Mr. Fineman asserts that the MSM came into existence...as the result of the fact that "a temporary moderate consensus came to govern the country." Please. America was a political battleground in those days, fighting over everything from McCarthyism to the true nature of communism to the proper role of government to Vietnam. The MSM didn't come into existence because of a brief period of political comity. The MSM rose because it had a monopoly. And it fell because it lost that monopoly.

Let me repeat that: The MSM rose because it had a monopoly on information.

Well, for one thing, it has no credibility. And no audience, no morale, no long-term emblematic anchorperson and no cohesive management structure. Outside of those annoyances, it shouldn't be that hard to fix.

About moving to Canada, Lucas says, "I really don't want to lose my American citizenship because it's important to me to stay here and fight and to vote. I'm somewhat fearful that if the economy collapses and we face what [economist] Paul Krugman and others are saying may be an economic Armageddon, well then all of us are going to be much less safe in all this evangelical fervor. I just want to have one foot across the border. I don't want to end like Freud: three sisters - all in their 80s -- who all died in Auschwitz when they couldn't get out.

"You know there's a piece of Hitler's unused stationery for sale at an antique store here in New Haven, and it's very cheap. I called Tony Kushner this morning and asked him if I should buy it, and he said, 'Are you crazy?...'"

Well, let’s assume that you own a house, and during a routine visit, your exterminator says that you’ve got a few termites. Nothing serious yet, but they’re there. And, they’re eating your home. Every day. And, much like rust, they never sleep. Is your decision to act going to depend on whether or not your house will fall down in fourteen years or thirty-eight? Or, regardless, you’re going to only pay...to fix this problem when it is clear that your house is actually starting to collapse? And, if that’s not any time soon, it’s Miller time.

For the first time in eight years, Jesse Jackson's Wall Street Project will not receive a donation from the New York Stock Exchange..."We are not giving to Wall Street Project this year," Diana DeSocio, the spokeswoman for the NYSE told Cybercast News Service on Friday.

Florencio Lopez-de-Silanes, a tenured finance and economics professor, issued a statement acknowledging "an error," but neither he nor Yale provided details.

The Wall Street Journal, citing anonymous sources familiar with the matter, reported Monday that Lopez-de-Silanes allegedly double-billed Yale for about $150,000 in travel expenses since 2001.

At a meeting in San Francisco last month...left-leaning billionaires agreed to commit an even larger sum over a longer period to building institutions to foster progressive ideas and people.

Far from being disillusioned by the defeat of John Kerry, the Democratic presidential candidate, the billionaires have resolved to invest further in the intellectual future of the left, one person involved said.

"Even if your dire prediction comes to pass, and Social Security Benefits [sic] are forced to be cut by 27 percent in 2042, how is that a disaster?"

Silviculture stands at the center of a well-ordered universe

T. W. "Doc" Daniels 1907-2004

Paul Krugman completed another year as a New York Times columnist, making it five full years of punditry without once finding a reason to write a column consisting mostly of substantive criticsm of any Democrat on any topic or substantive praise of any Republican on any topic. Although Mr. Krugman's utterly predictable criticism of Republicans is unsurpassed, his high ranking also depends on a careful protection of Democrats. He expressed a strong preference for Howard Dean and Wesley Clark, but once John Kerry took the lead in the race for the Democratic nomination, Mr. Krugman turned on a dime and was more favorable toward Mr. Kerry than any of our 33 pundits. He has carefully avoided any mention of Democratic scandals, adding disgraced former New Jersey governor Jim McGreevey to a long list of names which must not be mentioned -- Marc Rich, Al Sharpton, Robert Torricelli, etc.

During my time here in New York, we've had discussions about the President's belief that the establishment of personal retirement accounts should be one part of a comprehensive plan to fix Social Security for future generations. People here on Wall Street understand that the structure of those accounts would be designed to benefit retirees, not Wall Street investment firms. They welcome a sincere solution to Social Security for the right reasons, for the broader financial stability that a solution will bring to our economy and to our markets.

2002 -- The year the rich got poorer but paid higher tax rates, as the Bush tax cuts proved progressive.

Just released IRS Statistics of Income data for 2002 tax returns show that as a result of the Bush tax cuts the lower your income was the more your tax rate probably was reduced, while only the rich paid higher rates. (Hey, doesn't this sound backwards?) At the same time the rich got poorer, as income at the highest levels continued to plunge through the second straight year (after falling 60% at the highest levels the year before). So the rich wound up paying higher tax rates on less income.

The data is all printed out on my blog.

Mr. Luskin, you are so damn dumb that I'm e-mailing you a second time just to tell you again. Really, how can you stand to wake up every day and have to gaze on your own lying face? It must be just sickening. I cringe at the thought of having to occupy your skin. Just horrifying. Stomach-turning.

[Name ommitted on 2/12/2006 at writer's cowardly after-the-fact request]

President Bush says "the crisis is now" and Social Security will go into the red as of 2018. Eeek, just 13 years from now -- we might actually live that long. Except ... nobody else says that. The Social Security trustees, paid to be professional gloom-mongers on this subject, say it's good until 2042, and the conservative estimate by the Congressional Budget Office is 2052 -- not before Social Security goes broke, but before Social Security has to dip into its trust fund. Get a grip.

Krugman, and the rest of the Left, ignore governmental momentum when they look at Social Security. For them, you see, it's just a matter of the problem not being bad enough to worry about today. In reality, however, governmental momentum causes the problems inherent with any government program to get worse over time, like a ball rolling down hill. And, as we get further down the hill, reform of a broken system becomes less and less possible, whether that be because of bureaucratic pressures, electoral changes (how many seniors will there be in 2042?), and the sheer amount of change needed.

It's helpful, in this context, to think of government policy as a physical, solid object. As with any physical object, once it gets moving (gets funded), it begins to pick up momentum (obligations to taxpayers, deficits). Assuming that, for these purposes, money is the only relevant force that can act on a policy (absent action by Congress to completely eradicate a policy), we can treat policy like any physical object, and analyze it as such. As a policy gains momentum, the amount of force that one would need to exert on it to slow it down, or stop it completely, becomes greater. The solution is to either a.) apply a large amount of force at one point (spend a lot of money), or b.) apply smaller amounts of force over time. The end result is the same.

The Bush administration is going with option B on this one, attempting to slow the momentum of Social Security by applying small amounts of force over a long interval. So, even if the "crisis" moment is 45 years away, action now is still necessary, because now we have an opportunity to slow it down, and return Social Security to solvency before the ball gets rolling out of control on us. Would it be better to spend a couple trillion dollars now, to avoid having to either spend $50 trillion at once, or, as Luskin points out, cut benefits by 27% in one year? Which is the preferrable option?

While Ramsey Clark seems to have the Nobel Peace prize locked for 2005, I'd like to nominate Kelly Conklin for the award, at least for economics. This is a businessman with his heart in the right place. And the New York Times prominently displayed that by publishing his essay "Honest Work, Honest Pay -- A Strong Minimum Wage Is Good For Everybody" in the New Jersey section on Sunday [1/9/05].

Conklin owns an architectural woodworking firm that has a $10,000 per week payroll along with all the attendant costs and benefits. His employees require varied skill levels given their use of dangerous machinery on expensive woodworking. He explains how important it is to hang onto good employees with positive work attitudes. He states: "A reasonable minimum helps small employers attract entry-level workers."

He never tells us what a "reasonable minimum" is. Apparently the government knows and does so with their mandated minimum wage. But could he investigate what other similar employers are paying workers and offer more to attract, develop and keep these good workers? Assuming his employees are asked to do more than the Wal-Mart workers or hamburger flippers, what does the minimum wage have to do with his type of employees?

Conklin gives himself away by stating: "As long as other businesses pay a fair wage…we can compete with anyone. But we have little protection against unfair competition from illegitimate operators willing to skirt the law and exploit the desperate."

OK. The law-skirters are breaking the law. What's the minimum wage have to do with protecting him? Abolish it and there are no law-breakers. Regardless, ignoring the loaded language in bold above, we discover his real beef: Competition!!!

As usual, the businessman is afraid of competition and hides behind a claimed benevolence for the workman. Why? To protect himself. Adam Smith advised us years ago how businessmen were least in favor of a free market and free competition. Apparently, Conklin wants to rig the costs of his competitors by claiming that their employees are "desperate" and are being exploited. Where's the gun? Call Mr. Spitzer immediately!

He then further shows his hand by saying, "A fair wage doesn't only promote opportunity and ensure a level playing field. It plants the seeds of consumption."

Like the Kansas City Royals, he wants a "level playing field". (Let's ignore the second sentence since people with more money will spend more and save more). But things can "level" out in a variety of ways. Look at costs. Some buyers purchase in bulk while others do not. Should that field be level or should bulk-buyers get a lower price? Should the government level it? What about the level playing field of the free market? No, he wants the government to level the field for him.

As to Conklin's altruism, he ignores the empirical evidence that minimum wage increases have always reduced the access to entry-level jobs for minorities and teens. He ignores the reduced incentive to hire by the minimum wage.

And he ignores the real culprit. Conklin's firm is in Northern New Jersey. The overall costs of everything are exorbitant there. Besides either moving or reducing his profit, he can demand his legislators slash taxes and regulations to lower the cost of living for him and his employees and the cost of running a business in competition with those in other states. Then the entry-level wage would be fairer.

But given where Conklin's heart is, the next time I go shopping for high-end architectural woodworking, I'll spend more and will buy from him. Because he is a nice guy.

P.S. Times columnist Kristoff just reported in his column on Saturday 010805 entitled "It's Time To Spray DDT" that millions have died in Africa due to the environmentalist-led ban on the use of DDT world-wide. He writes, "But it's also tragic that our squeamishness about DDT is killing more people in poor countries year in and year out, than even a once-in-a-century tsunami." Maybe we should also get over our "squeamishness" over free market wages and avoid making so many able-bodied, willing Americans "year in, year out" part of the permanently unemployed.

Even funnier when you realize that the objective fact is this: the Social Security crisis actually starts a lot sooner than even the proponents of reform are talking about. The reality is that the Social Security crisis begins to materialize in just five years.

Here are the facts. You decide whether they amount to a "crisis."

Right now the Social Security program collects more in taxes -- both FICA taxes from current workers and income taxes on benefits from current retirees -- than it pays out in benefits to retirees. That surplus goes into the Social Security trust funds, where it is used to buy Treasury bonds that are held as an investment toward the payment of future benefits. The trust funds' purchase of those Treasury bonds is no different than if you or I bought them. The Treasury issues the bonds in exchange for cash, which is used to finance the current expenditures of the federal government.

According to the latest annual report of the Trustees of the Social Security Trust Funds, the surplus in 2004 was $64.4 billion dollars. It will be higher this year -- at $87.7 billion. The surplus will keep getting bigger and bigger through 2008, when it will reach $108.0 billion. Each year, that's more and more money that the federal government won't have to raise from the world capital markets. It's a captive audience of bond buyers -- and a growing one.

But then in 2009, just 5 years from now, the surplus will start to shrink. In 2009 it will fall to $103.7 billion, and in that year the federal government will have to go to the capital markets to raise $4.3 billion that it didn't have to raise the year before. That's not a lot of money in the grand governmental scheme of things nowadays. But it's an important turning point for Social Security -- it's the year the crisis begins.

Every year after that the crisis will deepen. Each year the government will get several billion dollars less from the Social Security surplus than it did the year before, and it will have to make up that difference by tapping the capital markets -- or by raising taxes or trimming spending.

Most observers point to 2018 as the earliest year for the Social Security crisis to begin. But that's only the year that the crisis -- which will actually begin in 2009 -- will pass an especially attention-grabbing milestone. That's the year, according to the Trustees, that the Social Security surplus will disappear entirely and become a deficit. In other words, tax revenues will be less than the benefits paid out that year, for the first time. From the standpoint of public finance, though, it will just be another painful year in which the federal government had to raise more money from capital markets -- or raise taxes more or trim more spending -- than it did the year before. By 2018, the Treasury will have already received $359 billion less cash each year, cumulatively, than it received in the peak year of 2008.

Starting in 2018, as soon as Social Security tax revenues are insufficient to cover benefit payments, the gap will be made up by the trust funds' redemption of the Treasury bills it has been hoarding. Not only will the Social Security system no longer give cash to the federal government in exchange for Treasury bonds. Starting in 2018 it will be just the opposite: the Social Security system will give back the Treasury bonds held in the trust funds -- and the interest on those bonds, which are held in the form of more bonds -- and demand cash for them.

According to the Social Security actuary, in 2018 the trust funds will demand $23.4 billion in cash from the federal government. The trust fund will redeem the last of its bonds in 2041 -- demanding from the government $1.003 trillion dollars that year. From 2018 through 2041, the trust funds will redeem bonds worth, cumulatively, $11.9 trillion dollars. Once again, just to be perfectly clear, let me emphasize the reality that this is $11.9 trillion that the federal government will have to come up with somehow -- either by tapping the capital markets, raising taxes, or trimming spending. 

This should illuminate the debate on whether the trust funds are "real" or not. They are perfectly "real" in the sense that the Treasury bills they hold are valid legal claims on the government. But they are not "real" in the sense that they, as a June, 2004 Congressional Budget Office report put it, "contain no financial resources" in and of themselves. For their value to be realized, they must be redeemed for cash by the government -- and that cash has to come from somewhere.

From the standpoint of public finance, the crisis ends in 2042 when the trust funds' hoard of bonds is completely exhausted. Under current law, Social Security benefits will then be trimmed such that they will be payable out of current tax revenues. According to the trustees, benefits will have to be cut by 27% from their present scheduled levels, and it will only get worse from there as time goes by. So, yes, the drain on the Treasury will end in 2042 -- but at that point the crisis will simply be inherited by retirees in the form of lower benefits.

Those are all simple facts. Yes, they are estimates. They might be off a little bit one way or the other, but the general pattern is clear. Social Security will start to become a drag on the budget of the federal government starting in 2009, and it will get progressively worse through 2042, by which time it will have consumed $11.9 trillion from the federal budget. And after that, Social Security benefits will be automatically cut. If that isn't a "crisis," I don't know what is.

The opponents of reform claim that the Social Security crisis is, in fact, a crisis of general public finance -- not a crisis of Social Security itself. They see Social Security as an entity separate from the Federal government, and not that its own dedicated stream of tax revenues and its trust fund assets will keep it going for more than a third of a century.

That's a fair point of view, as far as it goes. At the same time, it is dangerously myopic to treat Social Security in isolation from the overall finances of government. That would be like finding nothing troubling about a factory that dumps pollutants into a river. That may be no problem for the factory itself, but it can be a major problem for everyone downriver from it.

In this case, though it's worse than that. By 2042 the pollution will back up into the factory itself. Unless the opponents of reform don't think it's a problem to automatically cut benefits by 27% all at once in 2042, then Social Security itself has a "crisis" -- maybe not now, but surely then.

So don't be too hard on the advocates of reform when they throw the C-word around. It's fully justified. In fact, I even dare to use that most dangerous of all political words nowadays to describe that crisis: yes, the I-word: imminent.

Posted by Donald L. Luskin at 2:14 PM | link  

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Posted by Donald L. Luskin at 9:57 AM | link