Daylight on SS Retirement

A belated Merry Christmas to all.

I note a couple of articles relevant to the debate over Social Security. Sen. Sessions of Alabama puts my back up. But he has an op-ed piece in the Post
suggesting a bipartisan approach to SS reform. What's new, on a fast reading at least, is the acceptance of the pattern of the Thrift Savings Plan (the Federal govt's 401K equivalent) to give people individual accounts without going through Wall Street. In the past conservatives have used the bogeyman of the government controlling the economy through vast stockholdings to oppose this idea. Apparently Sessions, perhaps honoring the populism sometimes found in the South, is ready to abandon Wall Street. (Actually, the TSP system gets competitive bids from a financial firm to run its 6 funds; I think Barclays had the account for a while.)

The reason I'm encouraged by this concession is shown in a NYTimes article on the Chilean system. Apparently some in Chile have found their privatized system wanting, and propose some reforms. I was particularly struck by this paragraph:

In hopes of stimulating competition, the reform plan would let banks and insurance companies form pension funds. The six existing funds, down from a peak of more than 20, object. They appear especially fearful that the state bank will jump into a business that has yielded them a return on assets of as much as 50 percent annually.

With Wall Street getting record bonuses this year (an average of $600K per employee in one firm) I'm in no mood to give them any more business.

Takes All Kinds

Over at Marginal Revolution Alex Tabarrok posted on gift giving. Economists have problems with the concept--is there utility in exchanging gifts, etc. etc.. Anyway, I commented. Going back to read comments, I find that Virginia Postrel (who blogs and who has donated a kidney to an acquaintance) finds that O'Henry's "Gift of the Magi" (the wife cuts her hair to give husband a watch chain, husband sells his watch to give wife something--headband?--for her hair) a cruel story.

Big Farms and Foggy Language

Gaul, Cohen and Morgan have another article in their series in the Post on farm programs. This one focuses on the disjunct between our mental picture of farmers and the reality:

"Today, most of the nation's food is produced by modern family farms that are large operations using state-of-the-art computers, marketing consultants and technologies that cut labor, time and costs. The owners are frequently college graduates who are as comfortable with a spreadsheet as with a tractor. They cover more acres and produce more crops with fewer workers than ever before.

The very policies touted by Congress as a way to save small family farms are instead helping to accelerate their demise, economists, analysts and farmers say. That's because owners of large farms receive the largest share of government subsidies. They often use the money to acquire more land, pushing aside small and medium-size farms as well as young farmers starting out."

It's fair, although using John Phipps, who has an interesting blog, as an example might be a stretch, but he gives good quotes. There's the usual blurry (from a biased viewpoint) language. Discussion of "corporate" farming. I think it's true that most "corporations" involved in farming are composed mainly of farm families (and their city relatives). But I doubt that's the image evoked in people's minds. There's also mention of "income", but no description to say whether this was the gross income of the farming operation or the net income the farmer got, two very different things, particularly for someone like a dairy farmer.

And as my ag teacher pointed out many years ago (my high school actually was phasing out its ag instruction--the teacher took over driver's ed, which was inappropriate inasmuch as he was the most nervous man in the school (may have been after effects of war service)), income can be ambiguous for other reasons. Dairy farmers (IMHO the only "true" farmers) in particular have lots of capital invested in land and equipment and animals. When you're accounting for the invested capital on your books, you should really charge the operation for the interest the capital could be earning. In other words, if a man has 600 acres of land worth $4,000 an acre, he has $2.4 mill capital. If he sold, and bought bonds he could earn a comfortable 5 percent on his money, or $120,000 a year just clipping coupons (except that they've done away with coupons on bonds and only us old fogies understand it). But if Gaul, Cohen, and Morgan say the guy has $150,000 income, they don't point out that he's only earning $10 an hour for his labor (using a 3,000 hour year).

Why Do Farmers Like To Swim?

The title's a smartass way of leading into a subject raised by the recent discussion of the Post's article on dairy. What's the subject--why dairy farmers and others like pools or cartels.

Imagine you're a dairy farmer. Twice a day [warning--this is based on information 50 years old] you milk your cows and put the milk in the cooled storage tank. You know the milk truck has to come to empty the tank, because the cows have to be milked or they'll go dry and there's no way to use the milk on your farm. You can't store it. You have to sell it or dump it.

Who do you sell it to--your local processor. Maybe you have a choice; maybe there are two processors within driving range. But even if you have a choice, you can't auction your milk off daily or weekly to the highest bidder. The processor will take all the milk you produce, knowing that cows produce soon more after calving than 6 months after, that quantity can vary by time of year (though I suspect less so now than 50 years ago when most cows still calved in the spring). So you choose your processor once and change very seldom.

The bottom line is that you've no leverage, no market power. Your processor doesn't have much more. If there's more milk than can be sold as fluid, it can be processed into butter, cheese, or powdered milk. That permits a temporary surplus to be stored.

So what do you do if you've no market power--you combine. It's a time-honored American tradition, whether it's a farmers cooperative, a labor union, an oil trust, or a steel cartel. You get yourselves together to pursue your common self-interest. That's why dairy farmers swim.

Surge or Not?

The Washington Post reports that some in the White House want to "surge" the troops; the military apparently is reluctant. If I understand, "surging" essentially means robbing Peter to pay Paul. You keep some troops on longer, you accelerate the deployment of other troops, and maybe you change some rules so you can use the Reserve/National Guard more often. Bottom line is you use assets today that you won't have tomorrow. So that gives some political logic to the WH position. Do the "surge". If it works, great. If not, even the right wing will say we've done all we could. That's cold logic for those who might be killed in the surge, but cold logic is the logic of statecraft.

NY Times and Organic Agriculture

Two articles in the Times today seem to me to be relevant to the organic agriculture debate: one describes the effects of iodine deficiency; the other describes how vodka sellers are getting $60 per bottle by packaging it in bottles that look like perfume. How do they relate:

• there's a fervency of belief in organic agriculture that can lead to mythology. The iodine article reminds us that just because we eat foods from nature doesn't mean that they're sufficient for our nutrition. We need to add iodine to our diet in most parts of the world because the food doesn't contain enough for mental development.
• some of the marketing of organic food (full disclosure, I own stock in Whole Foods) is the developing of tastes that have nothing to do with good nutrition or even with good taste. Not that there's anything wrong with that. Vodka is just another example of it. Farmers in developed countries should push this all they can, as the vineyards have. Most of us could care less about wine tasting, but we spend more money for the higher priced bottle for special occasions anyway.
  

Lack of Bureaucratic Imagination?

The Post today reported that a judge wants FEMA to give explanations of rejections:

"Leon [the judge] ruled that FEMA mishandled the transition from a short-term housing program to a longer-term program this spring and summer. Instead of explaining why funding was being cut, FEMA provided only computer-generated and sometimes conflicting program codes, Leon said.

The judge ordered FEMA to explain those decisions so thousands of evacuees can understand the reasoning and decide whether to appeal.

"I'm not looking for a doctoral dissertation," Leon said. "I'm looking for a couple of paragraphs in plain English."

Sitcov [FEMA's attorney] said FEMA's eight-year-old computer system is set up only to produce program codes. "

I'm jumping to conclusions, but it sounds fishy to me. At worst, any word processing package can generate canned letters--you simply write a paragraph(s) for each code, then enter name and address and codes and you get the letter. Even better, possibly the program can create a file of this information. At any rate, it sounds like FEMA is more interested in defending their turf against judicial intrusion than in working out a solution to the problem.

(In the interests of fair play, I should note that the software program was designed in the Clinton administration. Even 8 years ago a good system designer should have provided for letters of explanation from the system.)

How It All Plays at the Local Level

I've blogged on the "erroneous payments" issue before. Two pieces from local papers show how the effort to fix the defects works out at the local level.

From the Hillsboro Free Press.

From the Murray County News.

Women and Introverts

Fake out title. Two interesting links, one to a piece on "Networking for Introverts". Like many advice pieces I find the contents logical and worthy, but getting the resolve to do is the problem.

The other is to a Christopher Hitchens piece in Vanity Fair on why women aren't as funny as men. Amusing.

Put Up Walls Against the Dutch

I was commenting at volokh.com about the Post dairy article and did a Google seach on "Dutch dairy farmers". It is interesting--apparently Dutch dairymen have emigrated to a number of different states--apparently there's more freedom and cheaper land in the U.S. Yet British dairymen were envying the Dutch because they have more ownership of the whole milk chain (i.e., production, processing, distribution, sales).

I wonder whether they may not be more successful than American dairy farmers simply because they have a fresh start--a son (or daughter) taking over an existing dairy farm is bound by all sorts of tangible and intangible things and finds it harder to change and innovate.