Social Security ain't bankrupt

Here is a very good commentary on the annual report of the Social Security Trustees on the current surplus and future solvency of SS:  Before you write that Social Security is bankrupt….  What is clear is that SS will run a surplus until at least 2033; and under its current construction have enough money to pay 75 percent of promised benefits.  That doesn't sound like "broke" to me.

This commentary on the Trustees' report by the Center for Economic and Policy Research also makes the excellent point that, "The main reason that the program's finances have deteriorated relative to the projected path is that wage growth has not kept pace with the path projected."  In other words, since the 1980s, U.S. wage growth, which is the source of SS financing, has been stagnant. And since Dubya's Great Recession, employment and wages have fallen further, causing a short-term shortfall in revenues.

But even better to read are the comments of learned readers on CEPR's site about the myth of SS's insolvency.  Wrote one reader,  Barkley Rosser, identifying himself as a teacher:  

I also note that [my students] are being asked to support cuts now to their future benefits on the basis of the argument that if those are not cut now, they might have to be cut in the future.  When that is posed to them, they also rather shake their heads in disbelief about how seriously this whole thing has been misrepresented to them.

Another reader, pete, repeated a point I've made several times that SS was never meant to be a pension system:

Most critical is, as skepto is suggesting, to completely end the facade of framing SS as a defined benefits program (it is not, you can read this in your annual statement), and simply re-frame it as old age and disability insurance, with some base levels and trickling off for the wealthy (a SS Buffet rule).  That was the original intent, only modified to bring in the Republicans in the 30s, while ignoring demographics. Then the funding can be done optimally, rather than fraudulently confounding the benefits with the payroll deductions.  

I would only add that the glut of Baby Boomers moving through the SS and Medicare/Medicaid system, like a golf ball through a garden hose, is a problem we have seen coming a long way off, at least since the 1980s.  It's like one of those cheesy scenes in every action film where the hero shouts "Nooooooooooooooo!...", only slowed down to about 40 years.  Enough.  Even if all the Baby Boomers live to be 90, they'll all be dead by 2055.  We just have to let the system gets back to demographic balance, and not dismantle and/or privatize one of the most successful anti-poverty programs ever designed out of fear of a hypothetical.  And it is certainly not the fault of the young that Social Security is the main source of income for most present retirees, aka those "affluent" and "responsible" ones who preach to us about the need to live within our means.

Who's getting rich off War on Drugs

4 Industries Getting Rich Off the Drug War

By Mike Riggs

April 22, 2012 | Reason

In a 2011 interview, Secretary of State Hillary Clinton said that legalization is "not likely to work" because "there is just too much money in it." Clinton was talking about cartels, but the same holds true for the legal industries that owe their profit margins, market shares, and—in some cases—very existence to the war on drugs. Here are four industries you might not realize profit off the drug war.

4.) The Drug Testing Industry

One of the highlights of President Barack Obama's 2012 Drug Control Policy report is a section encouraging drug-free workplace programs, which the report touts as "beneficial for our labor force, employers, families, and communities in general." The report also alludes to the administration's commitment to funding research for an oral drug test that can be conducted alongside a urine analysis.

An entire testing industry helped make those policies a reality, and is pushing for their expansion. One industry group, the Drugs of Abuse Testing Coalition, has spent $90,000 already in 2011-2012 lobbying for "Medicare reimbursement codes and payment rates for qualitative drug screen testing." Another group, the Drug & Alcohol Testing Industry Association, has retained the lobbying shop Washington Policy Association since at least 1999, but according to its filings, has spent less than $10,000 per year on lobbying since then. Another drug testing company, Bensinger, DuPont & Associates, was started by former director of the National Institute on Drug Abuse and former White House drug chief Robert DuPont.

These groups have successfully pushed for the passage of drug testing laws and regulations across the country, and were behind the Drug Testing Integrity Act of 2008, which made it illegal to buy, sell, manufacture, or advertise "cleansing" products that promise to help consumers "defraud a drug test." A new federal law that allows states to drug test people seeking public assistance is proving to be another boon to such companies: Florida has already spent $118,140 testing welfare applicants; or, $45,780 more than it would have spent if it had just given welfare to the 108 applicants who tested positive for drugs.

3.) The Alcohol Industry

Marijuana legalization advocates like to point out that pot is safer than alcohol, if for no other reason than no one has ever died from a marijuana overdose. They also like to point out that the booze industry has been working to subvert drug policy reform for decades, at least going back to the early 90s when the National Organization for the Reform of Marijuana Laws (NORML) FOIA'd the donation records for the Partnership for a Drug-Free America and found that it had accepted large donations from Jim Beam and Anheuser Busch.

Alcohol companies were less obvious about their opposition to legalization after being outed by NORML. That lasted until September 2010, when the California Beer and Beverage Distributors donated $10,000 to a police-run campaign opposing Proposition 19, California's marijuana legalization initiative.

2.) The Private Prison Industry 

Corrections Corp. of America (CCA), the country's largest private prison company, has donated almost $4.5 million to political campaigns and dropped another $18 million on lobbying in the last two decades. The company, and others like it, is up to its elbows in drug war spending. Its facilities house low-level drug users and contain in-house rehabilitation programs. CCA even trains its own drug-sniffing dogs. In 2010, the company had revenue of $1.67 billion. Florida-based GEO Group, which has given almost $4 million in campaign contributions and spent $2.28 million on lobbying since 1999, had revenue of $1.27 billion in 2010.

Nowhere is the private prison industry's reliance on the drug war more apparent than in CCA's 2010 report to shareholders. "The demand for our facilities and services could be adversely affected by the relaxation of enforcement efforts, leniency in conviction or parole standards and sentencing practices or through the decriminalization of certain activities that are currently proscribed by our criminal laws," reads the report CCA filed with the Securities Exchange Commission.

"For instance, any changes with respect to drugs and controlled substances or illegal immigration could affect the number of persons arrested, convicted, and sentenced, thereby potentially reducing demand for correctional facilities to house them. Legislation has been proposed in numerous jurisdictions that could lower minimum sentences for some non-violent crimes and make more inmates eligible for early release based on good behavior. Also, sentencing alternatives under consideration could put some offenders on probation with electronic monitoring who would otherwise be incarcerated. Similarly, reductions in crime rates or resources dedicated to prevent and enforce crime could lead to reductions in arrests, convictions and sentences requiring incarceration at correctional facilities."

According to a report from the Justice Policy Institute, lobbyists for the private prison industry have pushed "three strikes" and "truth-in-sentencing" laws across the country. Both types of laws adversely affect drug users. 

1.) The Addiction Recovery Industry

The business of treating addiction has come a long way since Bill Wilson developed the 12 Step program in the 1930s. It's now a huge industry with deep pockets, an impressive lobbying budget, and a vested interest in paternalistic public health policies. This industry has two big policy concerns: It wants the government to direct users—both hard and recreational—into addiction treatment facilities instead of jail, and it wants the government to require insurance companies to cover addiction treatment like it would any other illness. This doesn't mean the addiction recovery industry doesn't have voluntary clients, just that it wants government to declare drug use a disease, force anyone who has it to receive very specific treatment from very specific doctors, and have a third party pay the bill.

The addiction services industry didn't get this power by wishing for it. Since 1989, addiction services trade groups and individual companies have donated a combined $869,405 to political campaigns and spent almost $5 million lobbying in order to secure direct and indirect government funding of addiction services.

The biggest player on the rehab block is Phoenix House, which was started in 1967 by six Manhattan heroin addicts. Today, Phoenix House runs 150 addiction programs in 10 states, including in-patient and out-patient programs, as well as Phoenix Academy, a series of boarding schools for substance-using teens. Much of its $100 million budget comes from earmarks and government contracts: $250,000 for Phoenix House in Springfield; $480,000 for Phoenix House in Brentwood; $650,000 for Phoenix House in Dallas; $750,000 for Phoenix House in Brooklyn. The list goes on, and on, and on. Those earmarks don't come cheap, however. Between 2002 and 2011, Phoenix House spent $1.28 million lobbying.

Phoenix House also supports the Obama Administration's most recent pledge to spend more money on (much criticized) drug courts and other diversion strategies, as nearly all such programs shuffle drug users through addiction treatment centers. The company also invited former ONDCP senior advisor Kevin Sabet to pre-emptively attack legalization advocates on the Phoenix House website the day Obama's report was released. 

The National Association of Alcoholism and Drug Abuse Counselors (NAADAC), which bills itself as "the nation's largest association of addiction focused professionals," has spent $134,000 on campaign contributions and $338,000 lobbying Congress since 1995. The most notable recipient is Rep. Jim Ramstad (R-Minn.), who's received $12,000 in campaign donations from the group. Ramstad is the co-chair of both the House Addiction Treatment and Recovery Caucus and the Law Enforcement Caucus, as well as a member of the House Ways and Means Committee's Subcommittee on Health. In 2008, Ramstad was rumored to be on Barack Obama's shortlist for drug czar. He has a history of earmarking money for addiction treatment facilities and programs, and once earmarked $250,000 for Minnesota Teen Challenge, an Assembly of God-affiliated rehab program that teaches "Addiction is a sin, not a disease."

Adam Smith on selfishness v. self-interest

UPDATE (06.08.2013): Originally, I posted this article without any commentary although I found it extremely interesting, and, I won't kid you, very heartening for my progressive beliefs. For some reason it's one of my most popular posts.  I'm not sure why.  Maybe it's because people of all stripes, even today, see Adam Smith as the final authority on capitalism.  

Personally, I'm not willing to go that far. Experience and scholarship have contributed much to our understanding of capitalism/free enterprise, call it what you will, since Smith's time.  To give one giant example: Keynes. Say what you want, but the guy invented macroeconomics. Until him, there was only microecon, Smith's provenance. So we gotta give prop's where they're due.

Nevertheless, it's certainly worth discovering in the article that follows what Adam Smith himself actually thought about "capitalism," a word that wasn't even invented in Smith's lifetime; it was coined by 19th-century socialists to disparage what they saw as an economic system that exploited the working class.

I'm no economic scholar, I'm not even an entrepreneur. However, during extensive international experience as a consultant I've seen in developing countries what confirms Smith's belief that a certain moral underpinning (trust, fair dealing, a man's word is his bond, deal on a handshake, etc.), not to mention robust courts that enforce verbal as well as written contracts, are necessary for "economic individualism" to flourish without harming the common good. As Americans and Westerners, we overlook their powerful role too often. And it undermines our credibility when we preach the virtues of the "free market" to developing nations: like criticizing the composition of their roof while ignoring the crumbling foundation.  

Speaking of the common good, or general welfare, that's a concept under constant threat in the U.S., although it's specifically mentioned in the U.S. Constitution. Constitutional "purists" tell us there are no superfluous words in that revered old parchment, so it's worth contemplating what exactly was meant by the general welfare, and how it can be protected. Alright, enough of my two cents.



A Tale of Two Smiths: What Capitalism's Founder Would Think of Goldman's Greed

By John Paul Rollert

April 20, 2012 | Next New Deal

Adam Smith made a distinction between self-interest and selfishness -- and he knew that too much of the latter would lead a nation to ruin.

It has been over a month since Greg Smith's letter of resignation sent Goldman Sachs into full PR panic mode. Since then, the firm has completed its great "muppet" sweep, Mr. Smith has secured a blockbuster book deal, and Lloyd Blankfein has found himself fighting off stories of a growing power struggle at the top of Goldman high command.

All of this makes for good copy, but it risks obscuring the enduring moral dilemma at the heart of the original letter. Namely, when it comes to doing business, can we make a meaningful distinction between self-interest and selfishness? Or, apropos of Mr. Smith, should a place like Goldman ever hold itself to a higher standard than "How much money did we make off the client?"

Another Smith certainly thought so: Adam Smith, the founding father of modern economics. He first made his name as a moral philosopher with The Theory of Moral Sentiments, a careful diagnosis of the concern we have for others, the attention we show ourselves, and how the tension between the two underwrites a common code of ethics.

One of the principal villains of Smith's work was Bernard Mandeville, an occasional philosopher who impishly elided fine-grained distinctions. His scandalous work, The Fable of the Bees, was an allegorical poem involving a thriving beehive that bore more than passing resemblance to 18th-century England. Accounting for the affluence and ease the bees enjoyed, Mandeville made two contentions sufficient to give any high-minded economist heartburn. 

First, he claimed there was no essential difference, morally speaking, between the con man and the merchant. Both were driven by selfish instincts to get the better of their fellow man (or bee), and to that end, both trucked in deceit. Yes, the con man broke the law, but the merchant hid behind it.

Mandeville's second claim was even more scabrous: So be it. Vice, not virtue, kept the wheels of commerce turning, with the benefits shared by all:

Thus Vice nurs'd Ingenuity,
Which join'd with Time and Industry,
Had carry'd Life's Conveniences,
It's real Pleasures, Comforts, Ease,
To such a Height, the very Poor
Liv'd better than the Rich before,
And nothing could be added more.

If these lines sound a little bit like "greed is good," then you get Mandeville's point. Human beings are selfish, and thank goodness for it. Otherwise, we might end up like the bees, who are nearly wiped out after a spell of virtue saps their ambition, spoils their economy, and exposes them to outside attack.

When he stepped forward to challenge these views, Smith knew that he had to provide a compelling distinction between pursuits that are self-interested and those that are merely selfish. He granted Mandeville that there was "a certain remote affinity" between them insofar as both are motivated by a concern for personal well-being, but he appealed to common sense in saying that that we don't view all human desires equally. My interest in having a clean shirt is not only legitimate, it's laudable, whereas my longing for a panda skin sportcoat is not only illegitimate, it's an outrage.

Fair enough. But how exactly do we make these distinctions? Smith says we come by them naturally, by engaging others and discovering where our desires echo, overlap, and, finally, are at odds with one another. This process, iterative and ongoing, defines our moral sentiments, the felt necessities of right and wrong that shape and restrain our actions.  It also defines for us what Smith called "a fair and deliberate exchange," the very type of interaction at the heart of a commercial enterprise. 

When he turned his attention to economics, Smith did not think of himself as devising a system that was antagonistic or even alien to the one he had already developed. A free market provided individuals a space to engage each other in the pursuit of their own private interests, but that realm was not free from moral sentiments, nor should it be. Engaging in business was no less a part of human interaction than raising children or making friends, and the idea that a commercial sphere dominated by the grossest behavior would not contaminate the rest of society was not only silly, it was dangerously naive.  

This was Smith's greatest difference with Mandeville: He did not believe that a nation in which people pursued their interests irrespective of one another would be affluent. It wouldn't even be stable.  Riven by "hostile factions," society would seethe with conflict, for people with different interests would view each other with "contempt and derision."  In such an environment, Smith observed, "[t]ruth and fair dealing are almost totally disregarded," for the interests of others have no moral claim on us.

Is Goldman Sachs such an environment? Greg Smith says so, but only the people who work there know whether the culture is as "toxic and destructive" as his letter claims. Yet to the degree that clients are viewed with contempt and derision, especially by leadership, Adam Smith would say that we should hardly be surprised, as the other Mr. Smith seems to be, by "how callously people talk about ripping their clients off." This is to be expected. The line between selfishness and self-interest, in business as in all human pursuits, appears only when we feel that the interests of others occasionally require us to restrain our own. When we stop caring, that line disappears, and with it some very worthy things — personal integrity, self-respect, professional pride — that money can't buy.

John Paul Rollert is an Adjunct Assistant Professor of Behavioral Science at the University of Chicago Booth School of Business.

Gulag USA

Those socialist regimes of the past were so brutal and awful.  In the U.S. we have the 13th Amendment that would never allow us to force our citizens into slave labor camps....  Oops:

All told, nearly a million [U.S.] prisoners are now making office furniture, working in call centers, fabricating body armor, taking hotel reservations, working in slaughterhouses or manufacturing textiles, shoes and clothing, while getting paid somewhere between ninety-three cents and $4.73 per day.

Well, at least they're privately-run slave labor camps.  With private outsourcing, I'm sure we can improve on the efficiency of socialist gulags.

Locking Down an American Workforce

By Steve Fraser and Joshua Freeman

April 19, 2012 | The Nation

URL:  http://www.thenation.com/article/167473/locking-down-american-workforce

Koch mafia's raid of CATO continues

Poor, naive CATO Institute.  CATO's thick-as-thieves beneficiary-donor relationship with the Kochs all these years has been like going into business with the mafia.  At first your mafia friends make "good" things happen for you, and they always have ready cash.  Then one fine day your "partner" says to you, "It's all ours now.  Get lost."  And there's nothing you can do about it.

Digging the Hole Deeper

By Lew Rockwell

April 20, 2012 | The LRC Blog

URL:  http://www.lewrockwell.com/blog/lewrw/archives/110313.html