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Friday, January 28, 2005

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HERITAGE HITS BACK -- HARD!   
The Heritage Foundation has come out with a devastating rebuttal to Paul Krugman's bigoted New York Times column today. Some choice quotes:

Krugman cites a 1998 memo from Social Security Administration actuary Steve Goss criticizing some aspects of the methodology that we used and leaps to the conclusion our study is nothing but “damned lies.” ...We answered Goss’s critique (and others) long ago, in our December 11, 1998, report “Social Security’s Rate of Return: A Reply to Our Critics.” This paper has been available on our website for many years now and proves that we did account for Social Security’s progressive retirement benefits formula, as well as disability and survivor benefits and other elements of the program that disproportionately benefit minorities.

In short, we used the same benefit formula that Social Security uses to calculate retirement benefits for our study. We included the cost of a life insurance policy that duplicates the survivors benefits offered by Social Security. Most importantly, we treat disability benefits as a separate program from the retirement and survivors benefit program that we studied.

Indeed, we went so far as to rerun the numbers using an alternate methodology suggested by Goss and found that it reinforced our initial finding that African Americans generally receive a far lesser return on their “investment” of Social Security taxes than whites.

...A major factor in African Americans’ poor returns from Social Security is the sad fact that so many black workers die before they can receive significant benefits. When measured in terms of the proportion of a worker’s pre-retirement income that is paid in Social Security benefits, all lower income workers receive more than higher income workers do. However, they often receive these benefits for a shorter period of time.

Krugman tries desperately to minimize, even dismiss, this problem. “Blacks’ low life expectancy is largely due to high death rates in childhood and young adulthood,” he assures us, before noting that the typical African-American male who makes it to retirement age can expect to collect benefits for only two years less than his male counterpart.

However, the difference between receiving benefits for 14.6 years instead of a white worker’s 16.6 years is 12 percent. A 12 percent “cut” may be no big deal to Krugman, but it often determines whether workers realize a net gain or loss from Social Security. ...fully one-third of African-American men will die between the ages of 50 and 70. Contrary to what Krugman claims, the difference in Social Security rates of return between African Americans and whites is not primarily due to high death rates in childhood and young adulthood...

Rather than acknowledge and consider the inconvenient facts, Krugman resorts to base name-calling. Those who would reform the system to give Americans—and especially African Americans—a better return on their investment and the ability to amass a nest egg that can be passed on to their heirs are charged with “playing the race card” and bigotry.

Paul Krugman was once a respected academic, but sadly, he now stoops to produce superficial and poorly researched propaganda. Krugman’s January 28 attack is no more than an artfully executed piece of propaganda; Only when one examines the facts behind his charges does its veneer of reason shatter.


Posted by Donald L. Luskin at 7:27 PM | link  

JOKE OF THE DAY   

Posted by Donald L. Luskin at 4:36 PM | link  

DOUBLE EDGED BIGOTRY    Matthew Schiros makes a good point about Paul Krugman's column today. At one point, Krugman defends the Social Security status quo by saying that it advantages African-Americans:
...the formula determining Social Security benefits is progressive: it provides more benefits, as a percentage of earnings, to low-income workers than to high-income workers. Since African-Americans are paid much less, on average, than whites, this works to their advantage.
Yet a couple sentences later, Krugman blasts George Bush for advocating personal accounts because as advantaging African-Americans who don't live as long as whites, and so don't collect as many benefit payments under the current system:
...it isn't particularly soft to treat premature black deaths not as a tragedy we must end but as just another way to push your ideological agenda. But bigotry - yes, that sounds like the right word.
How come it's bigotry to advocate personal accounts by citing the fact that African-Americans don't live as long -- but it's not bigotry to advocate the status quo by pointing out that African-Americans don't earn as much?

Posted by Donald L. Luskin at 3:33 PM | link  

JUST IN CASE    you need to take a break from thinking about Social Security, check this out! Thanks to Dave Nadig for the link.

Posted by Donald L. Luskin at 9:49 AM | link  

MORE ON THAT TIMES ATTACK ON CHILE    Here's more on that New York Times story yesterday attacking Social Security reform in Chile. It's an analysis by Salvador Valdés-Prieto, professor of economics, Catholic University of Chile (Ph.D. MIT ’87). Readers, forgive me if this and my previous posting are more detail than you want. I haven't yet synthesized this and other responses into a single column. But that Times story was such a vicious and dishonest hatchet job, I thought I'd best serve the advocates of reform just be getting all the facts out as soon as possible.

I do not support a number of those government's policies, specially those related to human rights, but let us look at the facts. In 1981 it was advertised that the minimum pension (created in 1952) and the assistance pension (created in 1975) programs would continue their support for the old poor. Rohter presents things as if the advertisement was that the old poor would not exist under the new system.

It was also advertised in 1981 that for the first time, the self-employed would be allowed to participate voluntarily in social security. Note that nobody in Chile proposed to mandate the self-employed to contribute for old age, as the United States has done for decades. The reason is a social concern: it would be cruel to force the Chilean self-employed to contribute, because most have low take-home wages anyway, and because if they ever self-financed a minimum pension for old age, they would be excluded from the programs that support the old poor. In 1981 nobody advertised that all the self-employed would have pensions under the new system, but rather those that wanted to contribute would have one (which in fact have been very few). Rohter presents things as if the advertisement was that the self-employed would all contribute under the new system.

I, for one, am proud that we Chilean taxpayers "continue to direct billions of dollars to a safety net", despite criticism by Rohter. According to the Ministry of Planning in page www.mideplan.cl, button Encuesta Casen, button Estadísticas, categoría "Pobreza" (Poverty), the result has been the following (as of the 2000 survey):
 

Age group 65 and more All ages
% indigent 1.1% 5.7%
% poor 5.6% 14.9%
sum of both lines 6.7% 20.6%

Thus, Chilean social policy has reduced poverty among the old to a third of the national poverty rate. The children (up to age 14), with a 31.1% total poverty rate, deserve a higher priority than the old.

2) The Dagoberto Saez example.

Mr. Saez contributed just 24 years out of a 45 year career, so any earnings-related benefit formula will pay him far less than the target replacement rate. Therefore, it is a welcome aspect of the new pension system that it pays Mr. Saéz just $315 a month. This is still a respectable 33% replacement rate on the last wage and surely a much higher replacement rate on the average career wage as used in the United States.

What a journalist should be inquisitive about is how does the old system manage to pay his colleagues $700 a month.

a) Did he check if the colleagues contributed for 40 or so years, rather than 24?

b) Did he check that the old system calculates the pension on the basis of the average of the last five years of contributions (not 35 as in the U.S. Social Security), encouraging people to game the formula?

c) Did he check the contribution rate paid my Mr. Saez as a proportion of his actual earnings? If he was a government employee, then during the 1950-1990 period he would have enjoyed a partial exemption on contributions, granted by laws that declared that just 25% of the salary was taxable for social security purposes. This trick allowed short run savings to the employer (the government). The workers accepted this because their take-home wage increased (i.e. they could get a bigger increase in the next wage-bargaining round), and in the understanding that later on, when they approached the pension age, their full salary would become taxable and reported, i.e. effectively the full salary would count in the benefit formula based on just the last 5 years of contribution (of course other workers, who did not enjoy this partial exemption, or taxpayers, would cover the largesse. This explains also the “pension damage” reported by Rohter in the last lines). However, if Mr. Saez moved to the new system, where only actual contributions accumulate, these inequitable redistributions would be revealed and stopped.

d) Finally, were readers informed that the fact that the old system pays ZERO to contributors that contribute for less than 10 years, implies that the old system can direct the contribution revenue extracted from those people (whose contributions are taxed at 100%), towards the lucky ones that do complete the 10 years like Mr. Saez colleagues? Note that the number taxed in Chile by this arrangement is much larger than in the United States, because in Chile the share of people in that situation is large because of the exemption for the self-employed to contribute - who in turn are about 30% of employment - and because of many women's interrupted careers when they work at home.

Rohter does not report to readers that Mr. Saez earns 50% more than the average Chilean wage, so his position in the income distribution is like the one of somebody in the U.S. earning about $45,000 a year (far above poverty in low cost-of-living Chile). This may cause a confusion among some readers, because in the United States $950 a month is way below the poverty line.

3) The remarks of the Minister for Labor and Social Security (Mr. Solari, not Scolari).

The Minister says that “it is absolutely impossible to think that a system of this nature is going to resolve the income needs of Chileans when they reach old age”. This is exact, because no Chilean I know of wants to scrap the minimum pension, the assistance pension and other safety nets that have reduced the poverty rate among the old to a third of the general population’s poverty rate. Nobody expects an earnings-related plan to engage in wealth redistribution, apart from the fact that pension benefits are fully subject to the personal income tax, which is highly progressive in Chile. But the Minister is wrong if he means that the system will not resolve the income needs of the middle classes when they reach old age, provided that they contribute, of course.

The article reports that “despite initial projections that the system would be self-sustaining by now, spending on pensions make up more than a quarter of the national budget”. This is wrong. The overall pension system, including minimum pensions and assistance pensions, will never be self-sustaining. The transition deficit in the program of mandatory earnings-related pensions for the middle classes was never expected to fall to zero after just 24 years of transition, but only after 40-50 years.

4) The transition cost/deficit

Readers are told that “the annual cost to the government, as guarantor of last resort, has remained steady at 5-6 per cent of GDP”, just after stating that the transition period has turned out to be longer and more expensive than anticipated. This way of presenting facts suggests that the transition cost has been 5-6% of GDP.

The actual transition cost is much smaller. It is the amount of contribution revenue diverted to the new pension system. This has been about 2% of GDP, as shown by the following table:

Cuadro 11.2 Impacto Fiscal de la transición chilena, 1981-1997
(% of GDP)

Recaudación Aportes Déficit de caja
 

Año  Planes Nuevos Planes Antiguos

1981

n.d.

3,9

1982

1,7

8,1

1983

1,5

7,6

1984

1,5

7,7

1985

1,5

6,7

1986

1,6

6,3

1987

1,5

5,4

1988

1,8

5,2

1989

2,0

4,6

1990

2,2

4,6

1991

2,5

4,5

1992

2,1

4,4

1993

2,0

4,5

1994

2,0

4,4

1995

2,1

4,2

1996

1,4

3,6

1997

1,2

3,6



Source: Valdés, Salvador (2002) Políticas y Mercados de Pensions: A University Textbook for Latin America, Ediciones Universidad Católica, Santiago, Chile. Source of the data series: Table 5, p. 468, in Acuña, R. y A. Iglesias (2000) "La reforma a las pensiones", Chap. 11 in F. Larraín y R. Vergara editores, La transformación económica de Chile, Centro de Estudios Públicos, Santiago, Chile.

What explains the difference between the actual transition deficit of 2% and 5-6%?

a) Expenditure on the safety net. This expenditure has risen substantially due to real increases legislated in the 1990’s. This expenditure is much larger than the one reported in the fiscal accounts, because the Ministry of Finance has never broken down the expenditure in pensions made by the old system between “minimum pension supplements” and “self-financed earnings related pensions”. If this were done, it would become clear that the sum of expenditures in minimum pensions (adding both the old system and the new), is much larger than reported. It is also in a falling trend as a proportion of GDP, because Chilean real incomes have increased substantially in the last decade, reducing poverty.

b) A static fiscal policy adopted in 1981. The implicit labor tax in the old pension system was substituted by an implicit increase in VAT (or an implicit reduction of other expenditures). The implicit labor tax in the old system appeared as a source of pension revenue in the fiscal accounts, but the implicit increases in VAT and cuts in other programs are outside the pension budget. This budget classification issue inflates the “pension related deficit” reported by the Ministry of Finance.

c) The pension institution for the police and the military runs a permanent cash deficit. This happens for two reasons: (i) a large share of military and police pensions are deferred wages, as in the military in most countries including the United States, and as in many employer-sponsored DB plans, and the plan is financed on a pay-as-you-go basis. DB employer plans attempt to discourage quitting of personnel that has been trained at high cost by the employer (if a jet fighter pilot trained at a cost of $7 million quits to become an airline pilot, the loss is huge); and (ii) the number of Chilean military experienced a bulge in the past due to the military regime and specially to the threats of invasion by Peru and Argentina over 1975-78. After the return to democracy the number of military has fallen again, reducing contribution revenue in those plans.

d) The creation in the 1990s and in 2005 of new pension programs. They benefited those exiled by the Pinochet government that returned to Chile, the survivors of those killed or disappeared by that government, and in 2005 those that reported being tortured to a National Commission on Torture. The general thrust of these programs is sound, but their cost should not be attributed to the transition of the earnings related pensions for the middle classes from PAYG to full funding started in 1981.

5) The military’s pensions

Mr. Rohter gives credence to claims that the military were “careful to exclude fellow soldiers from” the new privatized and fully funded pension system. Did he check whether any country in the world would adopt a pension system for its armed forced where benefits are fully portable to civilian jobs? All of them attempt to discourage quitting of personnel that has been trained at high cost by the employer. If a jet fighter pilot trained at a cost of $7 million quits to become an airline pilot, the loss for taxpayers, and for national security, is huge. The reader was misinformed here.

The average military and police pensions in Chile are way below those of Mr. Saez’s colleagues. Why is this not reported?

6) The system’s administrative cost and the profits of fund management companies.

The reporting here is accurate and cautious, as it should be. The profit rates are very high, as I have shown in independent work. They rose to the current high levels in 1998, after the government introduced regulations that allowed the fund management companies to coordinate in firing their own salespeople, in exchange for an expected cut in commission rates to workers. The firms passed on only half of the cost saving. This arrangement failed because the fund management firms became hostage to political demands because their profits depend now on the government’s support. For example, as the reform of competition has been delayed once more in 2005, the government allowed them one more year of vulnerability to political demands.

It is a fact is that the fund management companies’ profits have never been so high as in the last 5 years, when Mr. Solari has been Minister for Social Security. This is a Chilean failure to manage a complex system. I hope other countries will avoid these mistakes.

Summing up: The readers of the New York Times got much less information than they deserve, overall.


Posted by Donald L. Luskin at 9:33 AM | link  

MORE TIMES DISTORTIONS ON SOCIAL SECURITY REFORM IN CHILE    Here's a line-by-line deconstruction of a scurrilous story that ran in the New York Times yesterday by Larry Rohter under the headline "Chile's Retirees Find Shortfall in Private Plan." It's by Mario Velasco, M.A. New York University. I found it on the web site of the International Center for Pension Reform.

Deconstructing Larry (of The New York Times)

The same journalist that gratuitously insulted the President of Brazil, former trade union leader Lula, by calling him "alcoholic" in print in the NYT, Mr. Larry Rohter (aka Larry Potter for his legendary imagination), has now insulted the intelligency of NYT readers. In fact, that newspaper published on January 27, 2005, his article "Chile's Retirees Find Shortfall in Private Plan", that I will dissect here to expose its fallacies, misrepresentations, innuendos, spelling errors, and other such tricks unworthy of an american newspaper. 

>Under the Chilean program - which President Bush has cited as a model for his plans to overhaul Social Security -the promise was that such investments, by helping to spur economic growth and generating higher returns, would deliver monthly pension benefits larger than what the traditional system could offer.

First mistake Larry. A defined contribution system makes no "promises" about benefits levels, absolute or relative. Those are words of a defined-benefit system. 

>But now that the first generation of workers to depend on the new system is beginning to retire, Chileans are finding that it is falling far short of what was originally advertised 

False Larry. They only parameter originally mentioned as a reference (since it is resultant return, not a promised one), was a 4% real rate of return. Official numbers show that it has been 10.1% real on average during almost 24 years. Indeed, an extraordinary achievement.

>For all the program's success in economic terms, the government continues to direct billions of dollars to a safety net for those whose contributions were not large enough to ensure even a minimum pension approaching $140 a month. 

The government contribution to the safety net of the private system was US$ 70 million in 2004, so far from "billions" as Larry from truth in reporting or as Madonna from chastity.

>Many others - because they earned much of their income in the underground economy, are self-employed, or work only seasonally - remain outside the system altogether. Combined, those groups constitute roughly half the Chilean labor force. Only half of workers are captured by the system.

As they were in the old system. By design, the private system is only mandatory for employed workers, as the old one was. The rest save on their own, as they did before, or do not save, as they did before. Get it Larry? 

>Even many middle-class workers who contributed regularly are finding that their private accounts - burdened with hidden fees 

Another distortion. There is no "hidden fee" whatsoever. Few financial industries in the world, if any, are more transparenet than the AFP industry, as designed by law.

>that may have soaked up as much as a third of their original investment 

The annual average fee is O.66% of assets managed, lower than most american mutual funds. That is the relevant comparison in a funded system. 

>are failing to deliver as much in benefits as they would have received if they had stayed in the old system. 

Sergio Baeza in a well known study (CEP) has shown that benefits in the private system are between 50% and a 100% higher, on average, than those under the unsustainable promises of the old system.

>Dagoberto Sáez, for example, 

Here they go. The usual discredited trick of finding one person and trying to derive general conclusions from his case. Of course, nobody can check the special circumstances of Mr. Saez, even in he exist. His situation maybe is explained by special circumstances, that always exist. Given what happened to former editor H. Raines-fired-Larry's editors should have abstain from approving this trick after the shameful Jayson Blair case of pure invention of cases. 

>is a 66-year-old laboratory technician here who plans, because of a recent heart attack, 

...the little element of drama of course, irrelevant to the conclusion, to soften the minds of readers 

>to retire in March. He earns just under $950 a month; his pension fund has told him that his nearly 24 years of contributions will finance a 20-year annuity paying only $315 a month.

With only 24 years! So, if he had worked 40-45, the average working life, and given compound interest, he would have easily achieved a pension higher than his last wage! You found the very wrong example Larry. 

>"Colleagues and friends with the same pay grade who stayed in the old system, people who work right alongside me," he said, "are retiring with pensions of almost $700 a month - good until they die. 

And how many years have they worked? Omitting that crucial piece of information in a pension debate is a joke. 

>I have a salary that allows me to live with dignity, and all of a sudden I am going to be plunged into poverty, all because I made the mistake of believing the promises they made to us back in 1981."

First, there were no promises related to level of benefits as explained. Second, the choice to opt out was voluntarily. Third, if he recognizes he made a mistake, in a free society mistakes are paid individually. But probably he did not made a mistake. 

>With many Chileans finding themselves in a situation much like that of Mr. Sáez, people are still looking to the government, not private pension funds, to ensure a secure retirement.

How does he knows that they are "many"? How many days did Larry stayed in Santiago to make that sweeping statement? There are close to 500.000 retirees of the new system and Larry has given us only one case. The equivalent would be to say that because of Jayson Blair "many" NYT reporters are outright liars.

>"It is evident the system requires reform," the minister of labor and social security, Ricardo Scolari, 

The man is called Ricardo Solari, not "Scolari", Larry. Can you trust anything written by a journalist that spend NYT money to dine and drink in Santiago and then cannot even spell well the name of the Minister? My goodness...

>said in an interview here. Chile's current approach based on private pension funds has "important strengths," he said, but "it is absolutely impossible to think that a system of this nature is going to resolve the income needs of Chileans when they reach old age."

What are the "income needs" of Chileans for a member of the Socialist Party of Chile (a party that still has not dropped, as the Spanish one did with Felipe Gonzalez, its Marxist inspiration)? Of course, Larry does not tell NYT readers this "little fact".

>Over all, Chile has spent more than $66 billion on benefits since privatization was introduced. 

That is called "keeping the promises" Larry, paying our grandmothers their checks, even if the old system was bankrupt. Of course, that amounts to $2.75 b. a year in a country with a GDP of $ 80 billion. But Larry thinks he will scare NYT readers adding them over 24 years. 

>Despite initial projections that the system would be self-sustaining by now, 

Whose "projections" Larry? There are no NYT rules to be explict about that?. You detect a desperate man when he switches from facts to "projections". And what is "self sustaining"? You want to kill all the pensioners from the old system?

>spending on pensions makes up more than a quarter of the national budget, nearly as much as the spending on education and health combined.

Again, keeping the promises Larry. Why are you so mad about that? 

>Faced with the likelihood of the gap remaining as it is or, as Mr. Scolari said, "perhaps even widening," 

Who is smoking a not entirely legal substance here? You Larry or your mythical "Scolari"? Unless Chileans will live for ever, that commitment is going down every year. 

>the Chilean government is contemplating a new round of pension changes. Suggestions that have been floated include many also under consideration in the United States and Europe, like reducing benefits or setting a higher retirement age.

So Solari is advocating reducing the benefits of the old system? They have been winning elections for a decade doing exactly the opposite. Interesting piece of information (I hope Chilean newspapers ask Solari about this benefit reduction)

>The problems have emerged despite what all here agree is the main strength of the privatized system: an average 10 percent annual return on investments. 

So, this is a big mystery. A defined contribution system that give you 10% real return and yet Larry tells us "Chileans dont like it". Very, very strange. 

>Those results have been achieved by the pension funds largely through the purchase of stocks and corporate and government bonds - investments that helped fuel an economic expansion giving Chile the highest growth rate in Latin America over the last 20 years.

Of course, Larry, you finally got something right. 

>"The great success of the system is its high profit rate, more than double what was initially projected," said Guillermo Arthur Errázuriz, executive director of the Association of Pension Fund Administrators. "In total, workers have set aside nearly $61 billion, which is invested in the sectors of the economy that show the most potential."

Hear, hear. 

>Among the admirers of the privatized system here is Mr. Bush, who on a visit in November called Chile "a great example" for other countries. On other occasions, he has suggested that the United States could "take some lessons from Chile, particularly when it comes to how to run our pension plans."

A visionary man Larry, despite the NYT endorsing Kerry. 

>Mr. Piñera declined repeated requests to be interviewed for this article. 

Maybe he respects President Lula or maybe he has read enough about the Jayson Blair scandal. Will ask him when he returns from his travels.

>In an article on the Op-Ed page of The New York Times last month, though, he extolled the Chilean system as one based on ownership, choice and responsibility and one that is widely popular because it gives workers a stake in the economy.

What an extraordinary Op Ed Larry! Yous should read every morning and every night. I love the Op Ed page decision of publishing articles from different perspectives than the editorial page and your Latin American "magical realism" dispatches.

>Among other achievements emphasized here by advocates of the privatized funds are the creation of a modern capital market, cheaper credit for companies that formerly could turn only to banks when they wanted to expand, and a brake on deficit spending by the government. 

Hear, hear. 

>"What we have is a system that is good for Chile but bad for most Chileans," said a government official 

What a contradictory statement!

>who specializes in pension issues and who spoke on condition of anonymity, fearing retaliation from corporate interests.

Retaliation to a government official? This is pure nonsense. This is Chile Larry!

> "If people really had freedom of choice, 90 percent of them would opt to go back to the old system."

Well, if he was going to utter such a nonsense, a guess impossible to prove, I understand his demand for anonymity. But that does not excuse you Larry for publishing it.

>Among the complaints most often heard here is that contributors are forced to pay exorbitant commissions to the pension funds. Exactly how much goes to such fees is a subject of debate,

They are "exorbitant"-Larry knows-but he cannot give a number because it is "a subject of debate". Patience My Lord, patience.

> but a recent World Bank study 

There are staffers of the WB writing studies. Which staffers? Which day of the week? I can give you contradictory "WB studies" on this issue.

>calculated that a quarter to a third of all contributions paid by a person retiring in 2000 would have gone to pay such charges.

And those were rebutted by Martin Gerson and Salvador Valdes, and those staffers had to republish the study (in the private sector their salary or job would have been at risk).

>But most Chileans are unaware of how much they are paying to the funds because the lengthy quarterly financial balance sheet they receive "is not comprehensible," according to Guillermo Larraín, director of the Superintendency of Pension Funds, a government agency.

But Larrain is in charge of regulating those sheets. So, what is Larrain doing during his work day that is incapable of solving this infinitisemal problem, if there is one. I fully understand my statement, but I agree it must be also understandable to your Chilean friends Larry.

>"It needs to be replaced by a simple and transparent financial statement," he said, so workers can determine which fund charges the lowest fees.

If so, do it Larrain!

>Government officials like Mr. Larraín and Mr. Scolari acknowledge that "commissions are high and need to come down." They say that "more competition is needed" to foster lower fees. But existing regulations frustrate the creation of new funds - 

As Salvador Valdes wrote in El Mercurio, those regulations were put in place by another Concertacion government, the center left coalition to which belong both Mr. Larrain and "Mr. Scolari". So they can remove them easily...if they do their jobs instead of courting leftists NYT journalists.

>"The dynamic of the market," Mr. Larraín said, "is one of consolidation and concentration." 

With such a confused Superintendent, and such a socialist Minister, would you create a new pension fund? Maybe Mr. Sulzberger should come to Chile to make "exorbitant profits" out of "exorbitant fees". There is total free entry to the industry by law. Citibank is here, Banco Santander, BBVA, ING, etc, etc. Come on Larry!

>Some other problems of the Chilean system stem from factors that do not apply with the same force in the United States and other advanced economies. Nearly half of Chilean workers, for example, are employed off the books in the so-called informal sector, while many others are hired as independent contractors, who are not required to contribute to a pension account and do not do so regularly because they cannot afford it. By the government's own calculations, only about half the work force contributes to a pension fund. "We are aware there is a big hole and that we need to take corrective measures," Mr. Larraín said.

The other half is saving in their own way, investing in their small companies, etc, or unemployed due to the rigid labor policies of the government of Mr. Solari and Mr. Larrain (who incidentally, should by law be supervising the pension funds rather than entering in public policy debates about the coverage of the system, a duty of the Ministry but not of a regulator)

>Because many of the claims initially made on behalf of the privatized system proved exaggerated or inaccurate, 

Which ones Larry? You have not mentioned even one, citing sources of course.

>the transition period has turned out to be longer and more expensive than anticipated. The annual cost to the government, still the guarantor of last resort, has remained steady at 5 to 6 percent of the nation's economic output. 

False, they are much lower. Keeping the promises Larry. Nothing to do with the new private system.

>Chile spends about $2 billion a year to pay retirees from its armed forces, according to Mr. Scolari. The military imposed privatization on the rest of the country, but was careful to preserve its own advantages and exclude fellow soldiers from the system. 

It is $1 billion a year, only 50% of your figure, a negligible exageration to you Larry. And the system was introduced as voluntary. The armed forces damaged themselves by not allowing their members to opt out. They should have, as it was proposed by the reformers in 1980.

>Despite calls that the military be forced to give up its exemption, no civilian government has been prepared to pursue that.

The only civilian governments have been those of La Concertacion, the coalition that includes Mr. Solari. So, why in 14 years they have not solved this problem? A $1 billion problem?

>Proponents of the privatized system argue that those costs will diminish in coming years, as those still receiving benefits from the old system gradually die off. But critics disagree, pointing to the large numbers of younger Chileans in the work force who either do not participate or whose contributions will fall short of the amount required for a minimum pension.

Economic growth during the Lagos years has been 4% on average, down from 7% before, and unmeployment has increased to 10%, due to less growth and demagoguery in the labor market. So, they create the problem....and then adscribe it to the private pension system. How intelectually and politically dishonest!

>This leaves many Chileans in a situation that has led to the coining of a phrase: "pension damage." There is now even an Association of People With Pension Damage, 157,000 members and growing, that consists of Chileans, mostly former government employees, who find that their pensions, based on contributions to the private system, are significantly less than if they had remained in the old system. 

...because the government did not pay contributions on the full salary but on fraction of the salary. They are all government employees.

>"They come to us in desperation," said Yasmir Fariña, the group's president, "because those who stayed in the government system are often retiring with monthly pensions twice as large as everyone else's."

Of course our good Larry ends with another handpicked complaint. 

Summary and Conclusions: After this sort of reporting, no wonder the decline of the NYT. As The Economist titled recently a book review, these are really "Hard Times" for the New York Times.


Posted by Donald L. Luskin at 9:05 AM | link  

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SPOKEN LIKE A WHITE MAN   
Paul Krugman today on why Afro-Americans don't get a bad shake from Social Security:

African-American men who make it to age 65 can expect to live, and collect benefits, for an additional 14.6 years -- not that far short of the 16.6-year figure for white men.

So, Paul, can we assume that since two years life is a negligible matter, you would be happy to give up two years of your life so that an African-American can live two years longer? Or are two years only negligible when they are somebody else's -- and especially when that somebody happens to be an African-American?

Update... Sylvain Galineau notes: "Maybe he'd get it if we put the debate in terms he understands; so let's assume that Social Security benefits are based on height..."

Posted by Donald L. Luskin at 1:31 AM | link  


Thursday, January 27, 2005

MEET "THE CONSERVATIVE PHILOSOPHER"    Our friend Keith Burgess-Jackson has set up a new group blog -- The Conservative Philosopher. It's home to a coven of analytic philosophy academics, with the mission of "defending tradition." Check it out!

Posted by Donald L. Luskin at 11:58 PM | link  

SOME QUESTIONS ON PERSONAL ACCOUNTS    A well-tempered reply to my posting about Diane Feinstein's proposal that Social Security personal accounts be handled as add-ons can be found on Frank Lynch's modestly titled blog, "Really Not Worth Archiving."  Lynch concludes with several questions about how personal accounts would work, and I'd like to try to answer those.

I suggest that if Luskin really wants to demonstrate that the poor will be better off with privatized accounts than under the current system, I think he needs to address some specifics:

  • How will the transition costs be paid for?
  • How will he guarantee the safety of the investments?
  • How will retirees who outlive their accounts live, after their accounts run out? What is the withdrawal schedule going to need to be?

The devil is in all these details. It's not the kind of thing where we can discuss reform without these details, or it's as vague a promise as "I hope."

Well, we're all eager to see the details. Nobody is going on mere "hope" here. Whatever happens will have to be written into law, so there will surely be details coming out of our ears, and we can argue about them then. At the moment, though, we can talk about these questions in principle.

How will the transition costs be paid for? Fair question, but in the context of wondering how the poor will be treated under reform, an easy one. We can be sure the poor won't pay any transition costs, because poor people have no resources with which to pay them. To the extent that there are any transition costs, the rich will pay them because, as Willie Sutton said, "That's where the money is." Chances are that what most people call "transition costs" will be paid through Treasury debt, which means that ultimately the American taxpayer will pay them; since the rich pay most of the taxes, the rich will pay most of the transition costs. That said, we should stop and question whether there really are any transition costs. I believe there are not, in the sense that so-called transition costs are just the frank and prompt recognition of obligations that the system has undertaken anyway.

How will he guarantee the safety of the investments? That's easy. The Social Security personal accounts would be handled in an independent government-supervised trust fund environment just the way personal accounts are handled by the Thrift Savings Plan of the federal government -- the plan that 3.5 million federal employees, including every senator and congressman, participate in.

How will retirees who outlive their accounts live, after their accounts run out? What is the withdrawal schedule going to need to be? It would be a simple matter to annuitize the account balance at retirement, either with a private company or -- if that is not seen as safe enough -- through an agency of the government. Many reform proposals require this.

Lynch then adds,

As for Luskin's complaint that Feinstein's proposal won't do anything to improve the fiscal stability of Social Security, neither will private accounts.

This is a common misconception, but it is a misconception nevertheless. It is true that personal accounts don't in and of themselves have much effect on the system's actuarial solvency, at least not over the intermediate term. But that's not to say they don't contribute to fiscal stability, which is an entirely different matter. Surely any plan that pre-funds retirement obligations has to be seen a more fiscally stable than one that does not -- and the current system most assuredly does not. What little pre-funding there is runs out in 2042 or 2052, depending on which government agency's projections you choose.

Posted by Donald L. Luskin at 2:08 PM | link  

CAMO FOR REFORM ADVOCATES    Here's a lesson from friend Dave Nadig on how to get a letter-to-the-editor supporting Social Security reform published in a liberal newspaper -- just be sure to bash Bush while you're at it.

...I've never gotten one published. I've written long ones, short ones, nice ones, mean ones -- all very honest and from the heart. Never seemed to matter.

...But then there is this. As a tactic -- a way to see if I could get it published -- I deliberately made it a little anti-Bush smarmy. I made it read like "hey, I hate Bush, I'm a democrat, I hate personal accounts, and I was against the war" without actually saying all that, just to see if by biasing my own letter more towards what I perceive to be the local bias, I could get it published.

Well it got published.

And here it is. The first words? "I didn't vote for Bush."

Posted by Donald L. Luskin at 1:33 PM | link  

THIS IS THE DEM'S "BIG IDEA" ON SOCIAL SECURITY?    Here's Democratic senator Diane Feinstein advocating the idea of "add-on" Social Security personal accounts. Superficially this is smart politics for the Democrats -- at least it looks smarter than just digging in your heals and defending a 70-yead old monstrosity as perfect. And it comports with some of the "New Democrat" proposals being thrown around during the Clinton years. But this idea that personal accounts should be an entirely voluntary addition on top of today's program has two fatal flaws, though.

From a purely political standpoint, this proposal is a major concession by the opponents of reform. It's hard to run all the usual anti-personal account talking points (Wall Street windfall, and all that noise) when one is advocating personal accounts, albeit in a slightly different form.

And in terms of addressing some of the worst failings of the current system, the idea of add-on accounts fails catastrophically. Perhaps the single best argument for diverting some payroll taxes into personal accounts is the idea that the lowest-earning Americans have virtually their entire savings capacity sucked up by those taxes. If they can't make personal investments with vested property rights with those dollars, then they're just never going to make those investments at all. In other words, just where does Feinstein think that a minimum wage tax payer is going to come up with the money for personal accounts? Seen this way, the add-on idea is nothing but a windfall for the rich -- they're the only ones who will be able to use it. If the solution to that problem is that the rich should be taxed so that the less-rich can have add-on personal accounts, then let's hear Feinstein say that flat out.

Thanks to reader Perry Eidelbus for the link.

Update... Reader Don Noone points to a discussion of add-on accounts at CafeHayek. There they ask what, exactly, add-on accounts enable anyone to do that they can't already do on their own? Good question. My answer is: nothing, if you are a working man or woman saving for retirement. But if you're a politician, add-on accounts allow you to claim you have an idea better than the status quo (or at least different).

Posted by Donald L. Luskin at 11:46 AM | link  

RAND AND THE CONSERVATIVES    I posted yesterday on National Review's Andrew Stuttaford having written a conciliatory column on the centenary of Ayn Rand's birth, recalling -- and, to some extent, recanting -- Whittaker Chambers' savage 1957 review of Atlas Shrugged. As I noted, that review was essential to crystallizing Rand's marginalization in the then-young conservative movement -- intellectual control of which was being hotly disputed between the NR crowd, the Randites, and the Birchers (all of which is documented in William F. Buckley, Jr.'s novelized history-written-by-the-victor, Getting It Right). Reader Tom Scheeler has pointed out another observation of Chambers' review, by Robert W. Tracinski at TIA Daily. Tracinski trashes the review on grounds of both form and substance, some of which strikes me as fair and other elements of which strike me as merely angry (though not, perhaps, without good reason). Tracinski links to a republication of the review itself on National Review Online, which has given me the opportunity for the first time to actually read its whole text, having merely heard about it for years.

The review is a hatchet-job, pure and simple. The Randites have been right about that. Certainly Chambers was entitled to his opinion -- and certainly one competing element of the conservative movement was entitled to criticize other competing elements. But Chambers' assertion that Rand's vision leads inevitably to fascism is just plain scurrilous -- and just plain wrong. With the perspective of almost half a century on the review, it's terribly clear what this was all about. Rand was an atheist -- she argued for political liberty for its own sake, as a necessary condition for the flourishing of reasoning human beings. Chambers and the National Review faction, on the other hand, have always placed religious faith at the center of the argument for political liberty. Essentially, Chambers' case appears to be that a moral code imposed exogenously by religious teachings based on faith is the one and only possible bulwark against dictatorship. So, ipso facto, any political philosophy based on atheism -- or anything else other than religious teaching -- must perforce lead to dictatorship. For Rand, human rationality informing enlightened self-interest was the bulwark that Chambers asserts cannot exist. Chambers neither makes the case for why that would not work, or why religious teachings would work. In fact, the faith-based view always conveniently ignores the question of what process, exactly, would a state take to make sure that the right religious morals are at the center of its politics. We could imagine a set of religious moral teachings that advocate dictatorship (indeed, it's surely the case that throughout history most of them have). As a practical matter, it's probably the case that Chambers' particular Judeo-Christian moral code, and the one that would evolve spontaneously under a Randian state of pure freedom, are probably very highly overlapping. But this was, on the one hand, a battle of basic principles -- and, on the other, a battle for political control. Differences were more important than similarities, so then, just as pundits do today, Chambers resorted to calling his opponent a Nazi -- just as so many on the Angry Left do now with President Bush. Since the main purpose of the review was surely to create solidarity among his faction of the conservative movement, such a silly strategy was perfectly effective for the limited use in which it was intended -- to preach to one's own choir.

Setting aside the matter of religion, there was another reason why Rand had to be expelled from the conservative movement by any means necessary -- her approach to politics was not practical. What I mean by that is that she was not very much concerned with the reality of effecting political change by normal means. She was interested in working from the very roots of political change -- by changing the very philosophy by which political actors shape their views and actions. And in this I'd say she has been quite influential, if not completely successful. But for an activist movement like the one the National Review faction envisioned, what Rand was trying to do was just a distraction. That faction was issue-oriented and action-oriented. The last thing they needed was for any potential follower to take on Rand's Olympian detachment and disengage from the immediate fray of political strife, in which every able-bodied soldier was needed.

Stuttaford's column suggests the basic commonality of purpose that Rand shared with the conservative movement, and it's a good thing to look back now and appreciate that. But that's always the way it is with battles between factions within a single movement. When the battle is in full swing, the small differences seem enormous. When one side or the other has won, and a seemly amount of time has passed, the old schisms have a way of healing and those old differences look pretty small. And some of the nasty things that the factions say about each other and do to each other seem pretty small, too. Or at least, small-minded.


Posted by Donald L. Luskin at 11:30 AM | link  

ATTENDING KRUGMAN    A note from reader Perry Eidelbus:
I was entertaining the thought of attending Paul Krugman's lecture at Fordham, since it's only a train ride from where I am, but it's restricted to "the Fordham University community." It's in an awfully small auditorium, though, especially for a lecture by a supposed Nobel-caliber economist. Only 250 available seats! Whether it's intentional, I'm sure he loves the "Fordham University community" restriction. That way, at least for a night, he doesn't need to be paranoid about you "stalking" him.

This is funny. As of right now, there are no student tickets left. But only 33 faculty, 21 alumni and 19 guests have reserved tickets. Is Krugman's only hope to indoctrinate the young, because the older, wiser folks see right through him and don't want to waste an evening on his lies?


Posted by Donald L. Luskin at 10:18 AM | link  

COMING TO A TAX-FORM NEAR YOU    Our friends the French call for a global tax to fight AIDS. All you other good causes out there -- sorry, you're fired.

Thanks to reader Perry Eidelbus for the link.

Posted by Donald L. Luskin at 10:15 AM | link  

MORE ON RACE BIAS IN SOCIAL SECURITY    Social Security reform advocates often point out that the existing system is unfair to minority groups who have lower life expectancies -- as I mention in a posting yesterday. One of the frequent comebacks to that from opponents of reform is that Afro-Americans don't have a significantly different life expectancy after retirement -- but in another posting yesterday I showed that, in fact, they do (whites live in retirement about 14% longer). But the more important point, really, is that Afro-Americans are less likely to live to retirement at all than whites are. That means their Social Security contributions over their working lives produce no benefits at all for them -- only reduced benefits for their survivors, presuming they qualify under the arcane and arbitrary rules. Here's on of many emails I've gotten over the last 24 hours on it from members of the actuarial profession. This one is from Mary Pat Campbell. It's full of good talking points and intellectual ammunition.

You mention the difference in life expectancy at age 65 between blacks and whites. Of course, this presupposes a person actually makes it to age 65. It would be entirely, mathematically possible (though perhaps an odd-looking distribution) for black and white males to have the same life expectancy at age 65, but the probabilities of making it to 65 be extremely different.

Would it make people feel better to know that life expectancy after retirement age is the same for all the races if a white man has an 85% chance of making it to retirement age and a black man has a 50% chance?
I think not.

No matter how you slice it, Social Security is a bad deal for blacks. One could say the same thing for white males (versus white females, who have a bigger life expectancy gap at age 65), but much of this is offset by benefits for their wives. The unmarried definitely get shafted by the benefit formulas, and blue collar workers are the worst-off overall (looking at mortality tables based on occupation, the life expectancy gap between blue collar and white collar workers was even wider than the gender gap and the racial gap). Indeed, a case can be made that the special groups supposedly represented by the Democrats -- blacks and blue-collar or minimum wage workers -- are the worst-off groups under present payroll taxes and Social Security benefit formulas. If one wants to make a political case for personal accounts, these facts can be brought up.


Posted by Donald L. Luskin at 10:13 AM | link  

HOGBERG NAILS USA TODAY TODAY    Here's a great post at the American Spectator by our friend David Hogberg, savaging the unfair and biased take on Social Security reform that appeared in USA Today yesterday. If this story was "news," then "Fahrenheit 911" was a documentary. Check it out.

Posted by Donald L. Luskin at 9:24 AM | link  


Wednesday, January 26, 2005

TAKE THIS SIMPLE TEST    Be careful how you answer the questions. You might find out something very, very scary about yourself.

Posted by Donald L. Luskin at 9:46 PM | link  

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PAUL KRUGMAN, THE VOICE OF AMERICA   
Is this why American radio shows get beamed to Cuba? From the Periodico 26, the daily newspaper of Cuba's Las Tunas province:
And there’s more red ink to come with the Bush team’s plans to privatize Social Security and push through even more tax cuts. "If this country were named Argentina or Indonesia, it would be a clear candidate for financial crisis any day now," economist and New York Times columnist Paul Krugman said in a recent radio commentary.
Krugman is serving as a voice of America for freedom lovers around the world. From Al-Jazeera:
"You cannot...subsidize two losing wars at the rate of over $5 billion dollars per month, and not eventually go broke. Somehow, none of the economic writers in America, aside from Paul Krugman, and a few of us on the internet, seem to realize this."

Posted by Donald L. Luskin at 8:30 PM | link  

NOTE TO DIM BULBS    Understanding that Social Security is unfair to Afro-Americans who have shorter life expectancies -- but who pay in the same taxes during their working years -- ought not to take too much mental wattage. And speaking of wattage, here's a note from reader Bob Doyle that makes the matter perfectly clear, even for some of the dim bulbs out there:

Imagine that an Afro-American enters a hardware store with the intention of buying a 75-watt light bulb. She approaches a clerk and asks where she can find the bulbs. The clerk points to a bin labeled as follows: "75-watt bulbs. Average expected lifetime: 1000 hours. Price: $1.00 (Afro-Americans Only)." Next to this bin is another bin with the label: "75-watt bulbs. Average expected lifetime: 2000 hours. Price: $1.00 (Whites Only)."

She complains that this is discriminatory and asks why she has to pay the same price as whites for a bulb that has a shorter expected lifetime than whites get. The clerk responds saying, "You really have no right to complain since you are getting a bulb with exactly the same wattage as whites get and nobody can be sure just how long any given bulb will last. It is quite possible -- in fact, probable -- that the bulb you buy from the 1000-hour-average bin will last longer than some of the bulbs whites purchase from the 2000-hour-average bin. Certainly this discriminates against those whites whose bulbs burn-out before yours does! Whether you are a white or an Afro-American, you get the same wattage for the same price for however long your bulb lasts, which is fair to all."

Flabbergasted and frustrated, she protests, "But that makes no sense! For every bulb in the 2000-hour-average bin that burns out early, there will be a bulb from the 1000-hour-average bin that burns out just as early or earlier! In other words, half the whites and half the Afro-Americans will have the random misfortune of buying bulbs that burn out before their bulb reaches its expected lifetime, while half the whites and half the Afro-Americans will fortuitously buy bulbs that last longer than the average. However, if you list all whites and all the Afro-Americans by how long their bulbs last, from shortest to longest, and then pair-up all whites and all Afro-Americans by how long their bulbs last, virtually every white's 2000-hour-average bulb will have lasted longer than the 1000-hour-average bulb of the woman to whom he is paired. In other words, all whites will benefit relative to all Afro-Americans!"

The woman continues, "In fairness, you either have to sell Afro-Americans 1000-hour-average bulbs with more wattage than the 2000-hour-average bulbs for whites for the same price or cut the price and leave the wattage the same."

The clerk, recognizing the legitimacy of her reasoning explains: "I sympathize with your arguments, but I can do nothing to help you. It is the law. The government has decided "fairness" dictates that wattage is the only thing that matters and that other factors, such as average lifetimes or even obvious defects that would tend to affect the lifetimes of the bulbs in either bin must be ignored."

Exasperated, the Afro-Americans exclaims, "Forget it! Where are the oil lamps?" The clerk says, "Let me show you. But first, let me explain the government-mandated policy regarding lamp-oil pricing..."


Posted by Donald L. Luskin at 8:25 PM | link  

LITTLE MAN ON CAMPUS    Paul Krugman will be lecturing at Fordham, on "The Role of Economics in the Political Arena." Instead, he should lecture about something he knows something about from personal experience: "The Role of Politics in the Economic Arena." If he's made a statement about economics in the last dozen years that wasn't influenced by his politics, I missed it somehow.

Thanks to reader Nicholas Perraglia for the link.

Posted by Donald L. Luskin at 4:18 PM | link  

IT'S IN THE BAG    Look what new tax the son of Nancy Pelosi has cooked up!

Posted by Donald L. Luskin at 3:45 PM | link  

WHO'S THAT MAN IN THE CHICKEN SUIT?    Editor and Publisher reports that William Safire was offered the job of New York Times "public editor" when Dan Okrent, by previous agreement, ends his tenure in the position. No way. No way. No way. No way the Times would even remotely consider appointing an honest conservative to replace Okrent as figleaf and apologist. The usual metaphor of foxes and henhouses doesn't quite fit here. For the Times, the public editor has to be a fox wearing a chicken suit guarding the fox den. Somehow I can't see Safire looking good in Okrent's chicken suit.

Posted by Donald L. Luskin at 11:56 AM | link  

RAND AND NATIONAL REVIEW    On the centenary of Ayn Rand's birth, it's good to see National Review's Andrew Stuttaford bury the hatchet a bit:
...the accusation by Whittaker Chambers in National Review that there was a whiff of the gas chamber about her writings is wrong. Rand lived in an era of stark ideological choices; to argue in muted, reasonable tones was to lose the debate. As a graduate of Lenin's Russia, she knew that the stakes were high, and how effective good propaganda could be.
When the Conservative Movement was being born in the 1960s, there were bitter divisions between the Goldwater camp (which National Review exemplified) and the competing Ayn Rand and John Birch camps. That quote from Whittaker Chambers was, for some inexplicable reason, devestating. By homing in on Rand's absolutism as its text (and her atheism as its subtext), it gave voice to what makes so many readers uncomfortable about Rand, and makes others so devoted to her. One man's fanaticism is another man's purity of purpose. But that Chambers line became a mark of Cain on Rand as far as the evolving conservative movement was concerned. I can't tell you how many times I've discussed Rand with conservatives, only to find that they haven't actually read her -- and they quote Chambers to justify their not bothering. The Goldwaterites have won, so now they can be generous, I suppose. Too bad it had to be that way, but the reality is that Rand's books sell better today than they did when Chambers made that remark. She's still changing the world.

Thanks to reader Jill Olson for the link.

Posted by Donald L. Luskin at 11:44 AM | link  

LIFETIME CLASS WARFARE    Here's a typically insightful (and typically acerbic) comment from my economic guru friend, Bob Ferguson:

Suppose you knew, in advance, that one person will live to be 100 and another will live to be 70. Suppose both will receive a retirement annuity, beginning at age 65. Suppose the price of the annuity, paid by each person at age 65, is the same per person. Who gets the better deal?

There are different classes of people defined by their expected lifetimes. Women live longer than men. Whites live longer than blacks. Healthy people live longer than sick people. The social security benefit is like the above annuity. Thus, the longer you can expect to receive your social security payments, the more your expected social security payments are worth at the time they begin (discounted present value). In other words, shorter lifetime classes receive less value than longer lifetime classes.

To put this in perspective, think of social security this way. At age 65, the Government gives each new retiree a lump sum to be used to purchase a retirement annuity. The lump sum is sufficient to buy an annuity that provides the same monthly income for each lifetime class. The Government also ensures that the insurance company charges a price for the annuity that reflects the retirees' lifetime class. All this is "actuarially sound". However, shorter lifetime classes will receive smaller lump sum payments than longer lifetime classes.

What would be fairer is if all lifetime classes received the same benefit, i.e., the same lump sum payment. That way, shorter lifetime classes could afford a higher monthly retirement income than longer lifetime classes. This is fair because shorter lifetime classes are doing taxpayers the "favor" of dying sooner. Such favors deserve just compensation.

One amazing thing about this issue is that it isn't obvious to everyone. Another is that so many liberals are accusing those who advocate changing social security to eliminate these race, gender, health, and other biases of being biased themselves.

Two things are clear. First, the social security system is race, gender, and health biased. Second, those who accuse people who favor eliminating these biases of bias are either not thinking straight or disingenuous.

Hey Bob -- can't it be both?

Posted by Donald L. Luskin at 11:41 AM | link  

FUTURE EQUITY RETURNS: ANOTHER VIEW    One of the talking points the Left keeps hammering home in various ways is that stock market returns will be lower in the future than they've been in the past, so (they claim) Social Security personal accounts are bound to bitterly disappoint their owners. Some even argue that personal accounts will, themselves, cause equity returns to be lower -- because (according to the Left) ordinary hard-working Americans are too stupid to make good investment choices, so capital will be misallocated and the economy will grow more slowly.

The Left is entitled to its own view of the intelligence of the American people, and to its own crystal ball as to the stock market, I suppose -- but of course leftist pundits like Paul Krugman can't help lying in order to make it appear that their personal opinions are more than that. I've already reported here how Krugman last week unconscionably distorted the equity returns forecast of Professor Jeremy Siegel, celebrated author of Stocks for the Long Run. But now let's look at an alternate view. Here's a thoughtful letter from a reader -- proving that you don't have to wait for a presidential election to see how smart the American public really is. It's from Jim Allen of Scottsville, Virginia:

Regarding the idea that investment returns will decline if people are permitted to put a portion of their payroll withholdings into private savings accounts, there is nothing in the course of recent history that could possibly lead one think that this would occur.

First, according to John Bogle, market returns over the past 100 years have averaged around 10%. Two elements comprise those returns: investment return (dividend yield and earnings growth) and speculative return (changes in the market multiples paid for each dollar of earnings). While the speculative return has bounded between a negative 7.5% during the 1970s to a positive 7.7% during the 1980s, the investment return component has remained relatively stable, ranging from a low of 6.3% in the 1910s to as much as 14.9% during the 1930s. (The only period of negative investment returns was during the 1920s, when it was a negative 1.1% because of negative earnings growth, an indication of the bubble that burst in October 1929.)

Since the 1950s, the investment return component has ranged from a low 8.6% in the 1960s to a high of 13.4% during the 1970s.

The key, though, is that from 1950 to today, investment returns have remained strongly positive in each decade, ranging from a low of 8.6% in the 1960s, to a high of 13.4% in the 1970s. The return for the 1990s was a healthy 10.6%.

Contrary to what the naysayers would have one believe, these returns were generated during the same period that mutual fund assets — a significant part of the overall investment market, but hardly all-encompassing — grew from just $2.5 billion in 1950 to more than $7.9 trillion in November 2004, of which $4.2 trillion is invested in equity funds, according to the Investment Company Institute. That $7.9 trillion increase in mutual fund investments amounts to a 313,039% increase, or a 12.8% compound annual increase over 50 years.

By comparison, if citizens were permitted to put 3% to 4% of their annual wages and salaries per year into the equities market, the overall increase in funds invested in the market would be something around $400 to $500 billion over the first five or so years of personal accounts. That amounts to an annual increase in funds of about 5% to 6% over what is currently invested in mutual funds. As a percent of total invested funds, the percentage would be even less.

To summarize, the naysayers suggest that one reason for not permitting personal accounts for public pensions is that returns will decline just as citizens are permitted to invest in the market. Yet the history of mutual funds over the past 50 years shows that even as mutual fund assets grew by 12.8% per year, returns remained relatively stable. Consequently, it is anything but certain that a modest increase in mutual fund assets every year in the future will produce lower equity returns for those fortunate enough to invest in personal accounts.


Posted by Donald L. Luskin at 11:12 AM | link  

DON'T NEWSPAPER REPORTERS WATCH TV?    When Tim Russert on "Meet the Press" Sunday asked House Ways and Means Committee chairman Bill Thomas whether it was proper for President Bush to talk about a Social Security "crisis," Thomas said:

Well, couple of weeks ago, the president had one of his forums in Washington, and if you'll look at what he said actually at that Washington forum, he used the term "problem" 27 times. He used crisis zero.

Here's how USA Today's Jill Lawrence reported that on Monday:

Bush has called Social Security's finances a "crisis." But Thomas, appearing on NBC, said "I think 'problem' is really what we're dealing with."

Sigh...


Posted by Donald L. Luskin at 1:03 AM | link  


Tuesday, January 25, 2005

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CBO: THE SOCIAL SECURITY CRISIS IS CLEAR AND PRESENT   
The Congressional Budget Office released today its new annual Budget Outlook, this time covering fiscal years 2006 to 2015. Take a look on page 23 -- and you'll find the picture of Dorian Gray. This is the illusion-free reality of when the Social Security "crisis" actually begins to unfold.

According to CBO, the crisis starts in 2012 -- the first year that surpluses in Social Security tax receipts above Social Security payments start to decline. Right as the 2012 inflection point is passed, the decline is small and gradual -- but it will accelerate violently through the middle of this century as the surplus first falls to zero, and then goes strongly negative as the Social Security trust funds are drawn down. Here's the discussion accompanying the chart:

Although the budgetary impact of the aging of the babyboom generation will not be fully felt during the current projection period, CBO’s baseline provides initial indications of the coming budgetary pressures. Charting the differences over the next 10 years between projected receipts and outlays for the Social Security trust funds (excluding intragovernmental interest payments) illustrates those pressures. Receipts are projected to exceed expenditures in each year of the period, but under current policies, the amount by which they do so will decline from more than $100 billion between 2008 and 2013 to about $85 billion in 2015 (see Figure 1-6). At that point, Social Security outlays will be growing by about 6 percent per year, but noninterest receipts will be growing by about 4.5 percent. Thus, in CBO’s baseline projections, the capacity of the Social Security trust funds to offset some of the net deficit in the rest of the budget—as they do now—will begin to dwindle during the coming decade. Shortly thereafter, Social Security is projected to begin adding to deficits or reducing surpluses.

This is a complete affirmation of what I wrote in a National Review Online column several weeks ago (see "The C-Word: Say It!" January 11, 2005). Note that in that column I had said the inflection point would be 2009 -- that was based on the slightly more pessimistic projections of the Trustees of the Social Security Trust Funds. But 2009, 2012, who's counting? The crisis is real, and it's on its way.

Update... reader Mike Lion adds:

I was reminded the other day that the real meaning of the word "crisis" is "turning point." In fact, the first two meanings in my copy of Webster's are in effect the same: turning point or crucial point. The popular usage of "emergency" or "imminent peril" is, in fact, only third. From the graphic you displayed today, it is clear that a turning point will soon be reached.

Posted by Donald L. Luskin at 1:33 PM | link  


Monday, January 24, 2005

WHY I HATE PRETENTIOUS LEFTIST TWERPS    Ken Waight at Lying in Ponds points to a posting by Spinsanity's former co-editor Brendan Nyhan on his own blog:

Why I hate elite journalism

In a short jab at Paul Krugman last month, ABC's The Note encapsulates everything I hate about the DC insider journalist perspective:

Paul "Pauly One-Note" Krugman of the New York Times looks at international examples of privatizing retirement funds and says he isn't buying the Administration's arguments, saying that privatization cuts benefits and leaves more retirees in poverty. LINK

Not only is The Note obviously uninterested in actual policy issues like Social Security (the reason we have politics in the first place), but it dismisses Krugman with casual disdain as "Pauly One-Note". This attitude is why Slate tries so desperately to be counter-intuitive -- because elite journalism prizes being unpredictable above all else. Krugman is consistently anti-Bush; therefore his writing is dismissed as partisan hackery even when it's not. What's sad about this is the press has a pitiful level of understanding of Social Security, and they could learn something from Krugman, one of the top economists alive (who has written a nice primer on the issue for the online-only Economists' Voice [196K PDF]). Here's a case in point: numerous reporters can't even understand the percentage of income that would be diverted into private accounts. It's certainly true that Krugman sometimes bangs the drum too hard or fails to find fault with liberals, but there's nothing wrong in principle with being a forceful and consistent advocate for your views.

Apparently for Brendan Nyhan, elite journalism is anything he disagrees with. Because as Waight proves beyond the shadow of a scintilla of a doubt in a rigorous and amusing response to Nyhan, Paul Krugman is Pauly One-Note -- and with a vengeance. So to Nyhan, I suppose Waight must be a member of elite journalism, too. But who's really the elitist here? Don't be fooled by Nyhan's groveling brown-nosing of Slate (hoping for a gig, no doubt -- I mean, has Slate ever taken an unpredictable opinion on any issue, ever?). The elitist here is Nyhan himself -- someone who hasn't earned the slightest shred of eminence, and yet condescends to share how "sad" he is, how full of "pity" -- as if anyone other than his mother cares -- about the press's "level of understanding of Social Security." Where does Nyhan get his understanding? Why, from Paul Krugman, of course -- "one of the top economists alive." Maybe so -- and maybe Noam Chomsky is "one of the top semanticists alive," but I wouldn't trust Chomsky's whacko interpretation of the semantics of media manipulation any more than I'd trust Krugman's partisan interpretation of Social Security. Check out that "nice primer" that Nyhan probably hasn't even read. Sure, it looks on the surface like its published in a respectable peer-reviewed economics journal -- it uses the same kind of typeface and page layout as real journals -- but does Nyhan realize that The Economists' Voice is actually a political rag run by three ultra-liberal economists including Krugman crony Brad DeLong? Does Nyhan think it's appropriate for this "primer" from "one of the top economists alive" to feature such subjective non-economic statements as:

The right has always disliked Social Security; it has always been looking for some reason to dismantle it. Now, with a window of opportunity created by the public’s rally-around-the-flag response after 9/11, the Republican
leadership is making a full-court press for privatization, using any arguments at hand.

And follow Nyhan's link to support his point that "numerous reporters can't even understand the percentage of income that would be diverted into private accounts." You'll be taken to the pages of Media Matters, a George Soros-funded leftist attack site. And you'll see that all Media Matters has to say on the subject is that some reporters use the expressions "percent" and "percentage points" interchangeably -- but none of their examples even begins to suggest that this semantic error either arises from or causes any misunderstanding.

Thanks to reader Jill Olson for pointing this out several days ago. It took me this long to write this response because, frankly, superficial wannabe twerps like Nyhan depress me and sometimes I'd just rather pretend they don't exist.

Posted by Donald L. Luskin at 10:56 PM | link  

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FACT-CHECKING FACTCHECK.ORG   
It's a sad commentary on the state of public discourse when you have to fact-check FactCheck.org -- but that's what it's come to. The non-partisan project of the Annenberg Public Policy Center of the University of Pennsylvania was a reliable guide to the issues during the last presidential election, even-handedly finding fault and favor with statements by both candidates. But now that the debate over Social Security reform has gotten increasingly nasty and complex, FactCheck.org seems to have lost its way.

In a posting last week, FactCheck.org asked "Does Social Security Really Face an $11 Trillion Deficit?" The answer, in the feature's headline, was: "Bush and Cheney say yes. But actuaries say the figure is 'likely to mislead' the public on the system's true financial state."

It's that headline that is "likely to mislead." And you can be sure that the opponents of reform will seize on it to do just that -- mislead. That headline gives the impression that the $11 trillion deficit is a number created by Bush and Cheney in defiance of expert advice to the contrary. In reality, Bush and Cheney are simply quoting an official deficit estimate of the Trustees of the Social Security Trust Fund in their 2003 and 2004 annual reports.

The Trustees relied on the work of actuaries to come up with that deficit estimate. So, to be fair, the headline should have read, "Actuaries say yes. But other actuaries say the figure is 'likely to mislead' the public..." But that wouldn't be an exciting headline, now would it? Battling actuaries is about as dull as, well, it's just about the dullest thing in the world.

Beyond the headline, FactCheck.org's analysis is also "likely to mislead." When you get right down to what was really said by the actuaries who differ with what Bush and Cheney quoted, it's not a matter of the accuracy of the number, which is the proper domain for actuarial opinion. Instead, the dispute is only about whether the number is "likely to mislead." If the number is accurate, do we really care what one or another actuary thinks about how "likely" it is that it will "mislead the public"? Actuaries are supposed to be experts on mortality rates -- not public relations.

One of the actuaries cited by FactCheck.org is the American Academy of Actuaries, who sent a letter to the Social Security Trustees on December 19, 2003 raising these concerns. I asked Ronald Gebhardtsbauer, the Academy's Senior Pension Fellow -- and a member of the Academy committee that sent the letter -- what it was all about. He said it was a response to the Trustees' adoption in 2003 of a new "infinite-horizon" analysis that examines Social Security's solvency to perpetuity, not just over the arbitrary 75-year period mandated by statute. That 75-year analysis shows a deficit of $3.7 trillion, but by considering the years beyond 75, the infinite-horizon analysis naturally shows a larger deficit -- and a more honest one: $10.4 trillion.

According to Gebhardtsbauer, while the Committee had concerns about public perceptions, the new infinite-horizon analysis has distinct advantages:

"Policy wonks can use this to compare different proposals. Any solution that has effects beyond the 75th year doesn't see those effects included. I totally understand why they developed this. With private accounts, the system bears all the costs up front, but the benefits often don't come until after the 75th year."

A conspiracy theory-minded critic might conclude that the new "infinite horizon" analysis was cooked up to flatter Bush administration proposals for personal accounts. But then a similarly minded critic on the other side of the debate could conclude that seeking to suppress the new analysis is a way of making personal accounts look bad.

Indeed, Gebhardtsbauer was concerned by the way the Academy's 2003 letter had been cited in a New York Times editorial several weeks ago, as justification for calling the $10.4 trillion deficit number "the closest you can get to pulling a number out of the air" and "essentially bogus." Both he and the letter's author Eric J. Kleiber, chairperson of the Academy's Social Insurance Committee strongly denied that was the meaning of the letter. Gebhardtsbauer told me, "We didn't say it was a bogus number."

FactCheck.org also cites concerns about public perceptions of the $11 trillion deficit number in the 2003 report of Technical Panel on Assumptions and Methods -- a panel of actuaries, economists, and demographers appointed by the Social Security Advisory Board. It recommended that the infinite-horizon deficit figure should be presented as a percent of payroll, and presented next to the value of payrolls to the same infinite horizon. This was done in the Trustees' 2004 report. $10.4 trillion was given as 3.5% of payroll, and compared to $295.5 total payroll.

If you want context -- so that the public is sure not to be misled -- then how about this? That $10.4 trillion number represents the value of economic assets today that would have to be contributed to the Social Security system to assure its perpetual sustainability, based on the best estimates we can make at this time. To set things right, then, we would have to contribute today virtually the entire market value of the S&P 500. We would have to throw down the gaping maw of Social Security almost every share of every major company in America today in order to satisfy the hungry beast.

Fact-check that!

Correction [1/25/2004]... As originally posted, I erroneously added the $10.4 trillion present value of Social Security's unfunded liabilities to the $295.5 trillion present value of total payroll, to calculate the present value of payment obligations. This was a silly error, as of course it is the present value of payroll taxes that must be added to the present value of the unfunded liability to get the present value of the payment obligations. This error has been struck from the text above. It does not affect the thesis of this posting, so nothing else requires correction and nothing else has been modified. Note to Dan Okrent: this is how you do it; everyone makes honest mistakes, and dishonest people make mistakes on purpose -- but only dishonest people refuse to admit their mistakes.

Correction 2 [1/26/2005]... Ron Gebhardtsbauer asked me to amend the word "prepare" to the word "compare" in my quotation of him. My contemporaneous notes show "prepare," and I really don't see how it makes any difference. But he is, after all, an actuary. I have done as he requested in the text above.

Posted by Donald L. Luskin at 3:44 PM | link  

HOIST ON THE TIMES' OWN REGULATORY PETARD    Ah, yes, the New York Times loves government regulation of the economy. There was that piece Sunday about reregulating the airlines. And there was that Jeff Madrick revisionista op-ed last week about how regulation is good for economic growth. But here's where that rubber meets that road:
Federal antitrust enforcers are reportedly investigating plans by Gannett Co., the nation's largest newspaper publisher, and the New York Times Co. to acquire or invest in local rivals...the Justice Department is investigating Gannett's proposed buyout of HomeTown Communications Network Inc., a Midwest community-newspaper publisher based in Livonia, Mich., and has opened a preliminary inquiry into the Times' plans to take a 49 percent stake in Metro Boston, a free daily that competes with the Boston Globe, which is also owned by the Times. While both transactions are relatively small...they suggest future deals also could face tough scrutiny.
Thanks to reader Jill Olson for the link, via Drudge.

Update... Skip Oliva has more on rampant antitrust action against media.

Update 2... Liberty Lover has a view on so-called airline deregulation.

Update 3... An anonymous reader adds:

Your note on the Times' story on airline officials hoping for re-regulation reminded me of a line in John Steel Gordon's An Empire of Wealth; The Epic History of American Economic Power: "In 1978 its [CAB] power to set routes and rates was taken away by Congress, despite ferocious opposition of both airline companies and airline unions (when both management and labor oppose a change in regulation, it's a sure sign that a cartel is in operation)." Emphasis mine.

Posted by Donald L. Luskin at 1:07 PM | link  

SUNDAY BLOODY SUNDAY NEW YORK TIMES    Reader Neal Phenes bravely makes his way through the Sunday New York Times:
The Sunday New York Times gave us a kaleidoscope of socialism mixed with historic revisionism and half-truths. In other words, it was a typical Sunday edition.

Starting with the least offensive, the Business section featured an analysis of the airline industry written by Micheline Maynard entitled "Coffee, Tea or Regulation?" Presidents of key airlines unions were quoted and all shockingly wanted government to save the industry from capitalism.

One union leader asked, "Are we willing to accept the results of a free marketplace, or do we think the role of commercial aviation is such a part of our economy that we have to have government influence?" Focusing on the relative value of the role of the airlines, I say it depends if I am flying that day. Ten minutes ago, the role of the cereal and milk industries along with welfare of coffee plantations meant a lot more to me that the condition of airlines do. And "government influence" sounds so safe, doesn't it? He doesn't ask for a heaping helping of government ownership, just a wee bit of "influence". Just a little pregnant, is she? I bet he'd prefer the former.

While providing ample space for union leaders to carp at the horrors of deregulation, the best were the quotes from economist Larry Kudlow, whose bags were lost by an airline. Kudlow said, "You don't want to Post Officize or Amtrakize the airlines."

The Job market section has Eduardo Porter's piece called "Factories Rev Up (At Last) in the U.S." While Porter provided data and explained how the many U.S. manufacturing jobs that went to China were low end opening up higher salaried jobs in America and credited free trade with reducing prices of commodities to consumers, he concluded that trade "may also not be the solution."

Throughout his long analysis of jobs data, he never once mentioned the benefits of the President's tax cuts. Not one mention that it may have been as effective as prominently predicted by one nameless party over the past 4 years. Weren't the 2.2 million jobs created over the past year due to the increased wealth of investors (us) and entrepreneurs (us) who reinvested into capital-creating efficiencies that resulted in the need for more workers (us)? Or did I just dream up those tax cuts that Bush wants to now make permanent? If the Times doesn't mention it, maybe it never happened.

Then the Week in Review gave us Robin Toner's history behind the institution of Social Security -- Toner wrote in "Life Before Social Security: A Great Calamity Has Come Upon Us" how the Great Depression destroyed everyone's savings requiring the government's helping hand to save the elderly and indigent. We know the story. Toner relates the economic freefall for families and the scarcity of jobs.

Historian David Kennedy is quoted, "It's not an accident that only in the context of that protracted trauma did we get such a departure from our notion of laissez-faire, rugged individualism." Maybe our context of low unemployment, massive stock ownership, the fall of socialism and a desire for economic freedom will allow us to depart from statist domination.

Many writers, notably James Powell in FDR's Folly, have shown that the initial, likely mild, depression under Hoover was turned into the Great Depression by FDR that dominated a decade because of inept fiscal management by the central banks, non-competitive local banking regulations, tariffs, price controls and unionism. It was these policies working so beautifully together that protracted and deepened the Depression destroying jobs, capital, food, production and families.

The essay concludes with Republican Bill Thomas' scary statement that "we are all children of FDR." Toner says this comment underscores unwittingly "the great pragmatist's enduring triumph." Hoping that much of the endurance is about to phase away and without commenting on the great pragmatist's motivation, I wish Toner would have told us how Thomas was vomiting into a pail when he made that comment.

Posted by Donald L. Luskin at 11:30 AM | link  


Sunday, January 23, 2005

A LITTLE ARITHMETIC LESSON FROM TOM    One of the memes rattling around noisily in the mostly empty skulls of Social Security reform opponents is the idea that high fees will eat up all the returns in personal accounts. You know, how reform is going to be a windfall for Wall Street fat cats and so on. Never mind that the federal government's Thrift Savings Plan -- the retirement plan that is surely the model for personal Social Security accounts -- has fees even lower than Vanguard's. Here's Tom Maguire on the Just One Minute blog, objectively forecasting what impact realistically likely fees would really have on retirement wealth -- and putting the lie to absurd exaggerations by Paul Krugman in his Friday New York Times column:

The Earnest Prof has an unsolved arithmetic problem; perhaps we can help him with it.

...if we take into account realistic estimates of the fees that mutual funds will charge - remember, in Britain those fees reduce workers' nest eggs by 20 to 30 percent - privatization turns into a lose-lose proposition.

Hmm, since my beer is cold, I know I am not in Britain, so what might a realistic estimate of cumulative fund fees be here in the States?

The CBO, in their July 2004 evaluation, assumed account fees of 0.30% per annum on total assets, which seems plausible for the types of comparable funds run by the Federal Thrift Savings Plan. Shall we try a simple calculation to help the Prof?

Suppose we are 20 years old, and our annual contribution will be an even $1,000 for the next 45 years. Let's keep this real simple, and assume we put the first $1,000 in a no-interest checking account with a 0.30% annual fee. This means that my first $1,000 will be charged $3 in the first year. If I had a spreadsheet (I will in a minute) I would reduce the $1,000 balance by that amount and calculate a new, slightly smaller fee for the second year. But for purposes of this estimation, lets just reduce my $1,000 deposit by $3 each year for 45 years.

In that case, the total fees charged on my first $1,000 deposit are ($3 x 45) = $135. That is 13.5% of my initial deposit.

But wait! I will also make deposits in subsequent years, and none of them will be charged fees over a full 45 year term. Good point. The last deposit will be charged a fee for just one year; taking a quick average of 45 years and 1 year, we can estimate that the average term is 23 years. The average fee is then $3 x 23, or $69. This is roughly 7% of my $1,000 deposit.

Seems too easy, doesn't it? Well, with a modest spreadsheet, we can vary the growth rate in the annual deposit, and plug in an annual return on the account balance. Both of these factors make the account balance, and hence the annual fee, get larger.

For 0% deposit growth and a 0% account return, the ending ratio, after 45 years, of an account with a 0.30% fee can be compared to a no-fee account. The result is a bit lower than our 7% estimate, coming in at 6.3%.

For an account with 5% annual deposit growth (that would represent rising wages), and a 15% account return (that would be an astonishing stock market run), the expenses consume 8.5% of the "no-fee" account. So the "right" answer is somewhere in the 6% to 8% range.

But hold on! Didn't Paul Krugman just ask for a "reasonable" estimate, and throw out 20% to 30% in Britain as a comparison? Based on the CBO number and some mental math, we came to 7%, which was quickly confirmed by a more elaborate calculation. Why, oh why is Prof. Krugman off by a factor of 300% to 400%? How can it be that he is misrepresenting the intelligence and hyping his case?

And don't miss blogger Tim Worstall going after more Krugman Social Security lies on Tech Central Station.

Posted by Donald L. Luskin at 11:38 PM | link  

DEAR GOD, WHAT DO FEMINISTS WANT?    You just can't win with these gals. From the Telegraph:
Martha Burke, the chairman of the National Council of Women's Organisations, said: "We've long been concerned that the ultra-thin body image of the fashion industry is harmful to women. So on one hand, we are glad that mannequins are getting some meat on their bones – but on the other, it depends where that meat is going, and what the intent is."
Thanks to reader Wim de Vriend for the link.

Posted by Donald L. Luskin at 5:34 PM | link  

NOONAN THE NUN    Inaugural Bush-basher Peggy Noonan gets her commupance from James Crystal:
With (dis?)respect to Noonan, maybe it's time to call a shade a shade. When she served Reagan by penning soaring speeches, she was at the start of her race to fame, in secret, since we didn't really find out about HER, until much later, probably when she wrote her own book, about being at the 'revolution'. Over the long, gray 8-year line (or was that a police line-up) of Clinton depravities, Peggy provided lots of commentary that helped us make it through the trough filled with the slimiest people a presidency has ever had---at least in my lifetime. Then, in perhaps what should have been her last at-bat (seen in retrospect), she let us in on her own inner thoughts, even before Bush was nominated for the Republican ticket, in 1999 or 2000, that she believed he was very Reaganesque.

However, AFTER W became president, it's all been downhill for Noonan, IMHO. (Ah, I'm back in 1960, after JFK wrapped up the Democratic nomination, when the big question was, "Would he take orders from the Pope, or follow the American Constitution.") Well, folks, since 2001 Peg has been moving one leg after the other down the slope leading to Rome, and the Pope! She's, in effect, a NUN! Hence, so much of her 'wise' opinionating is at least flavored, if not almost totally permeated, by a Roman Catholic perspective. I write from my own personal experience, as I found myself going from an "Oh boy!" to an "I gotta read this" attitude, when finding her latest public 'confessions' (of a sinner?) in the WSJ.


Posted by Donald L. Luskin at 2:08 PM | link