Category Archives: ethics

Government Pensions

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Steve Malanga, in a Wall Street Journal op-ed, had some rather dismal things to say about the health care and pension obligations of various state and local governments.

Citing Chicago Mayor Rahm Emanuel, he wrote

Unless Illinois enacts reform quickly, [Emanuel] said, the costs of [pension and retiree health-care] programs will force taxes so high that, “You won’t recruit a business, you won’t recruit a family to live here.”

Indeed,

Early last year, [Illinois] imposed $7 billion in new taxes on residents and business, pledging to use the money to eliminate its deficit and pay down a backlog of unpaid bills (to Medicaid providers, state vendors, and delayed tax refunds to businesses).  But more than a year later, the state is in worse fiscal shape, with its total deficit expected to increase to $5 billion from $4.6 billion….

The result?  For one, Caterpillar, which makes heavy construction machinery, decided last February to build its next plant in Not-Illinois.

But Illinois isn’t alone.  California is acting just as…suboptimally.  In Oakland, property taxes are still being collected, to the tune of an additional $410 per year beyond “ordinary” property taxes, to pay off a municipal pension fund that went bankrupt over a generation ago—in 1976.  So is Massachusetts going broke.  The Massachusetts taxpayers Foundation found that, for 10 cities in the state, the average per person debt for unfunded retiree health-care government obligations was more than $13,500.

There is, though, no competition among the states for getting businesses to locate in them.  It’s a no brainer, as the difference between the neighbors, Illinois and Indiana, illustrate.  Indiana’s per capita debt for unfunded retiree health-care benefits is $81. For Illinois, it’s $3,399.

Hmm….

Some Thoughts on Student Debt

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Having railed about Federal government debt for a bit, I got interested in student debt—an other end of the scale.  Specifically, I got curious about who borrowed, by chosen major field, and what the outcomes might be of those borrowings, based on salaries for jobs in those fields.  Much of the data in this post come from Steven A Harrast’s paper, Undergraduate Borrowing: A Study of Debtor Students and Their Ability to Retire Undergraduate Loans, which can be found here.  The data in this paper are from 2003-2004, so they predate the current economic dislocation, but the principles, I think, are intact.  The paper has a lot of good information in it; RTWT.

Using a student loan calculator, we can see some expected first year salaries and “affordable debt” suggestions for a number of majors.  I’ve selected four to be used illustratively throughout this post, and I used the calculator’s default values otherwise.

Major

Starting Salary

Maximum Manageable Debt Load

Sociology

$35,300

$35,976

Education

$35,900

$36,587

Engineering

$56,600

$57,683

Mathematics

$50,000

$50,957

These outcomes hold generally: the maximum manageable debt load is roughly the first year’s salary.  More than that is “excessive borrowing;” although this is a squishy limit.  Harrast defined excessive borrowing as “the difference between debt at graduation and lender-recommended debt level,” where the latter is based on an ability to pay 8% of a graduate’s second-year salary.  Others consider excessive debt to be total debt (which would include credit card, mortgage, if any, and the like, in addition to student loan debt) greater than 37% of income, which would lead most lending institutions to decline to lend.  All three definitions lead to substantially the same amount of “excess” for the purposes of this post.

Also, it’s clear that STEM-type majors (Science, Technology, Engineering, Mathematics) pay more, and so can borrow more, than do non-STEM majors.

Who incurs excessive student debt?  According to Mark Kantrowitz, of FinAid.org, that breakout looks like this for our example majors.

Major

Per Cent Overborrowing

Sociology

5.7%

Education

4.3%

Engineering

3.5%

Mathematics

3.6%

STEM students do better at managing their greater debts.  And importantly so: the overall average per cent of students excessively borrowing, across all majors, was 4.1%.

It’s also useful to lower the bar a bit and look at the size of excessive debt, given that it exists.  One way of looking at this is to look at the 75th percentile borrowing.

Major

Student Loan Debt at Graduation

Excess Student Loan Debt at Graduation

Sociology

$30,888

$11,795

Education*

$26,944

$7,850

Engineering**

$22,239

$3,146

Mathematics***

N/A

N/A

*Here, an average of Consumer Science and Education and Special Education
**Here, an average of Electrical and Mechanical Engineering
***Data were not provided by Harrast.

Plainly, some jobs are more valuable than others.  More importantly, the rigor associated with learning those jobs seems to correlate well with the ability of students to manage their debt buildup, and of the newly graduated to manage their accrued debt.

As some have asked,

Want to major in gender studies, women’s contemporary literary issues, or African-American history? Feel free, but don’t expect a dime from the US taxpayer. Because you likely won’t be able to pay your debt, and you most likely won’t be able to find a job to support yourself. Which means the degree is essentially worthless. And that is a luxury this country cannot afford any longer.

This is Promising

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Fox News reported over the weekend some excellent news concerning the Mojave Desert Memorial Cross, also known as the WWI Mojave Desert War Memorial.

A veterans group can restore a memorial cross in the Mojave Desert under a court settlement that ends a decade-old legal battle….

The [National Park Service] will give up the acre of land [the hilltop area known as Sunrise Rock on which the cross had stood for decades before thieves stole it after losing a court battle to have it removed legally] in exchange for five acres of donated property elsewhere in the 1.6 million acre preserve….

Justice Anthony Kennedy, siding with the 5-4 majority, wrote that the cross evokes more than religion.  “It evokes thousands of small crosses in foreign fields marking the graves of Americans who fell in battles, battles whose tragedies are compounded if the fallen are forgotten[.]”

As part of the settlement,

[o]nce the swap is complete, the park service will fence the site, leaving entrances for visitors, and post signs noting that it is private land. A plaque will be placed on the rock noting that it is a memorial for US war veterans.

No small amount of credit goes to Liberty Institute, who fought the legal fight for so long, and to Henry Sandoz, who worked so hard and so long maintaining the cross—keeping a promise he’d made those decades ago to his dying friend, Riley Bembry, who had erected the original cross in 1934—and producing the replacement that will go up when this all comes to fruition.

It’s not time to celebrate, yet; the land swap isn’t completed, the cross hasn’t been emplaced, and in the event, we still need to be alert for a repetition of the theft that prolonged this case.

Obama Got One Right

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President Obama is in hot water over a decision by his Health and Human Services Secretary, Kathleen Sebelius, to limit access to Plan B/Morning After pills to prescription only for girls 17 years old and younger.  Women 18 and older still can get the pill over the counter.

President Obama is right on this one.  Yes, he’s reputed to be “the most pro-abortion in the history of the United States.”  So what?  Those who use this to decry Obama’s hypocrisy are ignoring an important aspect of this issue.

While there is a legitimate question concerning the adequacy of the science and whether this pill is safe for “young teens,” there’s a larger matter involved.  Sex and pregnancy are serious matters, even for adults.  These girls, who are 17 and younger, are both legally and emotionally children.  It’s true enough that “18” is an arbitrarily drawn line for defining legal majority.  However, it’s also true that children lack the maturity to make reasoned judgments about the risks they run when they engage in various behaviors, including sex.

Whether or not this is the motivation for Obama’s decision, requiring the prescription for minor children is a pathway to getting/keeping parents involved, and parents need to be involved where their children are concerned.  Certainly, some children mature faster than others, some parents are bad parents, and many adults make bad decisions.  However, that last is irrelevant to this, and the maturation and examples of bad parenting are exceptions—they cannot justify a blanket rule granting all children access to this sort of medication without adult supervision—ideally, their parents’ supervision.

A Couple of Related Items

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The Wall Street Journal reports that the Securities and Exchange Commission gave up the identity of a Pipeline Trading Systems LLC whistleblower when an SEC lawyer decided to show the PTS executive the lawyer was questioning a notebook compiled by the whistleblower that was “filled with jottings about trades, calls and meetings.” The executive in question recognized the whistleblower’s handwriting.

The WSJ article also cites an SEC spokesman:

Our review of the facts confirms that we followed this practice in this case.  While we utilize evidence from all witnesses, we do not reveal which witnesses may be cooperating with the government except as required by law or the governing rules of civil procedure.

Oops.  Apparently, given the spokesman’s claim that the lawyer “followed this practice” in the present case, it’s SEC civil procedure to give a whistleblower’s identity to the investigation target during the investigation.

In another WSJ report, we learn that The Obama/Holder Justice Department “inadvertently misled the Supreme Court in January 2009 by asserting that officials routinely ‘facilitate’ the return of erroneously deported immigrants.”  That assertion was provided the Supremes pursuant to Nken v Holder, and Chief Justice John Roberts cited it in a ruling that deportation while an appeal was still pending didn’t necessarily impose irreparable harm on immigrants.  This revelation is especially timely given that the Supreme Court also heard arguments this week about the legitimacy of Arizona’s immigration law,

Oops.  Sorry about that.

How are they related?  By the dishonesty shared by these government organs.  Why dishonest?  Because the lawyers involved are highly trained, very intelligent people, and they were not acting on the spur of the moment.  It stretches credulity well past breaking to think these were simply careless mistakes.

For how much longer can afford this level of dishonesty in our government?