The Rational Optimist

The NEXT Financial Crisis

November 22, 2010 by rationaloptimist

Some talk as though financial crises are entirely avoidable events caused only by misfeasance or stupidity. But in an imperfect world of imperfect human beings, such things will always happen. We would be living in a stagnant, undynamic world if we did not have periodic crises. They are akin to a “cost of doing business;” the price we pay for the far greater benefits of the kind of civilization we have.

Now, the federal government’s financial pickle is obvious, what with ballooning entitlement spending and the impossibility of taxing enough. The recently mooted proposals of the Bowles-Simpson Commission – higher retirement age, reduced Medicare allowances, reforming the tax structure, etc. – no-brainers, really, mainly curbing “welfare for the rich” – met with the depressingly predictable and irresponsible ideological responses from both left and right. Sacred cows remain sacred. But at least Washington is not close to maxing out its borrowing ability. And it can also literally print money.

Not so the states.

They face the same fiscal pincers, but their borrowing ability is much restricted, often by constitutional balanced-budget requirements. They’ve been bailed out temporarily by the 2009 stimulus bill, giving them massive hand-outs, but that’s not going to be repeated.

Take New York (please). It’s deeply in hock to retired employees (like me), whose unions negotiated gold-plated pension deals when politicians had nothing to gain from resisting. (Greed is not restricted to Wall Street.) We have a “Cadillac” Medicaid program, with the nation’s highest costs. Our infrastructure of roads and bridges, etc., is crumbling because upkeep has continuously been sacrificed to pay current bills, and the backlog of must-do work grows impossibly huge. Meantime New York already has one of the nation’s highest tax burdens, and raising it would only serve to drive people and businesses out of the state, worsening the crunch.

In the face of all this, what did New York’s politicians do, in the latest fiscal year, with its $9+ billion deficit? Raised spending by 7%.

This fiscal cancer is metastasizing in most other states too. California is another poster boy, with notoriously extravagant pensions for prison guards, whose union keeps politicians in terror. Nationwide, underfunded pension liabilities are a ticking time-bomb. (Sorry for my over-use of metaphors.) State pension funds have been socked by Wall Street losses, and the formulas for funding them tend to reflect assumed future rates of return (typically 8%) which today are wildly unrealistic.

Moreover, future retiree pension and health costs are likely to be grossly underestimated, as longevity keeps rising. A lot of retirees are going to live practically forever, consuming ever more health care and merrily collecting their pensions. And while benefits for future public employees might conceivably be curbed, they’re securely locked in for existing workers and retirees.

This is the next financial crisis. Unlike the last one, it’s not going to blow up all at once. It will be slow torture.

Well (in keeping with my optimism remit), I do have one happy thought to offer. There’s no way lefties can blame this one on their bugbear, “capitalism.” Nope, the blame lies squarely with government – and, in particular, the expansive conception of government fostered by lefty thinking. Liberals keep nattering about how the greed of Wall Street has screwed us. Soon we will see how the liberality of liberalism has screwed us.

Posted in Economics, Politics | 3 Comments »

Sudan watch

November 16, 2010 by rationaloptimist

Sudan is ruled by a Muslim regime centered on Khartoum in the north, headed by Omar Al-Bashir, a really rough customer under international indictment for crimes against humanity in the Darfur region. But, in addition to the well-known Darfur horror, the Bashir gang has been engaged in a decades-long repression of the non-Muslim southern region, which has been in rebellion against the hated regime.

Sorry this map is a bit small. Darfur is the orange area at left; South Sudan the darker green at bottom

In 2005, the Bush administration spearheaded negotiation of a settlement, ending violent hostilities in the south. This is the kind of thing the U.S. does, often without fanfare or plaudits, acting as a force for good in the world, to which all the America-bashers like Noam Chomsky are morally blind. It exemplifies America’s true core foreign policy: not to “dominate” other nations and peoples but, rather, to foster a world in which all can thrive. Because that is ultimately our enlightened self-interest. We are actually better off in a world where all people flourish than if we exploit others and impose our will by bullying. That is not a long run recipe for our well-being.

As John F. Kennedy once said, “We seek not the victory of one nation or system, but the worldwide victory of men.”

The 2005 Sudan agreement bound the Khartoum regime to an independence referendum in the South, by January 9, 2011. Given the vileness of Bashir and his cronies – and the presence of oil resources in the south – it always seemed a bit over-optimistic to imagine that the south would be allowed to peacefully depart. Yet, for a long while, the agreement seemed to be more or less holding, with the January vote actually going forward.

The beautiful and charming Omar Al-Bashir

But, as the saying goes, the prospect of being hanged in the morning concentrates the mind; and the Bashir regime finally seems to be waking up to the implications of the vote. And I am shocked, shocked, that it has now started trying seriously to muck up the process.

This is a highly dangerous situation, and it will take a very muscular commitment on America’s part to follow through and shepherd a halfway decent trajectory to events. I hope the Obama administration is sufficiently engaged.

I do not romanticize about a noble South Sudan gaining Jeffersonian freedom from the northern ogres. Alas, if it does actually become independent, the south will start out in shambolic condition, run by a bunch of thugs scarcely better than those in Khartoum. But at least it will be their own thugs, and if a terrible new war between north and south can be averted, then maybe Obama can finally claim to earn his Nobel peace prize.

(Of course, the Nobel grandees would never have dreamt of recognizing George Bush’s genuine achievement in the 2005 Sudan agreement. Obama’s prize was awarded for his being not-Bush.)

Posted in World affairs | Leave a Comment »

The Dirty Secret About Unemployment

November 7, 2010 by rationaloptimist

The US economy is not creating enough new jobs. That’s true, but it’s not the whole story. The other side of the picture – the dirty secret about unemployment – is that we’re not creating enough people capable of performing all the jobs.

Liberals like to bemoan so-called “McJobs,” as though everyone is entitled to good pay and medical benefits and family leave time and so forth. They wish they could simply require businesses to thusly upgrade their jobs. Too bad they can’t simply require employees to upgrade their skills.

In a country where about 60% of people don’t have college degrees, and, shockingly, something like 25% don’t even finish high school, perhaps it’s not surprising that almost 10% are unemployed, and it’s absurd to do a Barbara Ehrenreich about how crappy some jobs are. Hello – if you don’t finish high school you ain’t gonna get one of them “good jobs at good wages” that liberals keep mewing about.

True, we used to have a lot of manufacturing jobs where someone with limited education could still do nicely. But times change, and people have to change with them. A century ago, most Americans worked on farms. Don’t romanticize that as Paradise Lost – it was a miserable existence, which is why millions fled the farm as soon as they got the chance.

What gave them that chance was soaring agricultural productivity, so we no longer needed almost everyone working on farms just to produce enough food. Today it’s less than 2% needed on farms. That vast change freed the other 98% to produce other things. And that was what made America rich.

Now we’re repeating the trick with manufacturing. Just as increased agricultural output freed people from farms, today increasing productivity means fewer people trapped in factories. With all the talk of “lost” manufacturing jobs, you might be surprised to learn that America’s share of worldwide manufacturing has not declined. We’re just making the same stuff with ever less labor.

And that’s a good thing. Just as increased agricultural productivity made us richer, likewise does improved factory productivity free up manpower (and womanpower) to do other things and make us richer yet. Provided that our workforce gets the necessary education.

Nothing is handed to us. Ultimately, there are no “entitlements.” In the past, we lifted ourselves by working hard. Technological advancement enables us to do it by working smart. The world of the future will belong not to those who work hard, but to those who work smart.

* * * *

I’m pleased to note a really good review of my book, The Case for Rational Optimism. Click here.

Posted in Economics, Society | 4 Comments »

Scoundrel Time

October 30, 2010 by rationaloptimist

Once upon a time political campaigns were almost friendly competitions. (Think Lincoln-Douglas.) Candidates may have been ambitious, of course, but losing wasn’t the end of the world; they’d give voters their views, and if they didn’t prevail, so be it, they’d go back to practicing law. They usually regarded their opponents as honorable and worthy adversaries.

Ad demonizing British Labour Party Prime Minister Tony Blair

How times have changed.

The fundamental reason is that the stakes in elections have become so high. Being a congressman or even a governor didn’t mean all that much when government didn’t do all that much. Not so today when control of government means power over billions of dollars. Candidates will often go to great lengths — trashing anyone in their way — to gain, and hold onto, such power.

The stakes have also been raised psychologically in elective politics. We’re in a Vince Lombardi world here – “winning isn’t the most important thing, it’s the only thing.” You don’t want to be, or be seen as, a loser. Candidates are driven by a terror of that fate. This was illuminated by a piece I read recently about Al Gore. When he was a potential president, the rich and mighty all sucked up to him. After he lost, they wouldn’t return his calls. It’s easy to imagine how devastating that can feel, driving politicians to do anything to avoid such humiliation.

And the higher the stakes in elections, the more are candidates motivated to expend immense resources on them. Meg Whitman in California has dished out $140 million of her own money running for governor. Other candidates must practically sell their souls to raise the cash. With that much invested, it becomes really really important to win – whatever it takes.

From famed 1964 ad implying candidate Goldwater would start a nuclear war and kill this child

Another factor is that we no longer view political opponents as honorable and worthy. No – they’re not merely wrong, they’re wicked. We don’t just assail policies, we impugn motives. This Manichaean bent in our politics makes it seem justifiable to smear a political opponent with negative ads, no matter how unfair or distorted. After all, isn’t a little mud-slinging justifiable if it means defeating evil?

And, of course, such ads work. We say we hate them, but are too often infected by their insidious messages. My Californian mother told me she’d never vote for that scoundrel who “shipped jobs overseas.” It seemed hopeless to argue the complexities of the issue, and that the real scoundrel was the perpetrator of that smarmy ad.

These revolting attack ads don’t target intelligent, informed voters. Those people already know whom they’re voting for, and why. We
idealize the “independent” voter who supposedly reflects carefully before making up his mind. But in reality the swing voters are the most disengaged, ill-informed, and clueless, caring little about politics, who will vote on impulse and hazy impressions if they vote at all. They’re the ones who decide elections, and whom attack ads aim to sway.

I’d like to say you shouldn’t vote for any candidate who claims the other guy wants to “privatize social security.” Et cetera. But low blows like that are so widespread, it’s hard to avoid voting for the guilty. (However, minor party candidates are typically innocent. And it’s erroneous to think voting for a no-hoper is a “wasted” vote. You only waste your vote when you give it to a candidate you don’t actually want.)

Am I a cynic about democracy? No, a realist. To be a good citizen, you have to understand reality. And I love it – not some romanticized version of democracy, but the actual democracy we actually have. I love it, for all its flaws, because I know what the alternative is. And when I go into the voting booth, I consider it a sacrament.

Posted in Politics | 3 Comments »

Reflections on the (Non-)Revolution in France

October 24, 2010 by rationaloptimist

President Sarkozy campaigned as something of a radical – promising what he called a “rupture” with past complacency. He was certainly a preferable alternative to his opponent, Segolene Royal, a clueless knee-jerk socialist, as well as to his predecessor, the feckless Chirac. But while Sarkozy did seem to see things pretty clearly, he turned out to have a touch of “French disease” himself.

His “rupture” reforms have been tepid, timid, not biting the bullet, hardly even licking the bullet. Sometimes he talks as though he understands economics, and other times he spouts the conventional French economic nationalism and dirigisme that has been that country’s curse. Such as his silly declaration that “capitalism is dead.” It’s hard to tell whether Sarkozy is just playing the cynical politician pandering to French foolishness, or really believes some of the absurdities he spouts.

So now we have the controversy over raising the retirement age from 60 to 62. Past efforts at reforms of that kind have typically run aground in the face of bloody-minded street demonstrations and strikes (which wrecked the Juppe premiership in 1997 and permanently removed the testicles from Chirac). So the reactionary unions and their allies have once more mounted the battlements to oppose what is, after all, a reform that is obviously necessary and indeed far short of what is really needed. And I must say that the otherwise disappointing Mr. Sarkozy deserves some credit for refusing to cave in.

Apparently there are some people in France who have brains. Unfortunately they don’t have the vocal chords of the ones who don’t have brains. The French mostly seem to have the opinion that they can keep on retiring early with fat pensions after having worked 37-1/2 hour weeks with lengthy vacations and generous family leave allowances, etc., notwithstanding the fact that the working population (if you can call that “working”) is inexorably shrinking and the population collecting public benefits is exploding. They just do not seem capable of comprehending that somebody has got to do productive work in order for society to fund all those generous allowances and benefits. They seem to think they have an unalienable right to do ever less work and collect ever more benefits.

But in fairness to the French, they are not the only ones suffering from this misunderstanding. The connection between, on the one hand, what government or society doles out, and, on the other hand, productive work, is a connection that usually is absent from political discourse. We’ve seen it as well in Greece. And with the American left.

Well, as of now, Sarkozy’s re-election seems unlikely. The leading candidate appears to be Socialist Martine Aubry – who was responsible for reducing the standard work week to 37-1/2 hours. Just the person France needs.

Posted in Politics, Society, World affairs | 4 Comments »

Liu Xiaobo and Ding Zilin

October 16, 2010 by rationaloptimist

The Nobel Peace Prize was recently awarded to Liu Xiaobo, 55, who is currently serving an 11-year prison sentence in China. His “crime” was to have circulated a petition calling for democratization. Actually, China’s top leaders themselves have called for democratization. The difference is that they know it is only hot air; Liu’s crime was to take it seriously.

In the 1950s, Mao Zedong famously said, “Let a hundred flowers bloom,” meaning that people should express their opinions openly. Thousands accepted this invitation to criticize the regime. Guess what happened to them.

My local newspaper published an op-ed saying the prize to Liu is actually a bad thing. The argument was that it’s just an empty charade that makes us feel good while doing absolutely nothing to change things in China. Some have even said it makes things harder for Chinese human rights advocates.

Liu’s wife had said she hoped to travel to Stockholm to collect the prize for him. That’s doubtful as the Chinese have effectively put her under house arrest. And now she alerts us that Ding Zilin seems to have been “disappeared.” Ding (her picture at left) is an elderly woman who has waged a determined lonely battle for recognition of what happened in Tienanmen Square in 1989. Her courage in doing so cannot be overstated, because Tienanmen is something the Orwellian Chinese regime wants expunged from history.

But I disagree with that mentioned op-ed. Our human values are important, and expressing those values is part of our humanity. Liu’s Nobel award is such an expression. Maybe gestures like that won’t budge the Chinese regime; but complicity with that regime by ignoring these issues, as it would like, is surely not the way to go either. In fact, you may not have noticed, but there is a global ideological battle under way, almost mirroring the Cold War. Then, it was Freedom vs. Communism; today it’s Freedom vs. Authoritarianism. The Chinese model is not Communism, but economic capitalism combined with political repression. And a lot of people believe this works better than our system with all its messy democratic dysfunctionality. They point to China’s economic growth rates far outstripping ours.

I don’t buy it. I don’t believe China’s people will achieve Western material standards of living without insisting on Western human rights. Nor should they. Our democratic system indeed has a lot of problems, but they are ultimately a consequence of government being accountable to the people; and when government is not accountable, as in China, the problems are deeper. (Including an endemic, corrosive culture of corruption.)

And the fact remains that, overall, democratic countries still have higher living standards than authoritarian ones. America’s government is a drag on its economy, but not enough to squelch the creative economic dynamism of a free people, which ultimately a repressive society cannot match. Moreover, even if you actually believe that tyranny works better in producing economic rewards, Man does not live by bread alone. Freedom is worth paying a price for. Human beings have proven they are willing to make sacrifices to achieve freedom.

Liu Xiaobo and Ding Zilin are monuments to that proposition.

Posted in Politics, Society, World affairs | 1 Comment »

Does humanity have a future?

October 8, 2010 by rationaloptimist

I have a friend who’s a college science teacher and has written a couple of science books. She is constantly talking about how humanity is not the last word in evolution, and is bound, in due course, to go extinct.

It’s a pretty common viewpoint. During the Cold War we were supposedly doomed to “blow ourselves up.” And if not the atom bomb, there was the “population bomb.” Today the trope is that we’re making the planet uninhabitable. Or that technology will somehow bite us in the behind, maybe with a new race of super-intelligent robots that will dispense with us.

Common to all these themes is the idea of humanity as sinful in some way, bringing about our own destruction – and deserving it. People who spout these ideas basically just hate their own species.

I don’t share this misanthropic pessimism. I reject it completely.

It’s true that every other species that ever evolved has gone extinct (barring possibly some bacteria, and of course all those living today). Every species is an adaptation to a particular environment, maybe very successful, but the environment always changes. Perhaps your prime food source goes extinct – or a new predator makes you its prime food source. Whatever – change comes, and you go.

Humanity is different, though, in a crucial fundamental way, because we can change our adaptation. In fact we’ve done so repeatedly. Remember, we evolved in the hot African savannah. Then we moved out to Europe and hit – guess what – the Ice Age! Bit of a shock, yet we managed to change our adaptation and cope.

There is actually good evidence that what drove humanity to evolve into such a uniquely adaptable creature in the first place was that climatic conditions within our original African homeland went through a time of great changeability, going from wet and lush to dry and spare, and back again, and again, relatively quickly. That would have been hell on any animal’s adaptation. It caused the evolution of creatures whose main characteristic was their ability to change their way of life pretty radically when circumstances required.

The emergence of agriculture 10,000 years ago was a key example. Necessity was the mother of that invention; we had reached the limits of our age-old hunter-gatherer lifestyle, and to survive required radical change. And look at us today: our urbanized, industrialized way of life is once again dramatically different from what it was not so long ago. Yet again we changed our adaptation.

So please don’t tell me we won’t be able to cope with climate change, or any of the other bugbears du jour. We are not going extinct. Even if you assume – quite heroically – that the most extreme climate fearmongers, the most extreme sustainability fearmongers, the most extreme technology fearmongers, and all their kith and kin, all are right – and humanity will be almost wiped out – surely there will be some survivors. And surely they will figure out a new way of life for their new and different environment. They’ll repopulate the Earth.

So billions of years from now, the planet will still be ruled by people. Oh, they may be a very different sort from you and me – just as we are so different from cavemen – perhaps those computerized robotized bionic creatures of sci-fi – or something beyond, which we can’t even imagine. But they’ll be the “humans” of their time.

In five billion years, the Sun will explode. Now, admittedly, that will present humanity with a darn tough challenge.

But I bet we’ll meet it.

Posted in Philosophy | 3 Comments »

“We can absorb a terrorist attack”

September 25, 2010 by rationaloptimist

The latest kerfuffle concerns President Obama’s saying “We can absorb a terrorist attack.” As though this somehow bespeaks callousness or complacency. As columnist Ruth Marcus observes, should he have rather said we’d crumble if hit again?

Obama’s words were obviously commonsensical. Unfortunately, that’s not reflected in actual administration policy, which continues as though trying to prevent terrorist attacks is one of our highest priorities,

It is not. In fact, the billions spent on this is a colossal misdirection of resources. The truth is that terrorism can’t hurt us very much. In the big picture, not even a radiological or biological attack would bring the country to its knees. (The big danger from such an attack would be government overreaction.)

We face much bigger challenges. Such as falling behind on education. And just for some perspective, while terrorist deaths are tragic, in the past decade we lost a hundred times more people in auto accidents. We “absorb” that too – hardly even think about it. But just imagine how many lives could be saved if all those TSA employees rummaging through your luggage were instead tasked with working to improve road safety.

As Obama said, we did absorb the 9/11 attacks, and are stronger. His comment was actually a tribute to the American character. But that doesn’t stop people trying to manufacture an issue by twisting his words.

Such “gotcha” nonsense is a bane of our public life. Despite serious global issues on our plate, we are continuously distracted by stupid little ones (like mosque locations and Koran abuse). Local public radio boss Alan Chartock constantly natters about “the politics of distraction,” as though some sinister forces cunningly cook up these side issues deliberately to distract us from larger ones. That’s utter rubbish. No – the fact is that we are too easily bewitched by issues that engage our simplistic reptilian reflexes. Thinking about how to respond to globalization’s economic challenges, for example, is hard work. Much easier to think about where a mosque should or shouldn’t be built.*

*I plead guilty, I did a blog post about that issue myself.

Posted in Politics, Society | 1 Comment »

Tax And Spend

September 17, 2010 by rationaloptimist

The Bush tax cuts – of so much political sturm-und-drang – are finally set to expire at year-end. The Democrats, after years of railing in high dudgeon over the alleged iniquity of these tax cuts, are now engaged in a legislative effort to . . . extend them.

The only question is whether this will include the tax cuts for the richest Americans. You might think the Democrats at least wouldn’t do that. You might be wrong.

It looks like they can’t manage to pass anything without some Republican support, and Republicans don’t seem willing to support an extension that doesn’t cover all the tax cuts. My bet is that the Democrats will give in and agree to that, partly because they don’t have the political balls to raise anyone’s taxes right now.

In fairness, the landscape has changed, and in today’s weak economy it would be crazy to raise taxes. That the Dems can recognize this reality is reassuring, somewhat. Yet the real elephant in the room still seems invisible to the political class. Or they act as if it’s not there.

It’s that spending and revenue have gotten way out of whack, and it’s not just temporary. Even ending all Bush’s tax cuts wouldn’t remotely close the gap. And raising taxes high enough to bring deficits down to merely tolerable levels would strangle the economy. So, to paraphrase the anti-war folks, tax is not the answer. Government spending has outstripped what we can reasonably afford.

The problem isn’t only the federal government. Here in New York, with a massive budget deficit this year, and an even bigger hole looming next year, the current budget increases spending by 7%.

We can muddle along like this for a time, but it’s ultimately unsustainable. The day must come when government can’t borrow any more, because repayment will become doubtful, and/or it will have to just print money to pay the debts, destroying the value of the dollar. Oh – and all those guys like Bill McKibben who condemn economic growth? – such growth is our only possible pathway out of this hole.

You actually can’t blame politicians. As long as voters continue to reward pols who promise and deliver more, more, more, that’s what we’ll get. We’re like children with a credit card whose bill is paid by Daddy. Only, actually, it’s the other way ‘round. The bill will be paid by our children.

We’d better have lots of them.

Posted in Uncategorized | 2 Comments »

Pornography and “Our Sick Society”

September 11, 2010 by rationaloptimist

The latest issue of The Humanist magazine examines the issue of pornography. One of the articles mentions a 1985 humanist panel discussion where, despite deep divisions, “all were in agreement . . . that porn both perpetuated and reflected a culture of filth and malaise, that it was ultimately a symptom of a sick society.”

Such laments that society has gone to the dogs have been with us since, well, society began. But it’s a gross error to romanticize prior epochs as a halcyon time of higher morality. Human suffering and injustice were far more widespread, and more tolerated. As to sexuality specifically, past humans had the same biological impulses and pecadillos as we do; what they lacked was our outlets for them. That didn’t make them more moral; merely less happy. What some decry as a modern sinkhole of depravity is just the fact that we have less suppression of our natural sexual feelings, and greater freedom and openness to express and gratify them.

Just look at the situation of homosexuals, for example. Where they suffered virtual torture in the past, today’s culture allows them to be open, honest, and fulfilled. We have finally gained the maturity to understand that how gays get their sexual satisfaction is nobody’s concern but their own. And the same applies to people getting sexual satisfaction via pornography.

All this freedom does not reflect “malaise” or a “sick society.” It’s societal health.

The same issue of the magazine also discusses the family “honor” code in many Muslim societies, decreeing that a father must kill his daughter if there is any suspicion about her “purity”, or for refusing to submit to his tyranny. A case was mentioned wherein the “honor” code even required letting a four year old rape victim bleed to death.

Now that’s what I call a sick society.

Posted in Philosophy, Society | 3 Comments »