TannerOnPolicy

Home » 2015 » August

Monthly Archives: August 2015

Market Crash No Argument Against Social Security Accounts

There have been many good, if ultimately unconvincing, arguments against allowing younger workers to privately invest a portion of their Social Security taxes through personal accounts. There have been even more silly ones. One of the silliest is the one regurgitated yesterday by ThinkProgress, that this week’s stock market decline proves that “If Social Security Had Been In Private Accounts The Stock Market Drop Could Have Been A Disaster.”

Few personal account plans would require a retiree to cash out their entire account on the day that the market crashed. But what if they did? It is important to understand that someone retiring yesterday would have begun paying into their account 40 years ago when the Dow was at 835.34. After yesterday’s decline, it opened at 15,676 today. Over those 40 years, the worker would have made roughly 1,040 contributions to their account. Only 48 of them would have been at a time when the market was higher than yesterday’s close.

Yep, even after yesterday’s crash, the worker would have made a tidy profit. In fact, his return would have been substantially higher than what he could expect to receive from Social Security.

The last that defenders of the status quo made this argument was 2009, during the market crash that led into the Great Recession. At that time the market hit a low of 6,547. Obviously, if workers had been allowed to start investing then, they would have done pretty well. But more importantly, retirees in 2008 would have done well too, once again better than Social Security.

Cato published this comprehensive study of that downturn and its impact on personal accounts: http://www.cato.org/publications/policy-analysis/still-better-deal-private-investment-vs-social-security

Social Security is running nearly $26 trillion in future unfunded liabilities. It cannot pay promised future benefits to young workers without substantial tax hikes. We should begin a discussion of how to reform this troubled program. A start to such a discussion would be to retire the canard about market crashes and personal accounts.

Crossposted to Cato@Liberty

Scott Walker, Sports Stadiums, and Crony Capitalism

I may have hit a nerve.

In this week’s column for National Review Online, I discussed crony capitalism and how too many supposedly free market Republicans were quick to grant favors for friends and constituencies. I particularly faulted some of the GOP presidential candidates.

http://www.cato.org/publications/commentary/republicans-crony-capitalism

One of the samples I cited was Wisconsin Governor Scott Walker, pointing out, among other things:

His support for using $250 million of Wisconsin taxpayers’ money to build a new stadium for the Milwaukee Bucks basketball team is a quintessential example of crony capitalism. Among those who will benefit from the taxpayers’ largesse is real-estate mogul Jon Hammes, a partner in the investment group that owns the NBA franchise; Hammes has agreed to serve as the national finance co-chairman for the Walker campaign.
Apparently, my comments hit a nerve with the governor’s campaign. Within hours they had rushed out a reply from Milwaukee Journal Sentinel columnist Christian Schneider defending Walker’s support for the stadium. (At least I presume that the Walker campaign was behind it, given the speed at which it was put out).

http://www.nationalreview.com/article/422452/scott-walker-milwaukee-bucks-arena-deal

Today, NRO senior editor Ramesh Ponnuru weighed in, pretty much shredding Schneider’s response.

http://www.nationalreview.com/corner/422493/walkers-stadium-subsidy-ramesh-ponnuru

Ponnuru really nails it, but I would add just a couple more points.

Schneider appears to suggest that the stadium financing will be offset by taxes paid by the Bucks and the NBA. That might be an argument if he was talking about new taxes that would be generated by an improved stadium or something. But Schneider makes a point of saying that “This isn’t expected revenue from future economic development — this is money already being paid to the state.” (His emphasis). If so, that money is already being spent on something. If it is now to be dedicated to the new stadium, won’t it have to be made up through other taxes, in which case the Wisconsin taxpayers will be indeed be footing the bill.

I suppose the lost revenue could be offset by cutting current spending, which would be a good thing. But if that spending could be easily reduced, shouldn’t it have already been eliminated and taxes correspondingly cut. Anyway you look at it; it appears Wisconsin citizens end up paying more than they should in order to benefit wealthy and connected private businessmen.

That the beneficiaries are private businessmen is also an important point. Schneider compares the stadium deal to funding for a chemistry lab at the University of Wisconsin–La Crosse. But there is an obvious difference between spending money at a state-owned university and spending it to benefit private businesses.

Walker’s camp also warns that without the stadium deal, the Buck’s owners might have taken their team and left town. This was a legitimate worry. But I thought Scott Walker’s claim to fame was that he was a tough leader who faced down the unions – Wisconsin’s version of Donald Trump, as it were, when it came to negotiations. That his spine suddenly turned to jelly when confronted by irate millionaires is less than inspiring.

Finally, on the merits of the deal itself, Cato has published several studies showing that there is little if any economic benefit from government-financed sports stadiums, including: Dennis Coates and Brad R. Humphreys, “Caught Stealing: Debunking the Economic Case for D.C. Baseball,” Cato Institute, Briefing Papers No. 89, October 27, 2004.

http://object.cato.org/sites/cato.org/files/pubs/pdf/bp89.pdf

I am not suggesting that support for the stadium disqualifies Walker for president, especially since his opponents are far from pure. But let’s not pretend this deal is something other than what it is.

PS: My colleague David Boaz has been blogging on the deal as well.

http://www.cato.org/blog/scott-walker-hands-250-million-taxpayers-money-billionaire-bucks-owners

PPS: My NRO column also criticizes Marco Rubio’s support for sugar subsidies. Jim Bovard makes the same point in yesterday’s USA today.

http://www.usatoday.com/story/opinion/2015/08/11/sugar-subsidies-political-scam-column/31467729/

Politically Incorrect?

“I don’t have time to be politically correct,” Donald Trump declared during last week’s GOP debate.

In an age of political correctness run amok – when students attend “ovulars,” because a seminar implies male dominance. or retreat to a “safe space” when faced with the prospect of hearing a dissenting opinion, or when there is an ever growing list of topics that cannot even be debated because to do so would be racist, sexist, heteronormative, or whatever – there is an immediate sympathy for Trump’s remark.

But recall that Trump was responding to a charge that he called women “fat pig,” “slobs,” “bimbos,” and similar insulting terms.

Comments like that are not being politically incorrect, they are being a jerk.

I see a very similar phenomenon on my Facebook feed or in the comments section for my columns. People feel free to indulge in any insult, to argue from the most despicable stereotypes, or cast off the simplest rules of normal human interaction, in the name of political incorrectness.

I certainly can understand the frustration that people feel when it is implied, for instance, that the only reason anyone could possibly oppose Obamacare is racism (just read any Paul Krugman column on the topic). And one can’t help but laugh at the ridiculous lengths that some go to avoid acknowledging that Islamic terrorism is, well, Islamic terrorism. But that doesn’t excuse referring to the president as “Obozo”, or posting memes that insult 1.5 billion Muslims. Moreover, the current level of discourse now goes well beyond puerile juvenility. I’ve seen commenters feel free to use the N-word, call gay people derogatory terms, or make disparaging comments about women’s appearances, and then excuse it by saying how politically incorrect they are. Wrong. You are not politically incorrect. You are crude at best, a bigot at worst.

The basic rules of human civility apply even in politics.
Moreover, being a jerk is not even a good tactic. Calling someone “stupid,” “an idiot, a “traitor” or a “DemoRAT” does nothing to advance your argument or convince anyone of anything. The same applies to the Left. You don’t win an argument if you shut it down by crying racism or whatever. ReThuglican is not a clever riposte.

Now, before you raise the straw man, I am not saying that all opinions or arguments are equal. Anyone who knows me knows that I have very passionately held beliefs. But, that said, there is virtually no topic that should be off limit for debate. There is also virtually no topic that cannot be debated civilly, with attention to the facts and logic, rather than the personal characteristics of the debater.

And if you start mistaking insult for argument, maybe its time to rethink how politically incorrect you really are.