Don’t bother reading Mitt Romney’s op-ed in USA Today on what he’d do about deficits and the debt. I can summarize it for you in one, terse sentence and save you the trouble: eliminate waste, fraud, and abuse and repeal ObamaCare. If he had deliberately set out to be vapid he could hardly have been more so.

I’m not unfavorably disposed towards Romney but stuff like this fits more into the habits of elites that Lawrence Summers complained about in his FT op-ed, overestimating their abilities including their ability to bamboozle ordinary folks, than it is a serious policy position.

When I read this comment from a regular commenter:

The fact that a job goes begging in one place while 10 people beg for a job somewhere else still means there aren’t enough jobs. And were those jobs in oil shale for displaced bank tellers? Not so much?

It’s fascinating that you won’t even begin to address the hypothetical. Maybe you’re right. But maybe you’re not. A theoretical possibility, right? I mean it is just barely possible that you’re wrong and that I (and a lot of other people) are right, and that we’re going toward a world where, to put it in simplified terms, anyone with an IQ < 100 can be replaced by a machine.

I immediately thought of the scene above from the end of the wonderful old movie, Dinner at Eight. The actress on the right is the incomparable Marie Dressler and that on the left is, of course, the luminous Jean Harlow.

All joking and leering comments aside, let’s consider the likelihood and implications of his hypothetical.

Here’s my two cents. I don’t believe we have that problem right now. I think that the problem we have right now is more of a problem of matching and mobility. I think there are thousands, tens of thousands, or even hundreds of thousands of jobs going unfilled because the right people with the right skills aren’t in the right places, aren’t aware of the jobs, can’t go to where the jobs are, or don’t like the jobs that are on offer. Here’s an example of what I’m talking about:

Tough as it is to find work these days, tens of thousands of jobs paying middle-class wages are going unfilled.

Open truck-driving jobs require little more than a high school diploma and a month or so of training. But not everybody wants to be a long-haul truck driver, and many who do find they just can’t hack it.

The story began three years ago when freight traffic fell off a cliff, pulling tens of thousands of truck drivers down with it. But now, at the American Central Transport terminal in Kansas City, Mo., recruiting manager Chad Still is showing off a lot of empty concrete.

“Not a lot going on over here today, which in the trucking industry, that’s a [big] deal,” Still says. “The less trucks and trailers you see around here, the better the freight is.”

Freight is now moving at pre-recession levels and companies are hiring. Transportation analyst Noel Perry figures trucking companies are short of about 125,000 drivers. What’s the hold up?

“It’s real simple,” he says. “Let’s say you get laid off tomorrow. Do you have a commercial driver’s license? No.”

There are companies that are so desperate for drivers they’re willing to pay an applicant’s tuition through trucking school. IMO a lot of people who are physically capable of doing the work could cobble together the money to go to trucking school. Why aren’t they doing it? It’s a semi-skilled job that pays adequate wages.

There are thousands of jobs for skilled machinists that are going begging. Why? My guess: the right people aren’t in the right places.

And then there are all of the positions in the healthcare industry that can’t be filled, e.g. RNs, certain kinds of medical technicians. Why? My guess is that it’s a combination of a peak load problem and an antiquated and inadequate educational system.

It’s currently estimated that there are something like 3 million job openings unfilled nationwide but several multiples more than that of people unemployed. What about that? That’s where our old pal the multiplier comes in. It’s not just for fiscal stimulus, you know. If a million more people were working, their increased consumption would produce jobs for more people. And their going to work would create jobs for yet more.

All of the foregoing notwithstanding I think it’s a still a serious issue. But it’s a serious issue for decades from now and when it is China’s rear end will be much more in the wringer than ours. What happens when the value of unskilled labor is not just near zero but actually zero?

Over at Forbes Louis Woodhill offers some out of the box prescriptions for stimulating the economy without government spending.

• Have the Social Security Trust Fund sell Treasuries and buy stocks. After a half dozen paragraphs of explanation of why bonds have out-performed stocks over the last 30 years and what a tragedy that is, here’s the justification for this that he offers:
  

  A better way to meet the market’s demand for risk-free assets would be for the Social Security Trust Fund to sell some of its $2.6 trillion in Treasuries and buy a fully-diversified portfolio of common stocks. This would raise stock prices and reduce bond prices, thus restoring a more normal relationship between risk assets and risk-free assets.

  As a side effect, investing some of the Social Security Trust Fund in common stocks would be highly profitable for Social Security. Historically, common stocks have produced much higher returns than government bonds. Interestingly enough, Social Security would be taking no real risk by buying stocks. If common stocks don’t produce a higher return than government bonds, the economy is going to be so dismal that Social Security will go broke anyway.

  That’s essentially the Butch Cassidy prescription. When pursued by Bolivian federales and finding his path blocked by a sheer drop off a cliff into a river, he turns to his hesitant partner and advises him that that “the fall will probably kill you”. I’m actually torn about this strategy. While I think it would be better than portions of the fund going into independent accounts, I still think that the urge to “invest” in politically advantageous stocks would be irresistible.

• Require large organizations to pay their bills on time. That’s an intriguing proposal but I’m bedeviled by two questions: how do you know and how do you enforce it?
• Let companies opt out of Sarbanes-Oxley. My preference would be to repeal it altogether. I know first-hand the damage Sarb-Ox has done even to small, privately-held companies whose large publicly-held customers make Sarb-Ox compliance a condition of doing business with them. However, I find his argument for doing so peculiar:
  

  In the good old days, people starting a company dreamed of going public. Now, the first thing that founders think about is “what big company will we be able to sell this thing to?” The Sarbanes-Oxley law, which was a hysterical overreaction to the Enron collapse, has so raised the costs of being public that only “moon shot” successes like Facebook can even consider an IPO.

  My nostalgia is for something completely different: when people running hamburger stands wanted to make and sell hamburgers, people who ran bookstores wanted to buy and sell books, and people who had pet stores wanted to sell pet food and supplies rather than quickly build up a business, issue an IPO, and get fabulously wealthy.

All in all I don’t think much of his prescriptions but at least they’re different from the tired, old, inside the Beltway, red and blue talking points that fill the blogs and opinion pages these days.

In a Financial Times op-ed Lawrence Summers issues five warnings to “world leaders”. At least three of the five (and maybe all five) can be summarized as “don’t get cocky”.

Here are his five warnings:

1. You can’t fine-tune:
   

   First, programme announcements that are vague and try to purchase stability on the cheap are more likely to exacerbate problems than to resolve them.

   or don’t get cocky.

2. The second was stated cannily by Abraham Lincoln as “You can fool some of the people all of the time, all of the people some of the time, but you can’t fool all of the people all of the time:
   

   Second, dubious assertions by policymakers end up undermining confidence.

   or don’t get cocky.

3. So far they’ve been successful at preventing a meltdown of the financial system. That’s the first step in the mission rather than its completion:
   

   Third, containing systemic financial risk is not enough to restore growth.

   or don’t get cocky.

4. Slow growth and deflation are worse than profligacy and debt.
5. Fiscal contraction leads to economic contraction.

I think that Dr. Summers is getting a little cocky himself on those last two points. What happens when you don’t know how to increase growth or, for political reasons, are incapable of taking the steps necessary to do so? On that last point I’ll have more to say in a later post. Suffice it to say for now that my experience in life has been that when you identify something that’s not working, you know how to fix it, and you do so, you’re frequently amazed at how many other things that helps.

But don’t get cocky.

The picture above is one of MF Global’s magazine ads. I think they’re getting ahead of themselves. First, we’ll have an investigation, then an indictment, then a trial, then convictions, then lenient sentences.

The story I’m referring to is here.

Hat tip: World First via Business Insider

While I’m on the subject of education, I thought I’d pass on a little anecdote. In one of my wife’s California classrooms her pupils had six different primary or only languages: English, Spanish, Arabic, Farsi, Creole French, and Chinese (I don’t know which “dialect”). Spanish was in multiple dialects, too, IIRC. I always think of this when I read about France or Germany’s immigration problems.

Alex Tabarrok at Marginal Revolution has a post on higher education, actually an excerpt from an upcoming book of his:

There is nothing wrong with the arts, psychology and journalism, but graduates in these fields have lower wages and are less likely to find work in their fields than graduates in science and math. Moreover, more than half of all humanities graduates end up in jobs that don’t require college degrees and these graduates don’t get a big college bonus.

Most importantly, graduates in the arts, psychology and journalism are less likely to create the kinds of innovations that drive economic growth. Economic growth is not a magic totem to which all else must bow, but it is one of the main reasons we subsidize higher education.

The potential wage gains for college graduates go to the graduates — that’s reason enough for students to pursue a college education. We add subsidies to the mix, however, because we believe that education has positive spillover benefits that flow to society. One of the biggest of these benefits is the increase in innovation that highly educated workers theoretically bring to the economy.

As a result, an argument can be made for subsidizing students in fields with potentially large spillovers, such as microbiology, chemical engineering, nuclear physics and computer science. There is little justification for subsidizing sociology, dance and English majors.

College has been oversold. It has been oversold to students who end up dropping out or graduating with degrees that don’t help them very much in the job market. It also has been oversold to the taxpayers, who foot the bill for these subsidies.

There’s an interesting chart in the post that illustrates that over the last 25 years the number of graduates per year in science, technology, and mathematics has remained the same or declined slightly while the number of graduates in the performing and visual arts, journalism, and psychology has skyrocketed.

Let me add a little fuel to this fire. According to the BLS the number of people employed in architecture and engineering in 2001 was about 2.49 million while the number in 2010 was roughly 2.3 million. I won’t go into the dreary statistics on the number of unemployed engineers or the engineers who are no longer able to get work in engineering. They’re easy enough to find. Another statistic to consider: the number and length of post docs has been increasing steadily, a reasonably good indicator of a lack of better jobs. That includes biomedical.

There are, essentially, three reasons to pursue higher education (there used to be four). The first and best is that it leads to a fuller, better, more satisfying life. That might well be worth subsidizing. However, unless college students have changed tremendously in the approaching fifty years since I started my undergraduate education, virtually no one seeks higher education for that reason.

Some pursue higher education for the reason that I did: it’s what we do. I no more questioned the idea that I would go to college (and graduate school) than I did that I would enter first grade. Both of my parents had college educations and graduate degrees. Of course I would do the same.

I think that most kids go to college because they or their parents believe it will help them get good jobs. I think that this is fatuous or, as Dr. Tabarrok more kindly puts it, “oversold”. Higher education does not ipso facto lead to a good job. That’s a cargo cult mentality. Good jobs, like everything else, are based either on supply and demand or fiat. More people with college degrees does not create more jobs for people with college degrees. It just provides a competitive edge over people who don’t have college degrees in securing jobs that could well be performed without college degrees.

In my day there was another reason to pursue higher education: avoiding the draft. Anybody who thinks that those who pursued higher education because it’s what we do actually did so to avoid the draft are merely reflecting their own prejudices and class identities.

Please do not point out the statistics on the income expectations of people with college or post-graduate degrees. The studies rely on the lump fallacy, the idea that there is a lump of undifferentiated college degrees. When you control for a relative handful of jobs (including the dwindling number of jobs for engineers), doctors of medicine, lawyers who’ve graduated from the top 15 law schools, MBAs from top schools, etc. the income expectations of college grads, particularly when you subtract the four years of deferred wages they’ve bought as part of the education package, aren’t nearly as rosy.

When you combine the low realistic wage expectations of people with training in the performing and visual arts, journalism, and psychology, the small number of jobs being created in any field right now, and the unconscionably high cost of higher education, you get the OWS movement.

MF Global’s filing for bankruptcy has produced a wave of opprobrium for its CEO, Jon Corzine, formerly CEO of Goldman-Sachs and senator, then governor, of New Jersey. Henry Blodget, for example, characterizes his handling of MF Global, which invested heavily in Spanish, Italian, and Irish bonds, as incompetent, likening his chairmanship to flying the company “into a mountain”:

As we noted yesterday, Jon Corzine, the pilot who took over the MF Global plane and flew it into a mountain, contractually has the right to a $12 million golden parachute, which would presumably go a ways toward easing his regrets. We hope that, for decency’s sake, he waives it.

If he doesn’t waive it, he can get in a long line of creditors including CNBC, from which Corzine’s MF Global bought (and didn’t pay for) some $845,000 of advertising. And, hopefully, if there’s any justice in the world, Corzine will be at the end of that line.

Because he really shouldn’t get a cent.

What happened to MF Global on Corzine’s watch was not just incompetence. It was spectacular recklessness. It was the equivalent of aiming a 747 filled with people straight at the side of the mountain and hoping that, just before you smash into it, the prevailing winds will shift and enable you to pull up.

And it’s not as if Corzine didn’t know the mountain was there.

All of the Wall Street CEOs who bet their firms in the years leading up to the financial crisis–most of which were then saved at the 11th hour by the government–at least had the excuse that they had never seen markets crash like that.

Jon Corzine had seen markets crash like that.

In fact, he had just seen markets crash like that. Just three short years ago. Along with everyone else on the planet who was not in a coma during the financial crisis.

And yet the first thing pilot Jon Corzine did when he took over the controls of MF Global was aim it straight at the mountain!

Charles Gasparino, on the other hand, says he knew it all along:

Jon Corzine is many things: Erudite, down to earth, and well-meaning being chief among them, people who know him tell me. But is he a good businessman? Not even close, these same people openly admit.

In fact, based on his long years in the financial business, from CEO of Goldman Sachs to his current job as chief executive of the failing MF Global, Corzine is proof positive that on Wall Street you don’t have to be very good at your job to get paid a lot of money, which is why hatred of fat cats remains a bipartisan pastime—and will for the foreseeable future.

What I think is missing from all of the stone-casting is a recognition that Mr. Corzine made an enormous amount of money over a period of many years. Why? If he’s so incompetent why did he make so much money?

He’s held quite a number of positions of extraordinary responsibility, not just as CEOs of Goldman-Sachs and MF Global but as advisor to Preisdent Clinton, senator, and governor. The answer may be Tevya’s conclusion: if you’re rich they think you really know.

IMO there’s only one iron-clad conclusion you can draw from somebody’s making a lot of money: somebody, somewhere is willing to pay for the goods she produces or the services he provides. He or she may be the smartest guy in the room, the hardest-working, the best-looking, or maybe just the luckiest. Those factors don’t explain their wealth but willingness to pay does. There are guys who aren’t particularly smart who make a lot of money (some professional athletes, for example), people who aren’t hard-working who make a lot of money (Jamie Johnson, who may be able to lay claim to popularizing the phrase “the 1%”, for example), and peole who aren’t particularly good-looking who make a lot of money in a field notorious for very good-looking people (Seth Rogen).

What were people willing to pay Jon Corzine for? I don’t know him and haven’t followed his career. My offhand guess is that early in his career at least he was one heckuva salesman. That echoes my dad’s observation (adjusted for 2011 dollars) that anybody who earns more than $200,000 a year is a salesman.

I’ve written about social class here from time to time. Summarizing my view quickly I think that we do have social classes in the U. S. but the upper class is sufficiently small that it’s not particularly concerning. Here’s my favorite definition of being upper class: you’re upper class when no matter how badly you screw up you won’t be allowed to fail. By that standard the clearest example of somebody who’s a member of the upper class is George W. Bush.

Money isn’t synonymous with being a member of the upper class. Ask Bernie Madoff or Raj Rajaratnam. Despite their wealth they have been allowed to fail in dramatic and public ways. Warren Buffett may be the richest man in the world but he is decidedly not upper class and whether his children succeed or fail will depend more on what they learned at the dinner table and their own efforts than to social class. Money may be a ticket to the upper class (the Kennedys). My greatest concern about the concentration of wealth that’s occurred over the last couple of decades is that those who’ve found themselves the beneficiaries of that trend may try to parley that into a real class system.

I don’t know why Jon Corzine made so much money. I think it’s possible that he was just smart enough, just hard-working enough, just tall enough, just charming enough, and just the right age to ride a demographic wave that brought him and thousands of others enormous wealth. Now the tide is going out.

Update

Mike Shedlock says:

Indeed, those looking for reckless behavior, massive risk taking, and willingness to bet the farm on marriage, in politics, and in life, Corzine represented rare “impossible to pass up” talent.

I stumbled across this passage from Joseph Schumpeter’s Capitalism, Socialism, and Democracy, it struck a chord, and I thought I’d pass it along.

One of the most important features of the later stages of capitalist civilization is the vigorous expansion of the educational apparatus and particularly of the facilities for higher education. This development was and is no less inevitable than the development of the largest-scale industrial unit,9 but, unlike the latter, it has been and is being fostered by public opinion and public authority so as to go much further than it would have done under its own steam. Whatever we may think of this from other standpoints and whatever the precise causation, there are several consequences that bear upon the size and attitude of the intellectual group.

First, inasmuch as higher education thus increases the supply of services in professional, quasi-professional and in the end all “whitecollar” lines beyond the point determined by cost-return considerations, it may create a particularly important case of sectional unemployment.

Second, along with or in place of such unemployment, it creates unsatisfactory conditions of employment—employment in substandard work or at wages below those of the better-paid manual workers.

Third, it may create unemployability of a particularly disconcerting type. The man who has gone through a college or university easily becomes psychically unemployable in manual occupations without necessarily acquiring employability in, say, professional work. His failure to do so may be due either to lack of natural ability—perfectly compatible with passing academic tests—or to inadequate teaching; and both cases will, absolutely and relatively, occur more frequently as ever larger numbers are drafted into higher education and as the required amount of teaching increases irrespective of how many teachers and scholars nature chooses to turn out. The results of neglecting this and of acting on the theory that schools, colleges and universities are just a matter of money, are too obvious to insist upon. Cases in which among a dozen applicants for a job, all formally qualified, there is not one who can fill it satisfactorily, are known to everyone who has anything to do with appointments—to everyone, that is, who is himself qualified to judge.

All those who are unemployed or unsatisfactorily employed or unemployable drift into the vocations in which standards are least definite or in which aptitudes and acquirements of a different order count. They swell the host of intellectuals in the strict sense of the term whose numbers hence increase disproportionately. They enter it in a thoroughly discontented frame of mind. Discontent breeds resentment. And it often rationalizes itself into that social criticism which as we have seen before is in any case the intellectual spectator’s typical attitude toward men, classes and institutions especially in a rationalist and utilitarian civilization. Well, here we have numbers; a well-defined group situation of proletarian hue; and a group interest shaping a group attitude that will much more realistically account for hostility to the capitalist order than could the theory—itself a rationalization in the psychological sense—according to which the intellectual’s righteous indignation about the wrongs of capitalism simply represents the logical inference from outrageous facts and which is no better than the theory of lovers that their feelings represent nothing but the logical inference from the virtues of the beloved. Moreover our theory also accounts for the fact that this hostility increases, instead of diminishing, with every achievement of capitalist evolution. Of course, the hostility of the intellectual group—amounting to moral disapproval of the capitalist order—is one thing, and the general hostile atmosphere which surrounds the capitalist engine is another thing. The latter is the really significant phenomenon; and it is not simply the product of the former but flows partly from independent sources, some of which have been mentioned before; so far as it does, it is raw material for the intellectual group to work on. There are give-and-take relations between the two which it would require more space to unravel than I can spare. The general contours of such an analysis are however sufficiently obvious and I think it safe to repeat that the role of the intellectual group consists primarily in stimulating, energizing, verbalizing and organizing this material and only secondarily in adding to it. Some particular aspects will illustrate the principle.

6. Capitalist evolution produces a labor movement which obviously is not the creation of the intellectual group. But it is not surprising that such an opportunity and the intellectual demiurge should find each other. Labor never craved intellectual leadership but intellectuals invaded labor politics. They had an important contribution to make: they verbalized the movement, supplied theories and slogans for it—class war is an excellent example—made it conscious of itself and in doing so changed its meaning. In solving this task from their own standpoint, they naturally radicalized it, eventually imparting a revolutionary bias to the most bourgeois trade-union practices, a bias most of the non-intellectual leaders at first greatly resented. But there was another reason for this.

Listening to the intellectual, the workman is almost invariably conscious of an impassable gulf if not of downright distrust. In order to get hold of him and to compete with non-intellectual leaders, the intellectual is driven to courses entirely unnecessary for the latter who can afford to frown. Having no genuine authority and feeling always in danger of being unceremoniously told to mind his own business, he must flatter, promise and incite, nurse left wings and scowling minorities, sponsor doubtful or submarginal cases, appeal to fringe ends, profess himself ready to obey—in short, behave toward the masses as his predecessors behaved first toward their ecclesiastical superiors, later toward princes and other individual patrons, still later toward the collective master of bourgeois complexion. Thus, though intellectuals have not created the labor movement, they have yet worked it up into something that differs substantially from what it would be without them.

The social atmosphere, for the theory of which we have been gathering stones and mortar, explains why public policy grows more and more hostile to capitalist interests, eventually so much so as to refuse on principle to take account of the requirements of the capitalist engine and to become a serious impediment to its functioning. The intellectual group’s activities have however a relation to anti-capitalist policies that is more direct than what is implied in their share in verbalizing them. Intellectuals rarely enter professional politics and still more rarely conquer responsible office. But they staff political bureaus, write party pamphlets and speeches, act as secretaries and advisers, make the individual politician’s newspaper reputation which, though it is not everything, few men can afford to neglect.

In doing these things they to some extent impress their mentality on almost everything that is being done. The actual influence exerted varies greatly with the state of the political game from mere formulation to making a measure politically possible or impossible. But there is always plenty of scope for it. When we say that individual politicians and parties are exponents of class interests we are at best emphasizing one-half of the truth. The other half, just as important if not more so, comes into view when we consider that politics is a profession which evolves interests of its own—interests that may clash with as well as conform to the interests of the groups that a man or party “represents.”

Individual and party opinion is, more than anything else, sensitive to those factors in the political situation that directly affect the career or the standing of the individual or party. Some of these are controlled by the intellectual group in much the same sense as is the moral code of an epoch that exalts the cause of some interests and puts the cause of others tacitly out of court.

Finally, that social atmosphere or code of values affects not only policies—the spirit of legislation—but also administrative practice. But again there is also a more direct relation between the intellectual group and bureaucracy. The bureaucracies of Europe are of pre- and extra-capitalist origin. However much they may have changed in composition as the centuries rolled on, they never identified themselves wholly with the bourgeoisie, its interests or its scheme of values, and never saw much more in it than an asset to be managed in the interest of the monarch or of the nation. Except for inhibitions due to professional training and experience, they are therefore open to conversion by the modern intellectual with whom, through a similar education, they have much in common, while the tinge of gentility that in many cases used to raise a barrier has been fading away from the modern civil servant during the last decades. Moreover, in times of rapid expansion of the sphere of public administration, much of the additional personnel required has to be taken directly from the intellectual group—witness this country.

As a counterpoint, a sort of companion piece, see this analysis of the “Occupy” movement by Kenneth Anderson:

The OWS protestors are a revolt — a shrill, cri-de-coeur wail at the betrayal of class solidarity — of the lower tier New Class against the upper tier New Class. It was, after all, the upper tier New Class, the private-public finance consortium, that created the student loan business and inflated the bubble in which these lower tier would-be professionals borrowed the money. It’s a securitization machine, not so very different from the subprime mortgage machine. The asset bubble pops, but the upper tier New Class, having insulated itself and, as with subprime, having taken its cut upfront and passed the risk along, is still doing pretty well. It’s not populism versus the bankers so much as internecine warfare between two tiers of elites.

Read the whole thing.