Friday, August 28, 2009

Can Employee Benefits Rise Again?

My article "Can Employee Benefits Rise Again?" appears in the August 20 AICPA Career Insider:

>Recent news has been discouraging. The Society for Human Resource Management has featured an article about Watson Wyatt’s study of Fortune 1000 firms that have frozen (i.e., eliminated benefit accruals) their defined benefit (DB) pension plans. Watson-Wyatt found that out of 607 pension plan sponsors in the Fortune 1000 (a reduction from 20 years ago), 190 have frozen their benefit accruals, up from 169 last year. Freezes peaked in 2007 for firms in the Fortune 1000 for at least six years. Only 42 percent of Fortune 1000 firms accrue benefits in DB pension plans.

At the same time, some proponents of private plans are concerned about President Obama’s proposal for a national health plan. While the proposal that was reported out of the House Energy and Commerce Committee did not suggest supersession of employer-sponsored plans (see the The Wall Street Journal, August 1, 2009), some might construe it as a first step. In the workers’ compensation field, public plans like New York’s State Insurance Fund have long competed, often unsuccessfully, with private plans. Nevertheless, the establishment of a health plan of last resort would suggest at least partial failure of the private system.

Read the whole thing here.

Wednesday, August 26, 2009

Ideology or Economic Interest? Ideology and Academe

Earlier this decade Stanley Rothman and his associates found that the vast majority of university professors are registered Democrats and that the imbalance is greater than had been previously thought. Rather than try to better understand the finding, the American Association of University Professors attempted to smear the research. The finding is unsurprising to anyone who has spent five minutes at college. Not only are university professors "liberal" social democrats but they are virtually universally so. Moreover, there is a vocal minority that is overtly communist. My faculty union, the Professional Staff Congress, is dominated by communist cranks who would be happy to see a repeat of the blood red mass murder that occurred under Chairman Mao and about which the left continually lies.

At the height of the recent discussion about the Bush-Obama "bail out", New York University featured "white papers" by 18 of its economists on its website. I teach at NYU's Stern School of Business as an adjunct and I think very highly of its students, faculty and administration. It is the best run place at which I have worked. My only complaint is that it's hard to find students who don't deserve an "A" and the business school only lets me give one third A's. It is indicative, though, that all 18 of the commentators favored massive wealth transfers to the super rich. None questioned the wisdom of the Bush-Obama policy of socialism for the privileged.

I noticed last night when I was looking for Ayn Rand tapes on Youtube that Michael Moore is coming out with a movie on the bail out in which he is more than willing to take Wall Street to task. There seems to be a division between the populist left represented by Moore and the academic left. While 18 economists are willing to do somersaults to protect Wall Street's interests, Moore lacks the economists' economic motives. No Wall Streeter has contributed to Moore's movies.

While nearly 100% of colleges and universities receive financial support from the public, nearly 100% of university professors support an expansive state that would include significant benefits to universities. The relationship is direct. In the past, only those wealthy enough to enjoy free time to devote to scientific discovery could participate in intellectual life; and only those wealthy enough could enjoy a life of leisure. Under the social democratic university professors can devote their lives to scientific discovery and/or enjoy a life of leisure. Therefore, there is little likelihood that university professors would (a) oppose the inheritance tax or (b) support anything other than an expansion of the state. If expansion of the state means expansion of support to the super rich, then that becomes part of the professorial game plan. Sadly, the chief voice criticizing the bailout is the corpulent and uncouth Mr. Moore.

Tuesday, August 25, 2009

Democratic Paradox

The Democrats have an interesting plan. Faced with the failure of 90 years of Progressivism and New Deal redistribution; a stagnant real hourly wage; a failed, monopolistic investment and commercial banking system that is the product of New Deal social democracy; an international monetary system that is a Rube Goldberg device fastened to a casino; wasteful real estate and stock market bubbles; and cities that have survived by gutting their economic identities and riding the crest of the same stock and real estate bubbles, the Democrats aim to further restrict economic opportunity; raise taxes; smash economic innovation and impoverish future generations. The Democratic paradox is this: when faced with economic decline, resolve it by deepening the decline. They did it during the depression, causing the 1930s to constitute a much longer correction than any before the existence of the Fed, social democratic programs and Keynesian monetary policy. They aim to do it now.

Cure decline by deepening the decline. The Democratic paradox.

Monday, August 24, 2009

Two Cheers for The Federal Reserve Transparency Act

Richard Cooper has blogged about Congressman Ron Paul's Federal Reserve Transparency Act of 2009 that has been cosponsored by 282 Congressmen and has been introduced into the Senate as S 604. Let us see if the Senate will play ping pong with this useful bill. Cooper links to the text of the bill on the Government Track site.

The bill would amend Section 714 of Title 31 of the United States Code to require that the audit of the Fed be made available to Congress. It reads:

>‘(1) IN GENERAL- The audit of the Board of Governors of the Federal Reserve System and the Federal reserve banks under subsection (b) shall be completed before the end of 2010...

‘(A) REQUIRED- A report on the audit referred to in paragraph (1) shall be submitted by the Comptroller General to the Congress before the end of the 90-day period beginning on the date on which such audit is completed and made available to the Speaker of the House, the majority and minority leaders of the House of Representatives, the majority and minority leaders of the Senate, the Chairman and Ranking Member of the committee and each subcommittee of jurisdiction in the House of Representatives and the Senate, and any other Member of Congress who requests it.

‘(B) CONTENTS- The report under subparagraph (A) shall include a detailed description of the findings and conclusion of the Comptroller General with respect to the audit that is the subject of the report, together with such recommendations for legislative or administrative action as the Comptroller General may determine to be appropriate.’.

The Fed ought to be abolished, not audited. Moreover, an audit will fail to reveal information to the public because Congress is incapable of debating monetary issues intelligently and there is no American news media. Hence, debate about monetary policy in 2009 is on too low an intellectual level to influence policy. In the 19th century Americans had elementary school educations and could understand monetary policy perfectly well. Today, with one fourth of the country graduating from college, the most elementary economic concepts are far too difficult for Congress to grasp.

In other words, while the bill won't hurt, it won't improve the education of Congress or the public (since the American news media is dead their education is of no concern). Revealing monetary data to Congressional idiots will not change Congress's idiocratic nature.

However, the bill cannot hurt if made law, and it is a step in the right direction.

Sunday, August 23, 2009

Power and Rationality

Decentralization enforces pragmatism. In a competitive economy markets test firms. Decentralization creates competition and so the possibility of failure. Without failure there is no pragmatism, for experiments fail more often than they succeed.

Centralization presupposes the ability of the rational mind to solve problems. It denigrates or neglects experimentation, even as it uses the rhetoric of science as its rationale. Without trial and error there is no science and no reason. There is no such thing as a priori expertise. Progressivism claims to be a movement of experts, but its claims are self contradictory. Progressivism forestalls experimentation by centralizing decisions. Progressivism is (a) ideological and (b) aims to facilitate the operation of special interests. It uses the rhetoric of "conscience" rooted in Christianity to justify special interest brokerage.

The use of centralization to facilitate special interests goes back to the Romans. The institution of free bread to the proletarians began with the Republic, and Septimius Severus increased the welfare benefits as well as special benefits to the military two centuries later. Septimius's escalation of welfare in Rome preceded Rome's fall by over a century. The Romans justified centralization of power in part in terms of welfare benefits to Roman citizens, but the biggest beneficiaries were businesses that catered to the Roman state, the military industrial complex.

Like the ancient Romans, Progressivism re-distributes wealth using claims of social welfare. However, its project is complicated by technological and scientific discovery that evolved out of Hellenic and barbaric decentralization. In order to coopt the source of progress, Progressivism needs to claim that it offers a superior method of scientific advance. It develops this claim through the ritualization and control of knowledge in universities. It also develops methodologies of allocating the "right" to think through IQ and other standardized tests that have validity. Such validity is partially related to the ability to invent or to create economic value, but to a greater degree to the ability to accomplish tasks within parameters, e.g., to perform a job well. IQ tests have been validated with respect to job performance but NOT with respect to entrepreneurship. Studies of millionaires do NOT find that they have extraordinarily high IQs, merely above average. Rather, they have moral, time preference and interpersonal skill characteristics that facilitate acquisition of wealth.

Development of methods of wealth creation is at part dependent upon the characteristics that IQ measures, but far from exclusively so. Progressivism limits access to universities based on IQ, then claims that universities are the chief source of wealth creation. National wealth is allocated to university-approved projects, specifically finance, legal and banking interests whose ranks are dominated by university graduates. Central planners come up with failed ideas, but ones with good rationales. IQ facilitates the spinning of manipulative explanations but without decentralization, experimentation and failure characteristic of markets IQ is not capable of innovation.

The result is a society that fixates on allocation of human resources through standardized tests and then subsidizes those with the highest IQs through government. Elements of risk are included. The economy becomes a casino, entry to which is made possible through admission to an elite university. Power rather than market and rituals associated with rationality rather than reason determine allocation of wealth. The system is self perpetuating and susceptible to manipulation. It is a system characteristic of decline.

Gengler to MacAskill: Resign!

Professor Chuck Gengler of Baruch College has written the following letter to Kenny MacAskill, the Scottish Justice Minister responsible for freeing terrorist and murderer Abdelbaset Ali al-Megrahi, who was responsible for the Lockerbie bomb that killed 270 people.

Al Qaeda murdered Gengler's brother on 9/11.

MacCaskill is quoted by the BBC as saying "the country's justice system was based on both judgement and compassion". Instead, I would say that Mr. MacAskill is a psychopath and Scotland's justice system is a bloodthirsty joke.

>Cc: "Mitchell Langbert"
>Sent: Saturday, August 22, 2009 7:41 PM
>Subject: Please resign in disgrace

>>Dear Sir.

>>My brother was killed in a terrorist attack on Sept. 11, 2001. I understand how >>families feel regarding the issue. While you may hold up a few idiots who support >>your decision, it is not the majority of us. This horrible excuse for a human >>being that you released was already shown ample compassion by not being put to >>death. Being allowed to live was insult enough to the families of his victims, >>but your actions are incomprehensible. We now have a man hailed as a hero for >>killing hundreds of people in a cowardly bombing. through your idiotic act, you >>have created a role model for others to follow in his footsteps. I could go on, >>but what is the point? You are too stupid to >>understand. Resign and hide your >>head in shame.

>>Charles Gengler, PhD