Disaster in Japan

Posted: March 11, 2011 | Author: | Filed under: Breaking News, Foreign Affairs | Tags: , , | 36 Comments

Last night, a 8.9 quake and tsunami hit Japan. Tsunami waves have hit Hawaii and are now hitting Washington state.  The worst damage is in the northern sections of Japan.  There is a worse danger looming that I wanted to mention here if you haven’t heard.  The Japan earthquake has shut down two nuclear plants and the core is not cooling in one.  This is a potentially dangerous situation. The U.S. is now rushing coolant to Japan at the request of the Japanese government.

Yet even light was on short supply, with nuclear power plants shutting down after fires broke out at some of the facilities and raised concerns of potential radiation leaks. Millions of buildings around Tokyo were reported without power.

The 8.9-magnitude earthquake struck northeast Japan at 2:45 p.m. local time, collapsing buildings 240 miles away in Tokyo, triggering a 30-foot tsunami that swept away everything in its path, and killing at least 300 people already. Hundreds more remain missing, including 100 crew on a lost fishing boat.

The plant experienced a fire.  People in the area are being evacuated. No leaks have been reported so far but again, CNN said that the core is not cooling so they are preparing for the worst.

About 5,800 residents near a Tokyo Electric Power Co. atomic plant were ordered to evacuate because of a possible radiation leak and the failure of the cooling system after Japan was struck by a powerful earthquake.

People within 3 kilometers (2 miles) of the Fukushima Daiichi nuclear power plant were told to evacuate, Chief Cabinet Secretary Yukio Edano said in Tokyo today. Residents within 10 kilometers were told to stay indoors, said Ryohei Shiomi, a spokesman at the Emergency Information Center of the Nuclear and Industrial Safety Agency.

Emergency power supply at the 4,696-megawatt plant 210 kilometers north of Tokyo failed after the quake triggered automatic shutdowns of the reactors, officials at the trade ministry’s Nuclear and Industrial Safety Agency told reporters without identifying themselves. Power is needed to keep cooling the reactor to prevent rising pressure and damage, they said.

A battery, which can last about eight hours, is being used to cool the reactor for now, the agency officials said. Another six batteries have been secured, and the government may use military helicopters to fly them in, they said.

CNN has just reported that radiation is rising in the Fukushima Daiichi plant. A refinery has also exploded.

Natural Gas prices are already on the rise in UK.

U.K. natural gas prices soared Friday after a major earthquake and tsunami hit Japan, shutting down nuclear plants and raising expectations that the country will import more liquefied natural gas as a replacement power source.

But with the global gas market so well-supplied, and the length of the nuclear plant outages unknown, the gains could prove short-lived, traders said.

Winter gas contract prices had risen to 68.8 pence per therm by 1420 GMT, around 4% higher from Thursday.

At least two nuclear power plants on Japan’s Pacific coast shut down following the 8.9 magnitude quake that hit the country Friday morning, leaving market watchers wondering as to the extent of the damage.

“The problem is there are a whole bunch of nuclear outages, which I’d think would be out for at least three to four weeks,” said a London-based trader.

Japan’s last major earthquake in 2007 caused an extended shutdown of the country’s largest nuclear power plant, sending the country scrabbling for LNG suplies as it sought alternative means of power generation.

However, the current rally in the natural gas market may be premature. The extent of the damage to nuclear facilities is still unknown and the market is better-supplied than it was a few years ago.

Unlike in 2007, the market today is oversupplied, said Noel Tomnay, head of global gas at Wood Mackenzie.

Japan quake area map from the BBC

Casualties from this quake/tsunami now number in the hundreds and may rise.  Japan has requested help from the US.  The navy is sending ships there now.

There are some amazing images at The Atlantic.  Videotapes of the moments during the quake and tsunami can be found at the NYT at the Lede Blog.

Friday Reads

Posted: March 11, 2011 | Author: | Filed under: collective bargaining, Domestic terrorism, Environment, Environmental Protection, Foreign Affairs, morning reads, right wing hate grouups, The Media SUCKS, the villagers | Tags: , , , , , , , | 19 Comments

Good Morning!

I’ve noticed that we seem to be seeing a lot of change recently along with a lot of people that would prefer to stick their heads in the sand and try to legislate the world back 100 years.  It really seems like science, voter sentiment, and the world are at odds with the vision of our leaders these days.  Here are some examples.

A study done by the U.S. Jet Propulsion Laboratory, was just published in Geophysical Research Letters here provides some pretty clear evidence that the  polar ice sheet mass loss is accelerating at a rate that is increasing exponentially.

It’s been clear for a while that the  polar ice sheet mass loss is accelerating (see Large Antarctic glacier thinning 4 times faster than it was 10 years ago: “Nothing in the natural world is lost at an accelerating exponential rate like this glacier”).

But the new study is a bombshell because of its credibility and thoroughness — and because it provides perhaps the most credible estimate to date of the sea level rise we face in 2050 on our current emissions path, 1 foot.

The JPL news release runs through the calculation that leads to the 1-foot estimate:

The authors conclude that, if current ice sheet melting rates continue for the next four decades, their cumulative loss could raise sea level by 15 centimeters (5.9 inches) by 2050. When this is added to the predicted sea level contribution of 8 centimeters (3.1 inches) from glacial ice caps and 9 centimeters (3.5 inches) from ocean thermal expansion, total sea level rise could reach 32 centimeters (12.6 inches). While this provides one indication of the potential contribution ice sheets could make to sea level in the coming century, the authors caution that considerable uncertainties remain in estimating future ice loss acceleration.

It is always worthwhile to make clear that the projections are uncertain.  On the other hand, one would have to say that the uncertainty is greater on the high side — since the rate of human-caused warming is itself projected to accelerate, and the poles are the place where the planet is heating up the most, much faster than expected (see “Deep ocean heat is rapidly melting Antarctic ice:  Oceanographer at AGU: Western Antarctic Peninsula is seeing “the highest increase in temperatures of anywhere on Earth”).

Senator Lindsey Graham wants Director of National Intelligence General Clapper to resign because he answered a question truthfully. It’s even unclear if Graham was even in the hearing for the entire committee interview.

Sen. Lindsey Graham, R-S.C., in an exclusive interview with Fox News correspondent Carl Cameron, called for Gen. James Clapper to resign or be fired as Director of National Intelligence, citing his comments before the Senate Armed Services Committee this morning, on which Graham sits.

Clapper had stated his belief that the Qaddafi regime, in the long term would “prevail” in Libya, and also assessed China and Russia to be primary threats to the United States.

Graham told Cameron that he lacks confidence in Clapper’s understanding of his job, that President Obama should “repudiate” Clapper’s remarks, and that this is the third time Clapper has faltered in this way.

It’s rather evident from the news reports that the evil empire is winning against the ewoks right now.  What’s Graham’s problem? He’d prefer the varnished untruth instead?  Clapper was also asked a very specific question in terms of threats to the US from just numbers of weapons and troops. The answer?  China and the USSR, of course.  I guess they wanted to hear Iraq and North Korea.  Clapper directly answered pertinent the question.  He just didn’t spin it the way the warhawks wanted.  I guess every one decided that he should’ve discounted the huge number of weapons, troops, and WMDS held by the other two super powers and gone straight to the little guys that can’t reach us from their neck of the globe.
Clapper clarified that North Korea and Iran are “of great concern,” but questioned whether they pose a “direct mortal threat” to the United States. The intelligence chief seemed to be focused on which countries have the capability, not necessarily the intent, to threaten the United States.

WonktheVote posted a thread earlier this week showing that the threat of terrorism in the US comes more from white, right wing military groups than from radicalized American Muslims. This evidence contrasts Peter King’s McCarthyism style hearing yesterday which relied on only personal stories.  There were no people invited to testify from law enforcement, the FBI, or Homeland Security.  Understandly, so there’s more evidence on who we should fear at C&L. Dave Niewert must’ve read her!!!  Niewert document 22 cases in these kind of violence in the last tw0 years and shows a map.  They’ve occurred all over the place.

In their eagerness to promote Peter King’s dubious and nakedly Islamophobic hearings on homegrown Islamic-radical terrorism, O’Reilly and his Fox colleagues have openly sneered at suggestions that we ought to do the same for right-wing extremists and their mounting acts of violence. This case definitively underscores that need, embodied in the 22 cases we’ve documented over the past two and a half years:

Simultaneously, it’s also not very clear that the Islamic radicals pose a serious threat in terms of domestic terrorist activity. Certainly, there’s plenty of reasons to believe that the threat of homegrown Islamic terrorism is wildly overstated — not least of which is the fact that, as Zaid Jilani at ThinkProgress reported, terrorism incidents in the USA have been coming from non-Muslim sources at nearly twice the rate as that of Muslims.

Lexington at The Economist had this to say about the hearings.

It is indeed hard to find much to like in Mr King. The representative for Long Island has approached this most sensitive of subjects with the delicacy of a steamroller, plus an overactive imagination and a generous dollop of prejudice. To be clear: he may not be prejudiced against America’s Muslims (the “overwhelming majority” are “outstanding Americans”, he says) but he long ago prejudged the question his own hearings are supposed to answer, being already firmly of the view that the country’s Muslims are doing too little to counter radicalisation within their ranks. He is the author of a novel, “Vale of Tears”, in which a heroic version of his thinly disguised self busts a home-grown al-Qaeda cell at a Long Island Islamic centre. His own attitude to terrorism, though, is conveniently elastic. In the 1980s this Irish-American Catholic sympathised strongly with the Irish Republican Army, going so far as to compare Gerry Adams, the leader of Sinn Fein, the terrorist group’s political wing, to George Washington.

Beyond these objections to his person, prejudices and past, most of the available evidence suggests that Mr King’s central thesis is overblown, if not flat wrong. Muslim co-operation with the authorities is not perfect, but by most accounts—including those of Robert Mueller, the director of the FBI, and Eric Holder, the attorney-general—the community has in general worked hard to expose terrorist plots in its midst. In one prominent case last year, for instance, five men from northern Virginia who had travelled to Pakistan in search of jihad were convicted after their families tipped off the FBI. The Triangle Centre on Terrorism and Homeland Security, a research group affiliated with Duke University and the University of North Carolina, reported recently that 48 of the 120 Muslims suspected of plotting terror attacks in America since the felling of the twin towers in 2001 were turned in by fellow Muslims.

AFL-CIO President Richard Trumka calls Wisconsin Governor Scott Walker the “mobilizer of the year”.

While blasting Walker and Wisconsin’s Republican legislators for their “absolute corruption of democracy” in passing an anti-labor bill, the leader of the nation’s largest union group thanked the governor for getting activists fired up. “We probbably should have invited him here today to receive the Mobilizer of the Year Award,” Trumka said Thursday morning while speaking to the National Press Club in Washington D.C. “Wisconsin is the beginning — it’s pushing the start button” for pro-labor activism.

ED Kain at Forbe’s American Times says that the GOP’s war on collective bargainning will turn out to be its Waterloo.

And not just Wisconsin, but also Indiana, Michigan, Ohio, Arizona, Florida, and the rest of the over-reaching state Republicans. Governors like Scott Walker, Rick Scott, and Jan Brewer are riding on the coattails of the Tea Party, but they’ve become blind to the dangers of their radical policies.

In Wisconsin, Democrats are already promising to step-up recall efforts. But the recalls are only a small part of what is likely going to be a huge anti-Republican backlash across the nation, as working Americans finally realize what that party actually stands for: an playing field heavily tilted toward the rich and powerful, toward corporate power, and against worker rights.

Wow, what a week!  What’s been on your mind and your reading and blog list?

Lessons in Overreach

Posted: March 9, 2011 | Author: | Filed under: 2012 presidential campaign, Barack Obama, Democratic Politics, Domestic Policy, Elections, Federal Budget, Republican presidential politics, right wing hate grouups | Tags: , , , | 9 Comments

Politicians within the beltway seem to live in a world of their own.  No place is this more clear than in the results of the last two elections where voters in desperate need of solutions for big problems have been misunderstood as providing ‘overwhelming mandates’ for the two party’s special interests’ agendas.  The 2008 election was a resounding no to the direction the country ushered in by Dubya and his neocons.  The 2010 election was a resounding no to the continued mess of partisanship and the passage of bailouts and a health care reform that no one understood.  I don’t think voters understood why this issue was put above solving the basic unemployment and recession-based problems.   Polls appear to indicate that neither side gets the message these days even though it appears very loud and clear to many of us.

There’s several places that this is really clear.  First, the tea party is a prime example.  This movement has been a hodgepodge of people looking for ways to send a populist message to the beltway. However, the movement has funding and leadership that’s hell bent on returning the country to the excesses of Robber Baron days.  Some of the electorate voted for tea party candidates thinking more on the folksy rhetoric and less of the hardcore John Bircher philosophy championed by movement organizers.  Plus, they just wanted some gridlock until they could get their minds around what was going on with a flurry of laws passed that seemed less related to what they asked for than what US bankers and businesses demanded.  They wanted jobs.  They got bailouts of Detroit and Wall Street and forced into a health care plan that benefited big Pharma and insurance company interests.  It seems like the Democratic party just looked at the election numbers, smiled, and went their merry way.  Republicans aren’t doing much better since they just looked at the last election numbers, smiled, and went their merry way.

A Bloomberg national poll indicates that the Washington crowd just doesn’t get it. It has to be a deliberate misconnect. You can’t be so wrong so many times.  They just don’t want to listen.  People don’t like paying taxes that are then used to fund politician’s pet projects and bailouts for big businesses and banks.  They don’t mind tax cuts to the middle class but they’re getting tired of footing the bill for the beneficiaries of the nation’s army of lobbyists.  The Republicans have missed the mark with their current assaults on collective bargaining and programs that impact just plain folks.  Why can’t both parties just shut up and listen for a change?

Americans are sending a message to congressional Republicans: Don’t shut down the federal government or slash spending on popular programs.

Almost 8 in 10 people say Republicans and Democrats should reach a compromise on a plan to reduce the federal budget deficit to keep the government running, a Bloomberg National Poll shows. At the same time, lopsided margins oppose cuts to Medicare, education, environmental protection, medical research and community-renewal programs.

While Americans say it’s important to improve the government’s fiscal situation, among the few deficit-reducing moves they back are cutting foreign aid, pulling U.S. troops out of Afghanistan and Iraq, and repealing the Bush-era tax cuts for households earning more than $250,000 a year.

The results of the March 4-7 poll underscore the hazards confronting Republicans, as well as President Barack Obama and Democrats, as they face a showdown over funding the government and seek a broader deficit-reduction plan.

The rejection of Dubya and cronies in 2008 wasn’t an invitation for further bailouts of fat cats, expansion of unpopular wars and invention of a health care program while current programs have such severe issues.  The Republicans need to understand that the ‘shellacking’ in November wasn’t an invitation for a full on assault on Sesame Street, Yellowstone National Park, and women’s ability to have a menstrual cycle without fearing manslaughter charges.   Here’s the message.

When given five choices for the most important issue facing the nation, unemployment and jobs ranked first with 43 percent – – down from 50 percent in Bloomberg’s December 2010 poll — with the deficit and spending cited by 29 percent, up from 25 percent. Health care was chosen by 12 percent, the war in Afghanistan by 7 percent, and immigration by 3 percent.

Asked to choose between jobs and the deficit, 56 percent called creating jobs the government’s more important priority now, while 42 percent said cutting spending was.

Why couldn’t we have gotten a decent jobs program and stimulus right off the bat during the first few months of Obama’s term?  We’d have been in a much better position politically, economically, and fiscally.  Instead, we got a bunch of worthless tax cuts that siphoned money off to investments abroad and just enough money to stem about 2 years of fiscal disaster in the states.

There are two follies that should haunt a few leaders for the rest of their natural born days.  Blame goes first to Obama for carving out the health care reform instead of focusing laserlike on job creation.  He clearly created a lot of unnecessary strife and tempests in teabots by taking his eye off the job markets.  The second heap of guilt goes to Mitch McConnell and his party of no. The Republicans seem intent on pleasing their base and burying the rest of the country in joblessness and despair.   Clearly, this is a man that will do anything to regain a Republican White House.  This includes taking our country down with the plan.

Some one needs to tell the President that ending bipartisan strife doesn’t mean selling out to other side.  That’s what brought us a health care plan that assaults women’s rights and forces every one to pay and play.  The Republican strategy of petulance has been paying off big time for them in terms of policy gains.  They need to pay for that petulance.   Giving into Republican demands is not bipartisanship.  The Republican agenda is clear now.  The political moves by Republican governors to force their will no matter what is being met resistance by Democratic legislators.   Polls are showing that the public is taking the side of these legislators.  The President needs to take a page from their playbooks rather than doing his version of bipartisanship (i.e. giving into Republican bullying on things like tax cuts for billionaires).  The leadership shown by Democrats in the heartland is being rewarded and is clearly showing the politicians in Washington the type of future the voters want.  Now, if we could only get Washington to listen before the presidential campaign silly season begins.

Are Republicans the new Confederate Holdouts?

Posted: March 8, 2011 | Author: | Filed under: Democratic Politics, John Birch Society in Charge, Republican presidential politics, U.S. Economy, U.S. Politics | Tags: , | 25 Comments

That’s a pretty interesting header for what is essentially a discussion among economics/finance bloggers over the ongoing disconnect between revenues and government spending, isn’t it?  There’s no doubt that Nixon’s southern strategy and Reagan’s appeal to social reactionaries ushered in the current mixture that represents the Republican Party.  This has basically become the new base of the Republican party since establishment Republicans and their business base couldn’t get a critical mass of voters back in the day. We’ve seen it lead to policy measures that would dismantle everything from civil rights to basic collective bargaining and workplace rights recently.

Economist Karl Smith believes that eventually this Republican coalition will fail.  He wrote on this at Modelled Behavior in a post called ‘Starving the Moral Beast’ which is quite worth a read and a discussion. So far, it has elicited responses from Mark Thoma at Economist’s View and Matt Yglesias at Think Progress.

All I keep thinking is the old Keynesian wisdom of  “in the long run, we are all dead”.  So much for any optimism on my part.  Here’s some tidbits from Smith.

If we want to build a model of what the government spends money on we would be best to start this way: ask people what social obligations do they believe “society” has. Look around for the cheapest – though not necessarily most efficient – programs that could credibly – though not necessarily effectively– address those obligations. Sum the cost of those programs. That will be government spending.

Contrary to Jonah Goldberg and others who see Canada and the United States as examples of two clashing ideologies, they are actually examples of two different ethic distributions.  The United States is not Canada because there is ethnic strife between Southern Blacks and Southern Whites. That strife reduces the sense of moral obligation on the part of the white majority and so reduces government spending.

I want to be very clear that I don’t say this to paint those against social spending as racists. From where I sit I am betting that most of the intellectuals lined up against expanding the welfare state are naively unaware that their support rests upon racial strife. Otherwise they would realize that as America integrates they are doomed. They are fighting as if they believe they have a chance of winning. Given the strong secular trend in racial harmony, they do not.

I point this out also to show why the major Republican strategy for limiting government was doomed from the start and why I am also not particularly worried about Americas fiscal future per se.

Again, Smith argues that the Republicans will be on the losing end of the argument because they are increasingly outnumbered by the very people they want to suppress.  Eventually, they will have to increase taxes and fund the part of the beast they’ve so tried to starve.

In the 1980s some conservatives believed that the might not be able to cut government but they could cut taxes and thereby starve the beast. Rising deficits would force the hand of future governments. Spending would have to be cut in order to bring the budget into balance.

Much of the handwringing about fiscal irresponsibility is a sense of alarm not only on the right, but throughout much of the political center, that these spending cuts are not actually materializing.

But, by what theory of government did you ever believe they would? Governments don’t look at how much money they have and then decide what they want to buy. They decide what they want to buy and then they look for ways to find the revenue.

Divorcing the two – through sustained deficits – was only going to lead to ever increasing levels of debt. This is what we got. At no point was the beast ever starved. The peace dividend lowered government spending growth somewhat, but that was undone by the war on terror. Otherwise spending hummed along, as it always will, with the government buying things the public thinks it ought to buy.

Yet, if this is causing upset stomachs among many of my fellow bloggers it calms mine. Its quite clear how this will end. Racial strife will continue to abate. The public will coalesce around the welfare state and taxes will be raised to meet the cost.

Ygliesias–from which I borrowed the Jesusland graphic–argues the semantics of the Canada-US sociopolitical distributions.  For some reason, I don’t think either of them have spent much time in central Canada where there are many fairly moderate to conservative folks.

And on both sides of the border there are differences between the big cities and the rural areas. But Québec is quite different from Anglophone Canada and in the USA “the south is different.” The interesting thing is that not only do Québécois people speak French, they also have unusually left-wing views on economic policy. Meanwhile, white southerners have more rightwing views on economic policy than do other North American white Anglophones. If you redrew the borders, you’d get very different political outcomes.

Thoma takes on the crux of the argument which is the essential problem of funding our government.  I’ve always found it odd that Republicans say deficits don’t matter when the spending is for war, tax cuts for business and the wealthy, or distributing grants to religious groups but scream when the spending is used for your basic public goods.  I think he has a good point when he discusses how the relatively different political groups place value on various government activities.  This turns the entire framework into your basic supply/demand model with price sensitivity being determined by the degree to which you value or shun providing revenues or selecting a program.

I agree with a lot of what is said here, but I am not as sure that the decisions about how much to spend and how to pay for it can be separated in this way. What society wants to do — e.g. the social services it believes it should provide — is partly a function of what we collectively think we can afford. Ultimately, I think, just as price is determined by both supply and demand, decisions about the level of government services and how to pay for those services are made jointly, not sequentially. The decisions cannot be completely separated. Part of the worry about health care, for example, and hence part of the opposition is a worry that we cannot afford it.

However, I probably shouldn’t push this too hard, it’s not a pure joint decision either, and for some social obligations have little to do with their cost. In addition, in many cases those who benefit from social programs and those who pay are not the same which sets up a social conflict and a political dynamic that can lead to deficits. But I do think that the costs matter when we make decisions about what services we think government should provide. The big difference across people, I think, is the assessment of the net benefits of some of these programs, and the differences are on both the cost and benefit sides of the equation. For example, the racial divide affects the assessment of benefits, and libertarians see taxes as an assault on liberty and hence very costly.

I still think that the Clinton/Gore administration provided some of the results that many Americans found palatable.  Republicans tend to defund functions they hate, place vapid politicos in charge of the projects they loathe, then point to the miserable results when the inevitable blow ups occur as ‘typical government’.  The hated the lean mean working model of Clinton/Gore.   Think Heckuva -job-Brownie at FEMA compared to the pared down and efficient Clinton/Gore FEMA.   The other main issue that I can see is the large number of Federal contractors that just disrupt the process trying to get no bid contracts to privatize essential government services.  The privatization schemes have cost us dearly at many levels.  I think this war on Public Workers is part of the effort to grab more lucrative government work as much as it is to starve the beast or shrink government.  As every one here as said, we’ve only seen selective ‘shrinking’ .

Having spent my life in that big red blob in the middle, I get a front row seat to some of the craziest of the crazies who scream government overreach or states rights when it affronts their personal practices while applauding government overreach in other things.  Think how many Republicans want to stick their noses squarely in people’s sex lives and health because they value a particular religious belief over science.  I’m less hopeful than Smith that this will all work itself out in the long run because the fault lines seem pretty large from my vantage point.  One of these days the middle class will figure out that they really do get their tax dollars worth.  Now they should just make the corporations and the rich pay for theirs too.

There does seem to be a populist contagion afoot in the world.  A lot of it is push back from the proposed policies that force big changes on either side of the aisle.  There is also this sense that there’s a lot of wealth out there and only a small few seem to be able to grab hold of it.  The democracy bug in the MENA area is as inspiring to me as the Wisconsin, Ohio, and Indiana protests.  Perhaps, the little guys have had enough of being pushed around.

I guess we will see.

Wrong! Wrong! Very Wrong!

Posted: March 8, 2011 | Author: | Filed under: Baby Boomers, Domestic Policy, Federal Budget, John Birch Society in Charge, Psychopaths in charge, right wing hate grouups, Social Security, The Media SUCKS, the villagers | Tags: , , , , | 22 Comments

I almost never read Robert J. Samuelson because he is basically one of those people that seems to read a few things then moves himself to expert status.   He’s one of many writers who seems to derive a livelihood by achieving intellectual dilletante status.  I couldn’t get pass this headline at his WAPO column: ‘Why Social Security is welfare’.  Why journalistic poseurs are allowed column space to promote so much wrong information is beyond me.

We don’t call Social Security “welfare” because it’s a pejorative term, and politicians don’t want to offend. So their rhetoric classifies Social Security as something else when it isn’t. Here is how I define a welfare program: First, it taxes one group to support another group, meaning it’s pay-as-you-go and not a contributory scheme where people’s own savings pay their later benefits. And second, Congress can constantly alter benefits, reflecting changing needs, economic conditions and politics. Social Security qualifies on both counts.

Samuelson is obviously confused. I wonder if he feels this way about every annuity investment sold by every insurance broker and bank in the country?  Social Security is a benefit that every worker pays for that is basically an insurance annuity set up to pay you back when you hit the stated conditions of the contract.  It has elements of insurance in it that is comparable to the government-sponsored flood insurance plan.  It has elements of a life annuity which is a similar contract that you can buy from any insurance broker.  You pay now and it pays you benefits in the future, again, when you meet the conditions of the annuity. It’s a form of longevity insurance.

Additionally, it is not means tested which means that receiving the annuity has nothing to do with your income.  It has to do with you joining the plan and paying the premiums as you work or as your parents or spouse works.  It is not a transfer payment which is the traditional form ‘welfare’ or safety net program. Transfer payments go to a beneficiary simply upon meeting certain criteria without ever having paid into the program directly.  Usually, transfer payments are means-tested which means they pay only to low income citizens. Transfer payments direct payments or services to people that don’t involve any exchange of goods and services for the benefit.  They are a one-way transfer of benefits and their main purpose is for income redistribution.  Social Security does not fall under this category at all.  If you or a qualifying family member don’t contribute to the program, you will not get your benefits.  Your benefits are also eventually based on what you contributed and not what your income says you need.  This is a huge difference.

You can read two other economics/finance writers who explain this in similar ways.  First, Economics professor Mark Thoma on Economist’s View explains the bad logic involved with this argument.  He also explains why Social Security is an insurance annuity and not a transfer payment in a similar way.

Social Security is no different, it is an insurance program against economic risk as I explain in this Op-Ed piece. Some people will live long lives and collect more than they contribute in premiums, some will die young and collect less. Some children will lose their parents and collect more than their parents paid into the system, others will not. But this does not make it welfare.

Is gambling welfare? Gambling transfers income from one person to another. Does that make it welfare? Loaning money transfers income when the loan is paid back with interest. Are people who receive interest income on welfare?

There is an important distinction between needing insurance ex-ante and needing it ex-post. Insurance does redistribute income ex-post, but that doesn’t imply that it was a bad deal ex-ante (i.e., when people start their work lives).

Angry Bear has made the same argument. (Both of these quotes are pretty old btw since Samuleson keeps rehashing this canard over and over and over.)  There is an example there of the basic insurance problem taught in finance classes in risk theory.  It shows why people basically buy insurance.  It also discusses the benefits of having insurance provided by the government when the private sector fails to provide the service.  Flood insurance and Longevity insurance make sure that people who have experienced those conditions do not become a burden on society and get shoved into the welfare system.  They pay premiums on each pay check–just as each of us do–to make sure that we don’t either outlive our incomes and wealth.

What does all of this have to do with Social Security? Those who are hard-working, fortunate, and not too profligate will have a large nest egg at retirement and Social Security will account for only a small portion of their retirement portfolio. This is tantamount to paying for insurance and then not needing it. This happens all the time — every year someone fails to get sick or injured and, while surely happy in their good health, would have been better off not buying insurance. That’s the nature of insurance: if you don’t need it, then you’ll always wish you hadn’t purchased it. Only in the context of retirement insurance is this considered a crisis.

On the other hand, those with bad luck or insufficient income will not have a nest egg at retirement. Because of Social Security, instead of facing the risk of zero income at retirement, they are guaranteed income sufficient to subsist.

This is precisely like the insurance example I worked through above: people with good outcomes will wish they hadn’t paid into the insurance fund; those with bad outcomes will be glad they did. Ex-ante, everyone benefits from the insurance. Overall, society is better off because risk is reduced; because people are risk-averse, the gains are quite large.

Additionally, Samuelson tries to force the Social Security program back into the federal deficit column when it is and was designed as a stand alone program. He also uses the current downturn–with its high and sustained rate of unemployment and hence, people NOT paying into social security at the moment–as an excuse to call the trust fund insolvent.  This is another canard.

Contrary to the Obama administration’s posture, Social Security does affect our larger budget problem. Annual benefits already exceed payroll taxes. The gap will grow. The trust fund holds Treasury bonds; when these are redeemed, the needed cash can be raised only by borrowing, taxing or cutting other programs. The connection between Social Security and the rest of the budget is brutally direct. The arcane accounting of the trust fund obscures what’s happening. Just as important, how we treat Social Security will affect how we treat Medicare and, to a lesser extent, Medicaid.

Dean Baker also calls Samuelson “inaccurate and misleading”. (h/t BostonBoomer)

It seems that for some reason he has a hard time understanding the idea of a pension. This shouldn’t be that hard, many people have them.

The basic principle is that you pay money in during your working years and then you get money back after you retiree. Social Security is a pension that is run through the government. Therefore Samuelson wants to call it “welfare.”

It is not clear exactly what his logic is. The federal government runs a flood insurance program. Are the payments made to flood victims under this program “welfare?” How about the people who buy government bonds. Are they getting “welfare” when they get the interest on their bonds? If there is any logic to Mr. Samuelson’s singling out Social Security as a source of welfare, he didn’t waste any space sharing it with readers.

There are a few other points that deserve comment. He claims that the trillions of dollars of surplus built up by the trust fund over the last three decades were an “accident.” Actually, this surplus was predicted by the projections available at the time. If anyone did not expect a large surplus to arise from the tax increases and benefit cuts put in place in 1983 then their judgement and arithmetic skills have to be seriously questioned.

In terms of the program and the deficit, under the law it can only spend money that came from its designated tax or the interest on the bonds held by the trust fund. It has no legal authority to spend one dime beyond this sum. In that sense it cannot contribute to the deficit. Mr. Samuelson apparently wants to use Social Security taxes to pay for defense and other spending.

Social Security coffers will see increased funding as long as people have jobs that pay more. Judging the cash inflows at a time when unemployment is unusually high and sustained is analysis aimed at pushing a political agenda.  It’s not a realistic view of the future stream of revenues.  The pot will replenish at a rate better than today simply by getting rid of the high unemployment rate and getting people into jobs with incomes that actually improve.  Consistently increasing the cap level by the rate of inflation would also provide an additional and reasonable source of funds.

I’ve written more than a few posts explaining the basics of social security.  It gets old when you have to repeat the same arguments to the same boneheads–like Samuelson–over and over.  I really don’t understand why some news outlets just seem to tolerate deliberate misinformation as ‘opinion’.  I certainly hope that some one with a similar sized readership will challenge Samuelson on his facts.  He plays fast and loose with them all the time.

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