New York’s Pension Problem

Megan McArdle notes:

In New York, reports the Times, the unions don’t want to move to more conservative pension accounting, because if they do, the city will be required to put more money into the pot . . . and the taxpaying public might mobilize against the union workers who put them in this spot.

Of course, putting it off will ultimately just make the problem worse; the inexorable logic of compounding is just not very forgiving. Over the next few decades, we are going to come face to face with more problems like Detroit’s: pensions that must be paid, legally and morally, but cannot be paid while still offering an acceptable level of government services. Taxpayers’ wallets are not an inexhaustible resource, and cities and states that demand too much will see their citizenry depart for more fiscally responsible climes.

The problem is that at any given time, it always looks better to delay — and the worse a crisis gets, the more attractive a delay looks, because the reckoning is already very painful. New York’s new mayor has so far said little about the city’s pensions, and it’s probably in his best political interest to keep mum. It’s too bad that the interests of future pensioners — and the city’s — are so different.

The title of her post asks a question: will New York be the next Detroit? My answer would be “No”. I think that honor belongs to Chicago for three reasons:

  • Chicago has all of the same problems New York does
  • Chicago is in worse fiscal shape than New York
  • Absent a stay of execution from the state, Chicago must put a billion dollars that it doesn’t have into its public pension fund

The state legislature is barely able to commit to what its members want to eat for lunch let alone bailing Chicago out of the fix they put it in. I think Chicago will walk the plank before New York.

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Government for a Digital Age

In the middle of a lot of partisan twaddle Michael Barone hints at the kernel of a good idea:

Government was reasonably good at replicating the bureaucratic processes of large corporations in the industrial age. But it’s not very good — it’s often downright incompetent — at replicating the IT processes of firms such as Walmart and Amazon.

I wish there were more there about why Amazon’s systems work better but there isn’t.

I can only speculate. Amazon wasn’t an enormous giant when it started. It started fairly small and its systems have evolved over time. They have been subjected to continuing, ongoing change.

The way that federal projects are funded and let precludes such a process.

I think there’s probably room for a lot more analysis of how modern system development could be managed in the context of 21st century government but, unfortunately, you won’t find that in Mr. Barone’s article.

Again, I can only speculate. I think a network model rather than the hierarchical model would be more effective. I think that bringing the development closer to the stakeholders rather than removing it to the confines of Washington, DC would also help. Agile development just won’t work in the severely top-down federal government and today’s environment in which every failure is trumpeted from the rooftops isn’t helpful, either.

I’m reminded of Churchill’s remark that success consists of going from failure to failure without loss of enthusiasm. That’s as good a definition of agile development strategies as any I’ve heard but I’m skeptical that our government could work that way.

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Animal Spirits

The most recent Wall Street Journal/NBC poll finds Americans in a foul mood over the economy:

Still scarred by a recession that ended five years ago, Americans are registering record levels of anxiety about the opportunities available to younger generations and are pessimistic about the nation’s long-term prospects, directing their blame at elected leaders in Washington.

A new Wall Street Journal/NBC News poll found that despite the steady pace of hiring in recent months, 76% of adults lack confidence that their children’s generation will have a better life than they do—an all-time high. Some 71% of adults think the country is on the wrong track, a leap of 8 points from a June survey, and 60% believe the U.S. is in a state of decline.

What’s more, seven in 10 adults blamed the malaise more on Washington leaders than on any deeper economic trends, and 79% expressed some level of dissatisfaction with the American political system.

“The American public is telling its elected representatives that the economic distress that a significant proportion of them are feeling is directly their fault,” said Democratic pollster Fred Yang, who conducts the Journal poll with Republican Bill McInturff. “The public seems to have moved beyond the plaintive cry of ‘feel our pain’ to the more angry pronouncement of ‘you are causing our pain.’ ”

The economy is an area in which belief equals reality or, at least, belief has an important effect on behavior which produces the reality. That’s what John Maynard Keynes referred to as “animal spirits”, an important force in pulling economies out of recessions.

In comments recently it was remarked that things would be no different today if Bill Clinton were president. I disagree. Whatever his failing, Bill Clinton was a relentless and indefatigable cheerleader for the economy. His confidence built confidence in others.

George W. Bush didn’t have that same quality and neither does Barack Obama.

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The Summary

Josh Zumbrun of the Wall Street Journal provides a fair summary of how economic indicators have fared during the Obama presidency. Here’s the Reader’s Digest version.

The stock market, home prices, GDP, the total number of jobs, and industrial production are up.

Real median household incomes and the labor force participation rate are down. Real average incomes are down, too, which means that even the continuingly increasing share of income by the wealthy doesn’t make up for the loss of income.

Food stamp use is up. Job growth has been phlegmatic by comparison with post-war presidents other than George W. Bush with whom it’s pretty comparable.

Whether you think it’s a good record or a bad one largely depends on your point-of-view. As usual where you sit is where you stand. President Obama clearly thinks it’s a good record.

My view is that it’s not good enough.

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The Floppy Ears

Here’s an interesting article on why so many breeds of domesticated dogs have floppy ears. It covers territory I’ve covered here before.

It’s pretty simple, actually. Floppy ears are a neotenous characteristic (neoteny is when immature chaacteristics are preserved in adulthood). Dogs have been selectively bred from wild canines for reduced cortisol production and reduced cortisol production is associated with increased neoteny.

My breed, Samoyeds, have “prick ears”, i.e. they’re not floppy. However, they’re also white and white in the coat is also a neotenous characteristic.

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The Rates

Health Affairs Blog considers the factors that will determine the 2015 healthcare insurance rates:

The rates are coming, the rates are coming.

While there seem to be fewer “latest verdicts on the ACA,” breathlessly reported in the popular press, as we move through the second half of 2014, the filing of 2015 rate requests for individual and small group products on the health insurance exchanges offer one more piece of catnip for pundits.

Who is up? Who is down? How much? Is this the dreaded death spiral for the ACA? Or its vindication?

They point to the paucity of data that insurance companies use to make their determinations as one of the key factors in what will eventually happen. I think it’s worth keeping in mind that the paucity of data is a feature rather than a bug.

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The Question

Bart Hinkle asks what I think is a pretty good question:

If insurance companies can’t turn people away, then why should physicians be allowed to?

4.4% of physicians accept no new private patients. 14% accept no new Medicare patients. Almost 30% accept no new Medicaid patients.

40% of physicians provide no care free or at reduced rates, generally considered an ethical obligation.

The answer that physicians generally give to the question is that they must turn away some patients to be able to provide adequate care to the rest. That the patients turned away are those for whom they receive less compensation is just one of life’s mysteries.

I don’t think that the answer to the question resides in something as abstract as self-determination or speculative as the ability to provide adequate care. I think that it was easier to persuade insurance companies that they would benefit from a larger pool of subscribers than it was to persuade physicians that they should do more work for lower pay.

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Arguing Against a DREAM

In arguing in favor of it Albert Hunt provides a pretty fair argument against any version of the DREAM Act, the proposed law that would allow individuals who came to the United States as children illegally to remain here legally. He addresses the president:

By all means, use an executive order to give work permits to, and avoid deportation of, the parents of those young undocumented “Dreamers.” Call it family values. The Republicans will go berserk, but the more vitriolic they get, the greater the probable voter backlash in November.

In other words, he sees the DREAM Act as a stalking horse for a general amnesty. I strongly suspect he’s misreading public opinion on this subject, including the opinion of legal immigrants.

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The Changing Nature of Employment

I found this article from the LA Times interesting:

A short gig doing security for the True Blood television show. A stint driving for a rental car company. A week as a customer service representative at a retail store.

This is how Delvontaie Antwine, 34, makes do in California’s economic recovery — earning a few scattered paychecks a month from odd temp jobs while living with relatives in Silver Lake.

Each week, he goes to a career center, where recently he was looking into positions transporting patients for Kaiser Permanente.

“I just need something consistent; otherwise, I’m like a puppy chasing its tail,” he said. “I’m at the bottom of the totem pole right now.”

It’s a purgatory sometimes called the gray economy. Although the official state unemployment rate dropped to 7.4% in June, 16.2% of Californians — or about 6.2 million — were either jobless, too discouraged to seek work, working less than they’d like or in off-the-books jobs.

The unemployment rate isn’t measured. It’s polled. What you read in the newspapers is determined by an arcane combination of the establishment survey (polling businesses), the household survey (polling households), and guesstimation. I have complained many times in the past that the fudge factors introduced in the guesstimation process are so much larger than the numbers actually polled that they strain credulity.

This article highlights how the nature of employment today may have rendered the establishment survey incredible if not irrelevant.

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It Can’t Happen Here

The Wall Street Journal op-ed by Ian Lipkin is a good illustration of what I meant:

An infected individual could board a flight in West Africa, become symptomatic in the air or after landing and then expose others to the virus. At worst, this might result in a few other people becoming infected and possibly dying. But sustained outbreaks would not occur in the U.S. because cultural factors in the developing world that spread Ebola—such as intimate contact while family and friends are caring for the sick and during the preparation of bodies for burial—aren’t common in the developed world. Health authorities would also rapidly identify and isolate infected individuals.

Am I wrong to detect notes of arrogance and patronization in that statement? That’s not a rhetorical question. I genuinely want to know. It seems to me that Dr. Lipkin is assuming things that are not in evidence and failing to take into account the much higher number of deaths and, presumably, infection rate in this most current outbreak compared to others. I see nothing in his profile that suggests firsthand knowledge which implicitly means he’s just repeating what he’s been told.

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