Sunday, September 26, 2010

It's A Wonderful Life but Social Security? Not So Much

I have met Jay Bullock a few times. He seems like a nice enough guy and I am sure he is a very good English teacher. Heck, he might even the second best English teacher in MPS. (Sorry, Jay, but top honors go to Karra Esenberg at Hamilton.)

But, Jay, you're thinking about this social security thing all wrong.

He seems to think that his insurance company (and mine), American Family, operates its business like the government has operated social security. If I thought that were true, I'd be looking at the Gekko or the ditzy girl with too much make up.

Jay fundamentally misunderstands the analogy between social security and a ponzi scheme. It is not that the government should have kept excess social security dollars locked in a vault. That would have been better than what it did do, but would have been its own piece of mismanagement. Jay says I would have beaten George Bailey to death for putting the money in Joe's house.

Not hardly.

In fact, had good old George failed to do so, I would have taken my money over to mean old Mr. Potter. Lending to Joe is how George earns the money to pay me interest.

But the social security trust fund is no Bailey Building & Loan. It did not lend its money to Joe. Lending the money to Joe - and to the Kennedys and Mrs. Macklin and a hundred others - gave that broken down old Building & Loan a claim on someone else's assets (it carries a mortgage on Joe's house) and a right to be paid income on that claim. (Joe owes principal and interest). The trust fund could have invested its money (much like American Family invests its money)in a way that gave it a claim on a someone else's assets. But it didn't. Think of Uncle Billy losing or blowing the money and leaving George with nothing but his IOU. Now that would have truly meant bankruptcy, scandal and prison.

Now, to be fair to Jay, you could operate social security (although not an insurance company) on a pay as you go basis. Insurers don't do that because they can't compel policyholders to stay with the company and can't raise the rates to whatever is required to pay current claims (and because, for those and other reasons, regulators wouldn't let them). The government, of course, has a more or less captive customer base. Taxpayers can't take their business "elsewhere."*

But social security long ago abandoned a strict notion of "pay as you go" and for good reason. We have know for a long time that birth rates following 1964 were far lower than those between 1946 and 1964. We have long known that this was going to result in a reduced ratio of workers to retirees when the little darlings born between 1946 and 1964 hang it up.

Not very complicated math demonstrated that this would result in levels of taxation that would be politically - and perhaps even economically - unsustainable. (Taxpayers may be unlikely to go elsewhere but they can prefer leisure to labor.) So we decided to charge our current "customers" "extra" to fund the largely predictable costs that would be incurred when it came time for them, as a class, to submit their "claims."

The government should not have kept the money in a safe. It should have invested it in conservative investments outside the federal government. This is, after all, what both private and public pension funds do.

Indeed, Jay should probably be a bit more concerned with this than he is. MPS has promised over two billion dollars of unfunded benefits to future retirees. If, in the end, taxes are imposed on city residents to pay those benefits, we should just rename ourselves "New Detroit."

Jay argues that, well, if the government had not done this, every dollar invested would have been a dollar in additional deficit spending or taxes. Another possibility, apparently even too hard to imagine, would have been reduced spending. But to suggest that behaving responsibly would have been hard takes nothing away from Johnson's original point that social security has been operated as a Ponzi scheme.

In the end, Jay succumbs in the end to the Ultimate Stupid Blogger Trick of the left. Concern about social security is, in the end, reducible to fear of the "Brown Menace." He cites Charlie Crist's proposition that we could fix the problem by creating a "path to citizenship." Because some critics of social security don't do that, they are, implicitly, racists or cynical exploiters of racism. I hope he doesn't teach his students to be that intellectually lazy.

Crist's comments reflect a misunderstanding of the problem. He thinks the trust fund has assets. Beyond that, current levels of illegal entry won't fix the problem. Most illegal residents already pay social security taxes. There are many issues surrounding immigration about which reasonable people can differ. Playing the race card against conservatives in general (as opposed to some particular position that might be fairly characterized in that way) fouls, rather than advances, the conversation.

* Of course, increased taxation can result in a reduced tax base.

Thursday, September 23, 2010

Just A Little on Vote Caging

A commenter in response to my earler post on our hapless (and now ex-) SEIU operative wanted to know if I would offer a "a similar critique about the just-exposed conservative voter suppression efforts ...." Faith will be rewarded.

One Wisconsin Now accuses certain conservative operates from running what they call "a vote caging" operation which, according to Bill Christofferson, is made illegal by the National Voter Registration Act.

The first thing to note is that "vote caging" is not a legal term. Some things that people call "vote caging" might be illegal, but not because of a direct legal prohibition against it.

By vote caging, most people mean a process in which potential voters are sent some type of mail that is either nonforwardable or requires a response and then some effort to remove these voters from the rolls when the mail is returned or there is no response.

The federal statute referred to by Mr. Christofferson is not, as he seems to think, an absolute prohibition against ever challenging a voter on the basis that they do not reside within the voting district, but a limitation on the circumstances under which states may remove registrants from the rolls based on failure to vote or change of registration. Thus, the state can't simply remove registrants on the basis of returned mail. But this doesn't preclude any further inquiry as to the eligibility of a voter. Compare, e.g., U.S. Student Ass'n Foundation v. Land
546 F.3d 373 (6th Cir. 2008) with Bell v. Marinko, 367 F.3d 588 (6th Cir. 2004).

Techniques referred to as vote caging sometimes involve challenges at the polls, but it is unclear to me that the groups here were planning to do that. Such a practice has been challenged when specifically targetted at minority voters, but there is not, in my voew, a general prohibition against challenges that a voter is ineligible because he or she doesn't live within the district.

However, it seems fairly obvious that such a challenge is not going to succeed if it based on nothing more than returned mail. The documents seem to suggest that the groups were planning to do much more than that, but, if it was their intent to seek the removal of, or make challenges to, voters based on returned mail, it wouldn't have worked. It wouldn't have forced the casting of provisional ballots and, depending on how it was implemented, might have faced other legal challenges.

Monday, September 20, 2010

The "Sexting DA" and Attorney Discipline

There aren't many things that political bloggers of all stripes can agree on, but I suspect there is near unanimous support for the notion that Calument County District Attorney Ken Kratz has, on apparently more than one occasion, acted like a pathetic dweeb.

I suspect that there is almost as much support for the proposition that Kratz' behavior toward a victim of domestic abuse was worse than pathetic in that it showed an utter disregard for the victim's humanity. A woman who has been the victim of domestic abuse doesn't need to be hit on by a person charged with helping to protect her. In proposing an amorous relationship at a time when he was supposed to be prosecuting her abuser, Kratz placed her in an untenable position. She was not free to laugh in his face or even to let him down gently. She may well have felt pressure to accede to - or to at least play along - with his desires.

It would not be hard to see this as a form of "quid pro quo" sexual harassment. The problem was not the words he used, but what the words proposed. If he wanted a relationship with her (in violation of the rule that you ought not to date people who could be your children much less the overly generous "half your age plus seven" rule), he needed to wait until there was no longer a professional relationship.

People are now wondering why charges were not issued by the Office of Lawyer Regulation. OLR itself is prohibiting from commenting. Under SCR 22.40, investigations are confidential.

I should point out that I am part of the attorney discipline system. I serve as a referee, i.e., I am assigned to sit as the "trial judge" in discipline cases and make - not a decision - but a recommendation to the Court. I don't see the cases until they are charged. Because of that, I don't want to comment further on the investigation which may have included significant material not in the public domain.

But ... I suspect that the question will now arise as to why "lawyers regulate lawyers." There are nonlawyers in the system and no charge can issue without review by a committee that includes nonlawyers. Often, a committee including nonlawyers will be involved in an investigation, but the rules do not make this mandatory.

Maybe a charge should have been brought in the Krantz case, but the reason that it wasn't is not that OLR is soft on lawyers.

The short answer to the question I've posed is that it takes professionals to judge many forms of professional misconduct. But there is misconduct which is more evident (this case may well involve it) and I fear that some people may believe that the OLR "goes easy" on lawyers.

Based on my experience, that is simply not the case. While it may be somewhat understaffed, my impression is that the OLR takes its charge quite seriously and, in my experience, it does take positions that are, from time to time, harsher toward the lawyer respondent than I would take. While I don't believe it is overly harsh, neither do I think that it is an easy mark.

SEIU Operative Kicks His Own A**

One of the things about blogs is that they can extend stories that appear in the mainstream media. Yesterday, Dan Bice wrote on comments by a union operative who said that he was going to "kick Scott Walker's ass" over the O'Donnell Park tragedy and problems at the Milwaukee County Mental Health Complex. In describing the coming campaign, he referred to things that Tom Barrett planned to say in coming debates.

I was interviewed for the story and was quoted as saying that I "could see the labor union encountering problems if it ran ads on the O'Donnell Park tragedy now that an employee is on record saying he talked with Barrett's staff about hitting Walker on this issue." Retired Elections Board lawyer George Dunst apparently agreed.

That's exactly what I said. Here's the problem. The SEIU, in a post-Citizens United world, is perfectly free to run ads that say bad things about Scott Walker. What it can't do is coordinate those communications with the Barrett campaign. If it does, it runs the risk of violating, among other things, laws that forbid providing something of value to a campaign with, to generalize, "unregulated" money.

That a guy from SEIU says that he is discussing a planned attack campaign with the Barrett campaign suggests coordination. To avoid such a suggestion, sophisticated operatives don't have those conversations. Or, if they have them, they don't tell strangers on the street.

I don't know if there was coordination. But, if SEIU now spends money to run attack ads focusing on O'Donnell Park and the County Health Complex, regulators are almost going to have to investigate.

Ron Johnson Understands Social Security All Too Well

The urgency of portraying Ron Johnson as clueless leads smart people to make silly claims. Last week, local blogger Jay Bullock said that Johnson's reference to social security as a "ponzi scheme" means that he doesn't understand it.

If that's so, then Johnson has a lot of company. Referring to social security as a
"ponzi scheme" is quite common.

To do so is, of course, an analogy and analogies point to one thing that is like another in some significant ways even if they may differ in others. Social security is not a ponzi scheme in the sense that, unlike Charles Ponzi, the government promises nothing to those who pay into social security. You aren't supposed to get a return on your money and you have no right to a dime in benefits. The government will, in any event, probably be good for whatever it decides to pay out - perhaps even for what it currently says it will pay out - because, unlike Charles Ponzi, it has the right to take money from others.

But there is a way in which social security is very much like a Ponzi scheme. Social security has not, strictly, speaking been, as its defenders lole to say, a "pay as you go" system for a very long time. Back when Baby Boomers were young, it was absolutely predictable that paying benefits upon our retirement was going to be extremely difficult because of the absolutely predictable diminishment in the ratio of workers to retirees. In other words, there are a lot of us and less of those born after us. Demography is, in a very real sense, destiny. It is a future that has already occurred.

So, in 1986, it was decided to raise social security taxes beyond that required to pay current benefits and create a trust fund. The problem, of course, is that the money was not invested in a way that represented a claim on anything other than the government's promise to pay. It was invested in special government bonds and, essentially, used to fund current government spending. It's as if you saved for your own retirement by placing money in a piggy bank and then replacing it with IOUs to yourself so that you could spend the money.

Thus taxpayers have been paying in more than a "pay as you go" system would require in order to create a trust fund consists of nothing more than IOUs. That sounds an awful lot like a Ponzi scheme.

People like Jay who defend the system like to say that the government won't or can't default on those bonds. It certainly can. Congress could repudiate the bonds, although it likely won't. The problem - the one that Jay elides by saying that the trust fund "can pay" out benefits for a number of years - is what it would take to pay those benefits.

The trust fund can't just write a check. It must redeem those bonds, i.e., call in the government's IOU to itself. The government can't just write a check to honor the bonds because it doesn't have the money. It must either raise taxes or borrow more money. To the extent that this cannot be done, benefits must be reduced. Thus taxpayers who have paid "extra" as "we went" really have nothing to draw on. They must either forego benefits or impose even higher taxes on younger people. That sounds an awful lot like a Ponzi scheme.

Jay wants to argue that this happened because we have been "undertaxed." Johnson would presumably argue that it happened because we have "overspent." Those are value judgments about how the problem that Johnson describes could have been avoided. But the problem that he described is very real and "Ponzi Scheme" is not a bad way to describe it.

Friday, September 17, 2010

Shark at the Capitol

One important, but perhaps underreported, development in our legal world is the work of the Legislature's Special Committee on Judicial Discipline and Recusal. The committee grew out of a request from Justice Patrick Crooks for the legislature to consider amendments to statutes governing judicial discipline and disqualification. Both issues have been hot button items in the Wisconsin Supreme Court in the wake of hotly contested and exceedingly well financed campaigns for seats on the Court in the 2007 and 2008 election cycles. The committee, consisting of legislators and public members, is charged with studying both issues and, if appropriate, make recommendations to the legislature.

Yesterday, I had the privilege of being one of nine invited guests to testify before the Committee. Four of the nine witnesses were sitting Justices on the Court - Chief Justice Abrahamson and Justices Bradley, Crooks and Roggensack. The hearing can be viewed here. I am the last (or as I would prefer to say "clean up") witness.

Yesterday's hearing had to do with recusal although some of the speakers addressed matters of discipline, largely addressing issues concerning the deadlock in the Gableman matter and how that might be avoided in the future. Much of the discussion on recusal centered on whether the legislature should adopt an objective standard (presumably other than, as I pointed out, the one announced in Caperton v. A.T. Massey Coal Co.), how that standard should be enforced and what it should be.

More to follow.

Wednesday, September 15, 2010

Don't Get Smug

It's now official. Wisconsin will elect a Governor from Milwaukee for the first time since 1939. Nevertheless, I think anti-Milwaukee feelings will play a role in the election. If outstaters see Milwaukee as an ungovernable mess seeking favors from Madison, they may well prefer a candidate who they see as, while from Milwaukee, not "of Milwaukee." If anti-Milwaukee animus is rooted in a belief(whether right or wrong) that the city want to be bailed out by the rest of the state, then the small government candidate is likely to benefit.

At the same time, Scott Walker is in a position to make great inroads against the normal Democratic margin coming out of Milwaukee. The fact of the matter is that most people in Milwaukee County actually like the way that he has dealt with the financial mess he inherited. There is a reason that he continues to be re-elected.

Jim Doyle has not done Tom Barrett any favors. His financial juggling act may have gotten him a few points in 2006. But it's not going to help the Democratic candidate in 2010.

Add to that the Zeitgeist and a Democratic nominee who seems disengaged from the campaign, there is a strong opportunity for a change in the state house. But, for Republicans, I want to quote an old trial lawyer friend of mine. When things went well, he'd always remind us.

Don't get smug.

Tuesday, September 07, 2010

God and the Lieutenant Governor

Dan Bice is interested in Rebecca Kleefisch's appeal to evangelical Christian voters to pray for her. He suggests that there is, if not something wrong, at least unusual in Kleefisch's apparent intent to "rely on her conservative Christian principles and interpretation of the Bible when making decisions as a government official."

So? I would expect her to act on her sense of what is right and wrong and for most of us those concepts are religiously informed. In the absence of some indication that she is about to jettison the religion clauses of the federal and state constitution, why shouldn't she call moral questions as she sees them?

(Of course, Bice is right in suggesting that the Lt. Governor has only slightly more power than the guy who runs the Capitol newstand - at least not until the Governor becomes ambassador to Tonga.

Questions for a Tuesday

There is a great piece by National Review's editors defending the legal and cultural distinctiveness of "traditional" marriage. There is much to commend it, including its frank assessment of the notion that same sex marriage is necessary to avoid the devaluation of homosexual relationships. I was struck by the following:

Same-sex marriage would introduce a new, less justifiable distinction into the law. This new version of marriage would exclude pairs of people who qualify for it in every way except for their lack of a sexual relationship. Elderly brothers who take care of each other; two friends who share a house and bills and even help raise a child after one loses a spouse: Why shouldn’t their relationships, too, be recognized by the government? The traditional conception of marriage holds that however valuable those relationships may be, the fact that they are not oriented toward procreation makes them non-marital. (Note that this is true even if those relationships involve caring for children: We do not treat a grandmother and widowed daughter raising a child together as married because their relationship is not part of an institution oriented toward procreation.) On what possible basis can the revisionists’ conception of marriage justify discriminating against couples simply because they do not have sex?

Does this matter? Is there a response to it? Are reciprocal beneficiary schemes a response to the problems cited by advocates of same sex marriage?