Which is Riskier?

For the past 20 years, traditional pension plans, which paid benefits based on an employee’s years of service and pay, have been gradually replaced by individual accounts loaded with stocks and more exotic holdings, which provide benefits based on fluctuations in the financial markets. Today, only 18 percent of the work force, at most, including government workers and most private unionized workers, still have old-fashioned “defined benefit” plans.

This transformation has largely been the result of government policies that have encouraged, through tax breaks, the creation of 401(k)-type plans and promoted an approach to investing that favors risky stocks and bonds held in high-fee commercial accounts.

So what happened to all of those defined pension accounts?  They collapsed, the companies that provided them went out of business.  It would seem to me that tying your retirement to the long term success of a single company is far riskier than the success of the market as a whole.

Technorati Tags: economics,politics

In the History of Bad Ideas

This one has to be up there:

Paulson was in talks with Democrats about their proposal that the government be able to purchase equity in faltering companies as part of the plan, so taxpayers could benefit from future profits.

Giving government further incentive to manipulate, meld, twist and generally distort the market is a bad, bad, bad idea.  Imagine that a company comes along that is better for consumers in every way to one of these “bailed out” companies – Company A.  It will start making more money than Company A, Company A’s bottom line starts to suffer.

Does Congress just sit idly by while its revenue stream is effected?  Will Congress just let Company A slowly perish?  I’m agnostic as to whether saving Company A is the right thing to do.  It is possible that Company A is too important right now to let it just collapse, but it doesn’t always have to be that way.  What sort of distortions will occur if Congress is a part owner in Company A?  Does Congress get to pick the CEO?  Or Board of Directors?  Will there be a quid pro quo?  “We’ll support you as Chairman if you stump for Obama in ‘12”

I can think of nothing more unappealing than giving Congress a vested interest in the running of any specific company – business is too political as it is.

Technorati Tags: economics,politics

On to the Next Class

I know that many of you have been sitting on the edge of your seat wondering how I fared in my econ class.  Well worry no more, I got an A.

Relieved, I know.

I start my next class today - in fact I'm sitting in the class room as I write this waiting for the prof to arrive.  The class is American Presidents.  As part of the curriculum we are required to read two biographies of two different presidents - one from the 20th century and one from prior to the 20th century.

The book I am reading now is Thomas Jefferson by R.B. Bernstein.  I haven't gotten very far into it, but I've already lost a lot of respect for the man though.  He appears to be an opportunist and a hypocrite - but maybe that is OK.

One thing that strikes me though is Madison's reluctance to add a bill of rights calling them merely a "parchment barrier" to government intrusion into citizen's rights.

Turns out he was right - though I can't imagine that not having a Bill of Rights would have improved matters any.

Technorati Tags: politics,Thomas Jefferson,constitution,school

Government Efficiency

A friend of mine applied for a job with the FAA two years ago and put me down as a reference.

I recieved a questionnaire for his security clearance... yesterday.

Why is it that we want these idiots running healthcare?