Hannah Arendt Center for Politics and Humanities
15Feb/130

Borrowing from Peter to Pay Paul

Stephanie A. Miner, the Mayor of Syracuse NY, has an important op-ed essay in The NY Times Thursday. Syracuse is one of hundreds of cities around the state and tens of thousands around the country that are struggling with the potentially disastrous effects of out-of-control pension costs. Where this crisis is heading can be seen in California, where San Bernadino has become the third California city to declare bankruptcy. These cities are dying. They are caught in a bind. Either they decide not to pay their promised debts to pensioners; or, in honoring those debts, they so fully raise taxes and cut services as to ruin the lives of their citizens.

In Syracuse, Mayor Miner understands well the depth of the problem. First, public employee labor costs are too high not because salaries are high, but because pension costs and medical benefits are rising without limit. Second, revenues are being slashed, both from the recession and from cutbacks from the state and federal governments. Finally, the middle and upper class flight from cities to suburbs have left the tax base in cities low at the moment when poorer city dwellers are disproportionately in need of public services.

The result is that cities are faced with a stark choice: Do they pay older citizens what has been promised to them? Or do they cut those promised pensions in order to provide services for the young? This is a generational conflict that is playing out across the country.

Miner is worried that the response by NY State is making the problem worse. In short, Governor Cuomo and the legislature have decided to let cities that cannot afford to fund their burgeoning pension obligations borrow money to pay those pensions. The kicker is, that the cities are being told to borrow money from the very same pension plan to which they owe money.

If this sounds suspicious, it is. As Danny Hakim—one of the best financial reporters around—wrote almost exactly one year ago in the NY Times, this is a desperate and dangerous move:

When New York State officials agreed to allow local governments to use an unusual borrowing plan to put off a portion of their pension obligations, fiscal watchdogs scoffed at the arrangement, calling it irresponsible and unwise.

And now, their fears are being realized: cities throughout the state, wealthy towns such as Southampton and East Hampton, counties like Nassau and Suffolk, and other public employers like the Westchester Medical Center and the New York Public Library are all managing their rising pension bills by borrowing from the very same $140 billion pension fund to which they owe money.

The state’s borrowing plan allows public employers to reduce their pension contributions in the short term in exchange for higher payments over the long term. Public pension funds around the country assume a certain rate of return every year and, despite the market gains over the last few years, are still straining to make up for steep investment losses incurred in the 2008 financial crisis, requiring governments to contribute more to keep pension systems afloat.

Supporters argue that the borrowing plan makes it possible for governments in New York to “smooth” their annual pension contributions to get through this prolonged period of market volatility.

Critics say it is a budgetary sleight-of-hand that simply kicks pension costs down the road.

Borrowing from the state pension plan to pay municipal pension costs is simply failing to pay the pensions this year and thus having to pay more next year.

Hakim, as good as he is, allows Thomas P. DiNapoli—the state’s comptroller—to get away with calling the scheme “amortization.”

The state’s comptroller, Thomas P. DiNapoli, said in a statement, “While the state’s pension fund is one of the strongest performers in the country, costs have increased due to the Wall Street meltdown.” He added that “amortizing pension costs is an option for some local governments to manage cash flow and to budget for long-term pension costs in good and bad times.”

But how is this amortization? The assumption or hope is that the market will rise, the pension fund will go up, and then the municipalities will owe less.  That is hardly amortization. No, it is desperate speculation with public monies.

The crisis in our cities afflicts the whole country, according to a study by the Pew Center on the States.

Cities employing nearly half of U.S. municipal workers saw their pension and retiree health-care funding levels fall from 79% in fiscal year 2007 to 74% in fiscal year 2009, using the latest available data, according to the Pew Center on the States. Pension systems are considered healthy if they are 80% funded.

The reason to pay attention to the problems in cities is that cities have even less ability to solve their pension shortfalls than states. The smaller the population, the more a city would have to tax each citizen in order to help pay for the pensions of its retired public workers. The result is that either cities get bailed out by states and lose their independence (as is happening in Michigan) or the cities file for bankruptcy (as is happening in California).

Mayor Miner, a Democrat, takes a huge risk in standing up to the Governor and the legislature. She is rightly insisting that they stop hiding from our national addiction to the crack-cocaine of unaffordable guaranteed lifetime pensions. Piling unpayable debts upon our cities will, in the end, bankrupt these cities. And it will continue the flight to the suburbs and the hollowing out of the urban core of America. Above all, it will sacrifice our future in order to allow the baby boomers to retire in luxury. Let’s hope Miner’s call doesn’t go unheeded.

-RB

5Dec/120

The “E” Word

The New York Times tells the story of Benjamin Goering. Goering is 22. Until recently he studied computer science and philosophy at the University of Kansas. He felt “frustrated in crowded lecture halls where the professors did not even know his name.” So Goering dropped out of college and went to San Francisco, where he got a job as a software engineer.

I applaud Goering for making a risky decision. College was not for him. This does not mean he wasn’t smart or couldn’t cut it. He clearly has talent and it was being wasted in courses he was not interested in that were costing him and his family many tens of thousands of dollars every year. In leaving, Goering made the right decision for him. Indeed, many more college students should make the same decision he did. There are huge numbers of talented people who are simply not intellectuals and don’t enjoy or get much out of college. This is not destiny. A great or good teacher might perk them up. But largely it is a waste of their time and money for them to struggle through (or sleep through) classes that bore them. If anything, the forced march through Shakespeare and Plato make these students less engaged, cynical, and self-centered as they turn from common sense to the internal pursuit of self interest in partying and life in private.

The story should raise the big question that everyone tiptoes around in this current debate about college: Who should go to college?

The obvious answer is those who want to and those who care about ideas. Those who see that in thinking and reading and talking about justice, democracy, the scientific method, and perspective, we are talking about what it means to live in a large, democratic, bureaucratic country at a time of transition from an industrial to a information-age economy. College, in other words, is for those people who want to think about their world. It is for people who are willing and eager to turn to the great thinkers who came before them and, also, the innovative scientists and artists who have revealed hidden secrets about the natural and the human worlds. It is, in other words, for intellectuals. And this of course raises the “E” question: the question of elitism.

It is folly to think that everyone is or should be interested in such an endeavor. In no society in history have intellectuals been anything but a small minority of the population. This is not a question of privilege. There is no reason to think that those who love ideas are better or more qualified than those who work the earth, build machines, or engineer websites. It may very well be otherwise.

Hannah Arendt was clear that intellectuals had no privileged position in politics. On the contrary, she worried that the rise of intellectuals in politics was specifically dangerous. Intellectuals, insofar as they could get lost in and captivated by ideas, are prone to lose sight of reality in the pursuit of grand schemes. And intellectuals, captivated by the power of reason, are susceptible to rationalizations that excuse wrongs like torture or suicide bombing as means necessary for greater goods. The increasing dominance of intellectuals in politics, Arendt argued, is one of the great dangers facing modern society. She thus welcomed the grand tradition of the American yeoman farmer and affirmed that there is no need to go to college to be an engaged citizen or a profound thinker. The last of our Presidents who did not attend college was Abraham Lincoln. He did just fine. It is simply ridiculous to argue that college is a necessary credential for statesmanship.

While intellectuals have no special claim to leadership or prominence, they are nevertheless important. Intellectuals—those who think— are those people in society who stand apart from the mainstream pressures of economy and influence and outside the political movements of advocacy and propaganda. In the Arendtian tradition, intellectuals are or can be conscious pariahs, those who look at their societies from the outside and thus gain a perspective from distance that allows them to understand and comprehend the society in ways that people deeply embedded within it cannot. Those who stand apart from society and think are important, first because they preserve and deepen the stories and tales we as a society tell about ourselves. In writing poetry, making art, building monuments, writing books, and giving speeches, intellectuals help lend meaning and gravity to the common sense we have of ourselves as a people.

One problem we have in the current debate is that College has morphed into an institution designed to do many (too many) things. On the one hand, college has historically been the place for the education of and formation of intellectuals. But for many decades if not many centuries, that focus has shifted. Today College is still a place for the life of the mind. But it is also a ticket into the middle or upper-middles classes and it is equally a job-training and job-certification program. Of course, it is also a consumer good that brands young people with a certain mystique and identity. For many localities colleges are, themselves, job creation machines, bringing with them all sorts of new businesses and throwing off patents and graduating students that reinvigorate local communities. The university is now a multiversity, to invoke Clark Kerr’s famous term. When we talk about college today, the debate is complicated by these multiple roles.

It is difficult to raise such issues today because they smack of elitism. Since college-educated people think they are superior to those without a fancy diploma, their egalitarianism then insists that everyone should have the same experience. We are not supposed to entertain the idea that some people may not want to go to college. Instead, we are told that if they had a better education, if they knew better, if they just were taught to understand, they would all want to sit in classrooms and read great books or do exciting experiments.

We are stuck today with what Hannah Arendt called, in a related context, the “democratic mentality of an egalitarian society that tends to deny the obvious inability and conspicuous lack of interest of large parts of the population in political matters as such.” In politics, Arendt argued that what was needed were public spaces from which a self-chose “élite could be selected, or rather, where it could select itself.” Similarly, in education today, colleges should be the spaces where those who want to select themselves as an educated élite might lose themselves in books and experiments and amongst paintings and symphonies. There is simply no reason to assume that most people in society need to or should be interested in such an endeavor.

One reason the question of elitism is so present in debates about college is the disgusting and degenerate state of American public high schools. If high schools provided a serious and meaningful civic education, if they taught not simply reading and writing and arithmetic, but history and art—and taught these well—we would not need to send students to remedial education in college where they could be taught these subjects a second time. While many academics wring their hands about making college available to all, they might do much better if they focused on high schools and grammar schools around the country. If we were to redistribute the billions of dollars we spend on remedial college education to serious reform efforts in high schools, that money would be very well spent.

To raise the question of elitism means neither that college should be open only to the rich and connected (on the contrary, it should be open to all who want it), nor that the educated elite is to be segregated from society and kept apart in an ivory tower. When one reads Shakespeare, studies DNA, or dances with Bill T. Jones, one is not simply learning for learning's sake. Few understood this better than John Finley, Greek Professor at Harvard, who wrote General Education in a Free Society in 1945. Finley had this to say about the purposes of a college education:

The heart of the problem of a general education is the continuance of the liberal and humane tradition. Neither the mere acquisition of information nor the development of special skills and talents can give the broad basis of understanding which is essential if our civilization is to be preserved…. Unless the educational process includes at each level of maturity some continuing contact with those fields in which value judgments are of prime importance, it must fall short of the ideal.

What college should offer—as should all education at every level except for the most specialized graduate schools—is the experience of thinking and coming to engage with the world in which one lives. College is, at its best, an eye opening experience, an opportunity for young people to learn the foundational texts and also be exposed to new cultures, new ideas, and new ways of thinking. The ideas of justice, truth, and beauty one learns are not valuable in themselves; they are meaningful only insofar as they impact and inform our daily lives. To read Plato’s Republic is to ask: what are the value of the ideas of good and the just? It is also to meditate on the role of music and art in society. And at the same time, it is to familiarize oneself with characters like Socrates and Plato who, in the world we share, epitomize the qualities of morality, heroism, and the pursuit of the truth wherever it might lead. This can also be done in high schools. And it should be.

It is simply wrong to think such inquiries are unworldly or overly intellectual. Good teachers teach great texts not simply because the books are old, but because they are meaningful. And young students return to these books generation after generation because they find in them stories, examples, and ideas that inspire them to live their lives better and more fully.

As Leon Botstein, President of Bard College where the Hannah Arendt Center is located, writes in his book Jefferson’s Children,

No matter how rigorous the curriculum, no matter how stringent the requirements, if what goes on in the classroom does not leave its mark in the way young adults voluntarily act in private and in public while they are in college, much less in the years after, then the college is not doing what it is supposed to do.

The basic question being asked today is: Is college worthwhile? It is a good question.  Too many colleges have lost their way. They no longer even understand what they are here to offer. Faculty frequently put research above teaching. Administration is the fastest growing segment of university education, which is evidence if anything is that universities simply do not know what their mission is anymore. It is no wonder, then, that many of our brightest young people will begin to shy away from the thoughtless expectation that one must attend college.

All around us, people are opting out of college. The mania for online education is at least in part fueled by the hunger for knowledge from students and others who do not want or need to attend college. The Times highlights Uncollege and other organizations that advocate “hacking” your education. Recall that Lincoln was better schooled in the classics of poetry and politics than most every college educated President who followed him. At a time when many colleges are so confused and trying to do so many things, they often do none well. It may be the case today that we need to evolve new networks and new organizations where intellectualism can flourish. And it may be small liberal arts colleges that are more flexible and more able to make that transition than large, bureaucratic research institutions.

The real question this debate needs to raise, but avoids, is: Who should get a college education? The answer, “not everyone,” is one few want to hear. And yet it might be the beginning of a real conversation about what a college education is for and why we are today so often failing to provide it to our students.

-RB

 

24May/120

The Technocrats to the Rescue, Part 4

How many times can we watch the latest European movie? Once again Europe is buckling under the weight of debt and austerity. And once again, Greece, the birthplace of democracy, has led the democratic leaders of Europe to shun their responsibilities and beg for technocratic saviors.

As the Financial Times reports, European leaders are as bankrupt as their economies and they are seeking to be bailed out politically and economically by Mario Draghi, the unelected President of the European Central Bank.

To the frustration of Mario Draghi, its president, the European Central Bank is once again being eyed as a possible saviour of Europe’s monetary union.  Since he became president last November, Mr Draghi has urged bolder action by politicians to strengthen public finances and build effective “firewalls” against spreading crises. Earlier this month he scolded governments for creating a European Financial Stability Facility that “could hardly be made to work”. He saw the unelected ECB’s role as strictly limited.  Instead, eurozone politicians, led by François Hollande, France’s new president, have sought to turn the tables, demanding action from Frankfurt.

As one person the FT quotes says, “There is a constant frustration at the ECB with politicians.” Sounds familiar. It is not only in Europe that politicians have refused to lead and take responsibility for solving our growing and increasingly insoluble problems.

It is easy to blame politicians. But keep in mind, they are elected. And that may be the problem. For it is we, those self-interested and apparently spoiled folks who elect them, who refuse to consider tax raises or austerity, or both, which would actually be necessary to bring our financial houses into order. This is especially true in Greece where voters have repeatedly refused to honestly and pragmatically accept the reforms needed to right the ship of the Greek state.

Which is why Amartya Sen's Op-Ed in the NY Times Tuesday sounds so shrill. Sen rightly sees that democracy in Europe is being replaced by technocratic fiat, and this understandably bothers him. He writes:

Perhaps the most troubling aspect of Europe’s current malaise is the replacement of democratic commitments by financial dictates — from leaders of the European Union and the European Central Bank, and indirectly from credit-rating agencies, whose judgments have been notoriously unsound.

But Sen's response is out of touch. If the Greeks would just be given an opportunity to publicly discuss the matter and engage in a rational public discourse, they would be able to take appropriate steps. In his own words:

Participatory public discussion — the “government by discussion” expounded by democratic theorists like John Stuart Mill and Walter Bagehot — could have identified appropriate reforms over a reasonable span of time, without threatening the foundations of Europe’s system of social justice. In contrast, drastic cuts in public services with very little general discussion of their necessity, efficacy or balance have been revolting to a large section of the European population and have played into the hands of extremists on both ends of the political spectrum.

This is of course a good point. It would be best if the Greeks were to engage in. It would be best if the Greeks were to engage in participatory public discussion leading toward appropriate reforms. But this doesn't seem to be happening, resulting in the draconian cuts, which, yes, are revolting to a large section of the European population. Unmentioned is the fact that other Europeans are revolted by the fact that Greeks for years have worked pitifully few hours in comparison to other Europeans, have paid significantly lower taxes, and supported a political patronage system that creates an untouchable class of political bureaucrats who live well for doing very little. The New York Times reports, today, on the class of Greek plutocrats who for years have avoided taxes and now, when times are tough, are abandoning philanthropies in Greece and secreting their money to tax havens. If the Greeks won't help Greece, why should the Germans?

The point is not simply to punish the Greeks for their past transgressions (although that too is not out of place), but that Germans also no longer trust the Greeks and refuse to go on paying for their profligate ways. And since the Greeks have not and seemingly will not democratically make the changes to their lifestyles that are required by their economic position, they are putting their hopes in undemocratically elected technocrats at the European Central Bank to save them.

The Greeks are not alone in seeking to trade democracy for technocracy. As I have written here and here and here over the past months, the trend toward technocratic governance is growing as people around the world lose faith not simply in democratic leaders, but in democracy itself. Around the world, democracies are electing politicians who are handing off power to non-democratically elected technocrats. This is happening in Europe and also here in the U.S.  I am sure some of "the people" disagree with this. But more and more seem fine with it.

It is easy to blame the politicians, just as it has been easy for years to blame the press. But as Edward Luce writes in his recent book Time to Start Thinking, the real problem with democracy is us. He focuses on America:

Americans reflexively single out Washington, D.C., as the cause of their ills. As this book will explore, however, Washington's habits are rooted in American society. Blaming politicians has turned into a lazy perennial of modern American life.

The problem as Luce sees it is that left and right are caught in a thoughtless nostalgia for a golden age that no longer exists. The left, he writes,

yearns for the golden age of the 1950s and '60s when the middle class was swelling and the federal government sent people to the moon. Breadwinners worked eight hours a day in the factory and could bank on "Cadillac" health care coverage, a solid urban or suburban lifestyle, and five weeks' vacation a year.

On the other side, the right is nostalgic for

the godly virtues of the Founding Fathers from whom their country has gravely strayed. People stood on their own two feet and upheld core American values. It was a mostly small town place of strong families, where people respected the military and were involved in their community churches.

Luce understands not only that both these visions are nostalgic, but that they are preventing us from thinking honestly and seriously about our present. The problem is that thinking honestly today requires accepting sacrifice.

The wealthy and the upper middle classes (not just the 1% but the top 20%) will have to pay more in taxes. The poor and the middle classes will have to receive smaller pensions, work longer, and get fewer governmental services in return. Maybe citizens will have to do public service. Standards of living across the board will be hit. This is the payback for decades of debt-infused living that we all need to confront. Luce is right, it is time to start thinking.

-RB

23Apr/120

Who Killed the Middle Class?

John Cassidy over at the New Yorker has an excellent article that clarifies some of the basics about the debate over inequality. In Inequality 101, Cassidy reproduces a chart "Who Killed the Middle Class?" an article he published in 1995. The chart is fairly clear. It shows how from 1947-1973, the wealthy, the middle class, and the poor in the United States all saw their incomes rise at about the same levels. From 1973-1993, however, this equality disappeared. While the poor saw incomes decrease, and the middle-class stayed the same, the wealthy saw incomes rise, although not as much as earlier.

This chart is similar to the one I described in my Friday Post, The Way Forward.  As I wrote there:

We see that until 1982, the wages of workers and the income of non-wage earners (thus the higher-paid supervisory workers) was largely equal. Beginning in 1982, however, the earnings of non-wage earners began to rise significantly faster than the income of wage workers. This is at least one original source of the increasing inequality of the American populous and it is exacerbated by an increasingly less-progressive tax code and also by the increasingly profitability of capital investments in the global economy.

Since the 1990s, the rate of inequality in our society has skyrocketed, especially for the very highest earners in the 1% and even the .1%. Cassidy provides this chart as well to make this clear.

I will be speaking with John Cassidy on May 10 in New York City. The event is part of the Hannah Arendt Center NYC Lecture Series. You can learn more about the event and RSVP here, as seating is limited.

-RB

10Feb/124

America’s Great Cultural Divide

You know that the problem of inequality has gone mainstream when even Charles Murray has written a book about it. Not only the Occupy movement and the Tea Party, but also Murray—the conservative force between The Bell Curve and other controversial contributions to the culture wars—is now loudly screaming about the dangers of inequality in America. But with Murray, there is a difference.

If the Occupy Wall Street movement focuses on the vast income inequality that divides the country into haves, have nots, and have-it-alls, and if the Tea Party divides the country into the self-sufficient and the governmental dependents, Murray points to yet another divide: the Cultural Divide.

Murray begins with a point that I take to be essential:

Life sequestered from anybody not like yourself tends to be self-limiting.

Americans (Murray means by this term always white Americans) are living increasingly amongst those like themselves. Murray means by this that American elites (both Republican and Democrat) have separated themselves from the rest of the country. Specifically, he is worried that wealthy white Americans live apart from and are ignorant of poor white Americans. And vice versa.

In his new book, Coming Apart: The State of White America, 1960–2010, Murray argues that an enormous cultural divide has separated white Americans into classes that don't mix. While many liberals might welcome Murray's voice pointing to the rise of inequality in America, his analysis and prescriptions are radically different from those usually suggested by the left. For one thing, Murray focuses on white Americans between 30-49. Part of this focus is to support his argument that "Cultural inequality is not grounded in race or ethnicity." This itself will strike many on the left as an evasion, which it is. And yet, Murray's focus on the increasingly vast class divisions amongst white Americans points to the profound depths of the rising class and income inequality that pervades and divides American society.

Murray does not only point out the vast class divide in the United States. He points to solutions as well. His book is a call to action, but one that has little if nothing to say about the need for government to help the poor. No, for Murray, what both the lower and upper classes need are better values. The lower classes must learn from the upper classes the values of hard work, marriage, and family. The upper classes must learn from the lower classes the value of community, patriotism, and religion.

Whatever one thinks of Murray's analysis, he is right that we all need to do more to read and think and interact with others with whom we don't always agree. Those interested in and concerned by inequality in American can learn from Murray's book, and they should, even as they should wonder at his single-minded concern with white people. Problematic books can teach us much. Thus, for this week's weekend read, I suggest you take a look at Murray's latest essay on "The New American Divide."

-RB