Relevant and even prescient commentary on news, politics and the economy.

State and local government austerity is over…

Bill McBride at Calculated Risk points us to some apparent better news State and local government austerity is over

I think most of the recession related state and local government layoffs are over, and it appears state and local government employment has bottomed.  Of course Federal government layoffs are ongoing, but it appears state and local government austerity is over (in the aggregate).

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2008… Let me be clear: I will not do either. Candidate Obama

Via Business Insider:

While campaigning for President in 2008, candidate Barack Obama promised to not alter the way that cost of living adjustments were calculated for Social Security, a policy that is now a key feature of his 2014 White House budget.

Addressing the AARP in September 2008, then-Senator Obama drew a major contrast between his policies and those of his Republican rival John McCain:

John McCain’s campaign has gone even further, suggesting that best answer for the growing pressures on Social Security might be to cut cost of living adjustments or raise the retirement age. Let me be clear: I will not do either.

But things have evidently changed. A critical element of the President’s new budget involves cutting cost of living adjustments through the adoption of chained CPI — a policy that will result in compounding benefit cuts for current and future retirees:

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Social Security and Me: Ayn Rand, the Four Freedoms, the Road to Serfdom and the Leninist Strategy

What the —! Well it occured to me, and not for the first time, that a lot of people really don’t understand my Social Security project and particularly what even some of my friends and allies think is a narrow focus on the nuts, bolts and numbers of Social Security financial reporting. It seems to them to often miss the point entirely. But there is method to my madness (although all madmen claim the same) although that method is based on an apparent paradox: the battle over Social Security is NOT about numbers and in most respects never has been. So why focus on them? And why set up a so-called game called ‘Total Security on Elsinore’ that seeks to abstract Social Security from all societal and economic context? Well the clues are in the post title and hopefully will be explicated below the fold.

But fair warning. There will be a lot about “Me” here. And for people who find me and my writing some combination of irritating, innumerate, illogical, intemperate, and worst of all interminable this probably isn’t the post for you. For others, friends, allies, and foes —–

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Total Security on Planet Elsinore: a Social Security Thought Game (Part 1)

Lets play a game. The ultimate point of the game is to understand certain aspects of Social Security but to keep complications from creeping in too early (wait for later parts) we are going to start with simple game play on a board far, far away. In fact on distant yet oddly Earth-like Planet Elsinore.

Setting the map. Elsinore has two large land masses named in order of discovery by the dominant tribe as Old Elsinore and New Elsinore. Elsinoreans are much like Earthlings except that they are universally numerate and logical (which makes them not much like us at all). The land mass of New Elsinore is shaped like an hourglass which has led our logical (if unimaginative) Elsinoreans to dub them North New Elsinore and South New Elsinore. Two centuries ago certain inhabitants of North New Elsinore established a democratic republican polity under the name of the United States of Elsinore. (Which name cheesed off every other inhabitant until the warlike and heavily armed USErs explained to them ‘Shut UP’).

Any way the citizens of what they liked to call the Good Ol’ USE established a program a hundred years back designed to deliver a minimum income to retired citizens of USE which they called Total Security or TS. This program is financed by an individual income tax starting from the first dollar with no exceptions, exemptions, deductions or caps at a rate of 10%. The overseers of TS were quite naturally known as the TS-tees and among other things were mandated to report on the finances current and projected of TS on an annual basis. So that is the map.

Game One and Special Rule One.
All citizens of the USE agree that under no circumstances should the current schedule of TS benefits be cut either now or in the future.

Game One Scenario. The TS-Tees report that Total Security faces a shortfall starting in Year 20 that would require a 20% cut in benefits overnight. This shortfall amounts to 2 percentage points of current income. This could be backfilled by an immediate boost in dedicated income tax from 10 to 12%, itself a 20% increase in tax. Or it could be phased in over the 20 years in a way that reduced the sticker shock up front but by deferring portions of the fix to future years would mean a higher rate in the end, how much depending on the phasing schedule.

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Ripping Off College Students’ Economic Future

Previously, I had written on Fair Market Value and its use by the CBO’s Douglas Elmendorf to rate the risk of Student Loans as advocated by both The New America Foundation and the Heritage Foundation. A rebuttal answer to a partisan CBO, the right-leaning New America Foundation, and the conservative Heritage Foundation on the usage of Fair Market Valuation methodology in the same manner as what I would have used it for to rate the return on a piece of capital equipment is simple. It is inappropriate for student Loans as there is little or no risk to loaning students money which can not be discharged through bankruptcy. The news media has been pandering to students promoting  a generational war by advocating the theft of student’s futures by such programs as Social Security, Medicare, Medicaid, etc. The Tom Friedmans, James Freemans, and others suggest baby boomers are ripping-off the X, Y, and Z generations with these programs.  From the well-heeled segment and do not have to work anymore 1-percenter population, we find Stan Druckenmiller, Pete Peterson, the Koch brothers, etc. spending portions of their $billions advocating the discontinuance of Social Security to save the country, students, and themselves. Some are taking to college campuses with false data and advising students to protest the rip-off of their futures in a Days of Rage manner. All tend to ignore the real threat to students and their future. The threat is not likely to come from Social Security, Medicare, etc.

What is threatening the future wealth and income of college students is the increasing debt taken on by students seeking the education necessary to have a chance in a global economy where investments are seeking fewer Labor intensive opportunities.  The increased funding necessary to go to college is the result of decreased governmental funding of schools, declining or stagnant household incomes, financial strategies delineating the increased risk of student loans  (CBO, The New America Foundation, Heritage Foundation, etc.), and the increased cost of attending colleges and universities (which as Alan Collinge of Student Loan Justice Org. states cost increases have outstripped CPI and even Healthcare) .

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The Map Office Still Calling: Israeli capabilities for striking Iran

Back in 2009 I put up a post with the title Joe Biden? The Map Office is Calling! after Joe had apparently given a green light to Israel to bomb Iranian nuclear facilities. In it I pointed to a study by Toukan and Cordesman Study on a Possible Israeli Strike on Iran’s Nuclear Development Facilities . On my reading the authors, without explicitly saying as much, concluded that such a unilateral strike was impossible simply on a logistical basis, while Israel had the offensive punch to deliver such a strike it just didn’t have the in-air fuel supply capacity to get the planes safelyback out of Iranian airspace and returned to their bases. You can read the study for yourself and my take on it but the IIRC longish comment thread it sparked didn’t survive the transition to Word Press from Blogger.

Be that as it may the talk of Israel finally running out of patience with the U.S. and taking out Iran’s nuclear capabiity on its own still persists today. Leading me to wonder if Israel had in the intervening years actually beefed up its in-air refueling capability in a way that would allow it to successfully carry out this strike today. And through the miracle of Google I found what is essentially an September 2012 update by Toukan and Cordesman Analyzing the Impact of Preventive Strikes Against Iran’s Nuclear Facilities Like the first piece this latest study contains an amazing wealth of detail on both the Israeli and Iranian Order of Battle for both a conventional aerial attack or one launched by ballistic missiles as well as detailed information on the nuclear programs both military and civilian for both parties. so it is well worth reading for that alone.

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How to Sound Insane by Talking Like a Bi Partisan Expert on Social Security

by Dale Coberly

How to Sound Insane by
Talking Like a Bi Partisan Expert
on Social Security

I apologize for the next couple of paragraphs because they sound overworked and insane,  but that’s what happens when you try to illustrate the way Washington talks about Social Security.

Try to imagine you have to buy a medicine that will save your life. You need 100 pills, and the doctor firmly said, “Finish the Medicine…  if you stop too soon the infection will come back worse and you will die.”

So you go to the pharmacy and the pharmacist tells you the price of the medicine has gone up and your insurance will only pay for 98 pills.   You say, “Okay, I’ll pay for the last two pills myself.”

But the pharmacist tells you,  “I can’t let you do that.  I can only give you the number of pills your insurance will pay for.”

This is what the “debate” about Social Security amounts to:   You are going to need Social Security when you get old.  The cost is going to go up by then about two percent.   Washington has decided they can’t let you pay the extra cost. The only solution they are willing to consider is cutting the amount you will get… to less than it will take to keep you alive.

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Another Congressman and stunning subsidies to his district

AB had a post on Congressman Steve King, an advocate of austerity and shut down yet received $9.17 billion in subsidies 1995-2012 for his district without offering cut backs for his district to share the sacrifices needed for austerity.

Brad DeLong points us to another stunning set of subsidies, this example for Congressman Tim Huelskamp:

Halloween on the Prairie: Congressman Tim Huelskamp Is the Most Frightening Thing I Will See All DayCongressman Tim Huelskamp: “I’m from a district that pretty much ignores Washington. If you say government is going to shut down, they say, ‘OK, which part can we shut down?’”   Farm subsidies! Shut down farm subsidies! Move farm subsidies from the “mandatory entitlements” to the “discretionary appropriations” side of the budget, and Congressman Huelskamp would switch his attachment to government shutdowns with the force of twenty mules! In an average year, Congressman Huelskamp’s First District collects roughly $1.5 billion in farm commodity and crop instance subsidies. There are about 20,000 farmers in the First District. You do the math: That’s $75,000/year per farmer in the district.

(ht reader rjs)

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Sunday solar hybrid eclipse…

…hybrid eclipse of Nov. 3 will be a special case: here the eclipse starts out as annular, then after only 15-seconds it will transition to a total eclipse, and then it remains total up to the very end of the eclipse path. The last time this happened was on Nov. 20, 1854 and the next such case after 2013 will occur on Oct. 17, 2172.

See Space.com. Clouds here in Boston.

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Investors warn moves to curb climate change will hit fuel demand

From the Financial Times (pay wall I believe):

Investors warn moves to curb climate change will hit fuel demand

October 24, 2013
By Ed Crooks
Investors managing assets worth about $3tn have written to the world’s largest oil, gas and coal companies, calling on them to prepare for a possible decline in demand for fossil fuels caused by policies to fight the threat of climate change.

The letters, signed by 72 investors including several US state pension systems and fund managers such as Scottish Widows and Aviva, warn the companies that they may be investing in production capacity that will never be used.

The correspondence reflects growing concern among many investors about the prospect that fossil fuel reserves will be “stranded assets”, which cannot be extracted and used without causing dangerous global warming. The letters were sent to 45 companies, including large oil and gas producers such as ExxonMobil, Royal Dutch Shell and BP, and mining groups including BHP Billiton, Rio Tinto and Peabody Energy.

They urge the companies to carry out a “risk assessment” of the consequences of a global move to cut greenhouse gas emissions by 80 per cent by 2050, a reduction that has been estimated as giving a reasonable chance of limiting the rise in global temperatures to an acceptable 2°C.

The investors asked the companies to carry out the risk assessment in time for their 2014 annual meetings, generally in the first half of
next year, and to publish details about their conclusions, subject to the constraints of commercial confidentiality. About 30 companies have now replied to the letter, Ceres said, some rejecting the idea outright, some saying they planned to comply…

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