Hannah Arendt Center for Politics and Humanities
9Nov/120

A Milestone Election

The re-election of Barack Obama is a milestone. Barack Obama will always be remembered as the first black President of the United States. He will now also be remembered as the first black two-term President, one who was re-elected in spite of nearly 8% unemployment and a feeling of deep unease in society. He is the black President who was re-elected because he seemed, to most Americans, more presidential, more trustworthy, and more likable than his opponent—a white, Mormon, representative of the business elite. Whatever you want to say about this election, it is difficult to deny that the racial politics of the United States have now changed.

President Obama's re-election victory and his distinguished service have made the country a better place. The dream of America as a land of equality and the dream that our people will not be judged by the color of their skin but by the content of their character—these dreams, while not realized, are closer to being realized today because of Barack Obama's presidency and his re-election.

There are some who don't see it that way. There is a map going around comparing the 2012 electoral college vote to the civil war map. It is striking, and it shows with pictorial clarity, that the Republic strongholds today are nearly identically matched with the states of the Confederacy 150 years ago. For some, this is an indictment not only of the Republican Party, but also of the United States. The argument made on Facebook and beyond is that the country is still deeply divided racially; that this election brought out the deep-seated racism underlying the country.

Election Results 2012

 

There is also the fact that Twitter apparently was awash in profoundly racist commentary after the election. According to the blog Floating Sheep, the worst of the racist commentary was concentrated in states that Mitt Romney won. Mississippi and Alabama were the states with the largest number of racist tweets on election night.

This could be evidence of a real racial problem. But I don't see it that way. Of course there are some people who are less trusting of a black President. But around the country, voters approved gay marriage, Latinos voted in record numbers, women swept into office, and we re-elected a black President to a second term. To see this election as a confirmation of racist intransigence is overly pessimistic.

Yes, Mitt Romney won the white vote, but he received 59% of the white vote; not exactly a landslide given that the country has real problems. Among white voters over 65, Romney received 61% of the vote. But among white voters under 29, he received only 51% of the vote, a sure sign of things to come. And the white vote was only 72% of the national vote, a record low. As David Simon writes in "Barack Obama and the Death of Normal":

The country is changing. And this may be the last election in which anyone but a fool tries to play — on a national level, at least — the cards of racial exclusion, of immigrant fear, of the patronization of women and hegemony over their bodies, of self-righteous discrimination against homosexuals. ... This election marks a moment in which the racial and social hierarchy of America is upended forever. No longer will it mean more politically to be a white male than to be anything else. Evolve, or don’t. Swallow your resentments, or don’t. But the votes are going to be counted, more of them with each election. Arizona will soon be in play. And in a few cycles, even Texas. And those wishing to hold national office in these United States will find it increasingly useless to argue for normal, to attempt to play one minority against each other, to turn pluralities against the feared “other” of gays, or blacks, or immigrants, or, incredibly in this election cycle, our very wives and lovers and daughters, fellow citizens who demand to control their own bodies.

This is all good news.

And yet, we should not celebrate too loudly. Race still matters in these United States. How it does and why is changing, and will continue to change.

Amidst the progress, one fact remains stubbornly true: black Americans still lag behind white Americans in metrics of education, employment, income, and success. Nearly 5% of black men are in prison in the United States, compared to 1.8% of Hispanic men and .7% of white men.

More than 70% of babies born to black mothers are born out-of-wedlock. When looked at honestly, the problem with race in this country remains stark. It is too big a problem to be swept under the carpet.

And yet that is what is happening. The Obama Presidency has not been kind to blacks. Here is how Frederick C. Harris puts it in the New York Times before the election:

[F]or those who had seen in President Obama’s election the culmination of four centuries of black hopes and aspirations and the realization of the Rev. Dr. Martin Luther King Jr.’s vision of a “beloved community,” the last four years must be reckoned a disappointment. Whether it ends in 2013 or 2017, the Obama presidency has already marked the decline, rather than the pinnacle, of a political vision centered on challenging racial inequality. The tragedy is that black elites — from intellectuals and civil rights leaders to politicians and clergy members — have acquiesced to this decline, seeing it as the necessary price for the pride and satisfaction of having a black family in the White House.

Walter Russell Mead makes a similar point in a rich essay published in The American Interest over the summer. He writes:

Many hoped that the election of the first African-American President of the United States meant a decisive turn in the long and troubled history of race relations in the United States. And indeed President Obama’s election was a signal success for the American racial settlement of the 1970s. But at the moment of its greatest success, that settlement—call it the Compromise of 1977—was beginning to unravel, as evidenced by the fact that President Obama’s nearly four years in office to date have witnessed decades of economic progress and rising political power in black America shifting into reverse.

The housing bubble and its crash have disproportionately impacted black and Latino Americans, who most recently achieved the dream of home ownership. And the loss of jobs in manufacturing and public unions have disproportionately impacted blacks, since these were important routes through which black Americans have entered the middle class. The results for blacks in this country are harrowing. As Mead reports:

Black unemployment under President Obama hit 16.2 percent (June 2011). The median net worth of black households collapsed, falling by 59 percent between 2005 and 2010, wiping out twenty years of progress and plunging to levels not seen since Ronald Reagan’s first term. By comparison, the net worth of white households only fell by 18 percent from 2005 to 2010. The gap between black and white net worth doubled during the Great Recession, and the “wealth gap” between the races rose; the median white household had 22 times the net worth of the median black household. Moreover, the damage to black prospects will not soon be repaired. Indeed, if we now (as seems likely) face a prolonged period of austerity and restructuring in government, there will be fewer job openings and stagnant or falling wages and benefits in the middle-class occupations where blacks have enjoyed the greatest success.

What is more, those national statistics like unemployment, exclude inmates in our nation's penitentiaries. Were we to add the 5% of black men in prison into those cumulative statistics, the situation would look even more perilous.

Mead's essay, The Last Compromise, is essential reading. He argues that race relations in America are marked by three main historical compromises. The first compromise, in 1787, is well known. Including the counting of slaves as three fifths of a citizen and the granting of slave states equal representation in the Senate, this original compromise allowed the country to emerge as a democracy without dealing with the obvious scar of slavery.

Image taken from The American Interest

The Civil War led to what Mead calls the second major compromise on Race that moved the nation forward without actually granting rights to blacks. In the compromise of 1877,

the white South accepted the results of the Civil War, acknowledging that slavery, secession and the quest for sectional equality were all at an end. The South would live peacefully and ultimately patriotically in a union dominated by Northern capitalists. White Southerners might complain about Northern banks and plutocrats (and they did for decades), but they would not take up arms. For its part, the North agreed to ignore some inconvenient constitutional amendments of the Reconstruction period, allowing each Southern state to manage race relations as its white voters saw fit. In particular, the North allowed the South to deny blacks the vote while counting them for representational purposes.

As Mead writes, this compromise was a disaster for blacks. And yet, there was some progress. Denied the vote and made second-class citizens in much of the country, and faced with continued violence and oppression, blacks could, nevertheless, work to create a small and thriving middle class.

The compromise of 1877 last about 100 years until, in the midst of the Civil Rights Movement, a new compromise emerged. This compromise of 1977 brought with it desegregation of public institutions, affirmative action, the entry of blacks into government and civil service, voting rights, and the chance for success. But it came with a dark side. As Mead summarizes:

At its core, the compromise offered blacks unprecedented economic opportunity and social equality, but it also allowed for the stern and unrelenting repression of inner-city lawlessness and crime. Blacks who were ready, willing and able to participate in the American system found an open door and a favoring wind; blacks who for whatever reason were unable or unwilling to “play by the rules” faced long terms in prisons where gang violence and rape were routine.

The election of President Obama shows the promise and the limits of our current state of race relations. On the one hand, black Americans in the middle and upper classes live in a society that if it is not color blind, is at least open to success, entrepreneurship, and leadership by black Americans. On the other hand, the misery of the black poor continues, largely invisible. This is not simply a racial matter, since it is poverty in general, and not only black poverty, that is ignored. There are many impoverished white people. But it would be dishonest to deny the racial components of poverty.

The 2012 election is a milestone. It proves that 2008 was not a fluke, and it shows that most of the United States will vote for the candidate they feel is better, no matter that candidate's race. This is an enormous achievement and one to celebrate. In many ways the future looks bright. But that is no excuse to refuse an honest confrontation of the problems many black Americans continue to have. President Obama has largely avoided the issue of race, for obvious reasons. It is time to insist that we bring the issue to light.

One good way to begin is to read The Last Compromise by Walter Russell Mead. It is well worth the price of subscription to The American Interest. It is your weekend read.

-RB

28Mar/121

Pensions: The Unraveling Fiction

How big is the pension crisis in the United States? As I wrote last week, The Pew Charitable Trust has issued a report that there is a whopping $1 trillion dollar gap between the pensions promised to state public employees and the money that has been set aside to pay those pensions. But I also said that many people think that gap is actually much bigger.

The states' calculations assume a rosy 8% or even 10% return on their investments. The Pew report shows that even with those unrealistic assumptions, there will be a $1 trillion gap, since the states are underfunding their pension funds even based on optimistic returns.

Recently, Gillian Tett of the Financial Times talked to a few academics about the question and learned why the gap is actually $3-5 trillion dollars, and not simply $1 trillion. The basic problem is that low interest rates (now around 2%) mean that the investment on pension funds is not returning close to the hoped for amount. As Tett reports:

Thus academics, such as Joshua Rauh of Northwestern University, think that if a more realistic rate of return were used, this would reveal that state pension funds are now underfunded to the tune of $3tn-$4tn. Other observers are even gloomier. “This $4tn figure is a lower bound,” argues Robert Merton, economics professor at MIT. “Liabilities as reported by state and local governments seem to creep steadily up with each report due to ‘actuarial losses’ or overly generous assumptions about mortality and worker behaviour. In recent years, these have added growth of about 4-5 per cent per year to total liabilities.” And, of course, the longer that US interest rates – and bond yields – remain ultra low, the worse this underfunding gap becomes.

Tett's essay makes for a sobering read. As she rightly points out, this problem cannot be ducked forever. Remember, the 2009 bailout that President Obama pushed through was $900 billion, slightly under $1 trillion. We are talking about a shortfall in state budgets of $3-5 trillion in coming years. This is enormous and the effect on state governments and public services will be disastrous. But the very worst effect will be on all of those public employees who have been counting on contractually guaranteed pensions who will, I fear, learn what workers in Rhode Island and Alabama recently learned: such contractual guarantees don't mean much.

What does it mean to have a fact-based politics? This is a question that Hannah Arendt struggled with. First in her writings on totalitarianism, she saw that at the core of totalitarian regimes was the need to keep alive a coherent fantasy that motivated the mass movements supporting the regimes. When inconvenient facts appeared, they simply had to be eradicated.

Later, writing during the Vietnam war and in response to her book Eichmann in Jerusalem, Arendt argued that lies came to serve not totalitarian movements, but well-meaning idealists and technocrats who convinced not only others but even themselves that their lies were in the service of a winnable and noble cause.

Today we face the unraveling of a huge fiction. While the United States is still a wealthy country, we are not as wealthy as we have pretended to be over the last 15 years. But instead of addressing this self-deception, we are continuing to demand higher pensions and better medical care without actually asking who is going to pay for such services. It is a nice slogan to say that pensions and healthcare are human rights. But the current way we are achieving such human rights is by lying to ourselves, and, most pointedly, to the public employees who will see their promised pensions and healthcare evaporate during their retirement.

It would be nice if one of the Presidential candidates in either party would actually discuss the crisis in state pensions. But that would require courage and leadership, not to mention a willingness to have an honest conversation about the fact that this country continues to live beyond its means and promise benefits it cannot afford.

-RB

20Mar/1211

Pension Ponzis: Questions About the Public Interest

The public pension crisis is eroding the American social contract. While many are up in arms against Governor Scott Walker's heavy-handed attack on public unions, the fact is that Democratic governors in NY and California are also struggling with the inevitable need to reduce public pensions. Governor Jerry Brown in California admitted recently that public pensions were a Ponzi scheme. That is obvious. What is now sinking in as reality is that the Ponzi scheme is out of money and falling apart.

The Pew Center on the States published a study in 2011 called the Trillion Dollar Gap. The first sentence states the point:

$1 trillion. That’s the gap at the end of fiscal year 2008 between the $2.35 trillion states had set aside to pay for employees’ retirement benefits and the $3.35 trillion price tag of those promises.

A mere one year later, the gap had increased 26%!

The gap between the promises states have made for public employees’ retirement benefits and the money set aside to pay for them grew to at least $1.26 trillion in fiscal year 2009-a 26 percent increase in one year-according to a Pew report.

The gap is actually much bigger than the Pew Center numbers suggest, since the report is based on the official numbers that use way too optimistic expectations of returns.

The Pew Center Report continues, stating the reason this matters so much:

Why does it matter? Because every dollar spent to reduce the unfunded retirement liability cannot be used for education, public safety and other needs. Ultimately, taxpayers could face higher
 taxes or cuts in essential public services.

Municipal bankruptcies are mounting. Prichard, Alabama and Central Falls, Rhode Island both filed for bankruptcy, and they have had to vastly reduce the pensions promised to their public employees. The city of Stockton, California is in bankruptcy court now, and it must pay $30 million every year in pension costs, even as it only sets aside .70 cents for every dollar it must pay.

The crisis is spiraling. In essence, cities and states around the country will have to decide whether to honor their legal debts to public employees or pay for services like police, fire, and parks needed by their current residents. The only other option is a bailout from the federal government, but the size of the problem is enormous and such a bailout seems highly unlikely.

In the meantime, states continue to juggle money around to keep the Ponzi scheme going.  Just this month New York State decided to let municipalities and public entities borrow money from the state pension fund to make their payments back into the state pension fund. This is nonsense. Dangerous nonsense.

And while New York State did finally pass a version of pension reform last week, the reform falls far short of what Governor Cuomo wanted and what is needed. The Assembly raised the retirement age for public employees (not for policeman and firemen) to 63 from 62, whereas Cuomo sensibly asked it be raised to 65. As it stands now, the New York State pension plan is expected to consume 35 percent of the New York State's budget by 2015. This is up from a mere 3% in 2001.  More.

For anyone who cares about government and wants government to succeed, the pension problem must be addressed, for it threatens not only economic disaster, but political cynicism beyond even today's wildest dreams. Across the country, teachers, policemen and firemen, not to mention civil service employees and others, will see their promised pensions shrink precipitously. Not only will this devastate retirement nest eggs for millions of people, it will fray the social contract—pitting young against old and taxpayers against public employees.

It is bad enough that we will have to renege on pensions owed to public service employees (as municipalities in Rhode Island, Alabama, and California are already doing), but it is worse that we will do so after bailing out Wall St. bankers and allowing taxpayers to pay their contractually-obligated bloated bonuses. That these seven-figure bonuses were paid and yet we are unable and unwilling to pay contractually obligated pension costs is both a fact and an example of why the bailout of the bankers was so deeply wrong and misguided.

The issues around public pensions are complicated. They involve contractual promises made to workers that simply cannot be honored as well as pitting public servants against everyday taxpayers. There is also the fact that public employees are paid significantly more than similarly educated private employees at all but the highest levels of income and education. A recent Congressional Budget Office study concluded that:

  • Average benefits for federal workers with no more than a high school diploma were 72 percent higher than for their private-sector counterparts.
  • Average benefits for federal workers whose education ended in a bachelor's degree were 46 percent higher than for similar workers in the private sector.
  • Workers with a professional degree or doctorate received roughly the same level of average benefits in both sectors.

The CBO chart below shows clearly the relative overcompensation of public workers against their private-sector counterparts.  While one could turn this around and argue that private-sector workers are underpaid, the fact is that the current level of benefits for public-sector workers is bankrupting our municipalities and states. We can argue all we want about what is fair pay, but the current pay levels are clearly unsustainable. More, they are threatening to devastate public services as we continue to cut services in order to pay outsized benefits to retired public-sector workers.

Do public employees deserve to make more than private employees? Should we say that someone teaching in public schools deserves more than one teaching in private schools?  For some, the answer is yes and there is a sense that it is more noble and thus valuable to serve in the public interest. Some might even turn to Hannah Arendt to justify such a claim, that a public-service career is more public-spirited and thus more socially valuable than a private-service career.

As much as I value public-sector employees, it is a mistake to put them on a pedestal. It is unclear whether most public employees are more public-spirited than their private-sector counterparts. It is also unclear whether public school teachers and professors are better, more important, or more noble than their private school counterparts.

What is clear, however, is that public employees have a private interest in taking more and more of the taxpayer-generated revenue for themselves. In other words, public employees have a private interest in diverting public funds from public services to their wages and pensions. In this sense, the increasing numbers of public employees and their increasing wages and benefits threaten to hollow out public services in our country.

This is not to condemn public employees. Nor is it to deny that at the higher incomes, wealthy Americans should pay more in taxes to support governmental services. But we should be honest and contest the prejudice that public employees have the public interest at heart. And we need to have an adult debate about what to do about underfunded and ballooning public pensions.

-RB