David Simon On The “Horror Show” That Is America

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I’m a big fan of David Simon’s classic HBO series, The Wire, as well as his more recent project, Treme. He’s a clear-eyed, street-smart social critic who understands the limits of both capitalism and Marxism, and consistently avoids viewing individuals or groups as exclusively victims or victimizers. If Simon has an ideological commitment, it is to try to safeguard the intrinsic value of human beings against the devaluation that usually occurs when capitalists and capitalist institutions regard them merely as costs. His thinking isn’t particularly subtle, but it is refreshingly direct and to the point. Here’s an excerpt from a column he recently published in the Guardian, which is worth reading in its entirety-

I’m utterly committed to the idea that capitalism has to be the way we generate mass wealth in the coming century. That argument’s over. But the idea that it’s not going to be married to a social compact, that how you distribute the benefits of capitalism isn’t going to include everyone in the society to a reasonable extent, that’s astonishing to me.

And so capitalism is about to seize defeat from the jaws of victory all by its own hand. That’s the astonishing end of this story, unless we reverse course. Unless we take into consideration, if not the remedies of Marx then the diagnosis, because he saw what would happen if capital triumphed unequivocally, if it got everything it wanted.

And one of the things that capital would want unequivocally and for certain is the diminishment of labour. They would want labour to be diminished because labour’s a cost. And if labour is diminished, let’s translate that: in human terms, it means human beings are worth less.

From this moment forward unless we reverse course, the average human being is worth less on planet Earth. Unless we take stock of the fact that maybe socialism and the socialist impulse has to be addressed again; it has to be married as it was married in the 1930s, the 1940s and even into the 1950s, to the engine that is capitalism.

Mistaking capitalism for a blueprint as to how to build a society strikes me as a really dangerous idea in a bad way. Capitalism is a remarkable engine again for producing wealth. It’s a great tool to have in your toolbox if you’re trying to build a society and have that society advance. You wouldn’t want to go forward at this point without it. But it’s not a blueprint for how to build the just society. There are other metrics besides that quarterly profit report.

The idea that the market will solve such things as environmental concerns, as our racial divides, as our class distinctions, our problems with educating and incorporating one generation of workers into the economy after the other when that economy is changing; the idea that the market is going to heed all of the human concerns and still maximise profit is juvenile. It’s a juvenile notion and it’s still being argued in my country passionately and we’re going down the tubes. And it terrifies me because I’m astonished at how comfortable we are in absolving ourselves of what is basically a moral choice. Are we all in this together or are we all not?

(Thanks Erik).

Wisconsin Underpays Its University Professors

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The Oshkosh Northwestern today published an informative article on the relatively meager wages Wisconsin pays its university professors. Of course, this is not news to those of us who work for the university, but since Gannett (the Oshkosh Northwestern’s owner) recently went to great pains to publish all UW employees’ salaries, it is somewhat gratifying to see them finally putting those figures into context.

The 11 smaller UW universities averaged $71,200 for a full professor. The UW study compared that average to 32 similar out-of-state schools, and the UW universities ranked 31st in that list. The UW average was 31 percent below the $93,100 median, larger than the 27 percent gap in 2011-12.

Data from the Chronicle of Higher Education paints an even bleaker picture. Compared to other master’s institutions nationwide, UW-Oshkosh’s full professors in 2012-13 were in the 15th percentile, UW-Green Bay was in the eighth percentile, and UW-Stevens Point in the seventh percentile. No category of professor ranked above the 40th percentile at the three schools.

It used to be that other forms of compensation (health care, pension benefits) helped to counterbalance the below-average salaries paid at UW campuses, and this could have been a decisive factor for new hires (such as myself) ten years ago. But Act 10, passed in 2010 by Governor Walker and the Republicans, changed that. Now the non-salary compensation, while still competitive, no longer makes up for the sub-standard salaries.

The article in the Northwestern makes many good points beyond these, and I recommend that you read it. It focuses largely on the danger of the system not being able to recruit the best new talent or retain the talent it recruited when the picture was not so bleak. I would emphasize as well a problem that will only get worse as the declines of the last five years continue to sink in: morale and motivation. The fact is, although they get paid on average only 73% of what they deserve (according to the “industry standard” outlined in the article), I know of not a single professor on my campus – UW Oshkosh – who puts in less than 100% effort at teaching their students – and, quite frankly, their students, many of whom are first-generation college students, need all of the dedication they can get from their professors. Does the Wisconsin government really think that, over time, the psychological effect of being undervalued by their employers will not cause a general decline in UW professors’ motivation… a decline that can’t help but diminish the quality of the education they provide to Wisconsin’s students?

Minnesota Versus Wisconsin (Redux)

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I recently noted that Minnesota, with its proactive implementation of the Affordable Care Act through its state-run exchange, enjoys significantly lower premiums for comparable insurance policies than Wisconsin, with its reluctant implementation of the Act through the federal exchange. Job recovery is yet another dimension of this Tale Of Two States, as Lawrence R. Jacobs noted in a recent New York Times Op-Ed-

A month after Mr. Walker’s inauguration in January 2011, he catapulted himself to the front ranks of national conservative leaders with attacks on the collective bargaining rights of Civil Service unions and sharp reductions in taxes and spending. Once Mr. Dayton teamed up with a Democratic Legislature in 2012, Minnesota adopted some of the most progressive policies in the country.

Minnesota raised taxes by $2.1 billion, the largest increase in recent state history. Democrats introduced the fourth highest income tax bracket in the country and targeted the top 1 percent of earners to pay 62 percent of the new taxes, according to the Department of Revenue.

Which side of the experiment — the new right or modern progressivism — has been most effective in increasing jobs and improving business opportunities, not to mention living conditions?

Obviously, firm answers will require more time and more data, but the first round of evidence gives the edge to Minnesota’s model of increased services, higher costs (mostly for the affluent) and reduced payments to entrenched interests like the insurers who cover the Medicaid population.

Three years into Mr. Walker’s term, Wisconsin lags behind Minnesota in job creation and economic growth. As a candidate, Mr. Walker promised to produce 250,000 private-sector jobs in his first term, but a year before the next election that number is less than 90,000. Wisconsin ranks 34th for job growth. Mr. Walker’s defenders blame the higher spending and taxes of his Democratic predecessor for these disappointments, but according to Forbes’s annual list of best states for business, Wisconsin continues to rank in the bottom half.

Along with California, Minnesota is the fifth fastest growing state economy, with private-sector job growth exceeding pre-recession levels. Forbes rates Minnesota as the eighth best state for business. Republicans deserve some of the credit, particularly for their commitment to education reform. They also argue that Minnesota’s new growth stems from the low taxes and reduced spending under Mr. Dayton’s Republican predecessor, Tim Pawlenty. But Minnesota’s job growth was subpar during Mr. Pawlenty’s eight-year tenure and recovered only under Mr. Dayton.

Republicans often argue, quite cogently, that the states should be the laboratories of democracy. Given these comparisons two such demographically and geographically similar states, progressive Democrats should certainly agree.

The Growing Social-Media-Corporate Complex

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When I visited Huffington Post today and saw this photo, I just wanted to leave a quick comment that hadn’t yet been left, namely to identify the beautiful setting as Kailua Beach on Oahu, one of my favorite beaches in the whole wide world. However, I then discovered that the Huffington Post no longer allows you to create an account just on it; instead, you have to log on via a social networking site. As my previous rants against Facebook make clear, I HATE SOCIAL NETWORKING SITES, not because they are social, and not because they involve networking, but because they invariably involve MARKETING. I don’t know about you (and don’t you appreciate that?), but I’d much rather have the NSA collect data on my every click around the web than have it done by some consortium of corporations whose only interest is to sell me products that I don’t want or need, and/or to sell information about me to other entities who might do whatever they like with it.

I searched to find other bloggers who might share my distaste for the growing social media complex, but (perhaps due to my impatience after spending several minutes trying to figure out a way around the HufPo requirement) all I found were pro-marketing sites whose authors view the growth as an opportunity rather than an annoyance or worse. In any case, if you haven’t considered the sheer size and interconnectedness of the social media marketing web, check out a larger, more readable version of Brian Solis and JESS3′s annual chart, which in miniature looks like this-

JESS3_BrianSolis_ConversationPrism4_Modified

UPDATE: Amusingly, as if to make my point, after tweeting a link to this post (Twitter is the one social networking site I’m on), I immediately received this marketing response on Twitter-

Making My Point

More Competition + Less Regulation = Higher Prices

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At least when it comes to the insurance rates charged for comparable plans in Minnesota and Wisconsin under The Affordable Care Act, the conservative mantra that more competition plus less regulation is the way to lower health insurance prices is clearly false, according to an informative story published in the Oshkosh Northwestern yesterday (Sunday 11/10/2013).

When Minnesota state lawmaker Joe Atkins hunkered down to draft legislation outlining the way Minnesota would implement the Affordable Care Act, he had no idea the results would be so dramatic. The Gopher State is now enrolling individuals through its health-insurance exchange by the thousands and at health insurance premium rates that are among the lowest in the country. Next door in Wisconsin, the numbers of Obamacare enrollees have barely hit the hundreds and premium rates are between 25 and 35 percent higher than in Minnesota.

The reason for the large gap in rates is unclear but could be, in part, because of the more aggressive approach Minnesota has taken to implementing the law. The most obvious difference between the two states is their exchanges. Minnesota has its own online marketplace where residents and small businesses can shop for and buy insurance, while Wisconsin is relying on the federal government marketplace, which has been plagued with bugs and technical failures and doesn’t accommodate small businesses. If and when the Obama administration fixes that, the rate differentials will remain. And they are stark.

A 50-year-old Minnesotan who lives just south of the Twin Cities in Dakota County can buy a mid-level, silver plan for $241 a month. Just 20 miles away, across the state line in St. Croix County, the least expensive silver plan available to a 50-year-old Wisconsinite costs nearly three times that price — $622 a month.

Analysts say premiums are based on a number of factors, from health costs and demographics to market competitiveness. But when it comes to Wisconsin and Minnesota, none of those appears to account for such a wide disparity. The nonpartisan Kaiser Family Foundation found that health care costs in the two states are roughly the same. Per capita expenditures were $7,409 in Minnesota versus $7,233 in Wisconsin, according to the most recent data released in 2011 by the Centers for Medicare and Medicaid Services. And the costs have grown annually since 1991 at nearly the same rate — 6.7 percent in Wisconsin and 7 percent in Minnesota. As for competitiveness, only five insurers are offering plans on the Minnesota exchange. Wisconsin’s exchange has 13 carriers.

Cynthia Cox, a policy analyst at the Kaiser foundation, said regulation also plays a role in premium levels. In Minnesota, regulators forced insurers in several cases to resubmit lower rates because they questioned the justifications. In Wisconsin, regulators took a more hands-off approach and let all the rates go through as-is after reviewing carriers’ justifications.

“The fundamental difference between the two states, which are similar geographically and demographically and have very similar underlying medical costs, is that Minnesota has embraced the national health care reform law and is using the tools it provides to deliver more affordable health insurance, while the Walker administration has tried to undermine the law at every turn,” Citizen Action CEO Robert Kraig and researcher Kevin Kane wrote in a scathing op-ed recently published in The Capital Times of Madison.

Guard Against Throat-Scratch

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Apropos of absolutely nothing, here is a 1952 ad from a Brooklyn newspaper that I stumbled upon while researching an entirely different subject. It, well, kind of startled me.

Guard-Against-Throat-Scratch

Click here if you’d like to read the fine print.

Funny as they may now seem, ads of this kind might well have influenced millions of people like my father, who would have been 32 years old at the time and destined to become a 2-pack-a-day smoker… one who died of esophageal cancer at the age of 57.

President Obama’s Climate Change Speech

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Amazingly, at least in my neck of the woods, only one cable news network covered President Obama’s full speech on climate change policy today: Fox Business, which immediately followed it with an interview of an electric company executive who is investing heavily in coal. Interestingly, even he had to be goaded by the hosts into criticizing the policies outlined in the speech. The other cable news providers, even MSNBC, had other stories that they deemed more important. So I’m linking to a video of the speech here, and I would urge everyone who has heard about it only second-hand to watch it. Although it’s not one of Obama’s best-delivered speeches, what with the heat in D.C. today (not a bad way of setting the scene, given the speech’s topic), the policies outlined in it are significant.

The President’s failure in the past to act more decisively and to speak more explicitly on the climate problem has disappointed me. I’m no longer disappointed.

A Tale Of Two Statistics

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These two figures nicely express the growing economic inequality in our society:

Average U.S. household’s net worth = $522,000
Median U.S. household’s net worth = $61,000

Averages are calculated by adding up a list of numbers and then dividing the sum by the number of numbers in the list. For instance, the average of this list of five numbers is 20: {1, 2, 3, 4, 90}, because their sum is 100, and 100/5=20. Medians, on the other hand, are by definition the middle numbers of such ordered lists; the median of our list is 3.

Now, if the list is linear and symmetrical, the average and the median will be the same, as it is in this list: {1, 2, 3, 4, 5}. Notice that the difference between the average here (3 – the same as the median) and the average in the previous list (20 – much higher than the median of 3) is due entirely to the highly irregular value of 90 at the end of the first list, versus the 5 at the end of second list.

An analogous explanation is available for the difference between Average and Median U.S. household’s net worth. The extreme, sharp increase of wealth near the top of the ordered list skews the average of the list much higher than its median.

These figures are given some interesting context in an AP story by Paul Wiseman, entitled “Rising wealth doesn’t generate spending“, which tries to explain why rising wealth of the U.S. as a whole (e.g., the rising average wealth) doesn’t result in more consumer spending-

The biggest gains in wealth are going to wealthy households that tend to save a big chunk of their incomes and spend a smaller proportion on basics such as food and clothing. “Those guys don’t spend much,” says economist Edward Wolff of New York University. The disparity shows up in numbers Wolff calculated. He found that the average U.S. household’s net worth rose this year to $522,000. But the average is skewed higher by the vast net worth of America’s wealthiest — Bill Gates’ $67 billion, for instance, according to Forbes magazine.

So Wolff looked at the net worth of the median U.S. household — those smack in the middle, where half of households earn more and half less. The median family’s net worth is far more modest than the average: $61,000, Wolff estimates. That is $50,800, or 47 percent, short of where it was in 2007.

One reason: The biggest gains have come from the rise in financial markets. And the benefits of the stock market’s surge have gone disproportionately to America’s wealthiest households. Wolff calculates that the wealthiest 10 percent of U.S. households own more than 80 percent of stocks, even including retirement accounts such as 401 (k) plans. “The recent stock market boom has really benefited just the top,” Wolff says.

Moral of the story: always discount reports of averages, or even reports of totals (e.g., GDP), when estimating how informative the given datum is. From such figures, very little can be inferred about how the economy is actually doing for most people. Reports of medians can also be misleading, of course, but they are generally more informative.

Governor Walker’s “Divide And Conquer” Strategy

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Governor Walker has claimed since the beginning of his term that he’s not interested in reducing the power of private unions in Wisconsin; his only concern, he said, was with the budgetary impact that collective bargaining agreements with public unions had. Now there’s a video – raw footage from Brad Lichtenstein’s documentary to be entitled “As Goes Janesville” – that seems to prove that his true intention has always been to just start with public-sector unions as a first step towards weakening private-sector unions as well. As reported by JSOnline, where you can view the video for yourself-

In the video, [Beloit billionaire Diane] Hendricks told Walker she wanted to discuss “controversial” subjects away from reporters, asking him:

“Any chance we’ll ever get to be a completely red state and work on these unions -”

“Oh, yeah,” Walker broke in.

“- and become a right-to-work?” Hendricks continued. “What can we do to help you?”

“Well, we’re going to start in a couple weeks with our budget adjustment bill,” Walker said. “The first step is we’re going to deal with collective bargaining for all public employee unions, because you use divide and conquer.”

The entire conversation was not released Thursday with a video trailer of the documentary, but Journal Sentinel reporters were allowed to view the raw footage.

“So for us,” the governor continues, “the base we get for that is the fact that we’ve got – budgetarily we can’t afford not to. If we have collective bargaining agreements in place, there’s no way not only the state but local governments can balance things out. . . . That opens the door once we do that. That’s your bigger problem right there.”

Walker co-sponsored right-to-work legislation in 1993 as a freshman in the state Assembly, but as governor has consistently downplayed seeking any restrictions on private unions in public statements.

“This is another colossal bait and switch that goes directly to his honesty,” [Democratic gubernatorial candidate] Barrett said. “What he claims he is not in favor of publicly, to the person who has made the largest contribution in state history, he says exactly the opposite. You can’t trust him.”

Barrett has been hammering Walker on right-to-work legislation for weeks, frequently using the phrase “divide and conquer.” Barrett said he used that term because he believed that was Walker’s strategy, but did not know until Thursday that Walker himself had used it.

In the 2010 campaign, Walker won the support of Operating Engineers Local 139, a union that represents about 9,000 heavy equipment operators in Wisconsin. The union is not endorsing anyone in this year’s recall election.

Terry McGowan, the union’s business manager, said the union gave its 2010 endorsement only after getting assurances Walker would not pursue right-to-work legislation. The union backed Walker because of his support for road building done by the group’s members, McGowan said.

He said Thursday he was troubled by the footage of Walker with Hendricks, but that he was continuing to take Walker at his word given his public statements and conversations he has had with him. “You don’t hear him say, ‘Yes, I’m going to go after right-to-work legislation,’ ” McGowan said of the video. But he added that divide and conquer is a phrase that is anathema to those in the labor movement. “It means turning worker against worker,” he said.

Because Walker faces a recall, a quirk in state law allowed supporters such as Hendricks for a time to donate unlimited sums to the governor’s campaign for certain expenses. Last month, Hendricks contributed $500,000 to Walker, bringing her total donations to him to $519,100 and the donations by her and [her husband] Ken to all candidates to more than $1 million.

Of course, it’s really no surprise that Walker, like the rest of the GOP, is ultimately after all of organized labor. But it’s nice to catch a politician telling the truth, even if only to a billionaire donor.

By the way, I’m not dogmatic about the benefits of unionization. It’s an empirical question whether workers are economically better off with or without unions, and I’ve seen apparently strong, statistical arguments on both sides. At the very least, it seems that if unions are to be economically relevant in the future, they need to focus on training and re-training, partnering with new technology rather than hedging against it.

Quite apart from the economic question, there is the dignity issue: the right of workers to organize for the purpose of negotiating with their managers seems as important to a free society as the right of citizens to peaceably assemble or petition their government for redress of grievances. Not everyone can be an entrepreneur or a professional. Especially in jobs where workers are easily replaced, it seems that only well-run unions can insure that workers have a meaningful voice in the enterprises to which they devote their lives.

Let’s Play Spin The Statistics

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In his recent political ads, Governor Walker has been proudly trumpeting the fact that there has been a fall in the unemployment rate over the last year, from 7.6% to 6.8%. Unfortunately for Wisconsin (and for the Governor, if the Democrats are smart enough to counter his positive spin with ads of their own), there are more ways to account for this decline than by a growth in the number of jobs: it could result merely from a shrinkage of the number of people looking for work, or from thousands of unemployed people leaving Wisconsin to look for work elsewhere.

The full story won’t be known for a while, but a further statistic found in the latest Bureau of Labor Statistics report indicates that Wisconsin was the only state to actually lose a statistically significant number of jobs over the last year. To keep his promise to add 250,000 new jobs in four years, the Governor now has add 273,900 jobs in three years. That is, if he has three years left on the job, rather than six weeks. As JSOnline summarizes-

Wisconsin is the only state that had “statistically significant” job losses over the most recent 12-month period, according to the U.S. Bureau of Labor Statistics. From March 2011 to March 2012, Wisconsin lost 23,900 jobs. That was the largest decrease in percentage terms in the country. Those job losses came from both the public and private sector, but the public sector job losses (17,800) were larger than the private-sector job losses (6,100).

At the same time, Wisconsin was one of 18 states that had a statistically significant drop in the unemployment rate during the same period, from 7.6% to 6.8%. Wisconsin has experienced both job declines and a drop in unemployment at various times over the past year. The two indicators come from different surveys, and the decline in the unemployment rate has also reflected a decline in the number of people looking for work.

If you’re the kind who’s able to read a BLS report without falling asleep, or if you can’t quite manage that but you need to fall asleep anyway, you can find the original report here.

Did The Stimulus Stimulate?

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According to an investigative story on the front page of last Sunday’s Oshkosh Northwestern, the answer is most definitely “yes”: although it operated invisibly to most taxpayers, the stimulus was key to getting many Wisconsin businesses through the Great Recession. In keeping with their penchant for appearing politically “balanced”, the paper “buried the lead” as best it could by using the headline “Stimulus loans oversight lacking” and by citing a number of minor gripes, including the fact that the stimulus money funneled needed credit to low-wage small businesses in addition to high-wage small businesses (isn’t it the Republicans who are constantly defending low wage jobs as being better than no jobs at all?)-

The Small Business Administration-backed loans ranged from a low of $5,000 to a high of $5 million — the most allowed under the program. In all, more than 6,000 loans were made in Wisconsin, for a total of $1.8 billion, including $260 million lent to retailers.

SBA officials say the loan program is accomplishing what it set out to do: making cash available to businesses when bank loans have been hard to come by. That did help an aluminum company in Manitowoc and a pet food factory outside Madison, for example, to create new manufacturing jobs.

But the money also was borrowed by businesses and industries with some of the lowest wages in the state.

“The SBA program was huge,” Chaudoir said. “If government didn’t do this, who knows what would have happened. People who are still debating whether the program was a success have to put themselves back to how they felt at the beginning of 2009, how afraid they were about the future.”

Some loans without question helped create jobs and trigger spending, particularly in manufacturing, the business sector that received the greatest proportion of SBA money.

Skana Aluminum Co. bought a Mirro plant in Manitowoc out of receivership and turned it into a thriving business that expects to ship 30 tons of metal this year. Skana borrowed $5 million of the $438 million lent to Wisconsin manufacturers, growing from zero to 75 employees in nine months and prompting Obama to praise the results in a 2011 visit. Skana in March employed 108 workers and was operating two shifts.

“The people of the community appreciate hearing stories like ours,” said Steve Gallimore, a Skana spokesman. “Things are looking good for us and for Manitowoc.”

Mequon-based Fromm Family Foods, recipients of $2.7 million in loans, took a dormant feed mill northeast of Madison and converted it to a facility that creates 600 tons of gourmet pet food each week. In Howard, near Green Bay, Centerline Machining & Grinding Inc. expanded into a new plant in 2010 after borrowing $817,000.

Adjustments to the loan program under the stimulus made more money available and made it easier for businesses to get loans, said the SBA’s Ness. Some fees were eliminated, and struggling businesses that met certain standards were given longer to pay.

“The stimulus was the first time we broke the $500 million mark (in one year) for loans in Wisconsin,” he said. “We clearly helped some companies stay in business, and we helped others to grow.”

Was the stimulus perfect? Of course not. Was it in some ways wasteful and inefficient? Seems likely. But when you’re trying to put out a dangerous fire, you probably shouldn’t worry too much about wasting some of the water you’re spraying on the flames.

UPDATE 4/17/12-

In an editorial in today’s paper, the Northwestern clarifies why it sees the glass as half-empty. The basic complaint seems to be that the SBA has failed to collect certain key data that would allow the paper (and taxpayers) to evaluate the overall success or failure of the stimulus-

…the devil’s not always in the multiplicity of details, but the one’s that are missing. The story in Sunday’s Oshkosh Northwestern examined federal loan money authorized in the stimulus and administered through the Small Business Administration.

The SBA … maintains an impressive amount of information about the loan program in Wisconsin. For example, we know the total value is about $1 billion for more than 6,000 loans ranging from $5,000 to $5 million for companies of widely divergent sizes and specialties. Some of the businesses expanded and created jobs; others refinanced and saved money and jobs, while some folded. We produced an equally impressive database and map that can tell you all kinds of spiffy things about loans, but the report failed to answer one very fundamental question: “Is it working?”

The failure wasn’t for the lack of asking. It was for the lack of tracking and oversight by the government for the facts that matter. To be sure, no conclusive answers can be drawn over such a short time frame. The goal of keeping capital flowing when banks were not lending money is a sound one. For all the facts and figures, basic information is missing. Facts that would allow citizens to make informed judgments on how their tax money was being spent, such as loan default rates, the number of jobs saved or created and businesses behind on payments.

In short, information that delivers on pledges of transparency and draw conclusions deeper than the government borrowed, loaned and declared mission accomplished.

Transparency is a good thing, as is full information. But notice that the sort of transparency the Northwestern is seeking would necessarily involve the sort of “government intrusion” into business that Republicans usually decry. Note also that news organizations as large as Gannett should not have to make do with the graphs and tables found on government web sites! Whatever happened to the days when large news organizations would collect the missing data for themselves, even if only by polling a sample of businesses that received stimulus loans?

The Growing Failure of The Wisconsin Republican Agenda

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As reported by the Oshkosh Northwestern, the political news this week in Wisconsin has been bad. First, instead of focusing on jobs and the economy, the Republican-controlled legislature has been concentrating on such critical issues as the rules of deer-hunting. Secondly, despite Governor Walker’s promise that cutting public employees’ salaries, taking away their collective bargaining rights, slashing public education, and providing tax giveaways to corporations would be good for jobs, the Wisconsin unemployment rate has increased from 7.4 to 7.9% since Walker was inaugurated. Thirdly, it seems that the latest round of budget cuts to the UW system were insufficient given upcoming budget shortfalls; the associated press reports that UW campuses will have to cut $46.1 million more this year and $19.6 million next year.

UPDATE: The four-year campuses are clearly being targeted; 2-year technical colleges are being excluded from the cuts. This, of course, is quite consistent with the anti-intellectual bent of conservative Republicans these days. According to a story in the Northwestern today (10/20)-

…UWO Chancellor Richard Wells said he was “bewildered” by the amount asked of universities. State agencies were asked to plan for a combined $174.3 million in cuts. The UW System was asked to plan on absorbing 38 percent of that number, according to figures released Friday by the Department of Administration. The UW System’s budget takes up 7 percent of the state’s general purpose revenue.

“It’s confusing. It’s disappointing. It causes dismay. We didn’t expect anything like this,” Wells said Wednesday. “It’s clear we’re the lowest priority in the state, which doesn’t make sense given we’re fundamental to economic development and recovery.”

Of course, the four year universities are fundamental to economic development and recovery only if you are hoping to attract professional, high-paying jobs to the area. But Republican Assembly Speaker Jeff Fitzgerald is admitting that their plan (which is basically to lower taxes for corporations and pray they will come to a state with an ever-diminishing public sector and a deteriorating infrastructure) is not so specific-

“What we’re trying to do is create a more positive business environment,” said Assembly Speaker Jeff Fitzgerald, R-Horicon. “No single piece of legislation is going to go out and create thousands of jobs.”

Fitzgerald, who is running for the U.S. Senate, said Wisconsin’s economic recovery has been slowed by the nation’s economic woes.

“We as elected officials, we can’t create the jobs,” he said. “The government can’t. That falls to the private sector.”

To borrow a Sarah Palin-ism, “How’s that attempt to create a more positive business environment workin’ out for ya?” [wink, smirk]

Of course, Republicans will likely blame President Obama for the failure of their own policies. But the Republican-controlled Congress has blocked nearly every policy initiative Obama has suggested, so that excuse won’t cut it.

Politics at both the state and federal levels have become absolute nightmares. Let’s hope we all wake up soon.

Wealth Distribution, Part II

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Paul Solmon’s excellent PBS News Hour series on the economy continued this week, featuring – in a remarkable display of intellectual fairness – Robert Lerman’s objection to Solmon’s previous report on the increasingly huge inequality of wealth distribution in the United States (which I blogged on here). Solmon had originally described the situation using the statistics represented in this chart-

Lerman objects that when social security and medicare are included in the comparison, the inequality is not quite so disturbing-

Several commenters at the News Hour site point out that medicare and social security are not really the equivalent of other sorts of wealth in that they are not fungible, nor are they anything but financial burdens prior to one’s reaching retirement age. But putting those qualms aside, it’s worth pointing out that if entitlements really do have the effect of mitigating an otherwise (presumably) unfair wealth distribution, that’s all the more reason to save the programs from Republican attempts at dismantlement. In principle, I’m not against allowing individuals to “opt in” to riskier private retirement accounts, which might help to equalize wealth (and wealth-fungibility prior to retirement, if the law allows), as long as the “public option” could be retained in its current form for those who want it. But simple math suggests that with fewer people paying into the public option, the difference would have to be made up somehow… and what better way to make up the difference than by lifting the cap on the amount of income subject to payroll taxes, as well as by taxing super-wealth at higher rates,thereby further mitigating the wealth gap?

Lerman argues that at some point extreme wealth does not make a significant difference to quality of life. The capacity for pleasure is, after all, finite. Yes, the super-rich can drive a Ferrari while the rest of us drive Toyotas, but a car is basically a car, a palatial house is ultimately just a house (and, even if you own several, you can’t live in more than one at a time). I think that this might well be true, and that focusing on it may help to mitigate the resentment so many people are feeling these days. But, by the same token, doesn’t it help to bolster the argument that raising someone’s standard of living to a merely decent level by taxing someone else’s super-wealth at a slightly higher rate is morally defensible – maybe even morally required?

Here’s the entire thought-provoking segment-

Watch the full episode. See more PBS NewsHour.

Of Ponzi Schemes And Social Security

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According to Politifact, the candidates’ statements at yesterday’s Tea Party/CNN sponsored Republican Presidential debate contained a surprising number of inaccuracies (even given the low expectations most people have of such events). But perhaps the most egregious, in my view, is Rick Perry’s claim that Social Security is a “Ponzi scheme”. Politifact rates this claim as simply false. Here’s why-

So how valid is the comparison?

Mitchell Zuckoff, a Boston University journalism professor who has written a book on Ponzi, noted three critical dissimilarities between Social Security and a Ponzi scheme, which by definition is both fraudulent and unsustainable.

“First, in the case of Social Security, no one is being misled,” Zuckoff wrote in a January 2009 article in Fortune. “…Social Security is exactly what it claims to be: A mandatory transfer payment system under which current workers are taxed on their incomes to pay benefits, with no promises of huge returns.”

Second, he wrote, “A Ponzi scheme is unsustainable because the number of potential investors is eventually exhausted. That’s when the last people to participate are out of luck; the music stops and there’s nowhere to sit. It’s true that Social Security faces a huge burden — and a significant, long-term financing problem — in light of retiring Baby Boomers. … But Social Security can be, and has been, tweaked and modified to reflect changes in the size of the taxpaying workforce and the number of beneficiaries. It would take great political will, but the government could change benefit formulas or take other steps, like increasing taxes, to keep the system from failing.”

Third, Zuckoff wrote, “Social Security is morally the polar opposite of a Ponzi scheme… At the height of the Great Depression, our society (see “Social”) resolved to create a safety net (see “Security”) in the form of a social insurance policy that would pay modest benefits to retirees, the disabled and the survivors of deceased workers. By design, that means a certain amount of wealth transfer, with richer workers subsidizing poorer ones. That might rankle, but it’s not fraud… None of this is to suggest that Social Security is a perfect system or that there aren’t sizeable problems facing the incoming administration and Congress. But it’s not a Ponzi scheme. And Ponzi himself, who died in a hospital charity ward with only enough money for his burial, would never have recognized it as his own.”

We agree with Zuckoff’s interpretation. We rated Perry’s November 2010 comparison of Social Security and Ponzi schemes False, and we stand by that ruling. The comparison still deserves a rating of False.

Putting aside the Ponzi scheme charge, the fact that Social Security could be saved in perpetuity simply by raising the cap on the amount of wages subject to the payroll tax (currently set at $106,800), along with a modest, phased in increase of a year or two in the age at which one can receive full benefits, puts the lie to the often-heard claim that young people should not believe that benefits will be available to them. The simple truth is that such an outcome is likely to occur only if young people come to believe the claim and act to end the program, making it a self-fulfilling prophecy.

There may be principled grounds on which to be against Social Security, but basing opposition to the program on the fantasy that it cannot be saved is not one of them.

The Funny Side of Class Warfare

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Thanks to Warren Buffett’s editorial in the New York Times last Sunday, entitled “Stop Coddling the Super-Rich”, there has been more publicity this week on the growing wealth inequality in the USA than I can remember in ages. Of course, Fox News regards any discussion of the issue as class warfare. And who better to bring out the funny side of class warfare than Jon Stewart-

And here is part II-