QUOTE OF THE DAY
State Journal-Register: A pension solution -- use Social Security formula
In the classic “sword vs. gun” scene from Raiders of the Lost Ark, Indiana Jones encounters a massive assassin ominously wielding a three-foot sword. We all remember Indy taking pause, shrugging, grabbing his pistol and killing his adversary with one shot. Simple. Effective. In the ongoing Illinois pension saga, Gov. Pat Quinn and the incoming General Assembly should adopt this Indy-inspired approach.
In each of the past three years the mind-boggling complexity of the current system has overwhelmed our political process. Reform proposals have included optional 401(k)s in 2011, voluntary benefit reductions and property tax increases in 2012 and mandatory benefit reductions in 2013. All have failed.
Let’s learn from our mistakes. The proposed solutions failed for the same reason — they all tinker with the same convoluted elements inherent in the pension system. COLAs, normal costs, retirement ages, amortization, defined benefits, spiking, cost shifts, yada, yada, yada. Who really understands this stuff anyway?
Did Indiana Jones brandish a sword because he was facing a swordsman? No! He chose a different weapon — simple and powerful. Here is ours. Stop negotiating arcane details and move to something everyone understands.
Calculate benefits for current and retired state workers and teachers according to the same formula used for Social Security. Problem solved.
WSJ: Washington Isn't a Credible Choice for Pension Reform
In addition to protecting taxpayers from further pension accounting abuses, Congress should make it clear that a federal bailout of state and local pension debt will not be forthcoming. Sen. Mark Kirk led the way on this front in 2011 by introducing a resolution urging that the federal government take no action to redeem, assume or guarantee state debt. His move was prescient, considering how Illinois's governor and legislative leaders continue to dither two years later on real benefit reform, even as the unfunded liabilities soar.
States that have managed their pension responsibilities prudently should also put their irresponsible brethren on notice that they won't countenance a bailout either. Keep the pressure on states like Illinois and California to clean up their own messes.
Illinois Policy Institute
Reuters: Summit on Illinois pension woes ends with no new plan
A union-led summit to address Illinois' unfunded pension liabilities ended on Monday without any deals or significant breakthroughs, according to elected officials from both sides of the aisle who attended the event.
The summit, organized by a coalition of unions that represents public workers, drew Democrat and Republican state lawmakers to an AFL-CIO office in Burr Ridge, Illinois, but ended after three hours without a statement of consensus or a commitment to meet again.
Daniel Biss, a Democratic state senator from Chicago's northern suburbs who as a state representative co-authored a plan to address the state's pension mess, said "no substantive breakthrough" was made during the meeting.
In Illinois, five state pensions are in the red by a staggering $97 billion - or more than $20,000 for every household in the state. Inaction by lawmakers has prompted rating agencies to downgrade the state's credit rating and raised fears of service cuts, tax increases and other hardships for the residents.
"I'm glad that everyone was in the same room," Biss said. "But at some point, you have to stop talking about talking and start crafting a solution. That didn't happen."
Biss, who came up with a proposal with Democratic state Representative Elaine Nekritz to reduce the unfunded liabilities of the state's five public pension plans, said he came away from the meeting unsure whether the parties would even meet again.
"It's not even clear whose court the ball is in," Biss told Reuters.
Chicago Tribune: Chicago leads nation in gas-price spikes
Drivers in Chicago are seeing a painful rise in gas prices get even worse this month.
The average price of regular unleaded in the Chicago metro area on Tuesday is $3.93, according to AAA. That's up 12 cents from a week ago. A month ago, the average was $3.42. Statewide, the average is about $3.79, up 8 cents from last week and 46 cents last month.
Prices are rising at pumps across the country, too, but not as dramatically. The national average is $3.60, up about 7 cents from a week ago and 30 cents higher than this time last month.
It's not typical to see gas price spikes at this time of year. Demand is typically low and picks up in the spring before driving season. And in general, gas is cheaper to produce in the winter because refineries can use less expensive blends.
The main reason for the spike is the higher price of crude oil. The price of oil has gone from around $85 a barrel in December to around $97 now because of improving economic certainty as the country moved past the election and the fiscal cliff deadline, according to energy analyst Phil Flynn. It's also being driven by better-than-expected growth in China, the world's second largest economy.
Prices in the Chicago area are typically some the highest in the nation, but the cost of a local fill-up is accelerating at almost double the national rate.
WSJ: Millions Improperly Claimed U.S. Phone Subsidies
The U.S. government spent about $2.2 billion last year to provide phones to low-income Americans, but a Wall Street Journal review of the program shows that a large number of those who received the phones haven't proved they are eligible to receive them.
The Lifeline program—begun in 1984 to ensure that poor people aren't cut off from jobs, families and emergency services—is funded by charges that appear on the monthly bills of every landline and wireless-phone customer. Payouts under the program have shot up from $819 million in 2008, as more wireless carriers have persuaded regulators to let them offer the service.
Suspecting that many of the new subscribers were ineligible, the Federal Communications Commission tightened the rules last year and required carriers to verify that existing subscribers were eligible. The agency estimated 15% of users would be weeded out, but far more were dropped.
A review of five top recipients of Lifeline support conducted by the FCC for the Journal showed that 41% of their more than six million subscribers either couldn't demonstrate their eligibility or didn't respond to requests for certification.
The American: The ‘Scrooge’ Who Begat Plenty
Civility to one’s opponents, certainty, restraint, federalism, economy, thrift, and respect for faith: these and other Coolidge ideals are needed today.
Indeed, all his life, and at every station on the great figurative river, Coolidge never ceased to probe the same questions of debt, money, commerce, growth, and prosperity that had so affected Oliver, puzzling over in his mind what might be the right balance. Coolidge’s inquiries into political economy were so intense and so fruitful that it is, again, hard to understand why they are not better known. From time to time historians — more than economists — try to blame Coolidge for the Great Depression and therefore downgrade his policies. A market correction was due in 1929. Coolidge himself anticipated that drop. In fact, he fretted over its possible consequences. The country would endure trouble, he knew, yet he remained convinced that experiments and arbitrary interventions would only prolong the downturn. But the contention that Coolidge can be blamed for the extended double-digit unemployment of the 1930s is a stretch. Many of the events that converted the 1929 break in the Dow Jones Industrial Average from a serious market crash into the decade-long Great Depression took place after Coolidge’s presidency or in places far away.
Perhaps the deepest reason for Coolidge’s recent obscurity is that the thirtieth president spoke a different economic language from ours. He did not say “money supply,” he said “credit.” He did not say “the federal government,” he said “the national government.” He did not say “private sector,” he said “commerce.” He did not say “savings,” he said “thrift” or “economy.” Indeed, he especially cherished the word “economy” because it came from the Greek for “household.” To Coolidge the national household resembled the family household, and to her displeasure he monitored the White House housekeeper with the same vigilance that he monitored the departments of the federal government. Our modern economic lexicon and the theories behind it cannot capture Coolidge’s achievements or those of his predecessor, Warren Harding.
It is hard for modern students of economics to know what to make of a government that treated economic weakness by raising interest rates 300 basis points, cutting tax rates, and halving the federal government — so much at odds is that prescription with the antidotes to recession our own experts tend to recommend. It is harder still for modern economists to concede that that recipe, the policy recipe for the early 1920s advocated by Coolidge and Harding, yielded growth on a scale to which we can aspire today. As early as the 1930s, Coolidge’s reputation and way of thinking began their decline. Collectives and not individuals became fashionable. Sensing such shifts, Coolidge at the end of his life spoke anxiously about the “importance of the obvious.” Perseverance, property rights, contracts, civility to one’s opponents, silence, smaller government, trust, certainty, restraint, respect for faith, federalism, economy, and thrift: these Coolidge ideals intrigue us today as well. After all, many citizens today do feel cursed by debt, their own or their government’s. Knowing the details of his life may well help Americans now turn a curse to a blessing or, at the very least, find the heart to continue their own persevering.
The Sun: Parent trigger petition passes LAUSD school board
A group of parents got the unanimous thumbs-up to take over their failing school.
The 24th Street Elementary School Parent Union is the third group to use California's parent trigger law, which allows groups that collect enough petitions to force dramatic changes on public schools. On Tuesday, the Los Angeles Unified school board unanimously approved the petitioners' request to enact the "restart model" portion of the 2010 law. The decision cleared the way for parents to bring in a charter-school operator to run the school starting in the next school year.
Outside LAUSD headquarters, a couple dozen blue T-shirted moms and dads of 24th Street Elementary students cheered the board's approval.
"We hope we get excellent proposals, that will give us strong and effective leaders, clean schools and a culture of high expectations," said Christina Sanchez, organizing director for Parent Revolution, the L.A.-based advocacy group that helped pass the parent trigger law.
"Today, I'm feeling very proud that we are getting" action, 24th Street Parent Union lead organizer Amibilia Villeda said through a translator at an earlier news conference. "Maybe the young children that are here will have a better future."
News & Record: School choice group releases report on private school costs in NC
Parents for Educational Freedom in North Carolina, a school choice group, believes private school tuition is not as far out of reach for working class parents as some people claim.
Today, the nonprofit published a report that shows the statewide median tuition is just $4,600. Couple those modest annual tuition amounts with a state-sponsored “Opportunity Scholarship Program,” the group claims, and more parents could afford to send their children to private school.
PEFNC President Darrell Allison stated this in a press release:
“Our research dispels what many believe about private education: that it is unaffordable for families. When you look at the low cost of private education coupled with affordable scholarships as an option, the savings not only creates a win for parents but a win for our state as well. The bottom line is that income should not prevent any family from choosing the school that best meets the need for their child.”
School choice advocates tried without success last year to get the General Assembly to approve a scholarship program. Under the program, the state would have offered tax credits to businesses that donated to scholarship programs for working-class children. Those scholarships would have offset the tuition costs, but some advocates of traditional public schools argued that the tuition would still be out of reach for most families.
Businessweek: The U.S. Long-Term Unemployment Crisis Stumps Economists
Michelle Hall, 44, hasn’t worked since last June, when funding ran out for her administrative job at Peaceful Acres Horses, a sanctuary in Pattersonville, N.Y. She applies for jobs online and usually hears nothing. “It’s a feeling of what I’ll call emptiness,” she says. “I have a lot of skills that are very applicable across the board, from file clerk to middle management.”
Hall is the face of a new problem that remains poorly understood: chronic, long-term unemployment that continues even as job growth resumes across the economy. The rate of short-term unemployment—six months or less—is almost back to normal. In January it was 4.9 percent of the labor force. That’s only 0.7 percentage point above its 2001-07 average. But the rate of long-term unemployment, 3 percent in January, is precisely triple its 2001-07 average, according to a Bloomberg Businessweek calculation based on Bureau of Labor Statistics data. (Those two rates—4.9 percent and 3 percent—add up to the overall unemployment rate of 7.9 percent.) A striking statistic: The long-term unemployed make up 38 percent of all workers without jobs, double the average share and just a few notches down from the 2010-11 peak of 45 percent.
Economists are puzzling over what has changed. Is it generous benefits that make it easy to stay unemployed? Or erosion of skills that render people unemployable? Or discrimination by employers? Peter Diamond, an economist at Massachusetts Institute of Technology who received a Nobel prize for his work on labor markets, says that regardless of the causes of long-term unemployment, the harm it causes justifies strong efforts to stimulate the economy, so even the long-term jobless are absorbed. Other public policy problems, he says, take second place. “We have an unemployment crisis and only a debt problem,” Diamond says.
One way to visualize this issue is to compare U.S. unemployment with job openings since 2001. The result can be seen on the attached chart: a scorpion-shaped curve that tracks the swelling ranks of the long-term jobless. The chart’s creators were Rand Ghayad, a Ph.D. candidate in economics at Northeastern University, and his adviser, labor economist William Dickens. Their work was part of a report they wrote that was published last year by the Federal Reserve Bank of Boston. It was so striking that the Boston Fed named Ghayad a visiting fellow.
Daily Caller: California facing doctor shortage amid Obamacare implementation
California, the state that first attempted to implement President Barack Obama’s health care overhaul, has realized there aren’t enough doctors to care for the large influx of newly insured patients.
The Los Angeles Times reports that only 16 of the state’s 58 counties meet the federal government’s recommended standard of primary care physicians, and almost 30 percent of California’s doctors are close to the retirement age — the highest percentage nationwide.
“We’re going to be mandating that every single person in this state have insurance,” Democratic state Sen. Ed Hernandez told the Los Angeles Times. “What good is it if they are going to have a health insurance card, but no access to doctors?”
Hernandez has led an effort in the state legislature to expand the definition of who can provide health care services to patients. Lawmakers have proposed allowing physician assistants to treat more patients and permitting nurse practitioners to have independent practices.
Also, pharmacists and optometrists could become primary care providers and be allowed to treat some chronic illnesses.
CARTOON OF THE DAY