Philip F. Laverriere Sr. in his office, ego wall behind him.
85-Year-Old Philip F. Laverriere Sr. has been head of the city of Lawrence, Masachusetts’ non-profit anti-poverty agency since 1974. 37 years later, Lawrence still has poverty, but the Greater Lawrence Community Action Council, funded almost entirely by federal and state tax dollars, has grown into a $30 million-a-year operation with 310 employees overseeing an array of poverty programs including child care; immigration assistance; Head Start; low-income heating and weatherization; lead abatement; and even a youth baseball league. Over the years, Mr. Laverriere’s annual salary, allowances, and benefits have grown to $144,641.
The local Eagle-Tribune investigated between Jan. 28 and March 14 (as the result of a tip) and found Laverriere was working 15 hour weeks, visiting his office weekdays between 9 AM and 12 Noon, then retiring to spend the entire afternoon relaxing at his Elks Lodge.
W.W., in the Economist, makes the case against public employee unions.
As Max Weber taught, the state is an institution distinguished by its claim to a “monopoly on the legitimate use of violence”. The principal task of political philosophy is to give an account of the conditions under which it is morally legitimate or justified for an exclusive group of people to get things done by threatening and applying coercion to the rest of the inhabitants of a certain territory. On the dominant liberal account, several things need to be true before some small subset of a population can be justified in pushing the rest of us around. First, it needs to solve a problem to which there is no voluntary or non-coercive solution. According to the standard story, only the artful application of credible threats of violence can deliver certain “public goods” without which we would all be worse off. This is, by and large, what the state is for. Of course, any state powerful enough to deliver the public goods and protect our rights is powerful enough to violate them. We each have ample reason to reject the authority of any state that does not rely on the oversight and authorisation of those of us at the business end of police batons. The government of the state must take a form that minimises the chances of the abuse of state violence. According to both liberal theory and history, some form of representative democracy seems to be the ticket.
While the liberal-democratic state has proven better than the known alternatives, it creates a number of serious problems on the way to solving others. Among the greatest of these problems is maintaining a system of public finance that does not stray outside the bounds of liberal legitimacy. The power to tax and spend is necessary for the performance of the democratic state’s legitimate functions, but it is also a ready tool of exploitation and distributive injustice. An ideally legitimate state does nothing people can do better on voluntary terms, and it takes no more from people in taxes than is necessary to finance necessary public goods. But this is a moral target we never hit because the strategic logic of redistributive democracy reliably errs in the direction of expansion of services, deficit spending, and the abuse of taxpayers and other not-very-organised constituencies at the hands of highly-organised special interests. If we are concerned to minimise exploitation—if we care about the extent to which state violence is public-spirited and not merely criminal—we must go out of our way to acknowledge and guard against the abuses of fiscal democracy.
It is in the context of these concerns that we must consider the function of public-sector unions. If they do anything at all, it is to protect their members’ claims on future government revenue from democratic discretion—to limit the power of the elected representatives of the democratic public to set the terms on which union-members will receive transfers from taxpayers. That these transfers come to workers in the form of compensation for services rendered the government seems to confuse a lot people. This is, I think, why people on both sides of the debate are distracted by the question of whether government workers are or are not “overpaid”. To my mind, the real question is whether government workers should be granted special legal powers that (a) are unavailable to other groups whose welfare also turns on transfers from the treasury, or on the size of compulsory transfers from their bank accounts to the treasury, and (b) limit democratic sovereignty over the distribution of the burdens and benefits of the system of public finance.
I would argue on liberal grounds that justice demands limits on democratic sovereignty over budgetary matters precisely to avoid the exploitative redistribution that otherwise occurs. That’s why I support constitutionalising nondiscrimination requirements on fiscal policy, among other reforms. My principled objection to public-sector unions is that their powers limit democratic sovereignty over taxation and public spending in a way that advantages some citizens at the expence of others—in a way that makes fiscal exploitation more, not less likely.
Matthew Ridley, in the Saturday Wall Street Journal Review section, offers a summary of a new and valuable article on the biases fueling endless government expansion and bad policy.
Slavisa Tasic, of the University of Kiev, wrote a paper recently for the Istituto Bruno Leoni in Italy about [the psychology and neuroscience of government]. He argues that market participants are not the only ones who make mistakes, yet he notes drily that “in the mainstream economic literature there is a near complete absence of concern that regulatory design might suffer from lack of competence.” Public servants are human, too.
Mr. Tasic identifies five mistakes that government regulators often make: action bias, motivated reasoning, the focusing illusion, the affect heuristic and illusions of competence.
In the last case, psychologists have shown that we systematically overestimate how much we understand about the causes and mechanisms of things we half understand. The Swedish health economist Hans Rosling once gave students a list of five pairs of countries and asked which nation in each pair had the higher infant-mortality rate. The students got 1.8 right out of 5. Mr. Rosling noted that if he gave the test to chimpanzees they would get 2.5 right. So his students’ problem was not ignorance, but that they knew with confidence things that were false.
The issue of action bias is better known in England as the “dangerous dogs act,” after a previous government, confronted with a couple of cases in which dogs injured or killed people, felt the need to bring in a major piece of clumsy and bureaucratic legislation that worked poorly. Undoubtedly the rash of legislation following the current financial crisis will include some equivalents of dangerous dogs acts. It takes unusual courage for a regulator to stand up and say “something must not be done,” lest “something” makes the problem worse.
Motivated reasoning means that we tend to believe what it is convenient for us to believe. If you run an organization called, say, the Asteroid Retargeting Group for Humanity (ARGH) and you are worried about potential cuts to your budget, we should not be surprised to find you overreacting to every space rock that passes by. Regulators rarely argue for deregulation.
“Affect heuristic'” is a fancy name for a pretty obvious concept, namely that we discount the drawbacks of things we are emotionally in favor of. For example, the Deepwater Horizon oil spill certainly killed about 1,300 birds, maybe a few more. Wind turbines in America kill between 75,000 and 275,000 birds every year, generally of rarer species, such as eagles. Yet wind companies receive neither the enforcement, nor the opprobrium, that oil companies do.
If lawmakers are to understand how laws get applied in the real world, they need to know and understand the habits of mind of their officials.
Ever have a personal experience of some irrational and unnecessary federal regulation?
I can remember, decades ago, when I was still a student working at factory jobs during the summer, spending weeks and weeks installing OSHA-mandated improvised barriers on machine tools of every sort.
The activity was pointless. The rods, bars, and pieces of sheet metal I was attaching were simply nuisances that would only get in the way. No one wanted them. No one needed them. No one thought they were desirable. But someone in Washington, undoubtedly someone who had never operated a machine tool or worked in a factory, had decreed that a symbolic sacrifice of convenience and efficiency to the safety gods must be performed, and every factory and machine shop in the land was obliged to genuflect and sacrifice.
Nicole V. Crain and W. Mark Crain, in the Wall Street Journal explain that regulations have continued to increase over the years, by now amounting to a serious portion of our national income.
The annual cost of federal regulations in the United States increased to more than $1.75 trillion in 2008, a 3% real increase over five years, to about 14% of U.S. national income. This cost is in addition to the federal tax burden of 21%, for a combined cost of 35% of national income. One out of every three dollars earned in the U.S. goes to pay for or comply with federal laws and regulations, and new policies enacted in 2010 for health care and financial services will increase this burden.
Talk about exercising your First Amendment rights in this country and if you’re threatened by the Saracens, government will march its forces up the hill and down again and then send you a bill for protecting you.
The city of Gainesville, Florida, plans to send a bill estimated at more than $180,000 to Pastor Terry Jones for security costs surrounding his controversial threat to burn Qurans on the anniversary of the September, 11, 2001, attacks, a police spokeswoman said Friday.
Police agencies spent more than a month working on security plans to ensure the community surrounding Jones’ Dove World Outreach Center — the planned site of the burning — was safe, according to Gainesville police spokeswoman Cpl. Tscharna Senn. …
The Gainesville Police Department said it spent more than $100,000 while the Alachua County Sheriff’s Office spent an estimated $80,000 during the weekend of the planned demonstration.
“We have 286 sworn officers and almost everyone was working either at the Dove Center or at other soft targets,” Senn said. “Unless you were sick or injured you were working” the day the burning was to take place.
Officers secured malls in the region, the University of Florida’s football stadium and areas around the church in the days leading up to the planned event.
Jones said Friday that the church was “not aware that we would be billed for security.”
“If we had known this in advance, then we would have refused to have security,” he said.
Most living Americans, including now approaching geezerhood Baby Boomers, have never seen anything like the current economic hard times. When I go out out of doors, I sometimes feel a bit surprised that the world is actually in color, not in black and white, and no one is dressed in 1930s styles.
But, on the whole, most of us have been facing current adversities with grim good humor. It’s our turn, we tend to reflect. We’ve had it good for so long. Sooner or later, government was bound to screw things up seriously.
But, we shrugged, we can survive. Our parents did. And the world has changed. We have vastly more education, more skepticism and sophistication. The peasant mentality that permitted the Great Depression to drag on for over a decade as the result of one socialist monkey wrench after another thrown into the engine of the economy and the Smoot Hawley Tariff just can’t happen today.
We’ve learned a lot. The policy errors of the New Deal have been exposed and its economics debunked. Today’s American population will not sit passively by and let Washington drive the economy into the ground year after year after year. The democrats will get slaughtered in 2010 and our Kenyan Caliban will be sent packing in 2012. A conservative Republican will take office in 2013 and the land will heal.
But, I have just read two news items in the Wall Street Journal which give me pause.
1) Despite the fact that the newspapers are full of foreclosure auction notices, and we all know people moving and abandoning homes to the banks, we tend inevitably to think that real estate disaster is well along and that we can look forward to the end of all that within an endurable interval.
We may be wrong.
This WSJ article from yesterday ends, I think, with whistling in the dark.
Housing markets began to stabilize early last year as low prices and government interventions broke the downward spiral. Policy makers spurred demand for homes by holding down mortgage rates, offering tax credits for buyers, and extending low-down-payment loans through the Federal Housing Administration.
The government also attacked the supply problem. Regulators relaxed mark-to-market accounting rules, giving banks more flexibility in valuing certain real-estate assets and removing some of the impetus for banks to quickly foreclose. Meanwhile, the Obama administration put in place an ambitious program to modify mortgages.
The Home Affordable Modification Program has fallen short of its goals. So far, fewer than 500,000 loans have been modified, below the target of three million to four million. Yet the program served as a “closet moratorium” on foreclosures that stanched the flow of bank-owned homes to the market, said Ronald Temple, portfolio manager at Lazard Asset Management.
The result: The share of distressed sales fell by November to 25% of home sales, and prices stabilized. After rising in the winter, the distressed share fell to 22% in June, before bouncing to 30% in July.
The problem is that these measures are wearing off. Demand plunged this summer after tax credits expired, and unsold homes are piling up. More foreclosures could move onto the market as borrowers fall out of the loan-modification program.
“We see the perfect storm brewing with rising supply and falling demand,” said Ivy Zelman, chief executive of research firm Zelman & Associates and one of the first to warn of trouble five years ago. She estimated that distressed sales could account for half of the market by year-end if traditional sales didn’t rebound.
The market does have some tailwinds: Housing starts are at all-time lows. Banks have hired more staff to manage problem loans and government entities such as Fannie Mae and Freddie Mac that own a growing share of foreclosures are less likely to deluge the market.
The next leg down in prices “isn’t going to be the foreclosure-induced freefall where you just had inventory coming out the wazoo, and it was going to be sold one way or the other,” said Glenn Kelman, chief executive of Redfin Corp., a real-estate brokerage.
Prices also have come down so much already they have less distance to fall. During the housing boom, prices inflated much faster than incomes rose, thanks to speculation and lax lending. The ratio of home prices to annual incomes reached 1.6 at the end of June, which is below the ratio of 1.88 from 1989 to 2003, according to Moody’s Analytics.
By those metrics, prices are actually undervalued in markets that have already seen huge declines, such as Las Vegas, Phoenix and Los Angeles. But Moody’s data show that prices remain “significantly overvalued” elsewhere, including Boston; New York; Seattle; Orange County, Calif., and Charlotte, N.C. Markets in both camps face supply imbalances that will pressure prices for years.
What I see is houses being offered for sale at significantly lower prices which are not selling, and a huge, absolutely enormous backlog of not-yet-foreclosed, not yet fallen out of the Home Affordable Mortgage Program houses yet to hit the market.
Who would be crazy enough to buy at any price in the current, totally unpredictable circumstances?
It is easy to find experts venturing predictions that home prices may fall another 10%. Why not another 30%, another 50%, or even 90%?
The market is flooded with homes. An enormous number more are somewhere in the pipeline headed for distress sale. Money is tight. People are still out of work, still losing jobs. Mortgage rates are low, but it is very difficult to get a mortgage. And, in the final analysis, who is going to buy now? Who will not believe that the market is still going down?
How low can we go? No one knows. People my age have lived through a period in which government policies lifted home prices into the stratosphere by arranging for 30 year financing for everyone. When I was a boy, working class families bought $5000-$12,000 houses, paying cash or arranging for two or three years of seller financing. The same kind of homes were selling for as much as $500,000 near Eastern cities a few years ago, and for $1,000,000 or $1,200,000 near San Francisco.
There is a very long way down between the prices of homes decades ago and recent prices. And deleveraging is just not happening. That backlog of unliquidated defaulted properties is sitting there, still unprocessed, like a ticking bomb.
2) Then, I read in the same WSJ of internationally-designed new banking rules intended to reduce risk by reducing liquidity and dramatically raising banks’ capitalization requirements.
The focus of the agreement is on the amount of “capital” banks are forced to hold. Capital is what banks use to absorb losses. Regulators and analysts typically believe that banks with more capital have a lower risk of failure or insolvency.
Regulators agreed to require banks to hold a specific level of a basic type of capital known as “common equity.” Common equity is considered the most effective type of capital because it is used to directly absorb losses. Officials agreed large, internationally active banks will have to hold levels of common equity equal to at least 7% of their assets, much higher than the roughly 2% international standard or 4% standard for large U.S. banks.
Who said governments in our time would not undertake “reforms” that reduce credit, constrict economic growth, and preclude recovery?
Remember Japan? Back in the late 1980s, everyone was afraid that Japan was going to replace the United States as the world’s leading economic power. Then along came recession, and Japan responded with the same kind of policies we see being applied right here today. Japan is still in recession, and nobody has been afraid of Japanese economic performance in years and years.
We have been saying to ourselves that housing prices may drop another 10% and that the real beginnings of the recovery may take another year, or maybe two, to arrive. We could be wrong.
You probably didn’t even know that the humble carp, an oily fish belonging to the Eurasian family Cyprinidae (which includes goldfish), constituted a problem.
The Chinese and Japanese think carp are beautiful and keep them in ponds for ornamental purposes.
Carp is an important staple in Continental European cuisine, most familiar in America in the form of the Jewish Gefilte fish.
Carp are popular with anglers in Europe, and to British bait fishermen a good carp can represent a real trophy. Isaac Walton claimed, in the Compleat Angler (1653), that
The Carp is the queen of rivers; a stately, a good, and a very subtle fish; that was not at first bred, nor hath been long in England, but is now naturalised.”
But for the Federal government, carp are a SERIOUS PROBLEM. One requiring yet another Czar.
The White House has tapped a former leader of the Indiana Department of Natural Resources and the Indiana Wildlife Federation as the Asian carp czar to oversee the federal response to keeping the invasive species out of the Great Lakes.
On a conference call today with Illinois Sen. Dick Durbin and other congressional leaders, President Obama’s Council on Environmental Quality announced the selection of John Goss to lead the near $80 million, multi-pronged federal attack against Asian carp.
“This is a serious challenge, a serious threat,” Durbin said. “When it comes to the Asian carp threat, we are not in denial. We are not in a go-slow mode. We are in a full attack, full-speed ahead mode. We want to stop this carp from advancing.”
Asian carp, which have steadily moved toward Chicago since the 1990s, present a challenge for scientists and fish biologists. The fish are aggressive eaters, consuming as much as 40 percent of their body weight a day in plankton, and frequently beat out native fish for food, threatening those populations.
They are also prolific breeders with no natural predators in the U.S. The fish were imported in the 1970s to help wastewater treatment facilities in the South keep their retention ponds clean. Mississippi River flooding allowed the fish to escape and then move into the Missouri and Illinois rivers. Some species can grow to more than 100 pounds.
The challenge for Goss, who was director of the Indiana DNR under two governors and served for four years as the executive director of the Indiana National Wildlife Federation, will be to make sure millions in federal money is spent efficiently, to oversee several on-going studies — including one looking into the possibility of permanently shutting down the Chicago waterway system linking Lake Michigan to the Mississippi River–and to bring together Great Lakes states currently locked in a courtroom battle over the response to the Asian carp threat.
Does anyone seriously believe that $80 million spent on studies and the creation of a Federal Asian Carp Directorate is really going to stop these frisky critters?
JON STEWART, HOST: It’s clear that this administration believes that government can have a stronger hand in regulating Wall Street, in regulating energy, in doing these things. But, has government during this time proved itself competent? And are our only two choices sort of an incompetent bureaucracy that doesn’t quite regulate properly or free market anarchy? Before you can make the case that this administration and government can effectively regulate shouldn’t they, you know, the MMS case makes a pretty clear point that the regulatory system is somewhat broken, and you guys had a chance to…
DAVID AXELROD, SENIOR OBAMA ADVISOR: The answer Jon is not to abandon the notion that there have to be rules and oversight. …
[E]verybody recognizes that government has to play a role. It shouldn’t be an oppressive role, but there has to be some firm oversight and some rules of people respond to. These, you know, it’s pretty clear the oil industry is not going to regulate itself.
STEWART: But do you think, I guess my point is before you have the opportunity, before you can earn the ability to go in and, and, and do that, don’t, don’t we have to show a certain baseline level of competence.
