To the Editor:

Contrary to Monday's column by Mr. Luskin in the National Review Online, the accusation that Senator Baucus alone held up the nominations of public trustees for the Social Security and Medicare trust funds, and subsequently the report from the trustees, is false. Upon learning last November that the White House intended to renominate John Palmer and Thomas Saving, we both responded immediately that the White House should find two new individuals to nominate as public trustees. We both continue to seek new nominations of individuals broadly respected by their peers in the academic and policy communities.

Since the public trustees were first confirmed by the Senate in 1984, no two individuals have ever served more than one term. This tradition is grounded in the constant need for new thinking about the economic and demographic assumptions and actuarial methodologies used in trustees' reports. We hope that the White House will act quickly to work with us to find two new trustees who can be confirmed and in place as soon as possible to continue the important work of producing the annual Trustees' Report.

Sen. Charles E. Grassley, Chairman
Sen. Max Baucus, Ranking Member
U.S. Senate Committee on Finance

*******************

Carol Guthrie
Communications Director, Democratic Staff
U.S. Senate Committee on Finance

Raymond inherited a company that was undervalued and transformed it into one so efficient it has become a model not only for his own industry, but most others as well.

...during Raymond’s 12 years as CEO, Exxon Mobil’s stock price quintupled and the market value of the company rose from $82 million to more than $352 billion.

Over a career that spanned 43 years, Raymond worked his way up from a production research engineer to head man. Exxon Mobil now has 86,000 employees working in 20 countries. By all accounts it treats its workers very well and its pay is well above the industry’s average. During Raymond’s stint as CEO, it never was forced to lay off an employee.

Krugman’s employer, The New York Times Co., in contrast, is rated an underperformer by several leading financial analysts including Prudential Securities. Many of its papers are hemorrhaging red ink and circulation. Last September, it announced it would cut 500 employees this year — about 4 percent of its work force.

"If Paul Krugman put on a Howdy Doody costume, had pictures taken of himself and then ran several of those photos in the space usually devoted to his New York Times column, it wouldn't be more laughable, more beside the point, more a comment on the decline of a once-great newspaper, than the stuff he often writes..."

Greater public involvement in markets has put pressure-I view it as positive pressure-on all companies to maximize performance for their owners. And by performance, I mean the real common denominator. The one that unites every single owner, whether he or she is the heir to a great fortune or the hardworking wage earner who's socked away a few dollars in an IRA: Return on investment.

In its best form, shareholder activism aims squarely at improving returns on investment. In its worst form, it actually reduces those returns... Anti-value activism is the act of saying "I'm shaping this company up," while you're actually shaking it down...

First, it often involves trial lawyers. Everyone here is familiar with these product liability cases that have little merit but end up costing companies millions to settle. We have the same thing in securities litigation, where frivolous class action lawsuits are filed alleging that a stock fell because company management made false statements about its prospects. But here's the crazy thing: When the lawsuit is filed, the stock price usually falls again-costing the company's shareholders even more. No wonder most companies settle rather than fight. The bad publicity from a messy courtroom drama is often worse than the cost of settling. Either way, less is left over in the company treasury for dividends, buybacks, or earnings, all of which would help shareholders. So who benefits from all the legal work? The trial lawyers, not the investors.

Let's talk about the second value killer: Government overinvolvement in financial markets. Government agencies in Washington and in all 50 state attorneys general offices are able to mobilize armies of career attorneys to investigate and indict businesses. I want to be clear about the role of these government lawyers: If there's clear evidence of real unethical or truly illegal conduct, the government should pursue the perpetrators with vigor. But as with lawsuits, a criminal or civil indictment damages a company's valuation so much that many executives settle as quickly as possible, whether they have done anything wrong or not. State attorneys general sometimes publicly threaten criminal prosecution if the company doesn't pay a fine or fire its management-a form of extortion that has no place in our legal system.

Do investors gain anything from this? The state of New York has collected tens of millions of dollars in fines, but we can't be sure where those dollars have gone. One thing is for certain: They did not go into the pockets of shareholders who suffered losses...

Let's talk about the third area of value destruction: Investors who will do anything-including breaking the rules-to make a buck. Hedge fund and private equity investors are a valuable and growing industry-they are creating pools of capital that help many companies grow. But a small minority of these investors spend a lot of time pressuring management to do things that are antithetical to long-term value. Some push to take on lots of debt so that companies can pay special, one-time dividends. Some press for spin-offs or sales of assets that should stay in the company's fold. Sometimes rumor campaigns are started that drive down stock prices...

Bottom line: Such investors have their own objectives, their own agenda, and they're not necessarily out there to help you.

A front-page article on Sunday about former President Bill Clinton's friendship with Ronald Burkle, the California financier and grocery chain operator, referred incompletely to the fate of Mr. Burkle's supermarkets during the Los Angeles riots of 1992 (an event that led Mr. Clinton to seek out the businessman after being told that rioters had spared some of his markets because of his reputation for fairness). Although some of Mr. Burkle's markets were spared, others were burned or otherwise damaged by rioters. (Go to Article)

The spat broke out in the House on Friday between spokesmen for Minority Leader Nancy Pelosi, D-Calif., and Georgia Republican Jack Kingston, who has earned good press for his outreach to conservative bloggers. Kingston's press office started the verbal fight with a blog post (and subsequent e-mail to select bloggers) that proves even flacks can excel at "gotcha" journalism.

The entry noted that Pelosi, who recently generated some mixed coverage for her efforts in the blogosphere, had on her congressional site a tip sheet for wannabe congressional bloggers. The gotcha part of the story: Of the seven blogs recognized in the "Blogging 101" document generated by Pelosi's office, five of them were Republican.

GOP Bloggers and Suitably Flip were among the conservative blogs to note the development...

Pelosi's staff reacted to the unflattering yet largely insignificant partisan jabs in knee-jerk fashion and pulled the blog advice offline. But that decision just made the story newsworthy -- especially because Kingston's Web-wise staff had expected the move and had made a copy of the document, which is now on Kingston's blog.

Yesterday provided a serious reality check for Arthur Ochs Sulzberger, Jr., chairman of The New York Times Company. In what could only be an act of protest against the junior Sulzberger's leadership, public investors controlling more than a quarter of the shares decided to just throw their hands up in the air by refusing to vote for the four out of thirteen directors of the company's board they have the right to choose...

According to reports today, only Morgan Stanley, the fourth largest of the company's investors, with 5.8 percent of the stock, was willing to reveal its reasons for withholding the vote. They want to do away with this [two-tiered board] system, which allows the family ultimate say. Unspoken, but clearly implied, is that it is such a system that has forced these investors to sit idly by while Sulzberger has made a series of management and investment blunders that, by many accounts, might have cost him his place as chairman in a more normal set up (see: Eisner, Michael). Not to mention the fact that the Times has fared worse than most other newspapers in the recent downturn -- 47 percent down over the last two years versus the industry average of 35.8.

So how was this rebellion covered by the major rags? Could the Times' own reporter, Judas-like, kiss Sulzberger, singling him out as the most probable source of this share-holder vote of confidence. The short answer: No, she couldn't.

Almost unbelievably, the Times' article didn't even mention the name Arthur Ochs Sulzberger, Jr. Not even once. (And shockingly, when it does mention the Sulzberger family, it misspells their name, twice referring to them as "Ochs-Sulzburger."). The piece goes out of it's way to emphasize that the vote withdrawal had to do not with any desire on Morgan Stanley's part to have the company sold, but rather, "to eliminate the company's two classes of stock...to force the board to improve management and the share performance." But it fails to follow up on this idea by exploring who should be held accountable for problems at the company.

On April 20, the Times ran an article by Jennifer Steinhauer on the problems the City of Houston has experienced in coping with refugees from Hurricane Katrina. A principal theme of the article was that the federal government had failed to come through with needed or promised help:

Seven months after two powerful hurricanes blew through the Gulf Coast, elected officials, law enforcement agencies and many residents say Texas is nearing the end of its ability to play good neighbor without compensation.

That theme, of course, fit well with the Times' "bash Bush" obsession. Today, however, the paper admitted in its corrections section that it had completely misrepresented the facts:

A front-page article on Thursday about strain on government services in Texas caused by hurricane evacuees misstated the number of evacuee children in Houston public schools and the amount of Federal aid the state has received. The most recent count, in late February, showed 5,475 students, not 30,000. The aid is $222 million, not $22 million.

...The Times reported that the feds had contributed $733 per student. In fact, the feds have paid $40,548 per student. One can only surmise that the people who run the newspaper are beyond embarrassment...

Oh, that's not quite all. Today's paper included a second correction for another article, published the day after the Houston piece:

An article yesterday about criticism of the Small Business Administration's response to the 2005 hurricanes misstated the value of loans the agency has provided to victims. It is $842 million, not $336 million.

Well, that article wasn't so bad. It was only off by a factor of 2.5. By the Times' standards, that's pretty good. What a funny coincidence, though. Why is it that the Times' math is always wrong in the same direction?

The basic facts are these. There has been a general trend toward rising gaps between the earnings of more and less skilled persons. With regard to education, real earnings (that is, earnings adjusted for changes in consumer prices) earnings of high school dropouts did not change much. Earnings of high school graduates grew somewhat more rapidly, so that the gap between dropout and graduate earnings expanded over time.

The main action came in the earnings of college graduates and those with postgraduate education. They both increased at a rapid pace, with the earnings of persons with MBA's, law degrees, and other advanced education growing the most rapidly. All these trends produced a widening of earnings inequality by education level, particularly between those with college education and persons with lesser education. I should also note that while an upward trend in the earnings gap by education is found for both men and women, and for African Americans and whites, the earnings of college educated women and African Americans increased more rapidly than did those of white males. As a result, inequality by sex and race, particularly among college educated persons, narrowed by a lot.

As the education earnings gap increased, a larger fraction of high school graduates went on to get a college education. This trend toward greater higher education is found among all racial and ethnic groups, and for both men and women, but it is particularly important for women. The growth in the number of women going to and completing college has been so rapid that many more women than men are now enrolled as college students. Women have also shifted toward higher earnings fields, such as business, law, and medicine, and away from traditional occupations of women, such as K-12 teachers and nurses. The greater education achievement of women compared to men is particularly prominent among blacks and Latinos.

The widening earnings gap is mainly due to a growth in the demand for educated and other skilled persons. That the demand for skilled persons has grown rapidly is not surprising, given developments in computers and the Internet, and advances in biotechnology. Also, globalization increased the demand for products and services from the U.S. and other developed nations produced by college educated and other highly skilled employees. Globalization also encouraged a shift to importing products using relatively low-skilled labor from China and other low wage countries instead of producing them domestically.