from selling vitamins with a "Prevents AIDS!" label. Can Congress deny me the right to refuse treatment with effective drugs? Congress can regulate the insurance industry sure enough. Can it compel me to purchase insurance?

As a judicial minimalist, I would prefer these questions to be settled by Congress and not by the Courts. As a Federalist, I think that Constitutional provisions ought to mean something. Lockean liberal, I think that the buyer should have the right to say no thanks. That is the point we have come to.

ObamaCare 2 to 1 in the Courts

So far it's two to one. Two federal judges in District Courts have ruled that ObamaCare is constitutional. Today a federal judge in Virginia announced the opposite conclusion. U.S. District Judge Henry E. Hudson ruled that Congress lacks the power, under the Constitution, to compel citizens to purchase health insurance.

I confess that this case strikes me with the force of a mother-in-law joke (if she drives off a cliff in your Ferrari, is that good news or bad?). First the bad news: I am a judicial minimalist. I don't think that courts are the best place to make public policy. I'll grant you that Judge Hudson would say that he is only ruling on the law and not on the wisdom of the policy. If, however, his opinion is sustained by the High Court, it will inevitably lead to more cases and the courts will in effect be compelled to make new law as they specify Congress's authority in this realm.

Now the good news: I have sympathy with my conservative friends who think that Congress exercises powers beyond the imagination of the founders. If Congress can compel me to purchase health insurance because it deems this to be in the national interest, can it forbid me to grow vegetables in my back yard on the grounds that this hurts the national farming industry and thus depresses the economy? You might want to know that the answer is yes, according to precedent.

If the Commerce Clause really gives Congress the power to compel me to purchase a product from a private vendor, then that clause gives it the power to do pretty much anything not explicitly forbidden in the Constitution. So far as I know, there is nothing in the Bill of Rights about growing wheat or tomatillos.

It's pretty clear that the Administration is making a dangerous argument. In an interview, President Obama vociferously insisted that the insurance mandate was not a tax. Now his delegates are arguing that it is in fact a tax and thus justified under the tax power. In case A.I. is still reading: Obama was lying then or he is lying now. If the tax power gives Congress the authority to penalize me for doing or not doing whatever it wants me to do or not do, well Houston, we have a problem.

For most of our history as a nation, the Courts have allowed Congress to do pretty much whatever it saw fit, so long as this did not violate some explicit prohibition in the Constitution, like the free speech clause. Only very rarely have the Courts taken seriously the idea of enumerated powers, i.e., that Congress has only such powers as are mentioned in the charter. In US v. Lopez (1995) the Court ruled that the Commerce Clause did not authorize Congress to regulate the carrying of handguns in the vicinity of a school.

I am skeptical that the Courts are in a position to put real limits on the powers of Congress on the grounds that this or that power was not granted. Lopez was a 5 to 4 decision, and when the Supremes finally weigh in on this one it will be 5 to 4 one way or the other.

Judge Hudson's opinion is not unreasonable. He isn't arguing that the explicit grant of powers in the Constitution severely restricts what Congress can do. He is only arguing that there are limits. The commerce and tax powers, and the Necessary and Proper Clause are very broad. They are not infinitely broad.

I like that idea. I just don't see how a consensus in the judicial branch is likely to form around it. Judge Hudson was a Republican appointee. The two judges who affirmed ObamaCare were not. Deciding big principles by five to four decisions is a recipe for disaster.

The insurance mandate is scheduled to come into effect in 2013, just after the next presidential election. That is clever politics. Maybe too clever. It may be an issue in 2012. The election would be a far better venue for the policy decision.

Our Future

All political action aims either at preservation or change. Leo Strauss says something like that somewhere. As usual, he is right. I am tempted to think that all economic policy, whatever its pretensions, aims either taking wealth away from those who have it or making sure that those who have it keep it. In most cases, it's the latter.

Michael Barone has some essential reading at Real Clear Politics:

The template for the Obama Democrats' policies, the New Deal of the 1930s, was not designed to stimulate economic growth, but to freeze in place a tolerable but not dynamic status quo.

The New Deal's father, Franklin Roosevelt, believed that the era of economic growth was over, just as many contemporaries believed that technological progress was at an end (how far could you go beyond the radio and the refrigerator?). FDR, like his cousin Theodore, was an affluent heir who had contempt for men who built businesses and made money. They were "economic royalists" and "malefactors of great wealth" -- sentiments echoed by Barack Obama last week.

This is right, and it points to the essential limitation of economic policy. Political communities are composed of tribes, and tribes worry about who has what. They do not think in terms of who makes what, or who will make what in the future.

Machiavelli notes that innovators have as enemies all the partisans of the existing regime. They have as allies only dreamers and dreamers are not ordinarily prone to risk. For this reason, it is probably neither necessary nor possible to have an economic policy that promotes growth. The best that one can have is an economic policy that does not stand in the way of growth. The U.S. has had that for most of its history. Are we about to lose it?

Robert Samuelson is worried.

It is becoming clear that the Great Recession has left a deep and possibly lasting scar on the American psyche. From CEOs to ordinary families, we are a nation that is more cautious, more fearful and more risk-averse. This widespread and -- so far -- indestructible anxiety has hobbled the recovery and helps explain the slow pace of job creation. The economy's revival depends in part on risk-taking, but risk-taking is in eclipse.

The American economy has long been a tremendously efficient engine of job creation and technological progress because it has allowed innovators to flourish and established firms to perish. If you don't believe me, ask someone who invested in Movie Gallery while you are searching your Netflix Instance Watch menu. Or ask the IBM people who thought that the money in computers was in the hardware and not in Bill Gate's operating systems.

I don't think we are at the end of our run, but we might be. A lot of what Samuelson worries about turns on temporal psychology and there isn't a lot that Barack Obama or Congress can do about that. But governments can put the screws on future economic growth in order to save or try to save the privileges of those who benefitted from yesterday's regime.

The New York Daily News is worried about that.

The public pension time bomb that fiscal watchdogs and this page have warned about for years is now exploding - and ripping huge holes in government budgets across the state.

No municipality will sustain more damage than New York City, which next year faces a mind-boggling pension tab of $8.35 billion - a 19% increase in one year - at a time when Mayor Bloomberg and the City Council are forced to hack away at practically every other expenditure.

Public pensions are squeezing state governments from sea to shining sea. Obama's great stimulus plan didn't much stimulate anything, but it did a lot to shield public workers from the recent recession. The great peril we face right now is that government will clamp down on all the engines of economic growth in order to "to freeze in place a tolerable but not dynamic status quo." If that happens, we will really be what the Chinese think we are: a declining power. I would also note that the status quo will become a lot less tolerable for a lot of people.

Some Biofuel Skepticism

A number of intrepid readers took issue with last night's post on bioethanol. One question concerns the "energy balance" of ethanol production. Producing a gallon of ethanol requires an input of energy. If the output is greater than the input (a positive balance) then ethanol production adds to the total stock of available energy. If the reverse (a negative balance), then bioethanol production reduces the stock of energy.

Here is one answer, from "Ethanol Production: Energy, Economic, and Environmental Losses", by David Pimentel, Tad Patzek, and Gerald Cecil (http://bilder.buecher.de/zusatz/20/20946/20946636_lese_1.pdf).

To produce a liter of 99.5% ethanol uses 43% more fossil energy than the energy produced as ethanol and costs $0.42/L($1.59/gal)… The total energy input to produce 1L ethanol is 7,333 kcal (Table 2). However, 1 L ethanol has an energy value of only 5,130 kcal. Based on a net energy loss of 2,203 kcal ethanol produced, 43% more fossil energy is expended than is produced as ethanol.

If that is correct, bioethanol production is consuming, not supplementing, available energy supplies. The authors acknowledge that there are contrary findings.

Shapouri (Shapouri et al. 2004) of the USDA is now reporting a net energy positive return of 67%, whereas in this chapter, we report a negative 43% deficit. In their earlier report, Shapouri et al. (2002) reported a net energy positive return of 34%. Why did ethanol production net return for the USDA nearly double in 2 yr, while corn yields in the U.S. declined 6% during that period (USDA 2002, 2003)? The Shapouri results need to be examined and explained.

Shapouri et al. (2004) omit several inputs. For instance, all the energy required to produce and repair farm machinery and the fermentation and distillation equipment is not included…

Shapouri et al. reported a net energy return of 67% after including the co-products, primarily dried distillers grain (DDG) used to feed cattle. These co-products are not fuel!

Who is right? Common sense sheds some light here. One of the problems with government subsidies is that they make it a lot harder to evaluate the true costs and benefits of any subsidized activity. What would happen if all government subsidies to all forms of energy production were ended immediately? Coal, oil, natural gas, and hydroelectric power would continue to be produced. The same is true, I suspect, of nuclear power.

By contrast, large scale wind and solar power generation would come to a grinding halt. Would bioethanol continue to be produced? It is pretty clear that the producers don't think so. That is what fuels the controversy. The corn ethanol industry is tenuous enough with the government subsidies. That would not be so if the energy balance were significantly positive.

Even if the energy balance were positive, that would not mean that ethanol production is a good idea just now, let alone that subsidies are in order. Producing ethanol from corn means either diverting a substantial portion of the world's corn crops to energy production, or significantly increasing corn production. It probably means both. The first necessarily increases the cost of corn and so raises world food prices. The second results in an increase in carbon emissions, something we are supposed to be trying to avoid.

Ron Bailey has a nice summary of the issue on the Reason website. Here is an abstract from a paper in Science to which Ron directs us.

Most prior studies have found that substituting biofuels for gasoline will reduce greenhouse gases because biofuels sequester carbon through the growth of the feedstock. These analyses have failed to count the carbon emissions that occur as farmers worldwide respond to higher prices and convert forest and grassland to new cropland to replace the grain (or cropland) diverted to biofuels. By using a worldwide agricultural model to estimate emissions from land-use change, we found that corn-based ethanol, instead of producing a 20% savings, nearly doubles greenhouse emissions over 30 years and increases greenhouse gases for 167 years. Biofuels from switchgrass, if grown on U.S. corn lands, increase emissions by 50%. This result raises concerns about large biofuel mandates and highlights the value of using waste products.

Okay, so what about the ideal of energy independence? I believe in that ideal like I believe in fairies, but has ethanol production reduced our consumption of foreign oil? Here is a bit by Robert Bryce at the Manhattan Institute website:

Between 1999 and 2009, U.S. ethanol production increased seven-fold, to more than 700,000 barrels per day (bbl/d). During that period, however, oil imports increased by more than 800,000 bbl/d. (In addition, U.S. oil exports—yes, exports—more than doubled, to about 2 million bbl/d.[3]) Data from the U.S. Energy Information Administration show that oil imports closely track domestic oil consumption. Over the past decade, as oil demand grew, so did imports. When consumption fell, imports did as well. Ethanol production levels had no apparent effect on the volume of oil imports or on consumption.

I do not know whether, in the foreseeable future, biofuels might become a viable source of energy. Fossil fuels represent millions of summers followed by millions of years of underground processing. A corn crop represents one summer and all the processing is on our tab. So I am doubtful, but I do not underestimate the power of human ingenuity.

Right now bioethanol looks like a bad gamble. It doesn't add significantly to the supply of energy, and probably subtracts from it. It doesn't make us less dependent on foreign oil. It increases the cost of fuel and that doesn't help the economy. It raises the cost of food, and that doesn't help people who eat food. It's bad for the environment. What it does do is shift wealth toward some at the expense of others. But hey, living in a corn producing state, I am all for ethanol subsidies.

Ethanol: Immortal & Immoral

It looks like the President and the Lame Duck Democrats have cut a deal with Republicans. The country can breathe a sigh of relief that taxes won't go up across the board on January 1^st. Another sigh of relief is coming from the ethanol industry. From the Washington Post:

The White House and key lawmakers cleared the way Thursday night for swift Senate action to avert a Jan. 1 spike in income taxes for nearly all Americans, agreeing to extend breaks for ethanol and other forms of alternative energy as part of the deal.

I don't find a lot to cheer in this. It is widely assumed that a significant tax increase would be another shock to an already weak economy. That might well be true, but maybe it would have done more good for Congress to show that it was serious about getting our fiscal house in order.

As for extending the ethanol subsides, I'm all for it. I live in South Dakota and work for the state. We have a lot more ethanol plants than beach volleyball courts. I figure what floats the state economy floats me, and I am worried about the sinking of fiscal real estate hereabouts.

Of course, ethanol subsidies make no sense on any other grounds. Ethanol production doesn't increase our "energy independence", whatever that might mean. It takes more energy to produce a gallon of ethanol than the gallon actually contains. That extra energy isn't coming from wind towers. Over the next five years, these subsides will cost us over $25 billion dollars.

Ethanol production doesn't yield any environmental benefit and certainly none at a reasonable cost. From Forbes:

Australian academic Robert Niven found that ethanol gasoline lets out more harmful air toxins than regular gasoline. The Congressional Budget Office finds that taxpayers are shelling out $750 for every metric ton (2,205 pounds) of carbon kept out of our atmosphere. To put that in perspective, the carbon-offset company Terrapass values the reduction of 1,000 pounds of emissions at a mere $5.95.

When you add up the environmental costs of corn production, the equation looks much worse. Virgin prairie has been plowed up to produce corn for fuel. The machines that work the fields aren't solar powered. From Pajamas Media:

A gallon of ethanol emits less carbon dioxide (CO2) than a gallon of gasoline when combusted. However, CO2-emitting fossil fuels are used to make fertilizer, operate farm equipment, power ethanol distilleries, and transport the ethanol to market. In addition, when farmers plow grasslands and clear forests to expand corn acreage, or to grow food crops displaced elsewhere by energy crop production, they release carbon previously locked up in soils and trees. For several decades, such land use changes can generate more CO2 than is avoided by substituting ethanol for gasoline.

Ethanol production raises the price of gasoline and it raises the price of food. Tariffs keep cheaper ethanol produced south of the border out of the U.S. market, which makes the system all the more expensive but is probably an act of Christian charity. Diverting corn to ethanol production raises the price of tortillas which results in hungrier children.

But hey, as long as it brings money to the Dakotas and Barry's own Illinois, why should I complain? The issue has made odd bedfellows of conservatives and environmentalists, who have united in opposing the subsidies. That's amusing, since it was the green lobby that gave us ethanol in the first place.

I can't help pointing out that subsidies for wind and solar power differ from the above only in so far as they currently do much less damage. But they are no more economically or environmentally advantageous.

The ethanol regime is what you get when you base your energy on beautiful ideas like "renewable energy" or "green jobs," and not on any rational estimate of the costs and benefits of energy technologies.

Lumpy Ocean

If there's one thing you thought you could count on, it's that sea level is sea level. Maybe it will rise and fall with time; but surely it's evenly distributed at any one time, like the surface of a bowl of water. I was disturbed by the news that this isn't true. From Der Spiegel:

"In reality, the water in the oceans wobbles all over the place," says oceanographer Detlef Stammer. He isn't talking about waves, but large-scale bulges and bumps in the sea level.

Stammer, who is the director of the Center for Marine and Climate Research at the University of Hamburg, is familiar with the incorrect notions that lay people have, which is why he likes to present them with two numbers to shatter their illusions. "In the Indian Ocean, the sea level is about 100 meters (330 feet) below the average, while the waters around Iceland are 60 meters above the average."

The ocean is lumpy! It's like bad gravy. This gives you some idea of how challenging it is to predict the effects of climate change. Most of the reporting seems to assume that as temperatures go up, ice well melt and waters will rise evenly across the globe. Not so.

The flood of data from the orbiting satellite has produced all kinds of surprises for scientists in recent years. For instance, while seas have risen by about 15 centimeters in the tropical Western Pacific, the ocean near San Francisco has fallen by about the same amount. "On the German coast, on the other hand, the sea level today is a few centimeters higher than it was 15 years ago," says Claus Böning of the Kiel-based excellence cluster "The Future Ocean."

I am not sure what an "excellence-cluster" is, but I am sure this is good news for a lot of high-priced Bay Area real estate.

Sea level rise is one of the scary things that global warming is supposed to do, but how scary is it, exactly? Al Gore showed us photo shopped images of most of New York City under water, which might count as an unparalleled disaster or as urban renewal, depending on your view of Manhattan. Again from Der Spiegel:

If the Greenland ice sheet, which is 3 kilometers (1.88 miles) thick in some places, were to melt completely, sea levels would rise by 7 meters on average. It would take many centuries before the 3 million cubic kilometers of glaciers ended up in the ocean. But people living near Germany's North Sea coast would hardly even notice, because the sea level there would remain virtually unchanged. The water would even subside off the coast of Norway. "And, purely theoretically, the sea level would actually fall by several meters off the coast of Greenland," Stammer explains.

Of course, a seven meter rise "on average" would dunk someone.

The nations bordering the entire Indian Ocean and the Pacific, as well as the countries of South America and Africa, would be the true victims of a global rise in sea levels.

In those regions, the oceans would not just rise by the average of 7 meters, but by as much as 8 or even 10 meters. "Of course, this is only a theoretical model," says Stammer, the oceanographer.

Ten meters up is a lot of meters in. Atolls barely visible above the waves would be history.

That is something we have to worry about "centuries" from now, according to theoretical models, which tells us what we need to know. There are many serious problems for policy makers to worry about. Sea level rise is not one of them. It has been rising for a very long time. It isn't at all clear that it is rising at present. We haven't much noticed sea level rise in the past and most of us won't notice it for the foreseeable future. The Germans, apparently, will never notice it, but they might have to start feeling guilty about the damage global warming is doing to Chile in 3075 or maybe 4075.

That's assuming, of course, the historical trajectory remains unchanged. The odds of that are very low. If the present world civilization survives the next several centuries and continues to progress, the technological challenges presented by global warming will be child's play. We will figure out how to charge our iPods without heating up Greenland. If not, well, that will solve the problem in another way.

It is delusional to think that we can base our policy on theoretical projections centuries into the future. I think we should take climate change seriously. I think it is absurd to believe that we can accomplish serious reductions in global greenhouse emissions over the near future without a dramatic contraction of world economic growth. That means that we should focus on dealing with the consequences of climate change. Some of these may be serious. Sea level rise is not likely to be at the top of the list.

Unappealing Repeal Amendment

The genius of American government is contained in three basic principles. One is equality. Every human being has certain unalienable rights that all legitimate governments are obligated to respect. The second is democracy. All legitimate powers rest on the consent of the governed, and the consent of the governed must be frequently expressed through the device of majority rule. The third is divided government. The government is divided first between the people and their elected representatives, and then between the people of the United States and the peoples of the various states. Likewise, the Federal Government was divided into three branches and the national legislature into two houses.

The genius of the Philadelphia Convention was to create a balance between the distinct offices of government that would preserve all three of those principles. The House of Representatives is the most democratic part of the Federal Government. California has 53 times the representation of South Dakota. The Senate is manifestly undemocratic. South Dakota and California are equal. The Supreme Court, nine unelected old folks, can overrule an act of Congress.

Dahlia Lithwick and Jeff Shesol, writing at Slate, think that a proposed Constitutional Amendment threatens this balance. Unaccustomed as I am to agreeing with Lithwick, I think she is right. Here is the language of the Repeal Amendment.

Any provision of law or regulation of the United States may be repealed by the several states, and such repeal shall be effective when the legislatures of two-thirds of the several states approve resolutions for this purpose that particularly describe the same provision or provisions of law or regulation to be repealed.

There are a lot of things wrong with this. First, it arises out of one of the most common political vices: the idea that we ought to change the rules because our side is losing too many ballgames. The Repeal Amendment website informs us that "The federal government has usurped the power that the Founders originally intended for the States." All that means is that the backers of the amendment are not happy with what the government created by the Founders has been doing.

Second, every member of Congress is elected by the people of the various states. Senators are elected at large, and Congressmen mostly by districts. If the people of the states are unhappy with what Congress has been doing, they can bloody well elect Tea Party or Green Party or who knows what party candidates. If you think that the states ought to get more protection, back state's rights candidates. If you fail to elect enough of them to make a difference, that's baseball.

In the Senate, under traditional rules, a mere forty-one Senators can block legislation. Who needs a stinkin' two thirds of the states? The founders built in plenty of protections for the states. If they have failed, it's because the people don't seem to want to use them.

Third and worst, the repeal amendment subverts Republican Government as designed by the founders. That system works because we elect representatives to make policy and then hold them solely responsible on the next Election Day. If we empower state legislatures to overturn acts of Congress, then who will be responsible for Federal policy? Not Congress, since their hands will be tied by the state legislatures. Not the latter, since they can't pass legislation on their own. The Repeal backers say they want to restore the Constitution. Their amendment would undermine the very logic of the Founder's system.

The Repeal Amendment is a bad idea for the same reason as the state initiative and referendum systems are a bad idea. We give our state governments the responsibility for making comprehensive policies and then tie their hands on any issue we care about. This leads to dysfunctional government. See California. The repeal amendment would not be so bad, I suppose, because of its supermajority requirement. Yet if it did anything at all, it would be bad. Let's hope this thing has no traction.

The Jobs Report & Battle Royale

A few weeks ago I finally watched Battle Royale, one of the few pieces of classic jhorror cinema that I hadn't seen yet. The plot is very Japanese. As the movie opens you are told that the Japanese economy is in crisis and that school kids are in rebellion against the adults. The Japanese state responds by passing the BR Act. A ninth grade class is chosen at random and transported to an island. Once there, each is given a sack contain weapons. They are told that at the end of three days one of them will be allowed to leave the island alive, but only if all the others are dead. If more than one is alive after three days, all of them will be killed. A sadistic former teacher runs the show, broadcasting an hourly report of deaths.

The action turns on how fast or whether each student accepts the rules of the game. Some begin killing immediately. Others form coalitions which steadily decay into betrayal and murder. The protagonists, you guessed it, are a couple who swear not to betray one another.

One thing that stuck with me was the description of the crisis that is responsible for this horrific scenario. Unemployment, we are told, reaches fifteen percent. That's it. And what does the youth rebellion consist in? What about the violence against adults? Well, a little. But mostly we are told that the children stop coming to school. In this film, playing hooky draws a death sentence.

The Japanese, apparently, have a very disturbing view of their youth and of their own attitude toward the young. They also have a ridiculous notion of what constitutes a real crisis. But therein is a tale.

This morning I read in the Aberdeen American News that the jobs report about to be issued would be "rosy". From McClatchy:

On Friday morning, when the Labor Department reports November employment numbers, they're likely to show strong hiring for the second straight month.

Oops. In fact the jobs report was terrible. From the New York Times:

The United States added a total of just 39,000 jobs last month, down from an upwardly revised gain of 172,000 in October, the Labor Department reported on Friday. With local governments shedding jobs, the additions in the private sector were too small to reduce the ranks of the unemployed or even to keep pace with people entering the work force.

The unemployment rate, which is based on a separate survey of households, rose to 9.8 percent in November. It was the highest jobless rate since April and up from 9.6 percent in October.

Something is wrong. We are used to an economy that cycles up and down. Recessions are followed by recovery, and vice versa. A few years when you can't find a job are followed by years when you get to choose the best offer. Just now, the recovery seems to be stalled.

It's a little early yet, I think, to send a bunch of middle school boys and girls to an island with sacks of grenades. But Battle Royale has something to teach us. A 9.8% unemployment rate means that 90% of Americans who want a job have one. My grandfather feared losing his farm and having to stand in a soup line to avoid starvation. Most folks I know today fear not getting a raise next year or, shudder, having to take a pay cut.

Fear is relative, but a little perspective might be in order. The economic dismay is general among developed nations. The cause is not a mystery. Governments have spent too much. Too much wealth has been diverted from the investment in the productive economy to maintain high levels of consumption. One way or another, that will be adjusted.

From Athens in Greece to Athens in Georgia, we all fear that something will be taken away. Any attempt to balance the books brings howls of pain from all of those who enjoyed the imbalance. If we don't balance the books sooner, we are going to face much worse things later. If you don't believe me, watch Battle Royale.

Wikileaks Very Bad 4 All

The release of over two hundred and fifty thousand diplomatic cables by Wikileaks founder and self-professed enemy of the United States, Julian Assange, is a disaster. Heather Hurlburt explains, at the New Republic, why progressives in particular should view it as such.

First, people on the left generally think that international conflicts should be resolved by diplomacy rather than by war. That is difficult enough in the best of circumstances, but for it to be possible at all the negotiating parties have to be able to speak honestly with one another in private.

I spent almost a decade working at the State Department and overseas. After reading through these files, I cannot stop imagining just how hard it will be for Foreign Service Officers to do their jobs. One former Officer, Alex Grossman, summed it up for me nicely: "fear of publication will only prevent people from voicing frank and honest opinions, assessments and recommendations."

And it's not just that U.S. officials will have to be careful about what they say or write. It's that they'll be dealing with foreign officials living with the same fear of exposure.

That might make it harder for the United States to assemble an alliance against, say, Iran; but it might also make it harder for the U.S. diffuse a crisis in, say, Korea or between India and Pakistan.

Second, the release is, paradoxically, a severe blow to the idea of open government.

In the last few years, there has been some progress toward classifying fewer documents and using the more rarefied classifications less frequently. This series of leaks will almost surely reverse that progress. A top-secret classification would have kept any of these documents off the shared network from which they were allegedly downloaded by a very junior soldier.

You can bet that the intelligence community will make that point—not only to justify stronger classification of new documents but also to slow the declassification of old ones.

If you think that governments need to be able to keep some secrets but you want them to keep as few as possible, you'd better make sure that the former are secure.

The Obama Administration has come under severe criticism for not acting more forcefully against Mr. Assange. Here I have to come to Obama's defense. It's one thing to prosecute someone for stealing government documents. Badley Manning is in the slammer for that, and he ought to be charged with treason.

It's another thing to prosecute someone for publishing the stolen documents. It is fantasy to imagine, as some have, that the New York Times will be prosecuted for publishing material provided by Wikileaks. The Administration is right to be careful in its use of power.

Does that mean that Mr. Assange is immune? No. If Assange did anything at all to encourage pfc. Manning to commit the crime he committed, then surely Assange is an accomplice. Did he? Since Mr. Assange has identified himself as an enemy of the U.S., can't the U.S. figure out some ways to make Mr. Assange's life intolerably difficult?

Attorney General Eric Holder has said that a criminal investigation is underway, though who is the target and what are the potential charges is unclear. I have no confidence. Only when the third of three document dumps by Wikileaks was imminent did the Administration act at all. Secretary of State Clinton wrote Mr. Assange a letter. Somehow, that failed to persuade him. The State Department has closed off its computers to the government's classified network, now. It took three Wikileaks dumps for those actions to be taken. I predict that the criminal investigation Gen. Holder speaks of will turn out to be dust in the wind.

Julian Assange has done serious damage to the United States and to the international system of diplomacy. It could have been worse. He could have obtained information that would result in a real catastrophe. Someday soon something like that might happen. One can only hope that there will be a more competent Administration in place to deal with it.