Is Paris Burning?

I draw your attention to the streets of Paris, this from the lead paragraph in an article in the10/13  WSJ —

” PARIS—French unions brought more than a million people into the streets Tuesday and vowed to press on with more strikes to protest President Nicolas Sarkozy’s plans to lift the retirement age, a measure aimed at cutting the fast-growing deficit of France’s state-run pension system.

The one-day strike and marches, the fourth such mobilization in a month, disrupted transport across France. Ports were shut, students blocked access to some high schools, and the Eiffel Tower was closed for most of the day.”

So what are the protests about, raising the retirement age from 60 to 62.

Certainly we have not gotten to the extremes of the social welfare programs of Europe but we also have rarely  seen the realities of Sweden and other European countries who spent beyond their means and are cutting programs.

If you think the problem is not here and now look at this article about the ten cities whose pension plan are most bankrupt-

-trust me we can tax the rich at the pre- Kennedy rates and we will bring the economy to a halt and still not deal with the real costs of all the unfunded social programs, health care and pensions.

– one writer on this blog posits that the reason for underfunding was and is to keep taxes lower, I am amazed by that analysis. In a system that has allowed public employees to spike their earnings and begin getting benefits after twenty years of service, one wonders if the deception was done by those in on the heist. The symbiotic relationship between the Democrat party and the public employees unions is well documented, thus to suggest it was to keep down the taxes on the rich is fiction at best and more cynically it is a canard.

I do believe that government has a vital but limited role in our country and am happy to elaborate where I would spend and where I would cut or eliminate.

I conclude with this rather provocative link juxaposing Ronald Reagan with the current nation Democrat leaders.


13 replies on “Is Paris Burning?”

  1. My brother, who lived in Philadelphia while, said that there it was pretty explicitly done to buy the votes of the public employees. They have a city income tax, paid by both residents and people who work in the city, and it ought to be beautiful, but it’s not. I would normally think that this was more a disease of large cities where more of the public employees also live and vote in the city.

    And if we’re behind on our pensions, now is the time to invest, when the market is low.

    Before we tax at pre-Kennedy rates, we might want to try taxing at Reagan rates. And for that matter, there’s no particular evidence that higher marginal rates will kill the economy. This guy plotted a graph of real GDP growth and top marginal rates, and found that if they said anything (and the correlation is weak) higher rates INCREASE economic growth. And obviously, he’s leaving out many things, but if you look to the data, the top marginal tax rate is not a dominating factor.

  2. And James, I assume I am the “one writer”. Just as the Democrats are generally union-friendly, the Republicans are tax-cut friendly, and they have promoted cutting taxes in the face of these pension obligations, whether they appeared on the books or not (and now, they do, with GASB). If the pension obligations are large and looming, yet someone still proposes to cut taxes, is that wise? The obligations are on the books; maybe we can reform them, but thus far, the conservative proposals that I hear for cutting taxes amount to a prescription to make governments even more unable to meet their obligations (their contractual, legal, obligations). Is that a responsible way to run a government?

    And I am no friend of these crazy king-for-a-day pension rules. We should get rid of them.

  3. Questions about King-for-a-day — how did that happen? Is this a case of a carelessly/ambiguously-worded contract, that in court was interpreted to mean “even one day counts”? And what percentage of public employees take advantage of this? That is, it’s a scandal — but is it also significant, or do the extra costs actually not loom that large? Because it seems like an obvious thing to fix, and I’m curious how it got broken, and why it remains unfixed.

    1. Good question! I would posit, as I did in a previous post,that because of the power of public employee unions, politicians, especially those supported by these unions, are in on the heist. Hard to envision accountability where is no independent agents or free markets to regulate the game.

      1. Why do you assume a conspiracy to do the worst, instead of, someone spotted a loophole, and grabbed it? I can easily see that a policy was naively written to use the “highest position held during the last three years of employment”, and someone decided to see if as little as one day of high position would count, and happened to win the legal challenge.

        1. I have no way of proving my assertion nor do you, yet if you right, my general belief that limited and highly focused government would focus all eyes on every policy. I, for one, cringe when I hear a leader say “you have to pass the health care bill so you know what is in it” (possibly a paraphrase); my point being that legislation is so pervasive and encompassing that mistaken, naively written and/or incomplete bills are the norm not the exception.

  4. I think I mostly object to the word “heist”. There are undoubtedly some corrupt politicians, but I think most of them are well-meaning. You get a distribution of bad behavior everywhere — politicians, labor unions, executives, and small businessmen. And, we have control mechanisms other than the free market, which doesn’t work that well anyhow when people in business manage to evade (or corrupt) their auditors (e.g., Enron, or e.g., the rating agencies that helped create our current mess by over-rating risky CDOs).

    And we are allowed to fix bills after the fact, if we discover mistakes. I gather that Boston has had king-for-a-day for some time, and I would be curious to know how that remained unfixed, and whether we have it here (and even if we have the possibility of it here, are people taking advantage of it?)

    1. I don’t argue your point that we have mostly well meaning politicians and that there is a distribution of bad behavior. In business, until the AIG/Bear/FNM/FRE/Gm bailouts, the free market usually works as the fact that Enron shareholders and bondholders were wiped outproves. I would argue that the CDO’s were more complicated ie. it was a government/ratings agency/politician/investment banker/mortgage originator “heist”. Happy to explain but again it buttresses my point that had government not been involved (limited and highly focused) the CDO product would never have been invented.
      The only effective why to fix a bill other then not legislating an issue is to have an informed and responsive electorate which I dare say we do not. One only has to listen to the years of negative ads to see what retail politics has become. As an aside we are fortunate to have a curious and thoughtful legislator like Will, but I think he is an outlier. So what we have is in MA is a political monopoly and in both the private and public sectors this is not a good thing.
      In closing I urge you to get into the guts of the financial reform bill recently passed to see what comes from (well meaning?)legislative over reach and incompetence. Like the health care bill much of it is still unwritten and while charitably the writers may be well meaning I believe it is impossible to definitively tackle things as complex as health care and the financial markets.

      1. My not-well-informed understanding of the financial reform bill is that it lacks teeth, because of financial industry lobbying. I’m not happy. My understanding of macroeconomics (mostly gained from reading economists’ blogs) is that the banks really are too big to fail — they might learn a lesson, but we might all suffer economically for years. They need to be regulated, heavily, they need to be transparent, this is an obvious role for government. And not having government involved, results in a sort of market failure, because nobody will know for sure if the risks and rewards of their investments are properly advertised, and so there will be less investment.

        My slightly better informed understanding of the health care bill is that it will eventually work as advertised, and it ought to provide better health care at a lower price, because it is modeled after systems that do so in other countries. This is a “data” argument, not a “theory” argument, and I’m convinced (mostly*) because it is not just one country doing better than us, it’s a bunch (20-some) doing better than us. Their systems are not trouble free, but in all cases, their “problems” could be thoroughly solved with minor increases in spending that would still leave it well below our level.

        It is not the “best” health care bill — based on results from other countries, single-payer or single-provider would be cheaper but just as good — but it is an improvement on the status quo, and the least change from the status quo for people who already have insurance. The Republican proposals for health care, I regard as crazy, both because microeconomic theory predicts they are crazy (according to the textbooks I’ve read, some long ago) and because there is no other country where their health care ideas have been tested and shown to work. Given a choice between something that has been tested elsewhere and shown to be better, versus something that is untested, why wouldn’t I want the tested-better choice? These other countries’ healthcare systems also suggest that the problem can be tackled — my position is essentially, “they did it, it’s better, why aren’t we copying them?”

        (*) the other explanations for our poor outcomes, that I have seen, and that seem plausible, include obesity, non-exercise, income inequality, and the stress of a ragged social safety net. The only one of these that I’ve seen a solid, data-driven argument on, is “non-exercise”; obesity, as obvious as it seems, doesn’t quite make the cut. I tried one informal regression on simple data available online, that didn’t work, some other people much more qualified (but perhaps with a bias) tried it, and also failed to get a good correlation.


        The evidence pro-exercise pops out all over if you go looking for it, the paper that caught my eye was this one: . The most astonishing result was the goodness of bicycle-commuting (which translates into relatively large amounts of exercise, every day, twice a day) — a 39% increase in mortality if you don’t do it (translated to US terms and mortality, I think that is 214 extra deaths per 100,000 people).

        But, if it is exercise, think how these other countries obtain it — oodles of money spent on transit (carrots, except you have to pay for it), and very expensive gasoline (sticks, except it pays for the carrots). This is not going to be incredibly popular here. I could contrive to blame our current situation on government intervention (socialized roads, free for the use, along with socialized protection of oil supplies overseas) but I think most people would regard that as a nutty interpretation.

        And you have to understand, 214 per 100,000 is a huge number — that’s five times worse than the murder rate in the most unsafe cities in the US. That’s a little worse than the most dangerous jobs out there (deep sea fishing, logging). I don’t have 100% confidence that it really is 214, but that’s what you get if you take 28% of our mortality rate (.72 times 1.39 = 1 — nobody bikes in the US, so I have to convert a 39% increase into a 28% decrease).

        Sorry if this is over-long, this is the data and the studies, this is how I make up my mind, and this is why I am so obstinate on some points.

  5. You may be surprised but I am also very unhappy about the financial “reform” bill for some of the same reasons and I know more about this area then health care. Having banks that are “too big to fail” is a great danger to the economy and our financial health. Transparency would help, so would a separation of the Ibanking and commercial banking functions into separate institutions, claw backs on bonuses as well. Unfortunately all of Washington was in on the deal, dems, repubs, the pres, the treasury, the fed and congress, all of them (and the QB’s were Schumer and Geithner). The only voices of sanity where Paul Volcker, Coburn of Oklahoma and Kaufman from Delaware. The 2088-09 crisis might be over for now but if you note the price behavior of the financials, they are lagging badly which to me indicates “smart money” knows there are problems yet unresolved.
    With due respect I do not have the time to write about health care at this time as I’m preparing for a trip. I agree with some of your points and as a believer in individual responsibility think those in good health should not be charged what those who act irresponsibly. I also can argue that our rank is the world is at the top; it depends on what you use as measures. Also I am against single payer which goes back to what I detect is a basis disagreement in our social and political philosophies.
    Gotta sign off, back next Saturday when we can continue to try and solve problems and agree to disagree. Vote for Will and (I wish I could) Sean Bielat.

    1. Well, as a placeholder till you get back, I’m plenty interested in metrics.

      The two reasons I tend to like life expectancy are that I figure death is more important than any other bad outcomes, and because we all agree on what it means (in the overwhelming majority of the cases). There are probably other important metrics, but imagine that we were better at “tooth whitening”. So, #1, whiter teeth is probably not good enough offset two years of reduced life expectancy, and #2, we could argue about how “white” teeth should be — it’s subjective. (I picked teeth whitening because it was the worst metric I could think of, and because we probably actually do excel at it, and I fear ever so slightly that in some cases it is actually counted as a medical procedure.)

      We can argue about personal responsibility another day.

  6. Just saw this in the WPost and it infuriates me. It is on reason I believe public employees should be not allowed to unionize or strike; JFKennedy’s executive order would be struck down the minute i had power….
    “The nation’s largest federal worker union plans to air a radio ad in seven states attacking tea party-backed Republican Congressional candidates who promise to cut government spending and freeze federal hiring.

    In the ad, the American Federation of Government Employees knocks what it calls “bumper sticker solutions” presented by the candidates to pay down the federal deficit, arguing that blanket federal spending cuts would impact Social Security payments, veteran’s health care and border security, among other services.”

    And Obama is concerned about the Chamber..yikes

    Feel better now.

  7. Great thread, guys!

    No expert on the national health care and finance reforms and appreciate your exchange on them.

    Regarding one point in the conversation on pensions — the king-for-a-day rule was in statute, but we removed it in June 2009, along with a bunch of other obviously abusive rules. Not sure on the origin of this rule. We also abolished the one-year-for-one-day rule which was almost undoubtedly written at some point as a gift to some legislator — our terms end on the first Wednesday in January.

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