Involuntary risk
Morality in a recessionary world
It used to be that the American retirement system relied on a so-called three-legged stool of assets: Social Security, a pension, and private savings. Changes in our economy over the last 50 or so years have cut away at two of the legs.
Our personal savings rate dropped to the low single digits for much of the 00s and most Americans don’t have access to a good pension (much less a career-track job). That’s why so many of those forty and older are suddenly scared to death about their retirement. With the precipitous decline in markets, few have truly adequate savings to bridge the gap between their 401k (if they have one) and Social Security.
Corporations have struggled, too. Those that invested their pension funds bullishly now have billions in liabilities they can hardly afford to cover. That’s why so many are reinvesting more conservatively. State and local governments, however, are doing just the opposite:
But states and other bodies of government are seeking higher returns for their pension funds, to make up for ground lost in the last couple of years and to pay all the benefits promised to present and future retirees. Higher returns come with more risk.
“In effect, they’re going to Las Vegas,” said Frederick E. Rowe, a Dallas investor and the former chairman of the Texas Pension Review Board, which oversees public plans in that state. “Double up to catch up.”
State and local governments employ about 14.8 million people. These employees tend to belong to strong unions that often negotiate for health and retirement benefits comparatively better to those found in the private sector (when they are offered at all).
But a good pension contribution plan isn’t much help when the bottom falls out. Because employees can’t control the investment portfolio, state and local workers are forced to take on an inordinate amount of risk–one that we now recognize can be crippling.
What’s the solution? Giving employees some measure of control over the pension mix seems like a coordination disaster, and there is no guarantee that a majority vote would prevail in favor of a more conservative mix.
That said, giving workers a choice about what risks they incur lessens the apparent moral harm when stock market swoons wipe them out. But many have argued that the current recession shows exactly why we need to give individuals less, not more, choice over how they save for retirement. It’s too easy to underestimate far-off risks, even when so much is at stake.
A more sensible approach would be to enact more stringent regulations about retirement investment–both for public and private funds.
It seems like we’re relearning the lessons that led to the creation of Social Security during the New Deal. It’s not good to be poor when you’re old, and it’s worth forcing people to insulate themselves from that risk. Liberty reaches its its limits when the capacity for informed choice is similarly limited.
-Sam
Reciprocal obligations in Europe
Some in Europe have long criticized the United States for failing to have a sense of communal obligation. Personal responsibility has been an important slogan here, rather than broad-based social welfare programs. But the limits of this European sensibility are now being tested by Greece’s economic problems.
How will it all turn out?
-Sam
Wrangling over ethics
What should come of Charles Rangel?
Charles Rangel, senior Member of the House of Representatives from New York and chair of the Ways and Means Committee (which writes tax laws), has agreed to relinquish his committee gavel after a months-long imbroglio involving allegations of privately-funded jaunts and failure to report income derived from real estate holdings.
What may seem less odd to congressional pundits and more odd to an ethicist is why so many are calling for him to give up his chairmanship as opposed to resigning from Congress altogether. Is there a method to the madness, or is everything political posturing? Read more
A Faustian bargain
Haiti, Chile and the Limits of Giving
In the wake of devastation caused by last month’s horrific earthquake in Haiti, Americans provided a striking level of support. The Red Cross raised more than $40 million through text message donations alone. The relief effort seemed to emphasize Peter Singer’s famous argument that distance should have little impact on moral obligation. We didn’t owe Haitians any less just because they were far away. Despite the tough economy, Americans everywhere gave to the cause and most supported the U.S. government’s extensive work to help rebuild the nation.
Now, just a matter of weeks later, an 8.8 magnitude quake has rocked the South American nation of Chile. The death toll is over 700, millions are believed to be displaced, and one estimate puts damage at between 10 and 20 percent of the nation’s GDP.
With so much work left to be done in Haiti, what do Americans (and people around the world) now owe Chileans? Are those who gave to Haiti “off the hook” with regard to Chile, or must they again dip into their pockets? Read more
Abusing state power
Rumors are beginning to spread the New York State Goveror David Paterson will likely not seek a second term after it emerged that state troopers may have directly intervened in a case of alleged domestic violence perpetrated by one of his top aides:
The resignation yesterday of Denise E. O’Donnell, Paterson’s deputy secretary for public safety, was the biggest jolt to the governor’s campaign.
“The fact that the governor and members of the State Police have acknowledged direct contact with a woman who had filed for an order of protection against a senior member of the Governor’s staff is a very serious matter,” she wrote in a statement. “These actions are unacceptable regardless of their intent.”
For those who wonder what abuse of state power really means, this is it. Using the point of the spear to interfere with the legal process, especially to protect a personal associate, is the definition of illegitimately wielding political power that derives from the people. If these allegations are true, Paterson should rightfully be in a heap of trouble.
-Sam
If you win, a gold medal
If you lose, your nation crumbles
Tonight, the hopes of a nation rest on the shoulders of Yu-na Kim, South Korean figure skating prodigy:
Figure skating is as much art as sport. Kim is a cultural icon as well as an athlete. Thus, Song said, the competition between Kim and her Japanese rivals will also be viewed as a referendum “on which country’s culture is better regarded by the rest of the world.”
Given that Kim is a national hero in South Korea, “her loss or her winning will be perceived as a national loss or a national winning,” said Kyung-ae Park, a political scientist who holds the Korea Foundation Chair at the University of British Columbia in Vancouver.
“If she wins the gold medal,” Park said, “I think it will be a great boost for national pride for Koreans. In a way, it will work as compensation for past humiliations.”
The bad blood between South Korea and Japan runs old an deep. But this is a lot of pressure to put on a single athlete. Part of the glory of the Olympics, World Cup and other international sporting events is that they capture a nationalist energy that can be exhilarating. The downside comes when those hopes fall on one teenager (or in the case of Egypt, place a nation into collective depression).
The costs seem too immense–for the athletes who compete and for the millions around the world who invest their passions. Is it time to reign in the stakes?
-Sam
Should terror suspects be tried in court?
A once staunch advocate of putting terror suspects in the courtroom changes his tune:
In the debate over how and where to prosecute Mr. Mohammed and other Sept. 11 cases, few critics of the Obama administration have been more fervent in their opposition than Mr. McCarthy, a 50-year-old lawyer from the Bronx who had built a reputation as one of the country’s formidable terrorism prosecutors.
Now he has a different reputation: harsh critic of the system in which he had his greatest legal triumph.
He has relentlessly attacked the administration for supporting civilian justice for terrorists. He has criticized the military commissions system and called for the creation of a new national security court. After the arrest of the suspect in the Christmas Day bomb plot, he wrote, “Will Americans finally grasp how insane it is to regard counterterrorism as a law-enforcement project rather than a matter of national security?”
-Sam
Americans don’t like Citizens United ruling
Recent poll shows 65 percent “strongly” opposed to Supreme Court ruling.
-Sam
The fragile limits of regional integration
Many have hailed the European Union as the new model for regional governance. But the sense of consent, common cause, and mutual obligation that holds a people together may be more important than many realize. Enter the curious case of Greece:
Here in Germany, opinion surveys show that two-thirds of the people oppose financial assistance for Greece. More ominously, a survey released Sunday by the newspaper Bild showed that a slight majority of Germans, 53 percent, said they favored expelling Greece from the euro group entirely if its mountain of debt threatened the stability of the currency union.
Some loyalties have not yet died, nor have others yet arisen.
-Sam
Should luge be cancelled?
Accounting for risk in sports.
The tragic death of young Georgian luger Nodar Kumaritashvili during a practice on the eve of the 2010 Olympics has not only cast a dark pall over this year’s Winter Olympiad, it has also raised questions about a notoriously dangerous sport. While debates will rage on over whether host-nation Canada afforded foreign lugers ample practice time, or whether exposed steel beams ought to have been covered, the deeper question is how and to what extent we allow athletes to risk their bodies.
-
Follow us on Twitter
