Political Economy category archive

A modest proposal:

I offer a legislative proposal that would make everyone wish top executives the best of luck in their quest for untold riches: Limit the compensation of executives of publicly traded companies, companies receiving public aid, and companies doing business with the government to no more than 100 times the salary of each company’s lowest-paid full-time employee.

For example, if the lowest-paid worker at a company earns the federal minimum wage – currently $7.25 an hour, or an annual income of $15,080 at full time – then the total compensation for the top executive (including stock options and yachts) would be limited to about $1.5 million. If a company pays its lowest-paid worker a “living wage” – for a single mother with one child living in New York City, $19.66 an hour, or $40,893 a year – the top executive could take home more than $4 million.

By way of comparison, the current average annual compensation of S&P 500 CEOs is more than $10 million, which is more than 300 times the annual pay of the average worker in those corporations.

Fat chance.

Looking good in meetings, writing nice emails, and testifying before Congress is ever so much more worthwhile than actually producing something of value.

The triumph of Republican Economic Theory.

Ashley Sayeau, an American ex-pat living in London, writes at the Guardian:

But when it costs a family of four $53,629.56 a year to insure their health, there is a problem, particularly when the average salary for someone living in the New York area is $50,820. There is no wonder 23% of uninsured families report that their medical bills require them to skimp on basic necessities like food and heat. Or that healthcare costs are the number one reason Americans file for bankruptcy.

Bloomberg:

More Americans unexpectedly filed first-time claims for unemployment insurance last week, indicating companies lack confidence the economic recovery will be sustained.

Initial jobless applications increased to 480,000 in the week ended Jan. 30, the most in seven weeks, from 472,000 the prior week, Labor Department figures showed today in Washington. The number of people receiving unemployment insurance was little changed and those receiving extended benefits increased.

Colorado Springs is in shut down mode as the Town Fathers discover that living in civilized society has a price tag and that the Laughable Curve just doesn’t work.

More than a third of the streetlights in Colorado Springs will go dark Monday. The police helicopters are for sale on the Internet. The city is dumping firefighting jobs, a vice team, burglary investigators, beat cops — dozens of police and fire positions will go unfilled.

The parks department removed trash cans last week, replacing them with signs urging users to pack out their own litter.

Neighbors are encouraged to bring their own lawn mowers to local green spaces, because parks workers will mow them only once every two weeks. If that.

Water cutbacks mean most parks will be dead, brown turf by July; the flower and fertilizer budget is zero.

Via the Inverse Square blog, where Tom editorializes so I don’t have to.

(Later on in the story, a local plutocrat is quoted as wondering “why the city spends $89,000 per employee, when his enterprise has a similar number of workers and spends only $24,000 on each.” Bet his enterprise offers great health care and retirement.)

Addendum:

Tom Publishes an follow-up, in which he discusses Megan McArdle’s statement that she is not against government “in its place.” A nugget:

So no, I don’t think, nor did I ever say, that McArdle wants to fire every cop in Colorado.

What I do think, and say, is that there are recognizable consequences to arguments consistently made…and Ms.McArdle’s position leads in practice, if not in the theory that lights the spotless sunshine of her mind, to local disaster and, unchecked, the long term erosion of American power and (relative) wealth.

As Tom points out, words have consequences.

Dean Baker, writing at the Guardian, speculates on what might happen if homeowners who are under water on their mortgage’s did the work of Goldman-Sachs’s god:

In Blankfein’s assessment, by aggressively taking advantages of profit-making opportunities given to them by the government and the market, Goldman Sachs is accomplishing great good here on earth. That’s a questionable view, especially given the extent to which Goldman has been able to use its political power to tilt the playing field to its advantage, but walking away from an underwater mortgage is one way in which normal homeowners may be able to both help themselves and the economy.

(snip)

In short, homeowners who are seriously underwater in their mortgages should check the numbers. Walking away from a home may well be the best economic choice, and in such cases, it is also likely to be the best choice from the standpoint of the economy as a whole. This may not be advancing God’s work, but if millions of people walked away it might educate Goldman Sachs and the rest of Wall Street bankers about what happens when everyone plays by their rules.

On the bright side, durable goods orders increased slightly.

Separately, the Labor Department said initial claims for state unemployment benefits dropped 8,000 to 470,000 last week, after rising for three weeks in a row.

Economists had forecast claims dipping to 450,000 from a previously reported 482,000 for the prior week, which had been elevated due to the processing of a backlog of applications from the holidays.

Moral: Don’t ask economists to pick the number of the day. (I know, that’s not fair. Economists and meteorologists are the only two disciplines graded on their ability to predict the future, rather than to explain the past.)

John Dillinger didn’t want to be regulated either.

Curmudgeonly as I can be, I have never felt a desire to live surrounded only by other old curmudgeons. I want there to be some young curmudgeons also.

So I have never understood the market for “over 55” developments.

Apparently, not many other persons did also.

But now the fad has run its course. The poor economy, a glut of age-restricted units and older consumers jittery about retirement finances contributed to the demise.

“It’s dead,” said Gary Werner, a Chesapeake developer who built one age-restricted project. “It’s like something just turned the spigot off completely. It’s not even a drip.”

As a result, developers are returning to planning boards and city councils for permission to scrap age restrictions on approved projects. Hundreds of approved units in Chesapeake and Suffolk have been converted to regular projects, and more requests are likely on the way.

So who did like the idea? From the same story (emphasis added):

Planning boards loved the quasi-retirement communities aimed at baby boomers for their promise of increasing the tax base without adding kids to burgeoning schools and cars to crowded roads.

Many large projects were looked on favorably – and approved – if they included some units restricted to people 55 and over. Images of silver-haired “active adults” riding bikes and hugging grandchildren in front of tidy homes were common in real-estate marketing material.

From the Philadelphia Shrinquirer:

. . . James G. Kahn, a health-policy professor at the University of California in San Francisco, who has studied administrative expenses, estimates that billing costs the nation’s health system up to $400 billion a year, although, obviously, some of that expense is necessary.

“The biggest part is the burden on doctors and hospitals, because they have to deal with literally dozens of health-care plans,” each with its own system, Kahn said.

If only half of that can be saved, that’s $200,000,000,000 that could be spent on actual delivery of care or on other stuff, like food and shelter and research.

And the odds are that much more than that could be saved with a rational system not involving executive country club memberships.

Not great, but not terrible:

The four-week moving average of initial claims fell to 440,750 last week from 449,750, Labor Department figures showed today in Washington. Weekly jobless claims, which are more volatile, rose by 11,000 in the week ended Jan. 9, more than anticipated, to 444,000.

You can bank on it.

Foreclosure activity nationwide also jumped last month, as 349,519 properties received foreclosure notices, up 14 percent from November and 15 percent from a year earlier. The national data include notices of default, the first stage of the foreclosure process after a homeowner has missed mortgage payments.

Looking for handouts because Republican economics just doesn’t work.

Governor Schwartzenburger’s swan song (emphasis added):

The governor announced that he would declare a fiscal emergency and immediately call the Legislature into a special session to make budget cuts. His plan includes no new broad-based tax increases. It relies instead on seeking billions of dollars in new federal money and on steep reductions in education, healthcare and social services, as well as cuts in mass transit, state worker pay and environmental programs.

“California is not Washington. We don’t have the luxury of printing money or running trillion-dollar deficits,” Schwarzenegger said at a news conference Friday morning.

Note the misdirection play at the end of the quotation.

Californians have rendered themselves ungovernable and their legislature incapable of levying reasonable taxes to help pay for the services those same Californians want. They wanted government for free.

It’s not working any more.

So not they want to suck at the federal teat because they are unwilling to pay for what they want.

I certainly have no problem with Federal assistance to states–some needs are too big to be addressed on the state or local level–but I do think the state or locality to show some desire to help itself.

California is a fiscal drunk that wants someone else to pay its bar tab.

It’s IMF material.

After all, the concept of human dignity and privacy has nothing to do with anything, does it?

The Transportation Security Administration said yesterday that Boston’s Logan International Airport is among the airports slated to receive a controversial scanning machine that can detect substances hidden under clothing, potentially thwarting terrorist attacks like the near-disaster on a Detroit-bound flight on Christmas Day.

Meanwhile, back in reality.

Reinstate Glass-Steagall The banksters are, of course, whining.

“The impact on Wall Street would be severe,” Wayne Abernathy, an executive vice president at the American Bankers Association, said in a telephone interview.

My heart bleeds.

Read more »

No last minute Christmas shopping for these folks, but the overall total sinking from previous weeks:

A . . . report from the Labor Department showed initial claims for state unemployment benefits fell 28,000 to 452,000 last week. That was the lowest level since early September 2008. Economists had expected a drop of only 10,000.

In other news, orders for durable goods up.

California Governor Arnold Schwarzenegger, anticipating a $21 billion budget deficit, plans to ask President Barack Obama to ease mandates and minimums on social programs to save as much as $8 billion.

Given that years of Republican misrule have rendered California unable to provide basic services, it must be tempting just to send them to the IMF, which specializes in ungovernable third-world countries.

From Eschaton, a reminder:

Total spending on health care, per person, 2007:
United States: $7290
Switzerland: $4417
France: $3601
United Kingdom: $2992
Average of OECD developed nations: $2964
Italy: $2686
Japan: $2581

But anything would be better than what we’ve got (unless your business model is based on denying health insurance claims).

Bell ringers recently discovered two potentially rare coins — a 1799 Draped Bust, Heraldic Eagle Dollar and a 1878 Morgan Dollar — in a Salvation Army red kettle near Berlin.

The coins have not been authenticated. The story goes on to say

The U.S. Hobby Protection Act, first enacted in the early 1970s, requires that replica coins — a popular novelty item — be marked with the word “COPY” on the surface of the coin, Tiso said.

“The coin has to say ‘copy,’ otherwise it’s illegal,” said Tiso, the president of G.R. Tiso Numismatics, who explained that it’s a violation of U.S. federal law to sell unmarked replicas.

If only persons had inspected credit default swaps and “securitized” debt futures as thoroughly.

It occurs to me that, with the coins, at least there’s something to inspect.