Sunday, January 11, 2004

Social Security Future Posted here Sunday, January 11, 2004 at 10:42:07 AM     This is helpful.. Leading Indicator www.economicprincipals.com Eight years ago, when economists gathered in San Francisco for the annual meeting of the American Economic Association, the plenary lecture – properly speaking, the only lecture, given annually at the invitation of the incoming president -- was presented by Martin Feldstein of Harvard University. He called for the privatization of Social Security. And though the possibility of dramatically recasting the program had been in the air ever since presidential aspirant Barry Goldwater raised it in the 1964 election, its adoption as a serious proposal by the scholar/activist who had been a top adviser to Republican presidents since Ronald Reagan accelerated its rise to the top of the party’s political agenda. This year Feldstein himself was president of the association, but when economists met last week in San Diego, it was Mervyn King, governor of the Bank of England, to whom Feldstein turned as his guest lecturer. Alan Greenspan also spoke at a session of the meetings, and, paraphrasing Oscar Wilde’s heroine Lady Bracknell, King observed "To have one central bank governor address you may be regarded as a misfortune, but to invite two looks like carelessness." For his part, King discussed the current emphasis on "constrained discretion" as the essential goal of monetary policy. He illustrated his remarks with a charming story about the recent history of the two varieties of the Iraqi dinar, silver and Saddam. Interest in Social Security was rather thin on the ground. Indeed, a trio of well-known advocates of individual accounts all but threw in the towel, at least for now. Former Fidelity executive Robert Pozen, compensation specialist Sylvester Schieber and Stanford University dean John Shoven presented a "hybrid indexation" plan that would restore long-term fiscal balance to the system by reducing its payout to the well-to-do. And outgoing president Peter Diamond of the Massachusetts Institute of Technology delivered a strong defense, on strictly economic grounds, of Social Security as it is currently organized in the United States. The system works better than many economists think, he said. It is not hard to say what changed. The stock market bubble of the late 1990s undermined faith that higher returns from equities might both restore fiscal balance and enhance stability of a system on which something like a third of the population depend for their entire retirement income. Everyone agrees that the system now is somewhat out of balance. Present funding levels are thought to be adequate to pay current benefits through 2042. At that point, if no changes are made, revenues would pay only three-quarters of what has been promised – a transition to new rules of the game so abrupt that most would consider it to be grossly unfair. So attention now is swinging back to the kind of behind-the-scenes compromise of relatively modest tax increases and benefit cuts that in 1982 restored the system to actuarial balance for a time.(Alan Greenspan, then in the private sector, led that commission.) Indeed, Diamond and Peter Orzag of the Brookings Institution recently published a book, Saving Social Security: A Balanced Approach, espousing just such a compromise. It is the latest and most authoritative in a series of blueprints on which sucha compromise could be based. The details can wait. For now, expect the future of the Social Security system to be subordinated to the general excitement of an election campaign. By this time next year, however, we will know much better what kind of negotiations to expect. Social security? Or personal security? This fifty-year-old argument about how best to mandate savings for retirement is coming to a head. David Warsh (Links to Governor King’s talk and Diamond and Orzag’s book may be found at www.economicprincipals.org. The Economic Principals Project is sponsored by Sabre Foundation (www.sabre.org) and supported by contributions from readers like you.) ********

Athens and war Posted here Sunday, January 11, 2004 at 7:11:26 AM     From the New Yorker The war that began in the spring of 431 represented what Kagan rightly calls “a fundamental departure” from this tradition, not only in its scope, duration, and complexity but also in savagery and bitterness. After the Corinthian diplomatic crisis, ties between Athens and Sparta disintegrated. Hostilities began, one night early in 431, with a sneak attack on a small Athenian protectorate called Plataea. This sordid violation of the norms of Greek warfare set the tone for what was to come. As the conflict spread across many fronts, from the Hellespont to Sicily to the coast of Asia Minor, it began to seem frustratingly unwinnable. The result, Kagan emphasizes, was a cycle of cruelty and reprisal that ended in a “collapse in the habits, institutions, beliefs, and restraints that are the foundations of civilized life”: schoolboys slaughtered in their classrooms by mercenaries, civilians murdered and enslaved en masse, supplicants dragged from (or burned at) altars, the war dead left to rot on the battlefield. In the end, the great standard-bearer of Greek civilization itself, Athens, collapsed. Bankrupt and imploding with civil strife after nearly three decades of fighting, it was finally defeated by an alliance of Sparta and Persia, the traditional enemy of the Greeks. It was impossible to foresee any of this in the spring of 431. Athens was at its peak. Its empire of tribute-paying “allies” stretched across the Mediterranean, disciplined by a massive and well-trained navy. Its special national character—raucously democratic yet with an aristocratic esteem for high culture—was reflected in its leader, Pericles, who had populist appeal despite being a nobleman of what Kagan calls “the bluest blood.” It was Pericles who advised his countrymen, during the first few years of the war, to follow an unusual and, to many Athenians, foolishly passive defensive strategy: to remain within the city’s walls (including the so-called Long Walls that connected Athens to its port, Piraeus, four miles away) when the Spartans came to burn their crops, and to put their faith in their supremacy at sea. This plan took realistic account of Sparta’s vast superiority on land and of the fragility of the Spartan Alliance: the Athenians would simply ship in their grain, while harrying the coastal cities of the Peloponnese until the Spartan Alliance disintegrated. Defining our time as "war" is a great mistake. If could have been defined as the time of justice, of learning how to benefit from the economy, of how to "buy" more than from the mall than the limited goods available there, for a new society of quality of life. Spiral negatives are hard to forsee and inevitable. Elites are remote from the realities they crate, and hecne lack feedback on failure.   Our history has an impact on leaders, and too many of ushave abandoned the field to the demogogues. Hanson’s article is featured in a collection called “An Autumn of War: What America Learned from September 11 and the War on Terrorism,” which Vice-President Dick Cheney recommended to his entire staff, declaring that it captured his philosophy. Hanson has also met the President and addressed the Joint Chiefs of Staff, and a certain military swagger tends to color his reading of Thucydides. In his introduction to “The Landmark Thucydides,” an amply annotated reprint of a Victorian translation of the History, he sneers at the “veneer of culture” that war inevitably strips away, showing us up “for what we really are.” In “Carnage and Culture,” his 2001 study arguing that Western warfare is superior to that of all other cultures, he says: There is an inherent truth of battle. It is hard to disguise the verdict of the battlefield, and nearly impossible to explain away the dead, or to suggest that abject defeat is somehow victory. . . . To speak of war in any other fashion brings with it a sort of immorality. And yet the Greeks themselves—not least Thucydides—did speak of war in these other ways. In fact, it is Hanson and Kagan who strip away the moral meaning that underpins Thucydides’ account of the war. To get a better sense of what that meaning is, you have to turn from the book that was started in 431 to the play that premièred that spring—which is to say, from history to tragedy. Mel.: And how could it be just as good for us to be the slaves as for you to be the masters? Ath.: You, by giving in, would save yourselves from disaster; we, by not destroying you, would be able to profit from you. Mel.: So you would not agree to our being neutral, friends instead of enemies, but allies of neither side? Ath.: No, because it is not so much your hostility that injures us; it is rather the case that, if we were on friendly terms with you, our subjects would regard that as a sign of weakness in us, whereas your hatred is evidence of our power. read more..   ********