Pension Solvency Again

I'm a great admirer of wonky liberal bloggers Matt Yglesias--and it is becoming clearer and clearer that John McCain is just gobsmackkingly ignorant of even the rudiments of public policy. Still, I don't know why Yglesias is getting his knickers all in a twist over the idea of a financially solvent pension system [Update: Ditto for this, with other links].

Run some numbers: Social Security benefits top out these days at somewhere around $20,000 pa. The average recipient collects for something like 18 years, starting at age 65. Assume (plucked out of the sky) an interest rate of 4 percent. To fund that pension, you would need a t=65 pot equal to about $253,000. To raise that money over a working lifetime--say, 35 years--you would need to deposit about $3,400 a year.

Fund a pension scheme according to these parameters and it is solvent, and perpetual. And rather innocuous. So, why don't we let it happen that way? I can think of two reasons. One, we don't trust people to do it on their own; we want to compel, or at least strongly nudge, them to do something of the sort, even if they are too weak-willed to do it on their own. And two, we want to raise money from the haves to take care of the have-nots.

Now, there may be good justifications for either of these two reasons--I happen to think there are, but we can cover that topic another day. The point is, that neither of these undercuts the basic principles of pension solvency.

Wonk note re numbers: You can get the basics in any first-year B school finance book. Or you can get them from Underbelly.

Yglesias on The Economist

Seems like everybody and his Aunt Maude is jumping on The Economist magazine (pardon, newspaper) this weekend. I feel no strong impulse to join the affray, not least because Matt Yglesias has said it well enough (link).

25,000 Christian Sects?

Yglesias and RBC have useful posts up about John Hagee, the fire-breathing San Antonio preacher who has endorsed John McCain. Extra points to Yglesias for situating Hagee’s much-touted “support” for Israel:

He argues that a strike against Iran will cause Arab nations to unite under Russia's leadership, as outlined in chapters 38 and 39 of the Book of Ezekiel, leading to an “inferno [that] will explode across the Middle East, plunging the world toward Armageddon.” During his appearance on Hinn's program at the end of last March, for example, the host enthused, “We are living in the last days. These are the most exciting days in church history,” but then went on to add, “We are facing now [the] most dangerous moment for America.” At one point, Hinn clapped his hands in delight and shouted, “Yes! Glory!” and then urged his viewers to donate money faster because he is running out of time to preach the gospel.

[“Hinn” is faith healer and televangelist Benny Hinn.] RBC remarks on how successful Christian politics has proven to be at bringing together “Christians” who are, historically, blood enemies (link).

All this reminded me of the assertion that there are 25,000 (or 22,000) Christian sects in the world, and to wonder whether they are all sending each other to hell, and if not, why not (Isn’t truth unique? Isn’t error error?). But wait—on what authority do I claim such multiplicity? Google “25,000 Christians” or “22,000 Christians” and you come up with plenty of hits, but no real baseline. The number—either one—actually sounds plausible to me, but is there any truth behind it, or are we all just making this up?

Pew's One-Dimensional Ideology Scale

Fascinating chart from the Pew Center (via Yglesias) on voter perceptions of the candidates:


There's so much one could do with this. Yes, I know it is "linear," but that is the way voters think--how else to evaluate a warmonger who likes dresses? How else explain Huckabee and Bush, at opposite poles on the likeability scale, huddled together on the same datapoint?

I'm particularly impressed by the demonstration that Republicans see Hillary as far more liberal than Democrats do. I assume it is a triumph of talk radio and talking-head TV, and pretty much a flat contradiction to Bruce Bartlett's argument that Bill Clinton was a much more fiscally responsible president than George Bush is (link; cf. link). But you can match it with the datum that they see Mitt Romney as pretty conservative: as I've said too many times, I think he is far too insincere for that, and that he will abandon his conservative allies when convenience dictates just as much as he will the liberal.

Yglesias says it is "it's interesting that all voters seem to classify the contenders almost entirely on the basis of cultural matters. " True in part, although I suppose if the voters went the whole way with that, they'd have Rudi at the far left end. And voters have a maddening way of crossing category lines: recall that McCain, perhaps the most hawkish of Republicans (but they are all hawkish)--McCain does best among Republicans most disaffected with the war.

Codger Watch: Why McCain Gets a Bye on "Hazy"

Yglesias is perplexed as to why McClain gets away with bloody murder on fact-check beat, while Mitt Romney other candidates get (at least sometimes) called to account. As McCain's age-mate (he is actually younger than I by a few months) I think I can offer an insight: he's a codger. I didn't say a "loveable" codger because the very idea is an oxymoron. But we (you) do tend to be a bit more forgiving of codgers than we do of ordinary responsible adults. Of course, we wouldn't actually want to elect a guy like that President. Oh, wait...

Yglesias Channels Buce!

Also Kleiman (link):

Mark Kleiman's with me that Mitt Romney would make the least-bad president of anyone in the field. Kevin Drum sort of agrees with us ... one thing a smart Republican apparatchik would want in a GOP president would be for that president to do a decent job and undue some of the damage Bush has done to the brand.

... The constant throughout Romney's career is a cautious, paint-by-numbers approach. He's running as a conservative right now, and that means that if he wins he'll govern as a conservative -- no use hoping for him to morph back into the moderate he was in 1994 or 2002. But that said, it seems very unlikely that he'd roll the dice on some hair-brained scheme if elected. He might do major harm, but I think it's relatively unlikely.

The whole piece also has some shrewd comments on McCain, and on Bush "cosnervatism."

And cf. here, here, and here.

Matt Yglesias and the Great Depantsing

Matt Yglesias has an uncharacteristically (for Matt) unsophisticated post up about the mortgage meltdown and the practice of banking (link). Matt puzzles over why the mortgage meltdown is creating such a pervasive problem. He discovers that the mortgage enterprises are, in some sense, like banks, and finds this insight, on the whole, comforting.

For most non-economist commentators, this probably draws a passing grade. But you might have expected ominicompetent Matt to realize that (a) there is no good, workable definition of what is a bank; and (b) correspondingly, everything is a bank, actually or potentially.

What’s a bank? The conventional old-style definition is that a bank is an entity that (a) takes deposits and (b) makes loans. Fair enough, but consider a life insurance company. It “takes deposits,” in the sense that we leave money on account with it for years at a time. It “makes loans,” in the sense that it tries to turn a profit with the money on account. And you could say that anyone “makes a loan” any time he extends credit. I read somewhere that Toyota isn’t a car company, it’s just a bank that happens to sell cars. At first blush, I assumed the quip meant only that Toyota was so choked with money it had to cook up ways in which to invest it. On second blush, it sank in on me that for Toyota—indeed for any car company, maybe for any big-ticket inventory seller—the installment credit side of the business may come to dominate, leaving the “inventory” side as some kind of a loss leader.

This is the kind of pitch banks make when they argue that they play on an unfair playing field—they are constrained by regulation, but others are not.

I’ve got a lot of sympathy with this argument, but there is an unsettling mirror image. That is: at the end of the day, still banks really are different from any other kind of enterprise. Banks are party of a system that runs on trust, and once trust ends, the whole system unravels. So banking is the only system in which one does not gain from the failure of one’s competitor. I’ve heard people describe it as the situation you get in a rugby scrum when somebody loses his pants: all the players mill around and make a racket while the unfortunate recovers his dignity. Then they give high fives all round and charge off again down field. I must say, I don’t envy Ben Bernanke tonight, as he tries to play “lender of last resort” (cf. Charles Kindleberger, passim (link)) for an entire galaxy. Is anyone strong enough to rectify the great depantsing. Anyone? Anyone?

For Your Dining Pleasure

From Yglesias:

Hugo Lindgren glosses Tyler Cowen's view on what makes for good cuisine: "The magic ingredient, he elaborates, is extreme income inequality, which ensures a large reservoir of cheap labor to grow and prepare the food, as well as a sufficient number of rich people who, being rich, must eat well."

I'd go a step further: I suspect a lot of NY restaurants could jack up prices an extra 15 percent if they had a supply of starving children pressing their noses against the window.

Pete Seeger: Worse than a Crime

Brad DeLong confesses to a guilty pleasure: Pete Seeger (link). But Brad seems discomfited: He learns that Dave Boaz recalls Seeger’s Stalinist past (link).

Boaz is right, but it’s worse than he realizes. I will play the old guy card here: I don’t remember the Hitler-Stalin pact, but I remember the Seeger with the Weavers from the 40s and Seeger solo from the 50s. I attended Seeger performances in little tiny halls where his long-necked banjo seemed to extend half way over the audience. I was enchanted by his banjo playing, thrilled by his energy and drive.. His “Wimaway” (back before Disney kidnapped it) was enough to knock me flat..

And as much as I loved the music, I always felt a creepy uneasiness at the Seeger schtick: it was sheer manipulation—no, worse, it was tacky down-market manipulation, vulgar Stalinism, proletarian art.

I grant there’s a complicated relationship between an artist and his art. At the same time that I was enchanted by Seeger’s “Tzena, Tzena,” I was dazzled by what Walter Gieseking could do with a Beethoven Sonata. It bothered me that Gieseking seemed to be a bit of a Nazi; but at least he didn’t get in my face about it. I could listen to the music and pretend that the politics wasn’t there. No such option with Seeger. He played his banjo with dazzling panache, but he played his audience with a lot of simplistic sermonizing about “the people” and “together” that was enough to make you gag. It was, among other things, a show of contempt—contempt for an audience that should have known better, but, sadly, perhaps deserved his contempt because they let him get away with it.

I grant in general that the 50s were a treacherous time in American politics, a time when it was almost impossible to get everything right. Who would have guessed that I would live long enough to think that accused wife-killer Dr. Sam Sheppard was probably innocent and Alger Hiss, almost certainly guilty? Seeger is no more than a bit player in that story and the sensible path might be just to remember the good stuff, and forget about the vulgar Stalinism. But I really wish he had stuck to what he was good at; Id’ rather not have to remember him as part of a mean, dishonest, thuggish lot. Paraphrasing a great man, it was worse than a crime, it was kitsch.

Fn.: Yglesias doesn’t even like the music (link).

Books Do Furnish a Room

I knew a lawyer who represented a Ferrari dealer. When the customer didn't pay, they had to send out the repossessor. But it turns out that a Ferrari is easy to find, because the customer never takes it anywhere: it spends almost all its life locked up in an air-conditioned garage.

I thought of the Ferrari this morning when I read Matt Yglesias, who plucks a line that I missed out of today's NYT (link):

[I]t is impossible to put together a serious library on almost any subject for less than several hundred thousand dollars.

Yglesias good-naturedly suggests that well, actually, maybe you can put together a serious library for less than several hundred thousand dollars, which is surely true, but he might have pursued the context. The Times appears to be quoting this guy, whose website marquees "Modern Literary First Editions/Fine Books & Manuscripts Bought & Sold." So when he says "books," he is talking "decorations," or maybe even more likely "status symbols" in the sense of goodies you use to awe or humiliate lesser mortals. That's the Ferrari tie: You wouldn't actually read one of these books any more than you would drive the Ferrari--you'd just haul them out on selected occasions to make the rest of the world feel like spit.

Even as recontextualized, I suspect that Lopez may be guilty of just a wee bit of marketing--he is, after all, a dealer. Reading his own on-line catalog (which, I assume, should be filed as "fiction"), I find he has on offer a Raymond Carver for $175 and signed E.L. Doctorow for $25 (eeuw, that hurts).

Yglesias and his commentators are having a good time speculating on how they might in fact assemble a good collection for less than several hundred thousand dollars, but they might want to turn the matter around: could you spend that much if you had to, without having large chunk of change left over? Maybe if you threw in a climate-controlled bomb shelter for storage. Or an autographed first-edition Old Testament. Or hey, just buy mine. Free shipping on all orders.

Meta note: observe that this is my second car repossession post of the day.