Things We Read Today (13), Tuesday


About Those Paid Days Off from Retirement

It’d be interesting to see the vote split around the editorial-board table, but the Providence Journal has come out in support of Cranston Mayor Allan Fung’s efforts to curtail the ballooning costs of pensions in his city. I was particularly interested to see this included in the editorial’s reasoning:

Cranston retirees also receive paid “holidays” for life. They get a 5 percent bump in their pension payments when they turn 55.

Those who’ve been following the Current from the start may recall that those paid days off are quite lucrative:

… the City of Cranston, Rhode Island, paid 314 men an average of $459 for the day, and all of them are retirees.  That amounts to double-and-a-half time for the former policemen and firefighters in the locally run system.  In total, the Presidents’ Day pension payments to these retirees equaled $144,151, and that same sum applies to 13 to 18 holidays per year, including 9/11, for some.

For What, Low Interest Rates

Catherine Rampell reports that some economists see very low interest rates, especially those below inflation, as a sort of hidden tax:

Though bad for people trying to live off their savings, low interest rates happen to be quite good for anyone borrowing money, like governments themselves. Over time, interest rates below the inflation rate allow governments to refinance, erode or liquidate their debt, making it easier to live within their budgets without having to resort to more unpalatable spending cuts or tax increases.

Along with keeping rates low, governments are using a variety of tactics to encourage captive audiences, like pension funds and banks, to buy their debt. Consumers, in other words, are subtly subsidizing governments without even knowing it. Economists have compared this phenomenon to a hidden tax on people’s wealth.

I’m not sold on this interpretation (although I don’t doubt that some of the folks in government making the important decisions are sold on it).  Consider pension funds:  As those who’ve followed Rhode Island’s travails know, such funds have to shoot for very high targets.  If government bonds (which are the method of government borrowing) have very low yields, investors have to move more of their resources toward more-lucrative investments, like stocks and riskier bonds.

In practical terms, the only real difference between “saving” and “investing” is the amount of money one seeks to make on the investment.  The lower the return, the lower the payoff for buying the investment, but the safer the bet.

To be sure, one of the objects of cheap debt is to make it easier for people to borrow.  A zero percent loan for a car means you might as well enjoy the car today that you were going to save to buy in five years.  So, you get some bank to take money out of its reserves (perhaps ultimately founded in other debt-money from the future) as a present-time representation of your future income.

But that gets to what I suspect to be the larger motivation of cheap debt:  It keeps people transporting dough from someday to today, effectively increasing the cash currently in the economy.  If debt goes down, then the amount of money in the GDP goes down, as well.

In other words, the deeper incentive, for people who rely on voter tolerance of government, is to keep GDP from dropping, which means finding some way of keeping the amount of dollars increasing, even if they’re worth less and less.

U.S. Government Sharing Assumptions of Islamic Radicals

This report should be the cause of some deep soul-searching among the folks who’ve thought it wise diplomacy to scapegoat a YouTube flick and cheapen the First Amendment over unrest in the Middle East:

Cairo has issued international arrest warrants for eight Americans—seven of them Coptic Christians from Egypt—who are allegedly involved with the anti-Mohammad video everyone’s rioting over. The prosecutor’s office also issued a warrant for Terry Jones, the Koran-burning nutjob in Florida, just because, and says if convicted the defendants may get the death penalty.

The United States government should be pledging to defend against these affronts to freedom, not engaging in a more “moderate” version of them.

The Individual Gasoline Mandate

Well here’s another step on the long road to illiberty:

The latest mandate handed down from the Environmental Protection Agency (EPA) is so ridiculous, even I [Rep. Jim Sensenbrenner (R-Wis.)] was shocked. The EPA has now mandated how much gasoline you must buy at certain gas stations. Say hello to the Obama Administration’s four gallon minimum. …

At the insistence of the ethanol industry, the Obama Administration is pushing E15 into the marketplace, regardless of the serious concerns about the fuel’s impact on drivers. From its inception, E15 is a study in the consequences of government interference in the marketplace. The EPA’s decision to set a minimum purchase requirement is just the most recent example.

Hey, you needed to replace your smaller-than-four-gallons vehicle or gasoline can, anyway, didn’t you?

All the News That’s Fit to Discourage

To close on a political note, I had to chuckle when I saw the headline, “Mitt’s Gettysburgh Moment,” above a blog post by Michael Walsh. As most news consumers have heard, a clandestine video of a private Mitt Romney fundraiser spiel exposed the presidential candidate as skeptical about his chances of winning the votes of the many Americans who receive federal handouts — indeed, who are dependent upon them.  Writes Walsh:

And Josh Barro at Bloomberg says Romney’s lost the election.

Well, as Jonah has famously said, the hell with them. This is Mitt’s time, this is his moment. As at the Battle of Gettysburg, neither side was really looking for this fight at this time and in this place, but here it is. And that means going all in.

We can debate specific numbers and the amount of slack that ought to be given to people speaking extemporaneously, but what brought the humor into it, for me, is that I’m listening to President U.S. Grant’s personal memoirs on book-on-mp3, and he mentions repeatedly the attempts of the Southern press to misrepresent the Union troops’ dire circumstances (near starving and struggling to flee the terrain in fear and despair) with the intention of persuading the Northern electorate to give up hope and force a withdrawal.

Some tactics never get old, I suppose.