By Michael Hudson, a research professor of Economics at University of Missouri, Kansas City, and a research associate at the Levy Economics Institute of Bard College. His latest book is “The Bubble and Beyond.”
On the Senate’s last day in session in December, it approved the government’s $1.1 trillion budget for coming fiscal year.
Few people realize how radical the new U.S. budget law was. Budget laws are supposed to decide simply what to fund and what to cut. A budget is not supposed to make new law, or to rewrite the law. But that is what happened, and it was radical.
Wall Street’s representatives in Congress – the Democratic leadership as well as Republicans – took the opportunity to create an artificial crisis. The press called this “holding the government hostage.” The House – backed by the Senate – said that it would shut the government down at some future date if two basic laws were not changed.
Most of the attention has been paid to Elizabeth Warren’s eloquent attack on the government guaranteeing bank trades in derivatives. Written by Citigroup lobbyists, this puts taxpayer funds behind future bank bailouts if banks make more bad bets on complex financial derivatives, such as packaged junk mortgage loans.
Critics have focused on how there must be a loser for every winner in a derivatives contract. The problem is that if banks lose, the government will bail them out just as it did in 2008.
Less attention has been paid to what happens if banks win. They will win largely in making bets against pension funds. Indeed, pension funds have not been treated well by Wall Street in recent years.
They are in a bind. Pension funds will fall further and further behind what theyneed to pay retirees if they do not make the impossibly high returns of 8.5%. The guiding philosophy of pension funds has been that instead of making employers pay enough to cover the pensions they have promised, funds can make money purely financially – by Wall Street sharpies.
The problem is that safe interest rates today are less than 1% for Treasury bonds.
Everyithing else – stocks, corporate bonds, and hedge fund derivatives – are much more risky. And when Goldman Sachs, or JPMorgan Chase draw up a derivative for a client, their aim is to make money for themselves, not for the client.
So pension funds have been at the losing end. Most funds would have done better simply to turn their money over to Vanguard in an indexed fund, and saved management fees.
At the state and local levels, pension funds in New Jersey and other states threaten to go the way of Detroit pension funds – to be cut back so that bondholders can be paid.
Many corporate pension funds also are behind, because companies are using their record profits to pay higher dividends and to buy back their stocks to create price gains for speculators.
But the funds most under attack are union pension funds. These are the funds that Congress has gone after. The fight is not merely to scale back pension funds – and avoid the government’s Pension Benefit Guarantee Corp (PBGC) being bailed out – but to break the power of unions to attract members or to defend them.
The Congressional budget act states that pension funds with more than one employer – such s construction industry funds, teamster funds for truckers and public service workers funds – can be scaled back in order to pay Wall Street creditors.
Labor now is told to go to the back of the line behind Wall Street. If the economy is too debt strapped to pay everyone what is owed, then the new motto is Big Fish Eat Little Fish.
Wall Street is eating the pension funds.
This goes hand in hand with Obama’s fight to scale back Social Security and, ultimately, to privatize it. Now that Republicans are in a majority of both the House and Senate, the Democrats will be able to take an anti-labor position and then try to blame it on Republicans.
Yet Democrats themselves were the leading advocates of the anti-labor, anti-pension fund policy. This special “rider” to the budget bill was known last spring to the House Budget Committee. Yet something tricky happened: While the committee approved the anti-labor pension rule, no record was taken of which members and which party voted for the radical change, and who opposed it.
For instance, Marcy Kaptur, who replaced Dennis Kucinich from Cleveland after the Democrats helped the Republicans gerrymander his district, said that she should remember who voted which way on the House Appropriations Committee she served on.
So this is the problem: the supposedly liberal Democrats are in the lead for scaling back pension funding, Social Security and labor protection in general.
Here’s an indication of how bad the situation is. Pension funds – union pension funds as well as corporate pension funds – are supposed to be backed up by the PBGC. But that agency has been headed by a former Lazard Freres investment banker, Joshua Gotbaum. He’s now at the Democratic Party’s pro-Wall Street think tank to refine their anti-pension policies. He has explained to the press that he wants to “save” pensions – by scaling them back.
This is the new Orwellian anti-labor rhetoric. “Saving” pensions means reducing what workers were promised – back when they negotiated lower wage gains in exchange for greater retirement security.
The new law permits pension plan trustees – often Wall Street financiers – to cut benefits without having to ask the PBGC to take over the plan. This “balances the federal budget” by saving the bailout funds for Wall Street, not for labor.
The problem is that the Employee Retirement Income Security Act (ERISA) of 1974 — vastly underpriced the contributions that employers would have to make in order to pay retirees. The problem was designed to fail from the beginning, because Wall Street and corporate lobbyists fought to underfund the program. They knew from the very beginning that pensions would fail in the end.
Yet at the same time, the law stated that benefits already earned by workers cannot be cut back. But last December’s Congressional budgetary coup d’état ruled that now, employee retirement benefits can indeed be cut back. Retiree claims are not treated on the same level as financial debts to Wall Street investors. They are sent to the bottom of the line of claimants.
Their strategy is basically Malthusian: to blame the pension problem on the fact that America is de-industrializing, leaving not enough new union members to pay the dues that are necessary to pay retirees. This is because the pensions were designed to be a Ponzi scheme from the outset – needing new contributors to pay the early entrants.
This is of course the argument that President Obama is making regarding the need to cut back Social Security too.
This turns out to be the big picture at work for the next two years. Outside of Wall Street, the economy is not really growing. Obama is escalating military spending in his heating-up confrontation with Russia and China, and that will take a large part of the budget. More bailouts and subsidies for Wall Street over their derivatives bets – the rule that Senator Warren criticized – will eat up more government revenue.
So something must give – and the PBGC is one of the designated victims. The aim is to avoid government help for pension funds in arrears – and nearly all funds are in arrears, because of the basically malstructured idea of making moneyfinancially instead of helping the economy actually grow by investing to produce more goods and services and raise living standards.
Congress has just legislated the right to scale back pension funds if they’re managed by labor unions, e.g. on multi-employer contributors. This will hit blue collar labor the hardest, especially unionized building superintendents, and service workers.
Once this is done, the idea of rolling back pensions can spread to other kinds of pension funds besides union funds. State and localpensions, corporate pensions and even insurance company annuities can be cut back.
And the great aim at the end is to privatize Social Security. Scaling back labor union and corporate pension funds will enable Wall Street propagandists to come out and say, “See, the only way you can be safe is to have your own private accounts, and manage your own money.”
The problem with this approach is that “managing our own money” turns out to be deciding which Wall Street firm is going to manage it – and of course, they manage it in their own interest first and foremost. They do this by raking high management fees that keep most of the returns for their own salaries and bonuses. In the end, the place their clients funds in bad bets.
The great argument for having Wall Street manage pension funds instead of labor union economists or their own people is that the mafia is strong in many unions. That’s indeed the case. In 1982 a federal consent degree stripped the Teamsters of its power to control its investments. The assumption was that if labor unions are crooked, then Wall Street must be more honest, is absurd. It’s basically one set of financial predators against another set.
Here’s how Prudential Insurance became notorious for ripping off the funds of clients it managed, for instance. It might make two bets on a given day: one, that a stock or bond would go up, and two that itwould go down. At the end of the day it would put the winning bet in its own account, and the losing bet in the account of its clients.
This is how crooked commodity traders have worked for many decades. In Ghana, for instance, the cocoa commission traders would place two bets: one, that cocoa prices would rise, and two, that they would fall.They kept the winning bet for themselves or their family members; the losing bet would be placed on the government’s balance sheet.
In a nutshell, this is how Wall Street has been treating pension funds. This is why Orange County, California, sued Wall Street, and why other cities have sued Wall Street firms over mismanagement that have led to huge losses for their funds – and super gains for Wall Street at the other end of these trades. The idea of “fiduciary responsibility” is no longer enforced, now that Obama’ Justice Department has made it clear that it is not going to charge large Wall Street banks and their brokerage arms with criminal fraud. The gates are now wide open for such fraud, as Bill Black has described on your show.
With this in mind, now let’s go back to the new Congressional budget law. It gives priority to debts owed to Wall Street; debts to labor now will go to the back of the line, and be scaled down so as to pay corporate raiders and banks.
The first great test case is expected to be the Teamsters’ Central States Fund. The rationale for cutting back pensions for drivers is that in 1980 it had four employees for every retiree. Today, it has just one driver for every five retirees. How can such a plan succeed?
The normal answer would be, by turning to the PBGC.
But let’s look more closely at the alleged source of the problem. It’s not just that there are so many fewer employees per retiree. The Teamsters Central States Fund is a prime example of Wall Street mismanagement. Goldman Sachs, Northern Trust and other firms make the decisions, not the Fund’s own board. A recent report has found that “Roughly a third of the pension system’s shortfalls — or almost $9 billion – can be traced to investment losses accrued during the financial industry’s 2008 collapse. These losses were in addition to more than $250 million in fees paid by the plan to financial firms in just the last 5 years.”
Obviously there is as much conflict of interest at work in letting Wall Street sharpies manage pension funds as there is in lettingMafiosi rip them off.
The important thing is that the PBGC has been as lax in oversight as the Federal Reserve has been lax in overseeing the banking system. But whereas the Fed then bailed out the banks in 2008 on the ground that they were systemically necessary for the economy to function, no such assumption is being made with regard to labor’s pensions.
It seems part of a long-term strategy to cut back pensions, privatize them into individual accounts managed by Wall Street investment banks and insurance companies, and then to privatize Social Security.
This is part of the strategy to use the demand for budgetary balance to privatize the nations’ infrastructure too as it falls apart – on the ground that the government is broke, and cannot raise taxes on the rich or simply print the money itself to fuel economic growth.
It looks like Greece may be the test case for where the American economy is heading.
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Question: will government employees, exempt from Obamacare, also be exempt from pension scale backs? i read a post somewhere that people will support government pension scale backs b/c they find them undeserving of their baked-in ‘securities’…not considering they will be next.
My dad loves what I do and I support my parents financially because they didn’t have a job that gave them a pension. Marilyn Manson (lawd help us)
Federal employees are “exempt” from Obamacare only in the sense that they have health insurance provided by their employer as do most white collar types who work for large employers. Workers pay about 1/3 of the premium and the govt. pays the rest. I’m not sure how this compares to other large employers.
Federal pensions were cut last year and the savings used to meet sequestration targets. Many expect all benefits to be under attack in the new Congress. Here is a good article about the current climate.
http://www.pionline.com/article/20141117/ONLINE/141119909/federal-retirement-benefits-likely-target-for-gop
It occurred to me that you might be thinking of Congressional staff and members as being exempt from Obamacare. In the law there is language that forces members and staff out of FEHB (federal health insurance program) and onto the exchange to purchase health insurance. They are the only federal employees treated this way and it was a blatantly political ploy. The language was quite confusing about who exactly was covered and how to treat the employer subsidy the staff currently receive. They make too much to qualify for subsidies under Obamacare. I think it ended up that Members and their office staff must use the exchange but that each committee chair can decide if their committee staff are covered and somehow those who must switch get their existing subsidy under FEHB applied to their premiums on the exchange. At least that is how I remember it was sorted out.
The statement “The guiding philosophy of pension funds has been that instead of making employers pay enough to cover the pensions they have promised…” is thrown in there so casually as if to say it’s no big deal. However, the numbers tell a different story…
To properly fund pensions over the course of a lifetime, taxpayers are being asked to contribute $1.50-2.25 for every $1.00 the employee contributes. In other words, if a teacher is contributing 9% of her salary, the taxpayer must put in 15-20% match to cover the employer portion. In the private sector, this equates to 6.2% SS (in which the payouts would be much smaller than a pension) plus a 14% (!!!) match of a 401k. This doubles/triples what the most successful companies provide for their employees. This is simply not sustainable.
Make no mistake…these banks alone should be held accountable for any risky trades they make, not the taxpayer. But to casually make statements pointing to the taxpayer to simply pony up for an unsustainable and unfair (to the taxpayer) system without some sort of pension reform is a naive viewpoint. The employEE contribution rates, across ALL public sectors, have simply not kept up with longer lifespans, increased salaries, end of career pension spiking, etc. A $1 for $1 match would right the ship rather quickly AND provide a benefit that still exceeds anything the private sector has to offer.
This “teacher contributes” versus “employee contributes” assumes a 401 (k) model. That is not how these pensions were negotiated or structured.
And using a private sector model as the benchmark and declaring it to be sacrosanct, which is what you do by implication, is also spurious. Corporations are earning record profit share of GDP. Depending on how you measure it, it’s 11% or 12%. No less than Warren Buffett declared a level over 6% to be unsustainable. How much goes to pensions and other labor compensation v. capitalists is a matter of social arrangements as to how you divide the pie. It has bupkis to do with “sustainability”.
People negotiated pension benefits as salary in the form of deferred compensation. If you want to cut that, you might as well default on bonds as well. It’s economically equivalent.
Now having said that, by virtue of decades of underfunding (which in many cases was done deliberately as opposed to buying into overly-optimistic prevailing return assumptions in a period of prolonged disinflation, which led financial asset prices to show better returns relative to GDP than they would in a period of steady inflation, see massively underfunded New Jersey as the poster child for that, with the decision made on Christine Todd Whitman’s watch), most public and private defined benefit pensions are in a deep hole. On the private side, that has been made worse by private equity, which uses co-investments to get its ownership stake below 80% so as to escape PBGC liability when companies go bankrupt. Shortfalls will be covered in two ways: defaults on defined benefits and coversion to defined contribution, and bail-outs by PBGC of a portion of commitments. PBGC is not funded by taxpayers, it is funded by government spending, which does not require taxation (Federal taxation is to neutralize the potential inflationary effect of excessive deficit spending).
To the taxpayer, “teacher contributes” versus “employee contributes” is the exact same thing. Attempting to define it any other way is a futile attempt to pass it off to semantics. Cost is cost, and asking the taxpayers to contribute twice as much as the employee aka teacher does for her own retirement is not fair nor realistic. At the end of the day, that is what it is. Putting more money in a failing and faulty system such as public pensions without reform diverts limited resources from other places.
I am aware “people negotiated pension benefits as salary in the form of deferred compensation”, but at least in IL, those negotiations were with politicians whom were paid off (sorry, 6 figure political contributions) by the unions, thereby having two parties essentially on the same side of the bargaining table and negating any sort of fair representation for the average citizen. The “deferred compensation” was the easiest place to hide the true cost of the services rendered and not be accountable for the cost in in the future. But guess what else is deferred compensation? 401k.
You can point to corporate America all you want as the true evil, but guess where the pension systems invest their money? They’re certainly not buying IL bonds. You can raise the tax on the 1%’ers all you want (and please do!), but to think that money should just go into this pension system is short-sighted.
Why are you unable to process Yves’ accurate statement that none of her suggestions requires raising taxes on the 1% or raising taxes on anyone? (Though that might or might not be a good idea.)
The reason Yves’ explains is that “taxpayer money” is not the source of government spending. The US govt does not spend tax revenue, but we can’t let that go, intellectually. Govt spends ad hoc, by edict, by issuing instructions. What they need to aim to balance is THE ECONOMY (the market), not the Govt’s spreadsheet.
Tax payments (federal) are not a “source”. Taxes are (a) a tool to reduce demand, in aggregate or for some subset group, and (b) a tool for turning “worthless litter” or electronic account entries into valuable “money” which the private sector needs to function.
Umm, speaking just as a homeowner whose local property taxes increase nearly every “unimportant” election via stealth educational tax levies, I’m pretty sure that my own money is in fact being used as a “source of government funding”. Now over $20K per year, it is nothing to sneeze at. As soon as my local Ohio county government can print its own currency… Oh wait…
We have never said that taxes don’t fund state and local spending. In the US, state and local governments are currency users.
The Federal government is a currency issuer. Operationally, it does not use taxes to fund operations. It spends first, as in “prints” and issues bonds later.
your viewpoint would make sense IF public sector programs had not been stripped away for the last 40 years. what is omitted, by you, is that policy is written by a narrow sector of power, and it scrupulously reflects the interests of this sector. Government and business are, at most times, indistinguishable. these things are transparent, but only if we extract ourselves from a meaningless economics seminar which has no application to policy in the real world. For example, once public funds are utilized to subsidize private entities, there IS NO FREE MARKET BY DEFINITION. These are concepts a 6th grader can understand. But a good, obedient financial education blinds many to transparent realities.
Personally … I believe that one of the real reasons for bailing out Wall Street in 2008/2009 was that if they allowed asset prices to fall and enforced mark to market, the pensions would have been wiped out. And our fearless leaders were scared that when everybody found out that they had been ruined that the pitchfork would have come for them.
This way … when it happens … it was that bad ole CONgress who did it. Who could have known.
BTW … I remember when the pension changes were put in place. People knew then that underfunding pensions would have these results. But nobody listened. It wouldn’t be an issue until … well … now.
so do i…Feb 1987 REAGAN SET TO ASK SWEEPING CHANGES FOR PENSION RULES
Absolutely. And look how underfunded a lot of them still are after an historic 5-year bull run. Its a good thing none of them were reaching for yield via junk energy bonds…….
*Puts tin-foil hat on*
Its difficult to see how we can ever have a bear market again without many of them going t*ts up. Ergo we wont.
Not true. Pension funds invest in PE funds and hedge funds, and not junk bonds, to reach for RETURN, not yield. The overwhelming majority hire outside managers. And the ones that are big enough for it to make sense for them to run some of their money in-house, like CalPERS, run index funds.
They don’t seek yield but return. If a business is faced with a $1 billion investment with a return of 2% or a $10 billion investment with a return of 1.5%, they will almost always choose the former because, even though the latter returns greater overall profit, the former provides a superior rate of return for the smaller investment and is a more efficient use of resources.
Which I now see Yves already covered.
That is UTTERLY untrue. Please take your propaganda elsewhere.
It was Treasury and the Fed, mainly the Fed, that ran the bailouts. Congress had NOTHING to do with it. In fact, they voted down the TARP the first time. It was only when the markets tanked after that vote that they were persuaded they needed to knuckle under to the needs of Big Finance.
The Fed does not and never did care about average workers. Their sole concern is the health of the financial system. irrespective of how recklessly and destructively it has and continues to operate.
Not disagreeing at all with your point about TARP and the other bailouts, but I think Angie’s point was that this time it will be viewed (correctly) as Congress cutting pensions, whereas if the stock market and financial institutions had been allowed to tank (bankrupting pensions), then Wall Street and the Fed would have been blamed.
Congress had “NOTHING” to do with it??? Just what exactly was it that persuaded our Congress critters to cave to the needs of big finance? The fact that they initially rejected the idea, but then capitulated does not absolve them of culpability. Without the best government money can buy, there might have been some concrete reform. Here we stand 5-6 years later and the system we have in place is even more corrupt than before. A fish rots from the head. I would think Congress is somewhere around the gills.
Are you old enough to remember 2008?
Do you recall that the financial system nearly collapsed?
There was absolutely no way a Congressman could vote this down after the market upheaval.
If you think GDP contraction of 8.9% in the fourth quarter and 15-16% properly calculated unemployment was bad, try double that. The cost to their own constituents, in terms of greater job losses and business failures, would have been massive.
So I see you don’t care about human costs.
Basically, the leadership of the Republicans (the Administration) and the Dems (Obama as de facto leader of the party, who whipped for the TARP) were united. The market pressure plus agreement between both parties at the top meant there was no time for the rank and file to get changes made to the TARP like tougher punishments for the leaders of the banks (throwing out the boards and CEOs). This was artfully done so as to corner the considerable opposition and it worked.
LOL!
Yes, thank you, I’m definitely old enough to remember what happened in 2008. I am deeply concerned about human costs, and quite frankly I think it’s this incessant bantering about saving the “system” that has wrought the greatest damage of all. The real financial “system” wasn’t the primary concern in 2008. The real financial system would have suffered extreme pain, no doubt, but we would be better off for it because we would have been able cleanse the system and rid ourselves of the corruption and rot that is embedded in it. What we have now is the equivalent of a major limb infested with gangrene. Nobody in the status quo wants to remove it, so they keep offering superficial remedies, modern monetary theory being just one flawed example. The people offering such superficial remedies are apparently willing to sacrifice individual sovereignty for the sake of keeping the predator state intact. If that’s your idea of progress, I guess we’ll just have to agree to disagree.
That’s absurd. Failure of the financial system means working people can’t deposit paychecks, pay their bills or accesd their savings. There is no “cleansing” involved in collapse of the payments system, other than to some sort of pain-loving conservative zealot hell-bent on punishing the littles for getting uppity
…but hot holding the banks (CEO’s) accountable for their fraudulent behavior has done nothing but compound the frustration and pain felt by MOST Americans. However, as the article points out, Congress is now going after the little guy pensions, while prepping the field for future Bank Bailouts!
This shit is SURE to create domestic terrists, my friend.
Seriously?
Did you actually listen to what he was saying about not bailing out the big banks, but perhaps engaging in a restructuring of the banking system with a bank holiday as FDR undertook in 1933?
No it is black and white with you, and anyone who did not buy into the bailout, pushed by the Fed, is some evil pain inflicting conservative.
The bipolar set of options and black and white thinking you revel in was what drove the Congress to back the TARP.
And by the by, how stand up has the Congress been since then with their reforming of the financial system? Not so much.
Insults are usually a pretty good sign that a person has nothing really useful to say, and Yves, I am shocked at some of your responses as well.
Why on earth are you shocked? It’s the sort of tactic used by those who believe only their own viewpoint is valid. It’s simply the system working exactly how it is meant to. A system fully supported by most of the folks at NC.
This could not have been done in a week. This is not the world of 1933. All the banks were massively interconnected, with each other, with foreign banks, and to some degree with large insurers (not just the poster child AIG but Axa, for example).
Sorting out the derivatives alone has taken years with just one player, Lehman.
You are seriously out of your depth here. The MOST that might have been done in theory was to resolve Citigroup as a lesson to others, but that was ALSO impossible because Citi had a large global cash management system with $500 billion in uninsured deposits. See here for details:
http://www.nakedcapitalism.com/2010/01/wsj-runs-dubious-argument-for-keeping-citi-intact.html
You could have disarmed the Citigroup bomb the second time nationalization was a hot topic, in early 2009, when markets were upset but not in full bore meltdown mode of October 2008.
Loo
He’s not “out of his depth” at all. This complexity issue you raise is precisely the reason the TBTF entities should have been allowed to fail. Suggesting that the situation could not have been resolved in short order is complete scatology. That’s what the market is for, at least when it is allowed to work. Now the crooks have only increased the depth and complexity of their fraud. You seem to overlook this issue to legitimize your own argument. Without real reform (and a real cleansing), there will be no real, sustainable recovery.
Ah, now we have it: the market god will sort everything out if only we have sufficient faith. The just will be rewarded and the guilty punished as markets always give what one deserves.
All hail free market Jesus.
After the crash the choices were stark. According to Ron Suskind’s book, when newly-inaugurated President Obama first met with the banksters, they quivered as he informed them that he was the only thing standing between them and the pitchforks. Then Obama said: So, what can I do to help you? That was it. The choice was made to reconstitute rather than reform the system. As we have seen, the bansksters have in fact increased their power and amplified their danger since the crash. This was the wrong choice. Worse, it squandered the crisis required for genuine restructuring. While the 2008 crash was bad, the next one may well be far worse and this is the course we have set for ourselves. IMO, far better to absorb some short-term pain then, than to lock-in even greater future disasters.
I am tired of you insulting those who don’t agree with you.
Did you not read this?
There’s no such thing as a “real” financial system, there’s no way to restructure this little bit over there on the fly while letting the rest go down and anyway, advocating “extreme” pain is a pretty clear-cut statement toward letting it all burn. It’s the same stupid opinion we get out of vulgar austrians that recessions and depressions are good because they somehow clear out economic dead-wood. How many littles get hurt always seems to be immaterial so long as bigs stay on top.
LOL! There certainly won’t be any cleansing if people keep bowing down to the status quo. The real economy and the real financial system can and will survive just fine without the current crooks running the show. What’s ironic is that one would think the folks at a site called Naked Capitalism would understand this. Apparently not.
I suggest you read up on Andrew Mellon and the devastation his policies produced.
So, does the REAL economy and the REAL financial system operate on bitcoin?
I don’t think REAL means what he thinks it means.
Ben,
“Real” to these sorts… is like when some reference groups, as say – “real people” – meaning like thinkers e.g. only we have the special ability to think correctly and assign reality.
Now where have I read that before…. ummm… only credentialed sorts from the especially gifted secures… have the properly formatted mental facility’s…. by which to adjudicate reality – TM.
Skippy… 2 mobs come to mind, one is self awarded and the other invisible stuff grants gravitas.
Why do you imagine there’s such a thing as individual sovereignty?
Congress has lost power from its central position under the Constitution for several reasons, but one important one is that it cannot act swiftly and intelligently at the same time (no body of 535 people can). The pace of modern events makes deliberative democracy very difficult. We lambaste Congressmen for not reading the legislation they vote on, but who is going to sit around and allow them to read, digest, think about, comment on, and debate 300, 400, and 500 page bills? Certainly not our 24/7 media or ADHD electorate. When the DOW dropped 900 points and the talk on the news was that all the bills used to pay shippers and suppliers were drying up and we were 2 weeks away from a complete seizure of the global economy people demanded action. And whereas Paulson and his buddies on Wall Street knew exactly what they wanted, Congress and the American people did not. In an emergency, people will follow the guy (it’s usually a guy) who acts with decision and talks like he knows what needs doing. He may be dead wrong and about to take them over a cliff, but human beings are human beings and that’s the way we are wired. The few who knew their interests and could insist that without help the global lending system (and with it the money system) would collapse trumped the many who were confused, unsure, or had conflicting interests they could not adequately articulate.
That’s actually not true, and I was following the events closely at the time. The American people knew exactly what they wanted, and that was that the banks not be bailed out. (This is TARP; of course the Fed and Treasury had been bailing the banks out all along, but only with Lehman and then TARP did the bailouts become part of the narrative.) Calls to Congress ran something like 99 to 1 against the bailouts, and there were a lot of calls. That’s why TARP failed the first time in the House, and then the Democrats got their act together and passed it. (Harry Reid larded the bill with goodies, and President-presumptive Barack Obama whipped the Congressional Black Caucus in favor of the bill.)
Lambert, I have to agree with Levy. Doing nothing was not an option, and merely opposing TARP was therefore not adequate. You’d need to develop and create consensus around a Plan B, and no way could that be done in the time frame allowed with the markets and financial system on the brink. How long do you think it would take to create and agree on a “bail out ordinary Americans and exact punishment or nationalize the banks you absolutely have to shore up” plan?
I think the conversation is kinda running around in circles because there seems to be this point of view that the choice was between doing something and doing nothing.
The reality is government, when it functions correctly, doesn’t just have to choose between two bad choices. Congress had the ability to put strings on the money that it was giving the banks. It didn’t. That’s why TARP was a failure for everyone except the banking industry. The money was used to cover bonuses and basically pat the bankers on the head for screwing up the economy rather than giving them a good swift kick that basically said either you get it right or WE’LL take over money management for your stupid backsides.
You are mistakenly treating Congress as unitary. It isn’t.
The rank and file revolted against the leadership on Syria because they didn’t have to come up with an alternative. All they had to do was refuse to vote in favor.
Here, not voting in favor was not sufficient. They’d have to get consensus, with the Administration and leadership of both parties opposed, on additions or alternatives. That is very hard to do in the normal course of events and not possible here, given the time pressure.
I have to say that it is not clear to me that many of the comments above against the bailouts should be understood as sadistic “conservatism.” MMT writers have criticized the bailouts, particularly the Fed’s behavior, the $29 Trillion lent to the banks studied by Wray & his students Nicola Matthews & James Felkerson.
In April 2008, Wray projected that “bailouts will be required” because a “financial crisis is not the time to teach markets a lesson by allowing a generalized debt deflation” Financial Markets Meltdown: What Can We Learn from Minsky? MMT thinkers have observed that depressions, recessions, debt -deflations do restore balance sheets, restore stability, through bankruptcy. “Reset” the financial system at enormous, unnecessary cost borne almost entirely by those not responsible for the crisis – those guys often/usually escape. But what kind of bailout “should have” occurred?
A major point was that this was not a mere liquidity crisis, treatable by classical Bagehot lender of last resort, but a solvency crisis due to fraud and recklessness, concentrated on a few giant institutions. So “The Roosevelt alternative should be adopted: temporary “nationalization” of failing institutions…” Or as in Lessons We Learned From the Global Financial Crisis- A Minskian Interpretation of the Causes, the Fed’s Bail-out & the Future “Proper government response to a failing, insolvent, bank is different than its response to a liquidity crisis. In short, the government is supposed to step in, seize the institution, fire the management, and begin a resolution.” See also Lessons We Should Have Learned from the Global Financial Crisis but Didn’t.
It is true that the Fed did two things to bail out Wall Street. They bought Wall Street’s assets (debt-based assets like MBS). But the Fed is arguably supposed to buy SOLID assets for what they are worth. The Fed is not supposed to buy over-inflated post-collapse “junk” assets at some imaginary “face value” that they claimed to have before the Crash. But they bought the “junk” at full price, a better deal than Cash for Clunkers.
The Fed also floated loans — not quite the same as bailouts — at near 0%, which allowed banks to recover from past losses by using the Fed’s loans for MORE financial speculation, and for (ironically) purchasing more US Treasuries, aka “growing the national debt” by purchasing it as a safe no-risk investment.
But Congress ALSO paid TARP … which it didn’t have to do, because that’s the job for the FDIC, bailing out customers’ savings and doing plenty of regulation along with it. Congress paying TARP didn’t actually hurt the Govt financially, but it DID generate an excuse to CUT into OTHER THINGS that our society and the economy needs.
With all due respect, you have this wrong.
1. During the crisis, the Fed had all sorts of LENDING facilities, and some of those did lend against real garbage. But it never bought anything.
2. QE, where it did make purchases, were ONLY of Treasuries, and highly-rated MBS, meaning Fannie and Freddie MBS and Ginnies. No junk.
3. As discussed earlier, the rank and file in Congress basically had a gun to their head, between the Administration, the state of the markets, and the leadership of both parties. Letting the markets seize up, which happened the first time they voted the TARP down, had too high odd of wrecking the economy.
More important, the government does not know how, then or now, to resolve a major capital markets firm, one with trading desks, so as not to produce a Lehman-type outcome. The FDIC has NO experience here.
If you resolve a company, you have to shut down operations. That means, for instance, valuing derivatives positions. As we’ve explained at length in older posts, the other parties can game that process. Plus it takes a really long time and counterparties have their capital tied up in the meantime.
And all the big firms are international. US regs have no authority over their foreign ops. They’d have to go into bankruptcy court. There were big fights in the Lehman BK between the British courts and the US courts. The US courts won, which means foreign regulators are insisting that foreign banks operate in a way that gives them more assets to grab when they fail (possession in 9/10th of the law, and Lehman has stripped its UK operation to try to protect the US parent before it failed).
If you DON’T shut it down, you have the Federal government owning say, Goldman while it continues trading. They don’t dare fire the employees because they can’t replace them. This is the worst of all possible worlds. It took the government a full seven years to resolve Continental Illinois, the number 4 bank, which failed in 1984. The banking industry was way less complicated then and Continental Illinois was not a big trading operation, let alone an international trader.
And the FDIC did NOT have enough money on hand to resolve any more than at most one big bank.
There’s simply not enough that care about what’s being done to them. Most are just slogging out life and trying to survive doing the best they can. Politics and politicians are so far removed from their thoughts, that if they vote, they are just voting for whom they’re told, or whoever they think is popular. Meanwhile, BOTH Party’s continue to do them, their families and everyone else irreparable harm.
Since in your own words, “BOTH Party’s continue to do them, their families and everyone else irreparable harm,” would you please suggest for whom those that you claim do not “care about what’s being done to them” should vote?
I personally vote Green, but most people don’t see the point of this, and I’m not sure I do, either. However, blaming the situation on people not caring “about what’s being done to them” is not only blaming the victim, it strikes me as elitist bullshit. Of course people care. They don’t know what to do about it, and neither do I.
Thought I was clear.
On a bright note … a poll I saw yesterday said that 14% of folks have finally figured out that we don’t have an economic problem here in the us … we have a political problem.
Seriously … we need to throw the bums out. All of them.
The less of two evils is pure bait and switch. Neither a Democrat nor Republican be.
Seriously … we need to throw the bums out. All of them.
and strip them of their fat pensions.
Absolutely, let’s ‘save’ Congress’s pensions first!
(in the Orwellian sense of ‘save’, that is).
That’s the genius of chapter 7 bankruptcy. You get stripped of everything. Your assets aren’t yours. They provided liquidity to prevent their own insolvency.
Actually, we have both. The money already stolen ain’t coming back, and this legislation lets everyone know where the next round is going as well. Merely refusing to vote for the big two ain’t gonna even remotely fix things. Wake me when wealth clawback and prosecutions are finally on the table, or failing that, armed insurrections.
Congress has 11% approval and that probably amounts to the hard core party supporters. Everyone else has figured out that the vast majority of govt leaders are crooked — not “Gifted Leaders”, rather “Grafted Looters”. Congress apparently wants to see how far it can go before revolution.
Forget the pitch forks and torches. With 270 million civilian firearms in America, it might be time to stock the cellar with rice and beans. (I’m kiddin’, kinda)
That 270 million firearms is only a guesstimate. Some people put the figure a lot higher, perhaps even more guns than total population.
Haven’t heard much from AARP. You would think they might have more to say since if pensions are cut, people won’t be able to afford their Medicare supplement insurance.
Perhaps they are as “sold out” as every single other large institution in this country. Once upon a time it was true, you didn’t mess with old folks, they were organized and they voted. Now they are ripe for the plucking as everyone else.
Over the last 40 years the world population has gone from 3.5B to 7B. Imagine the pressure on resources and the environment if the 1B living a developed world lifestyle doubles to 2B.
The US represents less than 5% of the world population and consumes probably more than 25% of resources… not even sure if this number includes oil and resources consumed in emerging markets to produce goods exported to US…
Up to now every generation has been expecting a higher standard of living (BASED ON MATERIALISM) than the preceding one. But what if this is not possible because of population growth and limited resources.
Today’s pension requirements are based on the last 40 years’ lifestyle. But maybe this lifestyle is not sustainable in the US without crushing the ROW.
Maybe paying promised pensions means that many boomers will be able to stay in their current oversized homes with too many cars in the driveway consuming energy that future generations would need to raise their families.
Maybe the pension system is collapsing because it was unfair and badly planned in the first place.
Maybe materialism needs to be curbed before the pension system gets propped up.
Maybe materialism in the US is going towards the US consuming its population share of the world’s resources and if this is the case maybe the boomers have already consumed more than their fair share and in future years will be forced to consume less than their fair share… unless they crush emerging markets.
Remember. Life is not fair. I know because the boomers have kept on reminding me since I was born.
And I am not blaming anyone. I am just noticing that we Westerners of every age group are incredibly entitled.
Up to now every generation has been expecting a higher standard of living (BASED ON MATERIALISM) …and vulture capitalist economics, backed by dumb-down education and fundamentalist procreation propaganda, operated/succeeded from least resistance!
One Hundred Years of Solitude!
Thanks for sharing your boomer hate. You never get tured of ut, do you? It’s impressive, in its way.
There is a difference between hating someone and hating this person`s actions. Frankly, Lambert you are just using on me one of the popular argument tactics you keep on attacking.
How about arguing the global resource consumption argument? You can“t. You might want fairness, but just in the US not across the planet.
IMO what you wish with MMT would suffocate the ROW… America still consuming more than its fair share.
Imagine an America only consuming 5% of global resources. That would be totally fair, no?
Imagine US materialism at 5% and what our cities would look like if we Western progressives truly cared about world peace and fairness.
The pension system as it is today is totally unfair and it is hard to protect unfairness without condoning more unfairness.
Resources, except energy, are recyclable and we’ll have a very generous amount of energy available when we get serious about nuclear fission. And when fusion becomes practical, our energy problems will be over.
So the US is consuming NOTHING that can’t be replaced.
Our problems are MORAL and ETHICAL, not lack of resources.
Your point is interesting.
It just goes to show how we can all want social justice but how hard it will be to achieve it because of differing views.
When I look at what we did to our environment globally to get the ugliness we have in North America, I don’t believe there are enough resources to fulfill the promises that have been made nor the material expectations of the people around me.
So I think we are currently being hit with a global resource distribution problem that is showing us how our economic system is failing us morally and ethically.
Wow, be careful, you’re getting your royal ‘we’ WAY to close to morals and ethics.
Really. The only time TPTB get serious about nuclear is when the coverups have to be rolled out. The same ‘short term profit is all that counts’ management philosophy has guided that industry for decades now. And since they can’t prevent radiation levels from rising, they just raise ‘allowable limits’ by an order of magnitude. And renew the licenses of units 40 plus years old for another 40, because all ‘nothing has gone wrong yet’ with the ever more irradiated, brittle steel and concrete, nor the water supply interrupted to the core and the thousands of spent fuel rods sitting in a pool outdoors. Oh, wait. But that was Japan, not here. Oh, wait. 3.5 years of pumping water out the bottom of the reactors into the Pacific. I guess it is in our backyard, now.
Imagine an America only consuming 5% of global resources. That would be totally fair, no?
It depends. Do we still have to account for 22% of the GWP on that?
Excellent point!
you need the societal change first to enable 5% consumption to be livable in the u.s. with the rentiers taking much of everyone’s income. Here’s an example of such to reduce consumption: insulating houses – it would reduce consumption and it beats people freezing to death.
The way I see it, this hurts those who don’t consume, the ones whose retirement income is barely enough to pay for food, shelter, and medicine. The basics, IOW. The ones who consume may reduce their level of consumption, but they won’t necessarily have to worry about the basics. And let’s keep in mind something else: those basics do cost more in the US than elsewhere, particularly shelter and medicine, so spending more on something does not indicate that one consumes more of it. Frankly this is aimed at the have nots; those who do have will keep on consuming.
Let’s say you are poor and buy something at Wal-Mart. You are still getting a subsidy.
Add up all the energy and resources that have been burned or consumed so that item gets into your possession. There is no way that all the externalities are currently reflected in this price. But there is a lag.
And slowly these externalities are getting priced in. That is why the middle class is shrinking. Over time the 25% consumption level will drop to 5%… unless the US:
1. steals it using force… with the help of the military
2. becomes so incredibly productive vs. the ROW.
IMO, what we are seeing is an slow equalization of purchasing power across the world… and even if the 1% in the US shared with the 99%, the purchasing power for material goods would still go down.
What is happening to pensions is horrible but there is not much I can do to help. I have been talking about what is now happening for more than 20 years. Everyone ridiculed me or called me a doomer… That s actually why I started reading NC… so I did not have to bother those around me with ideas they did not like. Now poor Lambert is stuck with that job. LOL!
The only thing I can do is help my loved ones if they have trouble. And on my list are a few boomers… imagine that!!!
The thing that bothers me is that we gladly dismantle previous institutions like pension funds before we replace them. It’s just another version of “the market will take care of it.” And the ACA? What a travesty. We are going to need food stamps, rent stamps, medical stamps, and etc. But congress is so clueless it will cause the greatest suffering unnecessarily. Imo, our pols brought down the entire economy because it was as ponzi and pensions. They did so with very little regard, and no practical remedies offered, to the plight of middle class and poor citizens. And when they were informing our bff (France and the UK) of this intention in early 2007, Hank Paulson told Christine Lagarde it would be OK because “the market would take care of it.” Right. Just like the market is taking care of Obamacare. For a mere 20% government guaranteed profit to the insurance companies.
It’s so true but if they tried to do it beforehand the basic retirement amount would be based on the amounts needed in the old paradigm when we need a paradigm shift.
Royal “we”, with a paradigm shift chaser!
The main beneficiaries of said subsidies are the Waltons and Walmart shareholders. I seem to recall you hinting that you are a shareholder. Sure, the shopper gets a bit of a seeming fringe benefit, but that is illusory because the subsidies that allow the Waltons to pay sub-living wage to their “associates” come out of the shoppers’ pockets in the end. You are correct about the externalities, but you are wrong to think that the poor shopping at Walmart are beneficiaries. They are victims of the same race to the bottom that eroded wages and retirement benefits in the first place.
And what of medicine and health care? Where are those subsidies? You think Americans pay the same subsidised prices for medicines that you pay in Canada? It is all well and good to talk about lowering consumption, but you are picking on the wrong targets here.
I am talking about the total energy and resources it takes to maintain the current system… from your house to Wal-Mart to get a fruit. Now imagine the poor in China or India walking form his place to the market to get a fruit.
When you conceptualize this, you can imagine how much energy even the poor American gets to “enjoy” vs. the poor in India and China. That’s the discrepancy that could potentially equalize. And if I am right, we will get a lot of Camdens across the US… not because of bad politics but because we built ourselves an unsustainable lifestyle across the entire developed world.
The world population has doubled over the last few decades. Can you realistically expect to maintain AND grow assets while maintaining a 25% share of global resources?
For me it is clear that household share of energy consumption will get squeezed over the next couple of decades… good luck to those who have a high energy lifestyle and no political clout.
It’s not because a poor American is not living in a McMansion that he/she is not consuming energy…. their whole life is based on decades of sunk energy consumption costs that are slowly depreciating. It is said that megacities can be more inefficient and energy intensive than smaller cities.
You think that making barely adequate pensions even less adequate will fix the systemic problems? It is about the necessities of life, not about consuming more energy. So many pensioners have hard enough time buying food and medicines as it is, and here you are talking about energy consumption and fixing energy overconsumption by reducing retirement benefits. WTH? It is not poor people who overconsume energy, and it is not them who fight tooth and nail the development of renewable energy technologies.and resources. It is corporations like Walmart and its bought and paid for government. It is industrial farming giants that sink an enourmous amounts of fossil fuel energy into producing food-like substances and tortured animals. Want to reduce energy consumption? Stop subsidizing industrial farming and start subsidizing traditional local farming. Make sure that people can afford to buy locally and sustainably grown food. As things stand, they can’t. Reducing their pensions ain’t gonna help energy consumption on that front either. They can barely afford the heavily subsidized, energy intensive crap food as it is. Truly, what planet do you live on? If you care so much about energy overconsumption you sure d have a funny way of addressing the problem.
I am not proposing anything to pensions. I don’t believe a good solution will come from the top at this point in time. The system is too complex.
My point is that pensions will get cut whether we like it or not; that there is no fair solution that will work because to give to the poor means taking from the top 20% who would not have enough to afford the lifestyle they have set up for themselves.
So it’s not just about the 1%. It’s about the whole system that consumes too much energy at all levels.
I am not proposing anything to pensions. I don’t believe a good solution will come from the top at this point in time. No, of course not! You only endorse the move from the top to cut pensions for the bottom.
to give to the poor You are not giving to the poor, you are simply holding up your end of the contract that you voluntarily agreed to. Whatever happened to the sanctity of contracts???
taking from the top 20% who would not have enough to afford the lifestyle they have set up for themselves. Wait, I thought it was about changing the wasteful lifestyles of Americans? Oh, I get it: it is about changing the “wasteful” lifestyles of the most vulnerable Americans. Ok then. I say let’s completely take away retirement benefits so as to expedite the necessary population reduction. Why drag it out?
So it’s not just about the 1%. It’s about the whole system that consumes too much energy at all levels Which, of course, was created by the 1% for the benefit of the 1%. Other than that, it’s not about the 1%, but about getting rid of sufficient number of the 99% so that the 1% can enjoy it’s loot. Glad we cleared that out.
If you believe there are no limits to resources or that technology will save us, then you will believe it’s just a question of redistribution and deficit spending and this would create growth which would bring back the middle class.
However, if you believe resources are limited and consumption will get redistributed globally, North Americans are in for a rude awakening.
I believe we are in for a rude awakening but I do hope I am wrong.
First of all, I did not agree to these contracts. I was born into this system. I have never agreed to most of these because for the last 20 years, I knew they would fail.
You can’t get blood form a stone. We have just gone through 40 years of malinvestment. A lot of the work is in the dump or depreciated. And a lot of what we built over the last 40 years will need energy to be propped up… energy that could be going to something else. If you need to pave a road or maintain a badly built house, that is energy not spend on something else.
North America is full of this.
So in the end you see yourself as apart from society and its associated obligations. No different from the 1% and their notions of being special and being individuals. They created the system, and then blame the victims of their own hubris and anti-social worldviews. Again, please explain the mechanism whereby cutting the pensions of the most vulnerable will reduce energy consumption from such energy hogs as industrial farming. I must be dense because I fail to see how your state aims will be achieved by cutting the pensions of the poor, unless the goal is for them to die off as fast as possible.
Are there two moneta’s?
One already decreed that pensions will be cut because moneta, representing the royal ‘we’, was challenged-
“The fact that I am being challenged confirms that pensions will continue to fail””
http://www.nakedcapitalism.com/2015/01/michael-hudson-war-pensions-us-budget-anti-pension-law.html#comment-2382922
The way I see it is that the older generation, dare I call them the boomers, will do whatever it can to cling to whatever it can, leaving only scraps for future generations.
I think Gen-X and Gen-Y will have an even harder time. Am I angry? No. Sad? Yes.
Do I blame the boomers? No, if I were in that cohort I would probably do whatever I can to protect my way of life and rationalize my actions.
Us Gen-X we are going to do all kinds of things that will anger the next generation.
But like I said, hopefully I am wrong and technology will save the day.
“The way I see it is that the older generation, dare I call them the boomers, will do whatever it can to cling to whatever it can, leaving only scraps for future generations.”
Come in off the ledge, one day you will be “the older generation” and guess what, the present “older gen” you are wringing your hands about will be dead.
Sooo. let me introduce you to a reason for optimism, in your context.
http://en.wikipedia.org/wiki/Conservation_of_mass
The thing is, all the stuff the BB Gen is “clinging to” will still be here after the BB Gen, punches out of this mortal coil because other than the occasional ex-earth orbital rocket kits, not much is leaving the Planet under our watch.
So In the meantime, your welcome for all the taxes I paid that subsidized your crapped pants unproductive years, don’t mention it.
So why don’t you kill yourself to reduce planetary consumption?
Do you eat only vegan, and then mainly food you grow yourself? Keep your house at 60 degrees in the winter? Use only public transportation? Not fly on airplanes? Not use shipping services to buy goods? Do you not have and plan not to have children?
Your use of electronic devices ALONE is bad from an environmental perspective (use of rare earths, extended transport to assemble the parts, high use of energy).
You are a complete hypocrite. You live in modern society. You consume at an advanced economy level just like the rest of us.
There are such things as existing conditions. People don’t create the societies they inherit. Fossil fuel use and suburbanization were well entrenched and increases when the WWII soldiers came back (a whole rash of “starter homes” were built in the late 1940s).
And tell me where to find a Boomer lobby or interest group. No such thing exists. Age cohorts don’t operate as a block, so to accuse them of agency or organized action is utterly spurious. Interest groups cross age lines. You are either utterly dishonest or too bigoted to consider the issue objectively.
Of course generations “lobby” as a group by their sheer size and their economic clout. Maybe you don’t notice the weight of the boomers because you are in the cohort.
Of course I am a hypocrite. Who isn’t? My brain is full of dissonance. These issues are so complex that it is impossible to be 100% consistent. There is no way for me to live in a way that fits all my beliefs unless I kill myself… but even then, would that benefit my children? I had them when I was naïve. In those days I believed there was enough to go around and if we all worked together, we’d grow the pie. But with my personal experiences of the last 15 years, I don’t believe it anymore.
Now I believe we are probably consuming too much energy and if this consumption gets redistributed we, in the developed world, are in for a reckoning.
I am not saying to cut the pensions. Not do I want anyone to suffer. What I am saying is that it is probably going to happen no matter what because we are living unsustainable lifestyles energetically.
There is no such thing as a generational lobby. The fact that you are trying to assert that shows how desperate you are not to lose an argument.
People of the same birth year in the US don’t have the same interests. You have evangelicals v. secular types, v. religious minorities, you have black v. white oppressors (and the bigoted whites who think they aren’t), you have other minority group interests, ranging from Hispanices to gays to career women, to the poor v. the rich, and big multinational corp execs versus smaller companies and entrepreneurs.
You should be embarrassed to have tried making that claim.
And now you are also flat-out lying. This is from your original comment:
Up to now every generation has been expecting a higher standard of living (BASED ON MATERIALISM) than the preceding one. But what if this is not possible because of population growth and limited resources.
Today’s pension requirements are based on the last 40 years’ lifestyle. But maybe this lifestyle is not sustainable in the US without crushing the ROW.
Maybe paying promised pensions means that many boomers will be able to stay in their current oversized homes with too many cars in the driveway consuming energy that future generations would need to raise their families.
Maybe the pension system is collapsing because it was unfair and badly planned in the first place.
You are arguing for cutting pensions. You don’t get to deny your clearly-stated views. You are running the same generational hate tropes as billionaires Pete Peterson and Stan Druckenmiller, both of whom aren’t satisfied with being enormously rich, no, they want to gut Social Security and Medicare to make them and their Wall Street cronies even richer.
You say you want to solve problems, but stoking hatred among the various elements of the non-0.1% guarantees that the lower orders stay divided, the train keeps running on its tracks which is very much to their advantage. Even in the collapse of Roman Empire, the top wealthy were pretty insulated.
And on top of that, you have the temerity to talk about the use of planetary resources and too many people when you did one of the most costly things and advanced economy person can do to make the situation worse: have children. Take responsibility for your own decision rather than demanding that others bear those costs.
Moneta’s point is global not national (as in USA, France, only the countries that have the luxury of pensions), and materialist, and it is well beyond culture war go-tos like “baby boomer hate”. Why all this ad hominim? I have to agree with Moneta’s earlier point. I liked this site because it seemed to bridge radical ideas with the political and social realities we are forced to acknowledge every day. Who, with enough research, could argue that our entire modern world is not the result of dense, transportable sources of energy? He is simply saying, try something else. The whole system is built on the assumption that we are going to be digging coal and pumping oil out of the ground forever not developing a fully renewable energy structure, which is incredibly intensive in terms of politics, culture, and economics. I don’t think we will. So we need to try something else. I do appreciate how riled up this article made everyone. It is needed.
Attacking what Moneta wrote isn’t ad hominem, it’s using the things they’ve been careless in writing and then forgotten about. For this person one need only wait a few comments before finding inconsistency and self-contradiction galore.
If you believe in protecting the environment and resources, the best decision for a Westerner is to kill oneself and the body getting left for the dogs, if he or she wants to live according to his or her beliefs.
It is impossible to live a non-contradictory life so using this argument is disingenuous.
Yet it doesn’t help any to be shopping at Walmart, does it? Think of the massive energy consumption to bring you them cheap things.
Make me a list of your activities so I can nit-pick.
I am willing to bet that may of them follow the law of unintended consequences.
Maybe, However it isn’t OFV arguing that we should renege on past promises so that “we” can consume less. Even though in the case of those at the bottom they already consume less by virtue of their economic station. The poor actually USE public transportation or walk because they can’t afford cars, insurance or gas. They already eat beans and rice and don’t get enough fruits and vegetables because meat and FRESH produce is more expensive. They already wear sweaters because a large heating bill is a disaster to their budget.
The bone you should be picking ought to be with the top 20%. However, the policy position you are taking isn’t going to affect just them.
“Attacking what Moneta wrote isn’t ad hominem….”
Ding!
“… It’s using the things they’ve been careless in writing and then forgotten about. ”
No, moneta consistently treats generations as having political and moral agency; it’s not “careless” at all, but a continuing theme in his writing.
It’s a category error, and a form of strategic hate management propagated by rentier-friendly organizations like the Peterson Institute for obviously tendentious reasons.
Ding, ding, ding! Winner!
Agency…So true.
It’s the mark of a libertarian, usually. They love the word, but only to abuse it.
It’s 100% backward, in those terms- A person has no agency, only people do.
“I have no agency, I was forced to kill him”
“they decided long ago that they wanted to be killed”
Fits very well with the royal “we”. Part and parcel.
I generally try to assume someone is dumb rather than wicked. Maybe that’s my mistake.
I can only imagine the number of smart and good people who do not post here.
I believe that we north Americans are entitled and question whether the game can go on uninterrupted and I am called a hater. That’s a good one.
Also, you keep on waiting a couple of days after I post to argue…. what is that tactic called?
You are just as extreme as the neocons. Remember, ideology is what got us in this mess.
“Attacking what Moneta wrote isn’t ad hominem….” (Ding!)
That’s a retreat to generality. How about we trade in particulars as we deride?
Whatever our disagreement with her words, this was an attack on Moneta’s lifestyle and character. Her very act of writing here to respond was deemed to be an act of hypocrisy because of the resources consumed in so doing. And she was subsequently characterized as either dishonest or bigoted. Not merely wrong.
Absolutely an ad feminem retort, if I have Moneta’s gender right. Ad hom otherwise.
As for the substance of her argument: as long as we have undeployed labor and crumbling infrastructure, we’re living smaller than we could be. Add technical advance and there’s no need to accept economic decline as immutable. And boomers didn’t use up; they bestowed.
Deep disagreement, minus the schoolyard taunts.
It is not an ad hominem because Moneta was attacking Boomers, an age cohort, for their profligate lifestyle, and taking the position that he and his fellow younger generation members were not responsible for the condition of the planet. He was assigning blame to them as a justification for cutting their pensions. He retreated somewhat, but if you read his initial and early comments, that is precisely what he said, and aggressively too.
By taking an argument that implied that his behavior was different, he opened himself up to this line of attack.
Ad hominem would have been “You are a Canadian and no one should listen to anything you have to say about the US.”
MMT is not an Ideology Moneta, that’s your entire problem.
Look. Are there enough resources to go around, yes or no?
We can not prove it. Therefore, any plan based on one or the other is ideology.
And the more you protect your ideas based on an assumption the more fanatic it makes you.
Just by getting rid of planed obsolescent you could reduce waste tremendously, that and proper mitigation to end unnecessary environmental feed back and reduction.
MMT does not mean endless consumption and destruction, regardless of your attempts to portray it as such.
Skippy… so far only your vulgarity is on display.
Skippy… so far only your vulgarity is on display
——–
Isn’t this ad hominem?
When someone uses such terms, shouldn’t they expand on what makes a person vulgar?
Up to now, none of those who have insulted me have argued any of my points on resource distribution across generations and across the planet.
Good luck to all you people lovers on your fight for fairness. God knows I needed a wake up call… I just saw the light!
“Up to now, none of those who have insulted me have argued any of my points on resource distribution across generations and across the planet.”
I just did and you blithely ignored it.
I have unpacked your vulgarity using children as emotive leverage before, have you forgotten so soon.
As far as resource distribution across generations goes – one might look at the Lippmann posse’s agenda and how far they were prepared, too go, to insure their preferred ideology [pure self interest] remained unchallenged.
That destruction – reduction in planetary carrying capacity started pre GD [post GD speed bump to full bore mid 70s till 9/11 shopping spree] and now that it might hit the back pockets of the first few rows, in that ideological temple, something has to give… ummm… unproductive members of society maybe [???] via pensions???
Skippy… funny how the mob that cracks on about responsibility never looks in the mirror.
PS. “God knows I needed a wake up call… I just saw the light!”…. quire … would that be the drunk under the streetlight of – divinity – by chance IMWLTK~~~
PS. “God knows I needed a wake up call… I just saw the light!”…. quire … would that be the drunk under the streetlight of – divinity – by chance IMWLTK~~~
———-
Obviously (to you) I was trying to be liberal but I should probably go running to the conservatives.
So much for attracting flies with vinegar. I wonder how many more you manage to convert.
Maybe one day the progressives will get it.
A few years ago, I quit a lucrative job in finance because I was disgusted with how the sector was destroying the economy and the middle class. And I could not stand the 1%.
After a few years of analysis and taking so many knocks from the average Joes and attacks such as yours, I have changed my mind. I think it’s systemic and now blame everyone. Too many people wanting a free lunch and looking for someone else to pay. And this at every wealth level.
I wonder how many more people have gone through my thought process.
Interestingly, I read Yves book and loved it. Yet I clash. Go figure.
Where is this progressive projection coming from?
I made two simple points wrt resources yet you now seem uninterested in that topic anymore, after making it your corner stone.
“So much for attracting flies with vinegar. I wonder how many more you manage to convert.”
Unlike you I’m not interested in proselytizing.
“Obviously (to you) I was trying to be liberal but I should probably go running to the conservatives.”
Skippy…. why go backwards… the conservatives will probably all doom themselves chasing your mob to the end of that ideological spectrum… its just a matter of how many you take with you ***involuntarily*** sadly.
1. When you put different ingredients together, you get different types of cakes with their own set of characteristics. If you refuse to see that the boomers has a set of characteristics where we can lump them all together such as AGE, that is your prerogative.
2. If you actually believe I should have not had children, well you are implicitly arguing that there are not enough resources to go around.
3. I have been proposing universal health care and universal pay-as-you-go forever. I would like all these unfair and badly managed pensions to be folded and develop a fair system.
4. But because of the unfair distribution of resources globally, I am not convinced that fair pensions would help over the next decade or 2 because maybe our allocation of resources will drop.
5. Furthermore, if you take from the top 20% to give to the bottom group, the top 20% will not be able to afford their current lifestyle. So the problem is really with the top .1%. The excess materialism and energy consumption exists at every level.
6. And if you take from the top .1% to redistribute, I am not sure there will be enough for the US middle class because maybe their share should be going to emerging markets and not the middle class in developed markets.
7. And if you cut the military spending, maybe it will accelerate the redistribution of global resources away from the US middle class to emerging markets.
Frankly, I don’t see where I show any hatred towards people. I just see a situation that is FUBAR and people trying to preserve their livelihood.
Royal “we”.
Regarding having children as environmentally damaging.
Yes, there will always be enough people, whether or not we ourselves don’t have kids. Others,probably those less conscientious and intelligent will more than make up for us.
People are not fungible. Who would you rather have show up for the future? The progeny of the articulate and thoughtful Moneta and his like, or the barely educatable numbers blithely produced by those who can’t even support them?
Faulty logic, plus down that path leads eugenics.
There is a tendency to regression towards the mean with all attributes, including intelligence, in reproduction. Einstein’s children were a mixed bad. One was “mentally challenged,” one became schizophrenic, and the third an academic, but not a notable math or physics talent.
https://answers.yahoo.com/question/index?qid=20081206131336AACOHVB
If generations lobby, can I get the address of their organization on K Street? Thanks in advance.
Have you ever stood in front of a herd of running bulls? You will notice that groups can have an impact even if it is not deliberate.
You keep distorting everything I say because you don’t like what I write.
You believe in MMT. That the US can deficit spend and make the middle class come back. You really want this to happen.
I am saying that maybe the global resource distribution will not less MMT work the way you want it. This kills your hope or your vision so you rationalize that everything I think is wrong and hateful.
Perhaps people object to the wondrous generalizations and opinions that are expressed.
You write of boomers as if a media label apparently used to describe the children born after 1945 are all identical in their materialist desires, their expectations, their success in realizing their avarice and greed.
You write that “Up to now every generation has been expecting a higher standard of living (BASED ON MATERIALISM) than the preceding one”, which is untrue (or at least, unverified and unverifiable) and you write that “[t]he US represents less than 5% of the world population and consumes probably more than 25% of resources.”
Apparently it is the boomer craving for a monstrous house and car lots in their driveways that consumes the 25% of resources gobbled by the U.S.A. Apparently among the general population there are no poor, no philanthropic, no people who would be content with “enough’. And even among the boomers (perhaps too busy reminding you that Life is Not Fair to enhance their own lives with generosity) you imply that there are few exceptions.
But it’s the U.S.A. (which is a big place) that is consuming, expending resources on everything from plowing roads in winter to threatening their perceived adversaries with war and annihilation. There are also boomers who sacrifice some of their material wealth to make life a bit more fair for others, including boomers who get a mere whiff of the big 25% pie.
To Lambert’s comment you answer that you didn’t generalize negatively against any group but were just referring to a person’s actions. You then changed the subject.
“Not fair’.
Maybe the next time I write, I will carefully replace the word boomer with “those people approaching retirement expecting a pension and those already in retirement born between 1945-1965.”
IN this article, we are talking about pensions after all. So I think this article implicitly focuses on the boomers. I lumped the boomers together because we can, that’s what pensions do!
Then I went on about how our system is too energy intensive and we gobble up too much of the world’s resources. Nothing about boomers in particular there. And my point is that it does not matter if there are poor, philanthropists, etc. If the US is consuming more than its fair global share of resources, then everyone will get hit if that share moves to emerging markets.
I think NC has worked very hard to control stereotypes. This is good to fight prejudice but if your go too far then you can’t accomplish anything for the common good. I find this intriguing because this means that NC promotes some forms of socialism but clings to the American cult of the individual.
All the boomer hatred was insinuated by everybody else. Me thinks the boomer word just triggers some kind of visceral response.
Royal “we”.
It’s a game! How many times can moneta drop it into his decrees?
What are they royal “we” talking about again?
The US is materialistic and consumes a greater than appropriate share of the world’s resources, granted. However, your argument seems to be the individuals bear personal guilt for the failings of the society into which they were born. If I read you correctly, any American who comes of age and does not immediately reject their entire society and live consciously as a pauper is worthy of scorn and has no room to complain when they are cheated by those much wealthier than they.
You seem, also, to be making an argument about “fair shares” of energy consumption, but how does one go about calculating that, exactly? You can’t just divide energy use by the population, since that still assumes that current overall use levels are sustainable, just not properly distributed. In fact, I think, and you probably do to, that current usage levels are unsustainable. So how do I calculate what amount of energy it is morally permissible for myself and others to use?
You appear to be saying that people who have used more than their “fair share” don’t have the right to complain that they are now being screwed by their bosses and representatives–but it’s those bosses and political representatives who really deserve our scorn. When these a-holes decrease pensions, they will be exacerbating inequality in the US while doing nothing to alleviate it globally…but I guess you’re fine with that, or so your comment leads me to believe.
And you are aware, I hope, that there are people who’s birth year places them in your “boomer” category that don’t own houses or vehicles, much less too many vehicles. You do know that class distinctions exist in the “boomer” generation as well, right? Your conflation of an upper-middle class lifestyle with an age cohort is indicative of some rather sloppy thinking, imo.
At the end of the day, it does not matter one bit how you perceive me to think about different generations or if I suffer from sloppy thinking pertaining to fitting people in boxes.
What matters is whether or not the resources will be there for the Americans and retirees in particular. If US resource consumption falls drastically as a percentage of global resources, the promised retirements will not be payable no matter how you structure the system. And that would explain the need for the rich to hog.
Instead of focusing on the global distribution of resources, you are focusing on my use of semantics and compartmentalization. Why? Because you don’t like the idea that the US share of world resources could drop so you block it out?
See my comment above. You are seeking to blame others for what amounts to your own hypocrisy. THAT is why your arguments and reasoning are sloppy.
You need to start with your own action and responsibility. Are YOU taking steps to reduce your consumption of planetary resources in a big way? Are YOU spending time and money on political efforts to promote those ends? I strongly suspect not. Instead, what you are writing is just a huge exercise in psychological projection, with Boomers as your pet scapegoat.
You can’t argue with the royal “we”. Who do you think you are? You’ve got some of that colonial blood in you, huh? Criminals, all of you. That’s why we starved your ancestors out.
Keep it up. Moneta has already decreed that-
“The fact that I am being challenged confirms that pensions will continue to fail””
http://www.nakedcapitalism.com/2015/01/michael-hudson-war-pensions-us-budget-anti-pension-law.html#comment-2382922
Pensions will fall already! Stop! You’re hurting us all!
“The US is materialistic and consumes a greater than appropriate share of the world’s resources”
Yeah yeah, so what is “appropriate? The flaw is its not a zero sum game. If I flick on the AC or the Heat, I am not inhibiting someone in Mumbai from doing so. I don’t have a shred of guilt about what I consume, I do have sympathy for others that live in (more) failed social systems and I personally encourage more productive investment outcomes in ways that I can.
I think your words, and generally… the majority of working/healthy/presumptively “productive” Americans who are (beyond…) frustrated with now 15 years of unproductive (more destructive then constructive) wars in ME (forget for the moment arguing all that led to these wars or preceded them), mortgage bond induced “crisis” and crash constraining so much economic activity over 7 years later, bailing of Wall Street and then singular issue that began this discussion (e.g.: author’s arguing financial system’s current influences describing how pension funds will be guaranteed losers at expense of a few WS investment bank’s congressionally sanctioned “preference” for distributing funds insufficient to meet obligations of both pension funds and WS contracts):
you say:
With all due respect, I see that as a “deflective” question… pushing discussion to peripheral rather then “front and center” (core) issues. As I see it, the “core” issue is… the vast majority of US citizens receive energy they use in their homes from a handful of the same generation fuels/technolgies: some nuclear, an lot of coal/oil/NG and last few years increase in much of the dirtier of these from our shale/fracking “boom” produced oil/NG. Just like Goldman et’ al control the financial investments/distributions (don’t forget pension issue that started this as present example) and most here would change that (although consensus on how seems, often impossible even amongst “progressives”)…
Similarly: US transformation from fossil fuel/nuclear generation to renewables (all of ’em currently mature and effective: solar, wind, geo-thermal and several little publicized newer developments) is stymied/held in check by (mostly) $$ influence of “big oil” in DC… a situation leaving most feeling as powerless as with the financial “influences”.
Moneta is not just arguing “distribution”, nor does her use of “boomers” narrow her context to them: she is also arguing (correctly AFAIC) to diminishing planetary resources, consumed on geometrically growing scales, as planet populations explode and “emerging” countries desire energy availability as the US has enjoyed for so long.
I’d suggest to separate “Moneta” from the larger picture she’s painting: transformation to renewables is imminently doable. Yet still, the misinformation (and massive $$ invested to promulgate said misinformation) to convince the public renewables is a “lark”… this effort as staggering as Bush’s lies that got us into Iraq.
Maybe our biggest problem is too many lies from a few, foisted upon the majority in what… I increasingly see, as life and death matters.
Moneta’s premise for (as you responded) assigning blame in proportional distribution calculations is a lose lose proposition assuming current slow pace of moving to renewables. Even if most of US populations “doesn’t have time” to investigate/figure it out, it’s in everyone’s interest that we accomplish this and do so both intelligently and at a far accelerated rate.
My state (New Mexico) has (I believe, someone could nit-pick data to push us down list 1 or 2 spots), on annual average, the most hours of direct sunlight (e.g.: w/out clouds/fog/rain etc.) in the US. In addition to collection advantages of being a mile high city… not too mention our vast wide open (un populated/developed) spaces, our transformation to solar generation privately/publicly is a no-brainer and imminently doable. Added emphasis when considering (usually excluded costs of nuke/fossil fuel production) WIPP “accident” threatening groundwater supplies in drought ravaged SE NM, Kirtland AFB’s dumping of (up to) 24m gallons of deadly toxic (full of EDB) in ABQ’s sole source aquifer (42 Air Force bases alone whose major local pollution events have landed them on SuperFund list) and made many people sick…
Yet our “progressive” Senator (Udall) fights for up to $4b for “make work” Sandia Labs/Kirtland refurbishment of entirely unneeded ’60’s era B-61 nukes, but -0- for cleaning our aquifer and very little for moving NM to renewables… something that would make lives of everyone here now and those in the future, much better/healthier/safer. The only thing that would change is a far smaller portion of GDP would go into the pockets of those pumping dirty energy to our wall sockets, mostly people whose current wealth ($$’s) was inherited and would not suffer one iota from this shift. Many of them lie in their advertising they are promoting this “shift”!
No, that will only create fights and disagreements. Change how the energy is generated, and that problem disappears entirely.
So maybe a better question to ask is, as a real life exercise (not just thought experiment): how can we (all of us that purport to care) band together and push this shift… make it something that happens in near future, rather then leaving it as a problem for others 2/3-5 decades down the road?
Consider… at current planetary rates of energy consumption, the sun delivers wattage in a 24 hr. period sufficient to power the entire planet for a year. That fact alone… if us human beings are really capable of all this “innovation” and good we all our told is in us, ought to get a whole lot of that good and “innovation” motivated to bring it to fruition AFAIC.
As long as enough people are content to let decisions made 5/10/20 years prior on our behalf guide our tomorrows, everyone’s going to end up a victim whether they like it or not. $$ generated (if $$ are to accurately measure wealth) should follow real value created.
When (even if, at least until now… not exercised) choices for energy generation far superior/cleaner and less costly over the long haul (maybe over a century forward), how much sense does it make for all the “sheeple” to accept reliance upon fossil fuel “technology” contrived largely several hundred years ago?
T
Part of the problem with regard to America’s level of consumption of the world’s resources is that our economic system forces people to consume a significant amount of resources in order to participate in the economic system. Furthermore, changes that would allow people to consume less are political nonstarters (such as shifting away from a transportation that revolves so heavily around cars or allowing higher density housing construction in the suburbs). If, for instance, the US followed the lead of the Dutch and the Danes by having better mass transit and a road system more friendly to pedestrians and cyclists, then consumption of the world’s resources would be much lower. Right now, however, most Americans are effectively forced to have cars, whether they want to or not.
I know. I tried the no car thing with 2 kids in Canada. The outcome is called marginalization.
That’s why I say the problem is systemic. It’s like a moving train. And anyone who thinks the top 1% could change the direction if they wanted to is deluded. They are just as stuck as the poor. Albeit in a more comfortable position but just as stuck.
The 1% as helpless victims of “the system”. Hmmm, do expand on that! It sure made Alysa Zinovievna quite famous as a writer of crappy novels and occasional contributor to Cat Fancy magazine. This genre is far from played out…
They are prisoners of their own mind, convinced they are special.
We humans are good at rationalizing anything.
Very good example of rationalization. If the problem is the faulty brain wiring of the 1%, it does make more sense to take away their source of power — their wealth– then to take away the poors ability to survive. That’s just me though, I am anti-social like that.
The Royal “we”…again.
I was in Toronto a few weekends ago and was struck by how aggressive some drivers there are. It’s definitely not safe for pedestrians.
The car culture here in Canada has never been more alive.
“I know. I tried the no car thing with 2 kids in Canada. The outcome is called marginalization.”
Was it important enough to relocate to a more urban environment w/ public trans?
Maybe he is.
As for myself, I have a hatred of Stuff: there’s way to much of it, one reason I hate the wretched excess that is christmas. Recycling and making do with a lifetime of accumulated stuff is the way to go. Better yet, “precycling”, not buying the item in the first place.
Ofbcourse, in our society, my feeble efforts are akin to rearranging deck chairs on the Titanic. After all, I still drive a car. I understand moneta’s concerns, but don’ t know of a solution any more than he does. I too have children, five of them, conceived when my husband and I were optimists.
Are you honestly saying that the people who hold 46% of the world’s wealth don’t have a choice on which direction they are going?
http://www.huffingtonpost.com/2013/10/09/richest-1-percent-wealth_n_4072658.html
Meanwhile in reality land the bottom 50% who you insist in lumping in with those selfish individuals in the top own 1%. Apparently in your world that is too much and they ALSO need to cut back.
http://www.huffingtonpost.com/2012/07/19/households-wealth-american-1-percent_n_1687015.html
The problem is, any such moves have so far inevitably led to gentrification that has pushed the poor ever further out and thus increased their dependency on cars. It would help if Rahm Emanuel, for example, would stop arguing for bike lanes and pedestrian-friendly streets as means of attracting “the creative class”. It rightfully makes everyone else highly suspicious of the motivations behind such improvements. In Chicago poor blacks that were once concentrated in the city by government policies have for 20 years now been pushed out into the new suburban ghettos as city living has become more attractive to the “creative” class and other such “important” classes. This while no new invesments have been made in public transportation infrastructure. So in the end, your policy prescriptions have become yet another elites-benefiting urban policy that allows the “creative” class and aging yuppies to self-congratulate themselves for being so environmentally responsible and tut-tut the poors for being stuck in their wasteful old ways. All this on the public dime, of course, as many of these developments were financed by TIF funds, which consist of property tax money diverted from the public schools. Which of course, also serves useful purpose as a driver of increased for-profit charterization of public education. Talking about hitting several rabbits with one well-aimed stone…
I like the NC community, but sometimes it is too stuck in elite-think for its own good,
First, of all, I support significant expansion of mass transit into the suburbs (which, sadly, in my city has not happened, in party because of suburban racism). I really don’t think that allowing for multiple forms of transportation is elitist, and if you go into wealthy suburban communities, you will find that very often they don’t even have sidewalks, which is a not so subtle way of preventing anyone who can’t afford a car from moving into their neighborhood.
I’m not sure how cycling is considered elitist (especially considering that, according to AAA, car ownership has an annual cost of approximately $10,000). Census data shows that low income individuals are more likely to bike to work than high income individuals. In my city (considered the fourth poorest large city in the nation), 30% of households don’t own a car, despite the harsh winters. And, in any event, I am not elite. i have never made over the national median income and come from a solidly working class background.
The bottom line is that the fact that we effectively force people to own cars has significantly contributed to wealth inequality (imagine how much money people would save if they didn’t have car payments, insurance payments, car repairs, gasoline expenses, etc). The cost of transportation in this country is extremely regressive, as the poor have to devote a much larger percentage of their income to car ownership than high income people. Meanwhile, our mass transit system is woefully unfunded and our streets are fundamentally unsafe for pedestrians and cyclists (all part of neoliberals’ might makes right ideology). Furthermore motorists (who tend to be high income) who negligently kill pedestrians (who tend to be low income) and cyclists are very seldom held criminally responsible for their actions.
Well good for you, but the fact is that the way these sensible policies are sold and implemented is elitist. They are for the elites the way they are implemented, but paid for by the poor and middle classes. Chicago is a prime example of this. So in a way, it is yet another way to exclude the poor while sticking them with the tab for the direct and indirect costs. As an avid pedestrian I enjoy more walkable city streets, but I also realize that many do not derive benefits from them. I also have noticed that many of the most avid advocates of pedestrian and bike friendly developments in Chicago NEVER bother to insist or even mention the need to make sure that these developments benefit everyone. So it is in fact a liberal elitist thing in its present form, and that’s not lost on those who have been displaced.
Well, I can tell you that the experience in Buffalo is different from Chicago. Despite being the fourth poorest city, it has the seventh largest increase in bicycle commuting in the country. That increase is not attributable to “gentrification” (Buffalo has no Chicago style gentrification).
The bottom line is that our existing transportation infrastructure is heavily biased for cars, and that has a very regressive effect. In fact, the enormous sums that Americans spend on transportation is a major reason why the American middle class is so much poorer (wealth wise) than the European middle class.
I went to Copenhagen last summer and fell in love with that city!
Dunno. A simple google of ‘Buffalo gentrification’ makes it clear that what you call “Chicago style gentrification” is an ongoing concern for the locals too. Gentrification and the Displacement of the Poor: “The one thing that is missing with all of this excitement is where is the plan for the existing poor, unemployed, and those shut out of the current job market? The Honorable Governor Andrew Cuomo has made Western New York one of his frequent stops, and has also promised one billion dollars in state aided economic expansion to spur job growth. The problem that I’m seeing is that the people who are directing the governor’s attention here in Western New York are doing so in a manner that his policies assisting in the displacement of Buffalo’s current poor residents, in favor of being displaced by wealthier residents. Thus higher property values and higher rents which will eventually force the exodus of existing poor residents to new designated areas rather than fixing existing problems that currently exist in these urban neighborhoods. This is a systematic failure of the governor’s Western New York appointments in fairly addressing the issue of fair urban renewal.” Elites do have the same playbook, regarless of location. I will be happy if the Buffalo elites have the warm and fuzzies for the local proletariat, but nothing I have seen of urban planning in the US causes me to give up on my cynicism, particularly in regards to liberal elites.
The Buffalo area is not as poor as we would believe if the surrounding suburbs are incorporated. But, yeah, the city itself is mostly refugees from the State Department’s enemy-of-the-month program–literally non-English speakers, with the East Side totally African Americans, unemployed since the industrial sector was shipped abroad in the 1970s-1980s.
The city is so abandoned/run down, that the slight gentrification is a good thing.
I would not call the whole city abandoned/run down (it isn’t) but Buffalo is certainly not gentrified like Chicago or New York, given that even the desirable areas are relatively inexpensive.
Care to link to some supporting sources? Just asking, because one hears about homeless people living in their cars, and your contention has now got my head spinning in confusion. Do you suppose that the picture might be a liiiiitle bit more complicated than car=rich, pedestrian=poor? Sorry but I think you are engaging in a bit of contortionism here.
My experiences with bicyclists in Chicago is as follows: the majority are just as aggressive as drivers, and much more likely to disregard the rules of the road. That makes them just as dangerous to pedestrians and to themselves as car drivers, and when it comes to observing the right of way of pedestrians in crosswalks, even more dangerous. I have had my fair share of confrontations with cyclists who came within an inch of running over me on sidewalks or while crossing, and the overwhelming attitude of said bicyclists has been one of entitlement. If you want to talk about holding motorists responsible, you will be a hypocrite not to insists on mandatory liability insurance for bicyclists and making them subject to rules of the road enforcement.
OIFVet, it’s been my experience too. Owning a car is not as expensive as you think. At least it doesn’t have to be. It gets expensive when you buy a car for what it says about you rather than getting from point A to point B efficiently in a short period of time. You could ride a bike, or a motorcycle, etc. Transportation costs having nothing to do with why the middle class is getting bent over. Computers and the internet have much more to do with that. As well as high finance.
I don’t know where you get that idea. My son just bought a $4000 vehicle. He’ll have to shell out around $80 each month for insurance and probably another $80 a month for gas. He could lower the cost of his insurance but then he’d be out the $4000 if what happened to force him to get the new car to begin with(an eighteen wheeler drug his car and him, totaling his vehicle but luckily not hurting him.) As it stands his costs for the year last year were well over $200 a month for owning a vehicle when you consider he ended up having to replace a water pump. That’s over 10% of his take home. However, we live in a region where public transit pretty much doesn’t exist. He needs a car to get to and from work on time.
I would also add the costs of registration, plates, license, depreciation (a $4,000 car will probably only last a few years), maintenance (as opposed to repairs), and parking.
I disagree that transportation costs are not a factor in the decline in the middle class. Americans are less wealthier than Europeans, despite having a higher after tax income.
http://www.nakedcapitalism.com/2014/04/canadas-middle-class-just-get-affluent-uss-happen-long-ago.html
This is in part attributable to Americans spending a much large share of their income on transportation than do Europeans.
http://www.fhwa.dot.gov/livability/fact_sheets/transandhousing.cfm
http://www.eea.europa.eu/data-and-maps/indicators/expenditure-on-personal-mobility-2/assessment
If the US had invested in mass transit and not made the conscious decision to shield reckless motorists from criminal liability, then perhaps less household income would be devoted to transportation.
Could you please site the laws that “shield reckless motorists from criminal liability”? Also, Europe generally has universal health care and at much lower cost than what we pay for our crappy health insurance premiums with their high deductibles and small networks leading to sky-high costs not covered by this “insurance”. Transportation expense is not negligible factor but it is a trifle compared to health insurance costs.
When I said shielding from criminal liability, I was referring to the fact that vehicular manslaughter laws are often unenforced.
Health care costs are attributable to a lack of public provision and a heavily private means of delivery (like in transportation).
About 9.22% of households don’t own a car, but 35% of households making less than $20,000 don’t earn a car.
http://blogs.wsj.com/economics/2014/01/21/vital-signs-more-households-dont-own-a-car/
http://www.consumerfed.org/news/450
Also, drivers of more expensive cars drive more aggressively and are less likely to yield to pedestrians. It’s probable, therefore, that relatively wealthy car owners are more likely to strike pedestrians.
http://usa.streetsblog.org/2013/07/16/study-wealthier-motorists-more-likely-to-drive-like-reckless-jerks/
Over 30,000 people die every year to automobile fatalities, far more than the number who die from cyclist fatalities.
Oh goody, the bike nazis from Streetsblog! Chicago editor Greenfield is beyond objectionable with his constant demonization of car drivers. Way to win people over to his cause by insulting them. Then there is his obnoxious refusal to even acknowledge that bicyclists are subject to the same rules of the road as car drivers and thus subject to enforcement for breaking said rules. More car fatalities you say, but a pedestrian gets hurt pretty bad regardless whether he is hit by a car or an overcaffeinated creative on a bike, oblivious to all but to the earbuds of his iMaster. Who is supposed to pay my medical bills when I do get run over by an uninsured biker? Look, having several friends who reside in Amsterdam, and having spent good amount of time there and elsewhere in Europe (I do hail from Europe), I assure you that the bicycling culture of the US is appallingly primitive and entitled compared to that of Europe. An observation shared by my Amsterdam friends, BTW. Want to make more support? Less demonizing and more introspection. The streets belong to all, and riding a bicycle does not make you extra special. You insist on cars sharing the roads but refuse to obey the rules of the road. What’s up with that?
OIF, there is very decent, reliable and accessible rail transportation Suburb- City.
The thing that has very much changed in Chicago over the last 40 years is that much of the skilled / low skill industrial employers have vaporized. Chicago used to be an industrial City and much of the core industrial jobs are gone forever as well the Legions of clerical staff that was reqd to support it. There just aren’t large rooms of people filing blue and red carbon copies or typing in steno pools, or manually banging out widget anymore. So IMO less a case of poor people being “stranded out in the suburbs” away from all the jobs, more a case of many fewer jobs in the City of the sort that used to support white and blue collar industrial employees.
What the Chicago area could really use is a light rail circulator from the City, say out near Chinatown, pick a spot, along I-55 that then hooks north connecting all the existing East/West rail assets up to the Elgin commuter rail which goes to Chicago, and a continuation of the El train west of Oak Park along the Eisenhower Expressway hooking north to connect to the O’Hare line that goes into the city.
Opti, all those black people from Cabrini-Green were pushed off somewhere, and that somewhere often ended up being the south suburbs. Same with all those people from Wicker Park after the hipsters discovered it in the mid-’90s. Both of these are now lily white paradises of creatives bicycling down Milwaukee Ave to work, or walking to the latte emporium/latest hip restaurant/boutique. So you see, it is not a case of being stranded out in the suburbs, it is a case of the suburbs becoming the new ghettos by absorbing a large number of the black people who were displaced from their formerly undesirable Chicago neighborhoods. Yes, Cabrini-Green was hell on earth and I am happy to see it gone, but redevelopment completely bypassed its former occupants.
And light commuter rail can not solve all the issues that these displacements create. You still need to get to the Metra station somehow, and the Pace bus network is neither adequate nor convenient. And Pace/Metra combination can be quite expensive. Thus, cars.
OIF
I beg ignorance on the south suburbs.
I do recall my late night cruises past Cabrini Green in the 1980’s. No red lights.
Cabrini Green was originally intended to be temporary accommodations for poor people to get back on their feet a humane alternative to living on the street and instead it became a hell hole of predator-prey. I clearly recall that there were kids there that literally never saw the lake. So the social engineering demonstrated the unintended consequence of high density public housing was a defacto prison for the residents and the pendulum swung to “low density” section 8 housing in ‘neighborhoods”. I honestly don’t know how that is evolving but it surely cant be any worse than C-G or the Robert Taylor Homes.
On public trans, ironically Chicago had a very efficient streetcar system that did the heavy lifting public transportation-wise superior to what exists now, according to my parents. It was replaced by a largely inferior bus system. I am old enough to remember the electric buses. The intracity public trans by contemporary standards is pretty primitive compared to other big (European) cities I’ve experienced.
check this out; https://www.youtube.com/watch?v=T95kGrRg5Gs
1940’s Chicago Street Scenes, To Market, To Market 1/2
at 7:23 you can get a grasp of the streetcar infrastructure that once existed.
Unrelated:
I assume your in the Swan Library system, you’d enjoy this
http://catalog.swanlibraries.net/search~S1/?searchtype=X&searcharg=Siberiade&searchscope=1&sortdropdown=-&SORT=DZ&extended=0&SUBMIT=Search&searchlimits=&searchorigarg=Xsiberiana%26SORT%3DD
Well Moneta, you stepped on a land mine there. Good discussion by all. :-)
I mostly agree with you on resources. You only need to look at all the signs of a dying planet to see it cannot support any more people. And we (the US) do consume too much. Afterall, they call us “Consumers”. I saw a recent news article saying that half of the Earth’s animal population has been lost (land and aquatic) in the last 40 years. When all the tuna is gone, I’m totally screwed.
That said, I’m a boomer. Worked most of my life at one of the largest US Tech companies. A corporate raider became CEO in ’95 and gutted the employee pension plan so he could cash in some stock options at a higher price. So rather than getting 60% of my final salary, I get 25% (right near the poverty line) with no inflation adjustments to look forward to. When they get around to gutting private company pensions, I’ll be living in a tent. So your generalization that all boomers are living like fat hogs does not hold for all of us.
Love your screen name. Great movie, wasn’t it?
Yeah I love that movie. The Coen Bros are geniuses.
I know many boomers who are living on Social Security alone. People say that’s not possible, yet millions actually do it.
And in response to Yves’ comment above I must say, I think we are all hypocrites. Certainly I know I am one.
like fat hogs does not hold for all of us.
———-
Honestly, I don’t mind getting attacked. I expect it. For me it just proves how we in North American are completely oblivious to how much energy our lives consume even when we are poor!
The fact that I am being challenged confirms that pensions will continue to fail because we are completely off course and we will not fix anything of value.
On the energy front, Canada is just as bad if not worse. It’s not about all of us living like fat hogs. My point is about the sustainability of the lifestyle we have built for ourselves. There’s a reason why the natives lives in tipis. They had no horsepower.
If over the next decade the ROW consumers a greater share of world resources, we will be forced to contract!
It was not an attack. Just a viewpoint.
The cost of the War On Terror (Iraq, Afgan wars, etc) is $5-6 Trillion by some estimates. I often wonder WHAT COULD HAVE BEEN if only we had spent that money on a Govt Managed Renewable Energy Infrastructure (solar, wind, etc). Instead we bombed the ME then paid to rebuild it — Only UNcle MIC is happy.
I did not take your comment as an attack! I was referring to some of the other ones…
The amount spent on the military… That’s one of the many reasons why I am cynical. It made me conclude that we have no way of getting out of the rabbit hole of malinvestment.
wonder what the cost was for the Iraqi and by extension also other people involved in terms of life? Can you please elaborate a little bit on the rebuild part?
Cost of Iraq/ Afghanistan Wars est. (thru 2011): $1.26 trillion (WaPo)
That $1.2 trillion dollars doesn’t include the cost of rehabilitating the troops who returned (or paying benefits to the families of those that did not return).
Reasonable estimates do go into the $4 trillion range.
Yes. It’s easy to get to $4-5TT when you consider just some of the externalities, the human carnage most importantly.. Many irretrievably wounded young people that in previous wars would not have survived that will require care for the rest of their lives. As well, less importantly, than the human cost but costs none the less is all the military gear that was obsoleted in theatre or worn out faster than predicted and will be buried in program “upgrades”..
Less tangible but maybe one of the most significant chunks of $$ is the cost of sustained and un-strategic deployment of “high” technology that has it’s own equivalent of a freshness date. The longer the perpetual deployment timeline the more effective the countermeasures that are developed and the more resources justified to be thrown at developing the extraordinarily expensive generation next follow on widget A parasitic drag that will just keep on taking until we become more adult about how to negotiate differences.
Yes, the taxpayers will be paying me a modest disability compensation and provide me with VA medical care for the rest of my life.
IIRC Joe Stiglitz pegged it at $3 trillion, and that was a few years ago.
“The fact that I am being challenged confirms that pensions will continue to fail”
Challenge Moneta at your own peril. You’re killing grandma!
Not because I have some kind of superpower but because most are fighting for something that shoots them in the foot.
Most don’t understand how the entire pension system works so fighting to protect them as they are today is futile. The fact that I get so much push back just shows me how far we are from a resolution.
But you have decided to see what you want to see in each one of my words.
Your words are very plain, and completely at odds with reality.
I don’t think the strong reactions against Moneta are warranted. Moneta’s observations, however unsavory to us as Westerners, are correct. Our (Western) world is a problem wrapped in a problem. Yes, the 1%, elite, whatever are absolutely immoral and unethical people (and I cannot say that strongly enough), but the rest of us share in the privilege that our society has provided us for the past 60 years through military, monetary, and cultural power (in that order). In fact, Europe and its settled lands have enjoyed the privileges of exploiting others for over 500 years. Attacking Moneta for being within that same society is a) belying the point that we have very obviously exploited our wealth and privileged from the rest of the world and b) an unnecessary attack on someone for being in a situation that they can largely not help (Moneta made an big-picture observation not a broad condemnation of our character as individuals). I may have said it differently but the observation holds true.
I don’t buy your argument, which conveniently cherry picks what Moneta wrote.
First, Moneta came and chose to pick a fight on a post about pensions. His persisted in a bad argument, which is why he got attacked. That is normal NC commentariat behavior. If you don’t like the heat, stay out of this kitchen.
Second, he tried making an entire group of people responsible for behaviors many did not participate in, for instance, living in big houses.
Third, he refused and continues to refuse to focus on who is most culpable. As Diptherio pointed out:
The US is materialistic and consumes a greater than appropriate share of the world’s resources, granted. However, your argument seems to be the individuals bear personal guilt for the failings of the society into which they were born. If I read you correctly, any American who comes of age and does not immediately reject their entire society and live consciously as a pauper is worthy of scorn and has no room to complain when they are cheated by those much wealthier than they…
You appear to be saying that people who have used more than their “fair share” don’t have the right to complain that they are now being screwed by their bosses and representatives–but it’s those bosses and political representatives who really deserve our scorn. When these a-holes decrease pensions, they will be exacerbating inequality in the US while doing nothing to alleviate it globally…but I guess you’re fine with that, or so your comment leads me to believe.
Fourth, Moneta started talking about overpopulation and overconsumption of resources by people in advanced economies as his justification for cutting pensions, which it tantamount to “old people need to die faster.” It turns out he has had children, which is a major contributor to the very problem he professes to be concerned about. So his position is tantamount to “I want mine for me and my children, and I am prepared to take it out of older people.”
Fifth, Moneta has NO solutions save hurting older people. If you want to guarantee that nothing gets fixed, stoke hatred among the peons. I wrote elsewhere:
You say you want to solve problems, but stoking hatred among the various elements of the non-0.1% guarantees that the lower orders stay divided, the train keeps running on its tracks which is very much to their advantage. Even in the collapse of Roman Empire, the top wealthy were pretty insulated.
About overpopulation, Moneta ignores the fact that developed countries also have far lower birth rates than developing countries. Within a society, the wealthy generally have fewer children than the poor, regardless of whether the country is from the global North or the global South. So Moneta’s argument is completely misguided to begin with. Eliminating inequality and providing everyone with a living income will do far more to control overpopulation than reducing meager pensions. It is quite infuriating, this attitude towards retirees. In the old country the pensions were robbed and the pensioners impoverished and forced into bare survival mode. All that did is create even more problems. Callousness like that is indeed used to pit the lower classes against each other, rather than against the true source of misery.
Not necessarily. People in advanced economies consume way way more in the way of resources. And the US is showing demographic growth due to immigration and higher birth rates among Hispanics.
However….drumroll…all those people being born now in developing economies DO want to have first world lifestyles…and their governments are not keen about compromising to save the environment just because they industrialized late. Although China is so polluted it is having to rethink that.
It’s interesting to see how people perceive what I write because I never proposed cutting pensions. In fact, on this site in previous comments, I have promoted a universal pay-as-you-go pension.
The thing is that IMO, all current pensions would need to get folded into this new model. But that is not going to happen fast enough, or ever, so all these badly managed pension plans keeping Wall Street fat will just keep on folding one at a time.
I am wishing for a better system which is not coming and now I am being called someone wishing for a die off???? That’s quite the stretch.
Wow, you’re completely fucking brilliant. A universal pension?
Social Security? I’m confused as to your age. If it as you said, that you proposed it, how old are you?
It’s “interesting”* that you continue to post under “moneta”, a die hard monetarist, on a blog that continues to prove you wrong, every single day. Not only that, but your patron saint was from Chicago!
* interesting in the passive-aggressive canadian past tense of “I’m smarter than you, I have interesting thoughts, and will now determine what is acceptable discourse, damn any built in contradictions.”
I try to stay respectful on this blog even if my arguments are not liked.
Double standards at NC?
Respect? You talk over everyone that continues to point out the faulty logic of your bankrupt, ideologically driven sermons.
We should just sit by and let you sermonize? You’re at the wrong blog..
This absolutely ignores the fact that many in the US are NOT living high on the hog. The bottom 50% of this country hold around 1% of the world wealth collectively. I can’t imagine they are doing much better than the 66% of the world that collectively hold 3% of the wealth or less than $10,000 in assets.
Let me put it another way…
The US is already consuming 25% of global resources while the concentration of wealth is at all time highs. So if the lower classes get to spend more does this ratio go even higher? Or do you think the top 10% consume 80% of this energy and we will just take it from them and transfer it to the lower classes?
In North America, there is a huge difference between wealth and energy consumption. And I would argue that a large percentage of the middle class consumes way more resources than a lot of the rich. They live in burbs with lots of toys in the house and multiple cars. They also tend to eat more processed foods and buy assets that depreciate faster because they are more sensitive to monthly cash flow.
A large percentage of the US population might be poor in terms of net worth but their debt levels have contributed to significant pent up energy consumption (burbs, cars, roads, agriculture subsidies, big box developments, etc.)
Let’s put it this way-
Are you or are you not american?
Your continued use of the royal we is the source of most of your detractors, and also my best hope for humanity. The gilded prince of the north, sometimes, is a US monarchist?
One foot in both worlds. That’s a good posture to ensure getting your head lopped off.
King of the “westerners”, comes fourth to speak for “US” all, in the comment section of a blog.
I bet your mother was a virgin.
Entitled? You mean like a canadian telling americans about their country? Broad generalizations and simple solutions.
Psss…You still have a queen. She can make all of the changes you want, and would probably agree with them. The last hope for a freedom loving tory- the queen!
A starving dog bites. I see scaffolds in the future.
I do too…
Unless the starving dogs just… starve first. Since all us dogs will starve in tranches and not all at once, I put the odds at 50/50 at best. Old starving domesticated dogs can be amazingly obedient right up to the bitter end.
When I was a kid, there was a phrase that I thought was, “It’s a doggie-dog world”. I figured it was a cute, sentimental expression.
When I was in early adulthood, I was living in a remote, extremely poor region among functional illiterates, many of who were plenty smart. These people always had dogs, often part-wolf breeds. These were ‘working dogs’ used for safety in the wilderness, as well as for hauling and other tasks. When a dog died, it was taken out of a village a short distance, and left for other creatures to consume.
One day, I was walking outside a village, and saw several large dogs hovering over a carcass and eating from it. I then realized that the carcass was one of my favorite dogs in that village.
And it hit me that the phrase from my childhood was actually, “It’s a dog EAT dog world.” This fact of life is hidden mostly hidden in suburban America, but for much of the world, this is the nature of existence. As it turned out, the dogs that I saw were eating a dog that was a sibling to one of them, and a cousin to the others. Those dogs ate as if they were ravenous, because these dogs always have to find their own food — the villagers viewed buying ‘dog food’ in a package as delusional. Money was never, ever spent on dogs: they had to find their own food.
So:
#1: Once in a while, when I read something I almost have the sense that a bomb is exploding in slow motion: that’s the sense that I had reading this. The implications are stupefying.
#2: It’s a dog-eat-dog world. Maybe the electeds and Wall Street really believe that security services and surveillance will protect them, but given what I’ve seen of human nature, I would not want to be a person who screwed people out of their retirements.
#3. Retirees have time, skills, and plenty that I know are damn smart. IOW, this is a demographic that I would not want pissed off at me.
#4. Dealing with Elder Care has made me extremely aware of the costs of retirement and longevity. There is a huge opportunity for anyone who can figure out how to provide decent, humane, affordable senior housing and services.
#5. What Hudson is not mentioning here is the phenomenal profit now being accrued by things like ‘Memory Care’ facilities that are corporate entities. How much of that revenue finds its way to the very same Wall Street funds that then screw public pensions?! (One of my relatives cost $9,000 per month for over six years before she passed on. To put it politely, there was no money left for her kids to inherit — not a dime. Do the math, and you’ll quickly see how ‘lucrative’ one single elderly person can be to the ‘Memory Care’ facilities, and yet families are ill-equipped to deal with this on their own.)
#6. If the pension funds implode, the social upheaval will make Occupy Wall Street look like a picnic on the village green.
#7. This article needs to be far more widely read and discussed.
#8. Reiterating item #6: This article needs to be far more widely read and discussed.
Agreed on #6. And the younger adults will not be patient when their kids AND their parents are hungry.
That may be point of the surveillance state: to cull the pack of breeds and individual who would bite.
What do people have as scaffolds today? Wooden carts to bring the elite to justice against smart bullets and bombs? Technology is not only making civil disobedience difficult to impossible, it is also lowering the price of doing so thus pushing out the inevitable point when government – of corruption, by corruption and for corruption – can no longer afford and/or function to protect the elite.
When reprisal happens, if it happens, it will likely be against local vestiges of government and may do as much or more harm than good.
You point about technology squelching civil disobedience is valid only up to a point, I think. All the high tech in the world is useless once the lights go out, and all that implies…
The solutions are so simple……a huge tax on inheritance so the money the Wall Street Bankers have stolen is given back to the government…….a huge jump in the income tax as well……..so it is more worthwhile to play golf on Wednesday afternoon……and a guaranteed annual income for all Americans. The guaranteed annual income has so much going for it……unless I am missing something. Make it higher than what the PBG pays even. I read somewhere that new business formation is greater per capita in Germany than in the US because if one starts a business and fails…….one can expect a basic income rather than eating dog food under a freeway bridge as we have here in the US……so one can take a chance.
Thanks for this timely post.
NC is a great antidote to the MSM reporting – or lack of reporting.
agree. considering the percentage of pensions & retirement accounts that are in fact hugely invested in OIL…it appears the politician spin won’t be needed. its all baked-in, right?
The Kleptocracy has read Citizens United unlike most readers here. They know that this is the moment when they must crush what is left of organized labor, because Citizens United not only empowers collective action by corporations, it explicitly empowers all collective political “speech.”
American “capitalism” is semi-feudal in its origins and remains so in its outlook. Beginning in the colonial era, the sovereign grants the “right” to extract value from the land and the people living on it. To engage in an oversimplification: first it was via agriculture, then minerals, then railroads, etc. However, the extraction of value today is from people. Their labor must be stolen and their savings looted for the benefit of those able to manipulate the sovereign through networks of privilege.
The notions of Ayn Rand and her ilk, of “freedom” and “individualism” are thrust at the masses to prevent their collective action against the cronies who have set themselves up as our sovereign. The looting of pensions and the crushing of unions are the logical and intelligent actions of the Beast that is American feudalism.
Great. More indications that Wall Street is actively preparing for another meltdown. So they plan on holding the FDIC hostage to get their bailouts and let the pension funds go bust. Any other bad news?
I’m not following this quote: “Scaling back labor union and corporate pension funds will enable Wall Street propagandists to come out and say, “See, the only way you can be safe is to have your own private accounts, and manage your own money.”
The problem with this approach is that “managing our own money” turns out to be deciding which Wall Street firm is going to manage it – and of course, they manage it in their own interest first and foremost. They do this by raking high management fees that keep most of the returns for their own salaries and bonuses . . .”
Aren’t these union defined benefit plans already managed by Wall Street? If newly invested assets are switched to defined contribution plans over the long term, wouldn’t that likely lower fees if the fiduciaries do their duty and include low cost options? This of course will not apply if Wall Street manages to get regulations approved that allow “2 and 20” vehicles to be included as defined contribution plan options.
The notion is that everyone should “be responsible” for their own savings and retirement. It’s the old “personal responsibility” meme. But of course retail products have way higher fees than institutional products and 401 (k)s are terrible that way, lots of hidden charges and abuses (like really slow transfer of funds from one account to another).
It’s not just the fees. It’s the whole structure of the pension system…
Here in Canada, company pension plans are protected from creditors… but if you can’t find a job with a pension and invest on your own in RRSPs… these can be seized by creditors.
When I first read the author saying that pension funds would be scaled back to pay Wall Street, I was horrified at the thought that pension funds could be raided in such a way. But on further reading, it appears as though what has happened is that the taxpayers are being taken off the hook for shortfalls in union pensions. These are two very different things.
The author makes much of the role of the the mismanagement of pension funds by Wall Street in creating the shortfalls, criticisms that I have no doubt are accurate and warranted. But then he glosses over the gross mismanagement by the Teamsters union, which apparently now has 1 current employee for every 5 retirees? The Teamsters union is clearly making promises to its members that it can’t keep and has apparently had no incentive to take steps to rectify the situation because the PBGC.
This all boils down to a squabble between two badly behaved pigs jostling for their place at the trough and the author is not happy with the current winner. Maybe the answer is that the government should force both pigs to properly manage their business instead of picking winners and losers at the trough.
If the pensions were properly funded, the ratio of retirees would be irrelevant. This isn’t about the unions being greedy, this is about adequacy of funding. And you also need to keep in mind that pension fund management is all about liability avoidance. Everything the trustees do is based on the advice of experts they hire.
The new pension rules have benefits not only for Wall Street, but there is also a specific carve-out for a little shipment and logistics company called UPS, which is contractually obliged to cover the pension shortfalls of their former employees who are enrolled in multi-employer plans. They stand to save $2 billion, but naturally they deny they stand to benefit at all:
http://www.latimes.com/business/hiltzik/la-fi-mh-congress-expected-20141210-column.html
“The provision generally applies to “orphans” — retirees whose employers have either gone out of business or exited the pension plan. UPS exited the Teamsters’ huge Central States pension plan in 2007, then agreed with the union to establish a separate new plan for its workers while committing to covering any benefit cuts for workers still in the old plan. Central States is perhaps the shakiest pension fund in the nation, so it’s most likely to take advantage of the Kline/Miller bill.
The new provision effectively places UPS retirees last in line for benefit cuts among all “orphans” getting their benefits from Central States. Pension experts say that arrangement materially reduces the likelihood that the UPS retirees will suffer more than minimal cuts, if any cuts at all. In turn, that reduces the liability of UPS.
The Teamsters on Tuesday said this provision could save UPS $2 billion, calling it an “outrageous government bailout of one of the most profitable companies in America.” The union noted, accurately, that it would likely result in deeper benefit cuts for non-UPS retirees — who would effectively be paying for UPS’ break with their own retirement stipends.”
—
Employers paying their pension obligations using other people’s pensions: it’s the new corporate American way.
didn’t they also get tarp?
Employers paying their pension obligations using other people’s pensions…
Even if they never got anything for it, it was cheap at that price. Without malice aforethought I had given them the best show that was ever staged in their territory since the landing of the Pilgrims! It was easily worth fifteen million bucks to watch me put the thing over.~charles ponzi
Also, the pension “reform” was preceded by an earlier “reform” that reduced required contributions to pension funds. The pension “crisis” is, to some extent, manufactured by Congress.
Bingo!
I agree with Moneta! Wall Street are the risk takers. Because of this, they earn the right to have several large homes around the world which they have necessarily need yachts and planes to reach. Cars are important in this line of work as well. You can’t meet clients in less than a German high class vehicle and still maintain your image. So making them take the consequences of failed risk would just ruin this entire economy for them, something we can’t allow, hence bailouts when the risk taking goes sour.
Now those disgusting pensioners– well, that’s a different story. Do those people need water? No, they do not. Do they really need housing? Absolutely not. I understand that under the new “law” a $3000.00 per month pension may be cut to $750.00. This will make a lot of people homeless and undoubtedly save the earth!
The more people starving, freezing, and getting sick/dying from lack of medical care and shelter will absolutely save the earth!
O.K. back to reality. Wall streeters aren’t risk takers when they know they will get bailed out for gambling with other people’s money. If we want to save the earth it’s going to take some coin. Regional renewable energy is a great start. There are homes which can be built to run on as little as $10.00 per month of energy consumption, but they cost a lot to construct. Organic produce benefits farmers, soil, air and consumers. Giving subsidies for organic produce to farmers and consumers is a great way to go, but again, it will take money.
Still, I haven’t noticed that the US suffers from a lack of money. It does suffer from a lopsided distribution of income that benefits the few. Time to redistribute that for a common good. Time to stop investing in war and start investing in the environment and the people.
I have a great deal of respect for Michael Hudson. He is an incredible analyst. What of potential action? Most critiques are concluded with a quiet call for some return to a “previously” formulated regulatory body/format or, more abstractly but in my opinion correctly, a positivist political structure willing to prosecute a well regulated, rational economy that manages monetary policy responsibly (this is where the emphasis should lie). Say something similar to Japan pre-1980s.
(link to a good documentary on the subject: http://documentaryaddict.com/princes+of+the+yen+central+banks+and+the+transformation+of+the+economy-12877-doc.html).
I suppose this is why I have difficulty accepting conventional monetary solutions post 2008. It is a tool that assumes responsible politics and the assumption is dangerous. The same central banks that can build a fairly equitable economy can also dismantle it, and this dismantling happens far more quickly than construction. I feel monetary theory has to be tightly coupled with politics (really they should be one and the same) though they seem to operate in different worlds. Listening to a central bank head discuss monetary policy is an otherworldly experience, as if their policy isn’t directly linked to real world politics and the peculiarities of trade and production. The heavy handedness of analytical theory blurs the complexity of economic structuring. Our approach to monetary policy has certainly worked in the past (as is the case in Japan pre-1980), but it requires an almost magical political and social environment to operate smoothly and these cannot be created with even more analytically driven monetary policy. In short, if the politics are junk, the monetary policy is junk.
I am an avid WIII-era reader. I remember reading that not having a spoon in your possession was tantamount to a death sentence in certain areas and points of time during the conflict. If you personally did not have a container and implement to consume the crappy soup available to you, you were in deep trouble.
I find myself thinking about this concept a lot, every time I throw away a plastic spoon or fork to stir up the nth cup of coffee I find myself making every day. We go to Costco to buy lots and lots of things that will eventually get thrown away, almost immediately after first and only use. I have three different sets of flatware that never gets used. Then I’d have to wash it, clean it, put it away. Annoying. So I blow through 500 count packs of forks and knives, heavily.
This would have been absolutely unheard of 60 years ago. In survival, things only have real value only if they have more than one use or multiple applications. Otherwise they are not advantageous to the owner of such an item.
Why do you think the ancient Jews banned pigs from the daily diet? In the middle east pigs wreaked havoc on what little land was useful for pasture. They fouled up the land, consumed too much water and left nothing for any other use, i.e. the land was rendered useless for more than one application, so that practice was banned in ancient times. Grazing animals, who could provide milk, wool, meat were prized and encouraged, who could be fed small amounts of the agricultural products that was being produced for humans anyway.
My point is this, here in a America the throw away culture is really killing us. Not from an environmental perspective, but economically. The plastic producers are king, the flatware people? Not so much.
Amazing how things that are purchased to be immediately thrown away are more profitable than something like a fork, which could be used by one person for their entire lives.
Some good points.
I’m sure that Lanny Breuer and his boss Holder do indeed lay awake at night worrying that if they declared Chase, Goldman and others criminal institutions, poor widows and orphans and pensioners would suffer. So best to tie their gains to those of the largest campaign contributors.
AARP have indeed been major campaigners AGAINST the budget’s rewriting of the pension law. I simply didn’t have the space to go into it.
There’s no question but that “the market” DOES take care of everything. But all that means is, what KIND of a market are you going to have? What oversight, checks and balances, escape valves, taxes, legal systems – and where does the public sector intersect with the market – to remove basic needs from being subject to it and being “socialized”? (That was what Polanyi was basically concerned with.)
To Obama’s Wall Street backers, “the market” is a lever for the financial sector to draw all the economy’s surplus income and, in time, assets into its own hereditary hands.
Re Yves’ point about “properly funding” pension plans. How MUCH would employers or governments have to pay to fund them (1) “safely” at <1% interest on government bonds (not 2% on longer-term Treasuries because interest rates may rise), and (2) if you assume “normal” capital gains (and there is a market break) and (3) management rip-offs from the top?
The problem is that it’s exponential to FINANCIALIZE such funding instead of paying on a pay-as-you-go basis as is done in Germany. I’m surprised that none of the discussion has focused on this point.
CalPERS has 7.75% return target. It made 18.4% in fiscal year 2014, 12.5% in 2013, and 1% in 2012. and 21.7% in 2011. So over the last four years it has averaged 13.4%. I think we are all expecting a really crappy year or two at some point, but CalPERS is huge, so this isn’t a matter of picking small oddball spots and getting a craazyman 10 bagger.
Interesting how well the Austerian Pete Peterson crowd harmonizes with the Malthusian Environmentalists. United gloomsters out to kill the middle class it seems.
As Ken Kesey used to say, “Why would I want to go on your bad trip?”
I know I am late to the party but I do not understand what Hudson is saying here . . .
“For instance, Marcy Kaptur, who replaced Dennis Kucinich from Cleveland after the Democrats helped the Republicans gerrymander his district, said that she should remember who voted which way on the House Appropriations Committee she served on.”
First, Ohio lost a representative since it lost population. Kaptur already represented northwestern Ohio and her district was essentially combined with Kucinich’s district(northeastern Ohio) forcing them to run against each other. Is Hudson saying that Kaptur is antilabor? She sure has Labor in NE Ohio fooled if that is the case.
I really am asking a question here and not being rhetorical.
Kaptor was vicious in her vile attacks on Kucinich trying to promote herself. (Truth in reporting: I was the economist for Dennis.) But she is much hated among his supporters for her opportunistic attacks on him, her uncollegiality — and of course, for her double-crossing labor when it comes to voting and then covering up her tracks, as in the above pension rewriting where no record was kept of who voted and what was said.
Hudson says it right here: “So this is the problem: the supposedly liberal Democrats are in the lead for scaling back pension funding, Social Security and labor protection in general.”
They are not working for us. None of them work for us. Got it?
There’s no question but that “the market” DOES take care of everything.
In the Mafia sense of the term.
Privatize Social Security is nonsense. It’s like saying that there is a “trust fund”. Sorry, Mitt wannabes but not everybody has a trust fund.
Carla: Got it.
Yves: Defending the TBTF gibberish? Really?
Moneta: No worries Bubba, just returning the FICA I paid and my employers matched and good luck to ya.
Jesse: Thank you.
Moneta falls into the generational warfare trap promoted by the Pete Peterson crowd, although I don’t sense he personally wants old people to suffer. He can’t get his head around the fact that the structural systems he blames for our current (mainly energy) resource predicament are not solely the result of a generation born between 1946-1964 or so, but includes the generations preceding and generations following them. Nor does every member of a generation equally participate or benefit from the imbalanced resource allocation we currently (do not) enjoy. He just fails to grasp the class basis of history and our present system.
And stripping pensions certainly will not fix anything, anymore than pauperizing single mothers and bringing back child labor.
Still, there is merit in the observation that western countries simply consume more at the expense of the rest of the world, and that our energy consumption will very likely have to change radically, and soon, as Kunstler and Orlov never stop reminding us. Our inheritance of colonialism and the current corporate regime, bringing sections of Asia into the first world fold.
But to dump this on “boomers” and say there are no options than pension slashing and pain for the poors is to accept the neo-liberal world view.
The point is to present alternatives.
But rational allocation of resources, and
First of all, I am focusing on boomers here because we are talking about pensions getting gutted and the boomers are the first in the line of fire. I could have talked about Gen-X or Gen-Y but I would have been off-topic because most of us either don’t have a DB pension or don’t expect to retire. And most of us are too far removed so not focusing in this topic. This pensions thing really is a big boomer topic right now because of the AGE factor of the cohort.
Secondly, I never blamed the boomers for the resource distribution problem. I just stated that the problem existed. And that it is present at every level.
Thirdly. I never proposed stripping pensions. I just stated that it will happen by design.
I believe in a pay-as-you-go universal pension but at this point in the game I do not think a change will happen fast enough to protect a large number of boomers.
What is happening here is a case of shoot the messenger.
“Here’s how Prudential Insurance became notorious for ripping off the funds of clients it managed, for instance. It might make two bets on a given day: one, that a stock or bond would go up, and two that itwould go down. At the end of the day it would put the winning bet in its own account, and the losing bet in the account of its clients.”
That’s how Hellary made her money from Cattle Futures. So elect Hellary and you’ll be electing an expert to deal with these problems. Hell yeah!
I have noticed that many pension articles have gotten posted but they do mot seem to generate much comment or thought. I think Americans want their pensions protected and they do not understand how the way these are currently structured keep Wall Street fat. This current pension system is protecting the ,1%.
If you want to fix your system, pensions will need to change drastically…. and it is not by protecting plans that are underfunded and badly managed. It’s by creating a new system.
But this would take at least a decade so this guarantees that many more boomers will suffer. And this is by design, not because I am an ogre.
I am passionate about the pension topic because I believe it is at the root of our systemic problem.
This pension system spans multiple decades. It builds up huge amounts of money which attract the thieves.
And the funding is based on valuations that can be easily distorted due to long durations and pooling.
It promotes financial engineering and kick the can.
Ok, but you haven’t proposed anything to replace the current pension system, and one is left with the impression that any new system that would be acceptable must involve a mattress. Which is not new, attracts thieves of different kind, and leaves the retirees just as vulnerable to sudden shocks.
How many time do I have to repeat that I am for a pay-as-you-go universal pension system?
You already have that. It’s called 401k. How are those working out for the retirees? Have they repelled the thieves in suits?
That’s not pay as you go.
“There are not many differences between a pay-as-you-go pension plan and a 401(k). Both require contributions from the employee, whereas a traditional pension is fully funded by the employer. In both a pay-as-you-go plan and a 401(k), the participant can choose from a provided offering of funds to invest in, while a fully funded pension’s portfolio is managed as a whole and participants have no say in how funds are invested. The differences between these two plans primarily lies with contribution limits and how funds are distributed in retirement.” http://www.investopedia.com/ask/answers/102814/what-are-differences-between-pay-you-go-plan-and-401k.asp
Paygo in Canada = not funded.
For example OAS is paygo… paid directly out of the tax base or deficit spending.
A few decades, paygo was dropped because it was considered unfair on an intergenerational level, especially when one cohort is larger than the next…
Fully funded was preferred but now we are finding out that large cohorts create painful situations no matter what.
Just checked… it would seem that in the US you call it paygo which is different from pay-as-you-go.
While here in Canada and/or Europe the terms are often used interchangeably.
When the average size of a new home is 2,600 square feet… it is easy to assume that for a vast percentage of Americans, resource redistribution is not even in the cards. And if it ever happens, it will affect every facet of American life.
http://articles.chicagotribune.com/2014-06-02/business/chi-average-home-size-sets-new-record-20140603_1_home-size-home-builders-new-record
Not much discussion about the role of organized labor on this issue. Many unions actually supported these cuts due to their subservience to the business union / labor management cooperation approach. This inherently produces a strategy defined not by what’s good for the workers, but what is necessary to keep their business “partners” productive regardless of the impact on the workers. Crisis calls out for an independent political and economic mobilization on class issues but this “cooperation” model is spent and is simply incapable of responding to these and other attacks. A class struggle approach inside labor is needed… Sad that AARP’s comments are better than most unions…
Agreed.. Seems the most frequent commenter in this thread is from Canada where employer pensions are not subject to this assault. A few years ago my National union General President was charged by the DOL with “breach of fiduciary duty” involving the investment of a large portion of the rank and file National Pension in a Florida luxury hotel and convention center. A fine was levied and the union insurance policy paid it.
Now we see this new budget legislation which removes trustees from fiduciary liability when they choose to cut benefits of the retirees. What could possibly go wrong from this bipartisan action? From the top on down, leadership was silent about the carving in the back room. If Banksters cannot be prosecuted for fraud, why should prominent Obama supporters in the labor movement be held accountable when the investments go south? The fix does seem to be in place. My Democratic Senators Cantwell and Murray took “no public position” on these “reforms.”
Actually OAS (old age security) here in Canada was recently pushed off to 67 from 65 for those under 50.
But, but, but…. I am a people hater creating generational warfare.
Pensions are under attack. Our situation is pushed off because:
1. our real estate is still in the stratosphere… so we have not gone through that pain yet
2. markets bounced back
I am seeing the same thing happening in Canada but Canadians are probably even more blind. The only place that realizes something is off is Quebec… but the rest of Canada thinks only Quebec has the problems because of all their socialist policies… but they should be looking in their own backyard.
On the pension issue, for the sake of contrast & comparison, a (very rough) look at the Australian system.
In Australia all employees receive a percentage of their income as superannuation. That is, the employer automatically adds, to a designated superannuation (“Super”) fund/account, a percentage of that income payment. At the moment that percentage is 9.5%. (its set to go up to 12% by 2025, politics and economics allowing)
Thus, if your (gross) pay is $ 100 the employer puts $ 9.50 into your “Super”.
That Super is accessible on retirement or in a number of very narrow circumstances before retirement.
Once it is paid over to the super account the employer has NO claim to it in ANY circumstances. That money is GONE.
Employees — usually higher wage earners — have the option to manage their own Super. That is, within the limits of a complex set of regulations you can invest your Super as you like. ( I know little of this: one …amusing (?) aspect is (I believe) that your Super can include investments in such things as valuable art works… as long as you don’t actually display them ! (ie you must “store” them away).
An employee is free to have their Super paid into any recognised fund they like. They may also “roll over’ (transfer, consolidate) funds from one account to another.
On retirement you may take your Super as a lump sum and invest it (and become a “self funded retiree”) or spend it (sometimes, just blow it) as you choose. If your Super is “inadequate” there is a government pension. Many Australians opt to (or have to) have income as a combination of a (reduced) pension plus invested Super. (The adequacy of the pension is an open question: if interested, I suggest you listen to Australian talk-back radio and make your ignorance absolute).
Employees may “top up” — voluntarily add — extra income to their Super. There are also an almost inexhaustible set of TAX issues associated with paying into and taking out of your Super.
I do know that there is a view in some quarters that older workers and higher income workers tend to benefit more than “other” workers from current Super laws. It’s believed that a certain amount of “tightening” of the Super Law at the top of the income brackets would return the government as much as a $ 1 billion (AUS) in saved tax concessions with little impact on the “average” wage earners’ Super.
It’s far from a perfect system, but it’s not the most inequitable system either.
I should have added, in fairness, that Australian Super has its fair share of fraud, gouging, excessive fees and general shonky business by some Fund managers/trustees etc etc. ie far from perfect.
Current labor “leaders” don’t have the vision to challenge the attacks on pensions, Social Security, Medicare, single payer health care, along with the privatization of everything. Why? They are mired in a belief in the merits of unlimited capitalism and their strategies to counter its excesses no longer are viable (if they ever were). Capital has taken the gloves off and as Warren Buffet says there is a real class war going on and his class is winning. Labor must be revitalized from the bottom up with a real popular anti big business message. It’s the only way to build a real movement to save pensions and everything that is good for the general public. It’s one thing to fight and lose, it’s another thing to give up before you even enter the ring.