Archives for September 2010

September 11, 2001 is slowly fading from current event into history. The wound of the moment seems to be scabbing over. Our reaction to the injury, unfortunately, seems to have become more of a chronic condition.

I, like most others who lived through it, remember that day fairly well. I remember being in the office when one of the staff members came in talking about it. So, we were all paying attention when the second one hit. Not much work got done that day. I recall refreshing various news sites on my web browser frequently. Personally, I got a lot of my information via the people on a bulletin board system called The Well. I also recall getting some insight into which cable channels were owned by the same company – since everyone was playing news feeds. Before that, for example, I’m not sure I had appreciated that MTV was aligned with CBS through Viacom. In retrospect, a lot of my 9/11 experience was through the media. And on that day, I think the major media did us a service. A lot of people were credits to their professions and humanity generally that day.

It was the reaction that mostly got us in trouble. I think we were all in something of an altered mental state following the attacks to one degree or another. I’m not a weepy sort of fellow, in general, but I remember crying a little bit on the drive home from work. The enormity of the day got to me, I guess. After awhile, though, I think the pressure to continue covering the story made the media a little stupid. And the pressure to “do something” made our politicians a little stupid. The terrorists had very little power over us that we weren’t willing to give them. Knocking down a few planes and killing, sad as it was, a relative handful of people was at the far reaches of their power to directly affect us. The rest was power we gave them through our reaction.

They were able to scare us and make us angry and afraid. Staying angry and afraid was something we chose to do. Saddling ourselves with war debt and casualties in Iraq and Afghanistan were also choices. Things like Gitmo and the PATRIOT act were self-inflicted. Unlike, say, Germany or Japan in the 30s and 40s, al Qaeda lacked anything like the resources to impose its will directly on a significant portion of the population of any industrialized country, let alone ours. Rather, it had to do a bit of geopolitical judo, using our energy against ourselves. And they certainly got into our heads. For awhile it was wall-to-wall 9/11 this and 9/11 that. Politicians reflexively supported anything that could be framed as anti-terrorist and cowered away from anything that could be framed as pro-terrorist. Civil liberties took a back seat. War spending got a blank check.

We just ended one phase of our involvement in Iraq, but I’m sure our people (keeping with the conventional tradition of ignoring the effect on the Iraqis themselves) will keep dying there and, while our schools wheeze along and our infrastructure decays, we will continue spending gobs of money on Iraq-inflicted debt. We’re still going on in Afghanistan, with the goal being somewhat opaque, as far as I can tell. I supported the U.S. going into Afghanistan, but in retrospect even if it was better justified than Iraq, I’m not sure how useful the whole enterprise was.

Comparing the country today to the country ten years ago in 2000, pre-9/11/01, I don’t think the state of the nation has improved any. So, we’ve either stagnated or taken a step back. I can’t say that was all the work of the terrorists; we’re dealing with a lot of problems with roots that extend back a long way – e.g. the loss of manufacturing as the world catches up to the head start we got in the wake of World War II; our decisions during the 80s and 90s to engage in some profit taking of the wealth built up in the country during the 50s-70s. But our response to 9/11 acted as a force multiplier for those underlying problems. Now it feels like we’re in a hole, and it’s not clear whether we are digging out or digging deeper. Certainly I’ll be interested to see what things look like in another ten years.

Some cheery thoughts on this rainy Saturday morning; quite a contrast from the perfect weather the morning of 9/11/01 that was horribly interrupted by the planes striking.

In the State Treasurer’s race, challenger Pete Buttigieg hammered incumbent Richard Mourdock on the waste associated with a risky investment of state money in the, at the time, foundering Chrysler corporation compounded by spending gobs of money on a wasteful lawsuit. The loss to Indiana from its payout in the Chrysler Bankruptcy was about $6 million. It invested about $18 million and got about $12 million back.

Buttigieg points out that the State used pension and Toll Road Privatization money to pick up Chrysler debt at $0.43 on the dollar, a clear sign that an investment is carrying a certain amount of risk. I have outlined in the past why Mourdock was tilting at windmills when he challenged the Chrysler bankruptcy decision – among other things, there simply wasn’t a better deal available for creditors than that received through the bankruptcy court; and, even if there was, Indiana did not get to make that decision because it had agreed to turn over decision making on such deals to a committee of creditors in which Indiana was a very minor stakeholder.

Now, Buttigieg has uncovered information about just how much good money was sent after bad to pay for the lawyers necessary to tilt at this particular windmill. The State spent $2 million trying to recover its lost $6 million with marginal legal arguments:

Buttigieg, a South Bend businessman, said the billing records raise serious questions about Mourdock’s management of state funds. He questioned why Mourdock could not have used an Indiana law firm, and noted that the New York attorneys billed the state from $365 to $1,050 per hour, with paralegals and legal assistants billing between $205 and $295 per hour.

And, he said, the costs of the pricey lawsuit was born by the funds that had lost money because of the poor investments. The Major Moves Construction Fund paid more than $427,000; the Teachers Retirement Fund paid more than $1.5 million and the Indiana State Police Pension Fund paid more than $64,000.

I really can’t say I know anything about Mr. Mourdock. I’ve heard that he is a very pleasant individual. But this Chrysler business is a debacle. To me, it looks like a questionable but not outlandish decision to invest funds in the shaky Chrysler because of the discounted price of the debt that has been aggravated by an effort to grandstand, on the public’s dime, against the Obama administration and its involvement in the Chrysler bankruptcy. Had the Bush administration been involved in the Chrysler bankruptcy, my suspicion is that the State would have borne its losses quietly and not increased them by 33% to pay out-of-state lawyers wads of money to advance long shot legal arguments.

I’m not really in favor of most gun control laws. And I think the 2nd Amendment is not there for hunters and target practice, but with the (perhaps quaint) idea that an armed populace can resist a tyrannical government. But, if nothing else, stories like this make me careful about where I let my kids go to play:

Crawfordsville police Detective David Long tells WRTV of Indianapolis that witnesses reported 27-year-old Steven Bixler was acting carelessly with a gun in a bedroom where four children were playing when it went off, striking the 10-year-old in the torso.

I wonder how the number of burglars fended off or criminals deterred by gun owners compares to the number of kids and other innocent bystanders who are killed or injured by improper use of firearms.

It’s Labor Day which I will celebrate by not working. I think it’s the disparity of wealth in this country that’s killing us at the moment. You can be poor but happy, but that’s tougher when there is a wealth class appropriating a significantly disproportionate part of the value of the nation’s production. I’m not an economist and won’t pretend to be one, but I don’t think it’s “envy” (a major bugaboo in these conversations) that makes such happiness tougher. I think perhaps it erodes the sense that if you work hard and play by the rules, you’ll get a fair shake. I know I look around and see that folks made piles of money moving around paper associated with real estate and walked away from the bust without losing their shirts. It’s hard to escape the notion that working is for chumps.

From my simple high school economics education, I have come to the conclusion that risk, innovation, and labor are the things that our economy should be rewarding. If you aren’t adding value through one of those things, you probably shouldn’t have any money. That probably doesn’t help us find the leak in our economy though; find places where value is being diverted inefficiently. Anyone can probably point to some level of risk, innovation, and/or labor they put forth in almost any given business undertaking. The question becomes whether those levels are being compensated adequately. My sense is that minor levels of risk are being over-compensated and major levels of labor are being under-compensated. Innovation is a crapshoot.

I am willing to be convinced that my notions of how labor should be compensated are skewed. I have come to the conclusion that some of our social conventions are skewed by a tendency to view the post-war 50s as a yardstick instead of an aberration. It occurs to me that I have to consider the possibility that the same is true of economics. The postwar boom where unions were strong and workers were well compensated for manufacturing had a lot to do with the fact that the rest of the world was a smoking ruin while our factories were up and running. The rise of production elsewhere means that an equilibrium is settling in among the workers of the world. (Idle thought: I wonder if this means equilibrium will settle in among the world’s capital?)

But, at the same time the equilibrium has been settling in among the working classes, our national tax structure has shifted in a way that is decidedly beneficial to the very wealthy. Over the past 30 years, productivity has been increasing; wages have been largely stagnant; and taxes on the wealthy have decreased sharply. The rich have gotten a lot richer over this time period. It’s hard for me to escape the conclusion that our economy has a bit of a leak where the very rich are concerned. I think they could be convinced to put forth similar levels of risk, innovation, and labor for less compensation. The excess is probably an inefficiency in our economy.

I’ve noticed an interesting thing when it comes to discussions about compensation of ordinary workers versus compensation of the wealth class. The focus seems to be more often on the proper workings of an efficient economy when it’s worker compensation being discussed. When it’s the compensation of the very wealthy, it seems like individual rights are more likely to come up . . . along the lines of: “Who cares if we could structure the economy to extract the same value from these individuals for less; it would be morally wrong to do so.”

Anyway, here’s hoping for a pleasant labor day for all. And, the best pro-labor song I know, from the Dropkick Murphys:

Amanda Iacone, writing for the Fort Wayne Journal Gazette, has an article (featuring Everybody’s Favorite Economist(tm), Larry Deboer) on the anticipated expiration of state funded homestead credits. This will cause pretty much everyone’s property taxes to go up unless they are already up against the tax cap.

The homestead credits, if memory serves, were funded by selling slot machine licenses to the horse tracks, (and got us through the 2008 elections with lower property taxes.) According to the Journal Gazette article, rural property owners benefited most from the homestead credits (as compared with tax caps) because those areas typically do not pay as many taxes as more urban areas – and therefore don’t hit the caps.