Against the Hollywood Bailout

National Review Online

Tuesday, September 29, 2026

 

Hollywood has been in decline for years as studios cut spending and shift production overseas. Now the companies and unions that run the town are seeking a bailout from federal taxpayers in the form of a costly “incentive,” and their friends in Congress are happy to oblige.

 

Last week, lawmakers released the Motion Picture, Television, and Entertainment Revitalization Act — a gilded name for an open-ended subsidy to the film industry. The bill would create a federal tax credit for movies and television shows produced predominantly in the United States, covering 20 percent of nearly all their labor costs. Bonuses for special conditions could raise a project’s subsidy rate up to 30 percent. One such bonus is for filming in declared disaster areas, which — because of last year’s wildfires — includes all of Los Angeles County until 2030.

 

Proponents in Hollywood say the credit is needed to rebalance the playing field after other countries developed their own subsidies. In the United Kingdom, Canada, and Australia, government programs can rebate nearly half of film-production costs. Projects are highly mobile, the argument goes, so America must match these incentives if it wants to compete. Since 2021, a third of U.S. motion-picture jobs have disappeared while employment has risen abroad.

 

Yet foreign subsidies can’t explain why domestic filming collapsed in the past few years, as most have existed for decades and U.S. employment peaked as recently as 2022. The story of Hollywood’s fall is more complicated. Though the box office has rebounded, total industry spending has stalled since the post-pandemic streaming surge. Releases are down, meaning workers have fewer productions to join worldwide.

 

The greatest job decline after Covid was in 2023, before Hollywood’s chief competitor, the U.K., expanded its film subsidies. That was the year of the industry’s “double strike,” when actors and writers simultaneously walked off studio lots for months. Hundreds of projects were delayed or outright canceled as filming rolled to a halt, costing the entertainment industry billions of dollars. When studios finally signed contracts to end the strikes, they had to accept unions’ core demands, ballooning their compensation in perpetuity. Is it any wonder they have looked to film elsewhere?

 

The proposed federal tax credit would bail out the union workers who bargained for more than they were worth. It would subsidize almost all labor costs — for employees and contractors, both pre-production and post-production — of film crews, animators, special-effects artists, writers, actors, and even producers and directors. There are no limits on eligible compensation, so taxpayers would pick up a good chunk of the salaries of Christopher Nolan and Tom Cruise.

 

Advocates suggest that all Americans would benefit from the subsidy spurring economic activity across the nation. It’s rich that Hollywood, which usually slanders “trickle-down” economics, is calling for a tax cut to boost supply. But, as opposed to broad rate reductions, targeted tax incentives don’t have a strong record of goosing economic growth. Dozens of states already have film subsidies to woo studios away from one another, costing taxpayers billions with no discernible effect on employment or wages. Why would another giveaway stacked on top perform any better?

 

Unlike most state incentives, the federal tax credit would be entirely uncapped. It would therefore cost the federal government billions of dollars each year at a minimum, with the fiscal burden rising with industry spending. Congress needs to be shrinking the gap between federal revenues and outlays, not widening it.

 

Sadly, it is not just California Democrats who want to increase the deficit by giving Hollywood a special break. Many Republicans, including President Trump, have also endorsed the subsidy. The bill’s sponsor in the Senate is Tim Scott (R., S.C.), whose history of using the tax code for industrial policy is instructive. Scott was the author of Opportunity Zones, a tax exemption for low-income areas that was recently expanded at a ten-year cost of $41 billion. Studies find that the zones seem to create jobs but in fact merely reallocate them from nearby communities.

 

This evidence reflects the theory of the “broken window” fallacy, in which policymakers point to the visible benefits of an intervention — like the repairman hired to fix a broken window, or an investment made in response to a subsidy — while ignoring the unseen production that had to be redirected. To the extent a federal credit would result in more projects filmed in America, it would shift jobs and resources away from more valuable uses.

 

Of course, the true purpose of the tax credit is probably not to foster prosperity but to help Hollywood pay off the unions that wrecked its labor market. Either way, Congress should leave this handout on the cutting-room floor.

It’s a TARP!

By Kevin D. Williamson

Friday, August 29, 2025

 

I like alternative-timeline movies for their funny little details, like that scene in Watchmen when two former superheroes are reminiscing about how their lives were derailed by Richard Nixon, still president and essentially a dictator in this imaginary version of the 1980s. “To think, I voted for that prick five times,” says the grizzled old veteran. His younger interlocutor shrugs: “Hey, it was him or the commies, right?”

 

We live on the dumbest timeline. I know this because millions of Americans believed that they had to vote for Donald Trump to avert a national descent into socialism—“It was him or the commies, right?”—and so they sent the malignant little criminal back to the White House, where he went about . . . setting up state-owned enterprises in order to seize the means of production on behalf of the workers. It’s still more Idiocracy than Watchmen or 1984, but it’s all in the mix. If it were a series of shorts, it would be called Way More Than Three Stooges.

 

“Don’t get so excited,” the apologists say. “This is basically like the financial crisis, with the bailouts and General Motors.”

 

Oh, is that it? In the words of CFO Gial Ackbar: “IT’S A TARP!”

 

You’ll remember TARP–the Troubled Asset Relief Program—and the bailouts that were executed during the 2008-09 financial crisis. I don’t think anybody remembers that time fondly except for me and other journalists who had the daily pleasure of writing about it. Bad times, great story.

 

I suppose there are some similarities between the Trump administration’s partial nationalization of Intel and the Obama administration’s bailout of GM, in which the U.S. government owned an equity stake. You have two opportunistic presidents who like to talk about economic nationalism jumping into two businesses they don’t understand for purely political reasons and, in both cases, probably doing so illegally. The U.S. government ended up losing billions of dollars on its “investment” in GM, and there is every reason to believe that Uncle Stupid’s stake in Intel—whose Ohio-based chip-foundry is foundering because it has no customers—will end in tears one way or another.

 

Citing the bailout policies of the early 21^st century as your model going forward is a real . . . interesting choice. U.S. taxpayers lost billions on GM, and GM is still a piss-poor company that makes inferior products at every price point from $20,500 to $130,000-and-up while pissing away billions of dollars on mismanaged overseas partnerships. It didn’t even make sense from the political baloney “saving jobs” point of view, inasmuch as GM has shed some 80,000 employees since 2008. The heavy-handed government-backed GM restructuring saw the firm kill off Saturn as a sop to the union bosses, who did not like the semi-autonomous division’s independence from rigid work rules. The parallel bailout of Chrysler (not Chrysler’s first) saw the administration essentially rob the bondholders—the secured creditors who had first claim on the firm’s assets—to pay off its union-goon allies.

 

The bank bailouts were no better. The geniuses in Washington who fretted that firms such as JP Morgan were “too big to fail” watched, apparently helpless, as those firms grew larger and larger during subsequent years of consolidation—JPM today has a market value four times what it was back when we were all hearing the words “systemic risk” five times a day.

 

The economics of failing banks can be pretty funny, in a so-obvious-you’d-think-somebody-would-notice kind of way: When a badly run bank gets bailed out by the badly run government, the market concludes—correctly—that the badly run bank has the badly run government’s backing, and access to the badly run government’s magical money machine. That means that the badly run bank can access capital at a lower cost than its better-run competitors, and it uses that cheap money to buy up those better-run competitors and various little fish, creating a much bigger badly run bank. Financial systems dominated by a relatively small number of large banks rather than by lots of smaller players in a large competitive marketplace tend to be more brittle, experiencing worse outcomes during economic crises.

 

The bank and nonbank bailouts of the TARP era were different from what Trump is doing in many important ways: The GM shenanigans probably were illegal, but the overall bailout program was, for good or for ill, duly authorized by Congress (it was the Emergency Economic Stabilization Act of 2008) and other relevant authorities, and the program was kept on a reasonably short leash—and by the very modest criterion of having prevented a total worldwide credit collapse, you might even call it a short-term success. We are not in a comparable crisis now. And Trump, being Trump, is pretty vague about the legal authorization for his moves at Intel and elsewhere. The CHIPS Act gives the government the power to make grants to chipmakers (i.e., to engage in massive corporate welfare) but no explicit power to use those grants to buy stock in firms. As with the “golden share” that gives the U.S. government the power to veto decisions at U.S. Steel (now a subsidiary of Nippon Steel), setting the government up as a boardroom dictator is the whole point of the exercise. It is an open-ended project.

 

You can call that corporatism if the right-wing flavor of the word makes you feel better, but it is simply a half measure of socialism, a government takeover of certain economic assets for the purpose of replacing market forces with political mandates.

 

Hey, it was him or the commies, right?

Farewell, President Stimulus

By Matt Weidinger

Tuesday, December 31, 2024

 

When it comes to stimulus, President Joe Biden has carved out a signature spot in American history. From his role as “sheriff” overseeing Democrats’ massive 2009 stimulus law to signing an even bigger stimulus bill as president in 2021, Biden is more closely associated with partisan stimulus policy than any other politician. And the disastrous political consequences of his stimulus-law failures may prove to be Biden’s most enduring legacy.

 

In the aftermath of the 2008 election, as the severity of the Great Recession became more apparent, President Barack Obama and Vice President Biden worked with Democratic congressional leaders to craft what became the American Recovery and Reinvestment Act. Enacted just weeks into their new administration, the 2009 law directed a then-record $800 billion to an array of stimulus policies: large stimulus checks, increased unemployment and food stamp benefits, state aid, green-energy subsidies, and more. Obama dubbed Biden the “sheriff” overseeing the law’s implementation, crediting him with “seeing shovels hit the ground” just two weeks after its signing.

 

The marketing for the Obama-Biden stimulus law preceded its enactment. A report authored by the incoming administration’s senior economists predicted the still-draft legislation would keep unemployment under 8 percent while creating 3.7 million new jobs. Reality proved far different. After the law’s signing, unemployment soared to 10 percent, remaining well above the administration’s forecasts — with or without it. Employment fell to nearly 7 million positions short of administration predictions.

 

As job losses mounted, the Obama-Biden administration pivoted from suggesting the law would create millions of jobs to wanly suggesting it had instead saved millions of others from being lost. Few were convinced. On the law’s first anniversary, more Americans believed Elvis was alive (even though he died in 1977) than that the stimulus had created jobs. Obama eventually admitted “there’s no such thing as shovel-ready projects,” and jobs even evaporated during what Biden dubbed “recovery summer.”

 

The political consequences were severe. In the 2010 midterm elections, voters delivered what Obama dubbed a “shellacking,” with House Republicans gaining 63 seats and sweeping into the majority. Obama and Biden were subsequently reelected in 2012, but they had to negotiate with Republicans on phasing down stimulus benefits for the remainder of their administration.

 

Looking back on that experience, Democrats blame the slow recovery from the Great Recession on too little stimulus. Joe Biden built that lesson into his Covid response playbook. At nearly $1.9 trillion, Biden’s own stimulus law — the March 2021 American Rescue Plan — was roughly twice as large as Obama’s 2009 law. And within weeks of its signing, Biden promised trillions of dollars in additional benefit expansions and other spending as part of his massive Build Back Better agenda. There also would be no repeat of 2009’s missed administration job-creation promises: Those predictions were outsourced to private-sector allies.

 

But if failed job creation was the original sin of the 2009 stimulus, historic inflation fueled by excessive spending proved the undoing of the 2021 stimulus law. Former Obama treasury secretary Larry Summers warned that the legislation was too large and could “set off inflationary pressures of a kind we have not seen in a generation.” Obama “car czar” Steven Rattner seconded that warning about the “risk of igniting high inflation” and called for scaling back the legislation’s vast deficit spending. Both were ignored, with Biden and his allies later arguing that any inflation would prove transitory. When inflation reached 40-year highs, the administration admitted it had a problem by dubbing a second stimulus law the “Inflation Reduction Act.” But as with 2009’s “saved” jobs, voters were unpersuaded. Republicans reclaimed the House majority in 2022 and, with inflation still a top concern, voters reelected Donald Trump in a Republican sweep.

 

Since the election, Biden has been largely silent, except for a Rose Garden address in which he praised his “historic presidency.” Without mentioning stimulus laws by name, he touted “work we’ve done” that “is already being felt by the American people.” Naturally he made no mention of how, as Charles Cooke put it, “the Biden-Harris administration will be remembered for spending its way into the worst inflation in 40 years, and then pretending that it had done no such thing.”

Democrats’ Atrocious Attack on Personal Responsibility

By Noah Rothman

Thursday, April 20, 2023

 

The fallout from the 2008 implosion of the mortgage market was still settling over the American economic landscape in mid February 2009, when Barack Obama’s party passed a massive $787 billion stimulus designed, ostensibly, to staunch the bleeding. Not long after that, the president announced plans to spend $75 billion — $25 billion more than initially advertised — to support monthly mortgage payments for distressed homeowners and forestall a wave of foreclosures. This, treasury secretary Timothy Geithner said, would help shore up the nation’s teetering banking system, keep interest rates low, and prop up the value of America’s housing market. CNBC business reporter Rick Santelli was not convinced.

 

“The government is promoting bad behavior,” he famously boomed from the floor of the Chicago Mercantile Exchange. “Do we really want to subsidize the losers’ mortgages?” he asked the traders by whom he was surrounded. “This is America! How many of you people want to pay for your neighbor’s mortgage that has an extra bathroom and can’t pay their bills?” A chorus of boos erupted from the floor. Santelli joked about harnessing the anger he’d channeled into a “Chicago tea party,” but conservatives took him literally, creating the populist movement that fueled a Republican resurgence.

 

Though the moral hazard Santelli raged against was real enough in 2009, so, too, was the threat to the macroeconomy represented by the subprime-mortgage crisis. In 2023, those conditions are no longer present, but the Biden White House is acting like they are.

 

Once again, the administration is prepared to “subsidize the losers’ mortgages,” so to speak, and not in any effort to save the economy or help Americans avoid destitution. The Biden administration’s only goal is to purchase the loyalty of prospective homebuyers who are locked out of the property market by high real-estate prices and rising interest rates — rising interest rates necessitated, in part, by the administration’s reckless spending. And Americans who did everything right are going to suffer, perversely enough, because they did everything right.

 

The administration is set to enforce a new rule that will compel potential homebuyers who spent their lives paying their bills on time and building good credit scores to pay more for their mortgages. Why? To subsidize the loans assumed by higher-risk borrowers. Beginning May 1, prospective homeowners with a credit rating of 680 or more “will pay, for example, about $40 per month more on a home loan of $400,000,” the Washington Times reported this week. “Homebuyers who make down payments of 15% to 20% will get socked with the largest fees.”

 

Federal Housing Finance Agency director Sandra Thompson tried to reassure borrowers that there would be “minimal” fee changes associated with the increased “pricing support for purchase borrowers limited by income or by wealth.” That is cold comfort to the loan officers who expressed their exasperation over this distortion of the real-estate market at a time when low inventory, excess demand, and high borrowing costs have combined to produce a substantial shortage of affordable housing.

 

Those conditions will be exacerbated in August, when the FHFA is set to impose a new upfront fee on certain borrowers with a debt-to-income ratio over 40 percent, which one financial-services consultant said was also designed to hurt “better credit quality borrowers” to “subsidize the fee reductions for lesser credit borrowers.”

 

It’s difficult to understate the perverse incentives this act of bribery will encourage. You’ve spent your adult life borrowing responsibly and paying your bills on time. You’ve saved for years to acquire enough money for a down payment on a home that approaches the rate at which you can avoid a Federal Housing Administration–subsidized loan and the premium it imposes on your mortgage insurance. For all your diligence and hard work, the Biden administration will now punish you only so that consumers who were not similarly conscientious can have access to better mortgage rates and lower down payments. Knowing that, why on earth would you devote yourself to an unrewarding enterprise like thrift when someone, somewhere will foot your bill regardless?

 

Even more grotesque is the fact that this political payoff to what Democrats regard as core constituencies is designed to mitigate the effects of an orgy of spending that was itself little more than a political payoff to core Democratic constituencies.

 

In January, the publication Clever Real Estate surveyed millennials looking to purchase a home and found that over 90 percent of those polled said inflation had become an obstacle to buying a home, eclipsing buyer competition. Nearly half cited high interest rates as their primary concern, and a quarter of prospective homebuyers had put off purchasing property. The stress associated with saving to purchase a home in this environment led more than half the millennials surveyed to confess that they were “reduced to tears” by the process.

 

The interest rates that dissolved these young adults into puddles of anxiety were rendered necessary not just by the cash the federal government hemorrhaged as a response to Covid but also by the Democratic Party’s effort to use Covid as cover in pursuit of more parochial goals.

 

The party in power spent billions of taxpayer dollars bailing out union pension funds, backstopping the budgets of Planned Parenthood and the National Endowment for the Humanities, and helping profligate municipalities like San Francisco bridge their budget gaps. It spent over a trillion on “infrastructure,” which provided a “tremendous boost” to the law firms that represent developers, lenders, investors, environmental-impact specialists, and private-equity funds. It subsidized billions in child-care costs for Americans struggling through school closures at the tail end of the Covid pandemic, which it had encouraged by allowing recalcitrant teachers’ unions to set the bar for what constitutes a “safe” reopening inordinately high. And when all this spending overheated the economy, the party passed the “biggest piece of climate legislation in history” under the assumption that the cure for the ills of too much spending was even more spending.

 

Now, as the Fed seeks to raise the costs of borrowing and restore price stability, the consequences of the Democrats’ spending binge are being felt most acutely by a demographic that disproportionately votes Democratic. So, what do Democrats do? Complicate the Fed’s work further and make it illogical to devote yourself to sound financial habits.

 

It is a profound irony that the supposedly populist iteration of the GOP is not nearly as well positioned to take advantage of this catalyst for a populist revolt as the GOP of 2009 was. Maybe Republicans can summon the enthusiasm to craft and sustain a messaging campaign against this attack on personal responsibility; after all, they’ve done it before. But if they can’t take this ball and run with it, they should get off the field.

There Will Be No Soft Landing

By Matthew Continetti

Saturday, March 18, 2023

 

To recap: On March 8, Silicon Valley Bank of Santa Clara, Calif., announced that its balance sheet was weak. The bank held around $175 billion in deposits. They needed to raise capital, but its management had parked too much money in long-term government bonds. At the time of purchase, in a low-interest rate environment, those bonds had seemed safe. Then inflation arrived. Rates went up. Silicon Valley Bank was forced to sell the treasuries at a $1.8 billion loss.

 

The next day, March 9, panic began to spread. Ratings agencies downgraded Silicon Valley Bank’s credit. Its stock plunged. A run on the bank — with depositors demanding their money back — took off. On March 10, Silicon Valley Bank collapsed.

 

Silicon Valley Bank is the largest financial institution to go under since the Global Financial Crisis in 2008. Its sudden demise shocked investors into reexamining the financial sector. The largest banks may rest on firm capital cushions. What about regional banks? Fear of instability caused depositors to flee these midsized firms. Shareholders did too. Signature Bank of New York was caught in the whirlpool. It drowned.

 

To stop the contagion from spreading further, on Sunday, March 12, Treasury Secretary Janet Yellen, Martin Gruenberg of the Federal Deposit Insurance Corporation, and Federal Reserve chairman Jerome Powell made the following announcement: The federal government would guarantee deposits at Signature and Silicon Valley Bank. Until last weekend, the FDIC insured deposits up to $250,000. No longer. The ceiling was blown away in a cyclone of panic.

 

President Joe Biden was quick to assert that the backstop is different from the Troubled Assets Recovery Program, or TARP, the controversial bank bailout of 2008. The new Federal Reserve facility won’t support creditors or shareholders or executives, just depositors. And tax revenue won’t pay for the guarantee directly, an FDIC fee will — a fee levied on banks and passed on to consumers, who also happen to be taxpayers.

 

Biden and Yellen won’t say it’s a bailout. Of course it’s a bailout. In some ways this bailout is worse than in 2008. After all, Congress passed TARP. Congress is a bystander here. And TARP set economy-wide rules and qualifications. Biden’s intervention is discretionary and selective. When she appeared before Congress on March 16, Yellen admitted that the unlimited deposit guarantee doesn’t apply to every bank. It applies to systemically important banks. Who decides which bank is systemically important? She does. As circumstances dictate.

 

Yellen tried to soothe Congress. She tried to project strength. “I can reassure the members of the committee that our banking system is sound, and that Americans can feel confident that their deposits will be there when they need them,” she told Senate Finance. “This week’s actions demonstrate our resolute commitment to ensure that our financial system remains strong and depositors’ savings remain safe.”

 

Feel better?

 

Authorities have struck similar notes of confidence during previous emergencies — the pandemic, the crash of 2008, the first hours of September 11, 2001. Subsequent events proved them wrong. Yellen and Biden may end up looking just as foolish. They are playing Whack-A-Mole, concentrating on financial varmints as they pop up. They should be addressing underlying causes.

 

The chaos in the banking system is the result of decades of low to zero interest rates and $6 trillion in fiscal stimulus since 2020. That flood of money and credit produced the worst inflation in four decades. In 2022, the Federal Reserve began raising interest rates to restore price stability. The Fed should have acted sooner. It waited because it assumed that inflation would be temporary.

 

That assumption was false. The Fed’s complacency made the situation worse. By the time it started raising rates, inflation expectations were fixed. The past year of Fed hikes may have slowed inflation. What they haven’t done is kill it.

 

Biden, Yellen, and the Federal Reserve want a “soft landing.” They are after a magic formula that will quell inflation and avoid a recession. They will be disappointed. No one likes inflation: It lowers the standard of living. But the Federal Reserve’s solution — a contraction of the money supply through higher interest rates — is nasty too. High interest rates can cause a recession. Or something worse.

 

Now Biden and the Fed are caught in a stimulus trap: Higher interest rates increase the likelihood of financial instability, while keeping rates pat — or cutting them — will prolong the inflation. Doing nothing will perpetuate the current mix of declining standards of living amidst periodic chaos.

 

Biden has ruled out other options. Supply-side measures such as deregulating energy and reducing means-tested income transfers are off the table. Legal immigration won’t be made easier. Trade barriers won’t be reduced.

 

Biden, Yellen, and Powell have gifted America with another “emergency” measure that will last long after the crisis subsides. Republicans are eager for a piece of the action — why do Gavin Newsom and Silicon Valley tech giants get this guarantee, while midsized banks in rural areas do not?

 

Rather than limit and sunset the deposit backstop, enforce market discipline, and reassert the Fed’s commitment to price stability, the same team that brought America the worst inflation in a generation is entangling itself further in a key sector of the economy. It would be foolish to trust in their judgment. Look at the record. Practical wisdom is scarce in an administration populated by academics and partisan fixers.

 

Soft landing? Afraid not. Brace for impact.

No, the Silicon Valley Bank Bailout Doesn’t Justify Mass Student-Debt Relief

By Charles C. W. Cooke

Monday, March 13, 2023

 

On Twitter, CNN’s John Harwood asks what he presumably believes is a rather clever question: “Will the same people who oppose student debt relief also oppose making Silicon Valley Bank customers whole beyond FDIC’s $250K insured-deposit limit?”

 

What a profoundly dumb political culture we live in.

 

I can answer Harwood’s question with one word: Yes. I oppose student-debt “relief.” I also oppose “making Silicon Valley Bank customers whole beyond FDIC’s $250K insured-deposit limit.” But we should not pretend that these two issues are interchangeable, nor insist that those who answer Harwood’s query with a “no” are hypocrites. I understand that it is fashionable at present to pretend that every political issue that we debate is inextricably linked; for a good example of this phenomenon, consider how often you now see absurd sentences such as, “The reduced mill rate in Eggton County is a women’s-rights issue!” I know that politics is politics is politics. But truth matters, too, and I’m afraid that, while it might be convenient for progressives to pretend that the topics Harwood is conflating are identical, they are, in fact, no such thing.

 

Because I worry about the obvious moral hazards that are associated with such a move, I am strongly opposed to the federal government taking any action beyond what it was already legally obliged to do in a situation such as this one — which was (1) to use the FDIC to honor per-client deposits up to $250,000 and (2) to manage the sale of Silicon Valley Bank or its assets, so that depositors could be made as whole as they can be without outside interference. We have such rules in place for a reason, and, by treating those rules as if they were infinitely malleable, the Treasury has signaled to every bank in the country (or, at least, every bank in the country that the Treasury happens to favor) that, as a de facto matter, all of their deposits will be backed by the federal government. Human nature being what it is, this development is going to cause problems.

 

Nevertheless, there is a general-welfare claim here in a way that simply does not apply to President Biden’s illegal student-loan order — which, if we’re drawing analogies, is akin to the Treasury deciding on a whim to bail out the healthiest banks in the land. The purpose of the federal government’s intervention with Silicon Valley is to prevent a broad-based run on the banks that ends up severely damaging, or even destroying, the economy. The purpose of Biden’s student-loan play is to give money to people who spent a lot of cash on a consumer product that they received in full, and who, for entirely selfish reasons, would now like to have both the product they bought and the money they spent obtaining it. As a matter of political prudence, we can debate whether the Federal Reserve’s decision to guarantee all deposits at Silicon Valley Bank was necessary to achieve the aims by which it was justified, and, beyond that, we can debate whether it was an appropriate use of federal power. On both questions, I’m a “no.” But the existence of that legitimate debate does not require us to pretend that there is a useful comparison to be drawn between it and what Biden is trying to do with student loans. There’s not.

 

This is especially true when one considers that, pace all the caviling, the federal government has, in fact, chosen to provide “relief” from student loans when it considered the circumstances to be comparable. Last June, the Biden administration wiped out $6 billion worth of student-loan debt that was held by the more than 200,000 students who had attended schools that had allegedly defrauded them. This decision, Secretary Cardona announced, was “based on strong indicia regarding substantial misconduct by listed schools, whether credibly alleged or in some instances proven,” and was designed to reimburse consumers who, through no fault of their own, had spent their borrowed money on a faulty product. Cardona’s move was not without controversy — the Trump administration had declined to use the program, describing it as “free money” — but it at least drew a comprehensible line between borrowers who had invested their money in an institution that they believed to be kosher but was not, and borrowers who had invested their money in a legitimate institution from which they benefited in full. This being so, one could reasonably reverse Harwood’s question and ask, “Will the same people who support writing off the debts of students whose colleges collapsed around them also oppose making Silicon Valley Bank customers whole beyond FDIC’s $250K insured-deposit limit?”

 

Which is all to say that the correct analogy to draw between Biden’s unconstitutional attempt to write off $400 billion in student-loan debt is not with the crisis at Silicon Valley Bank, but with the banks that are running just fine. There is no “crisis” of student-loan debt; there are a lot of people who borrowed money to pay for a product they received. There is no “systemic” problem with student-loan debt; not only do college graduates earn more than everyone else on average, but, for more than three years now, the Treasury has stopped collecting student-loan repayments from anyone in the United States — at a cost of nearly $200 billion — on the extremely frivolous grounds that to do so would provoke hardship. Nor is there a risky “contagion effect” with student-loan debt — except, that is, for the federal government’s apparent desire to convince everyone in America that they should attend college irrespective of whether it makes sense, and that, when they’ve done so, they should recast themselves as the most hard-done-by victims in our society.

Anatomy of an Airline Debacle

By Kevin D. Williamson

Tuesday, January 03, 2023

 

The executives of Southwest Airlines can take comfort in this much at least: It still isn’t a crime to run a business incompetently.

 

As a wise friend of mine likes to say, “Stupid should hurt.” And while running an airline badly probably shouldn’t be a felony, there is an entirely justified sense that corporate stupidity doesn’t hurt people such as Southwest CEO Bob Jordan nearly as much as it should—and not nearly as much as it hurts his customers. Your kids will never get that Christmas with grandma back, but Bob Jordan will still be rich. Bob Jordan is never going to miss an important meeting or a family holiday because it puts 50 bucks in your pocket.

 

If it seems that in the great calculus of the airline industry the typical passenger—his plans, his interests, his convenience—doesn’t amount to squat, that’s because in the great calculus of the airline industry the typical passenger doesn’t amount to squat. As I have written before, one of the few good things you can say about the airline industry is that airlines are almost alone in American institutions in being generally honest and transparent about status. And the status of Passenger X is not very high: According to surveys, slightly more than half of all Americans do not fly at all in any given year, and those infrequent fliers are driven almost entirely by price. They consistently tell consumer researchers that they will not pay extra for amenities, that they will not pay more to fly on a preferred airline, that they will not pay more even to avoid being assigned the dreaded middle seat. These are the looky-loos and livestock who gum up the works by flying to Tampa once every other year to visit Aunt Marge. Or the guy who, upon being informed by the TSA goon overseeing the TSAPre line that he didn’t have TSAPre and needed to go to the prole line with the rest of the status-less, started in with, “Tell me about this TSAPre program, maybe I would be interested in signing up”—at 9 a.m. the day before Thanksgiving at DF-by-God-W. These fliers have no loyalty to any airline and they are not very profitable, but there are just scads of them, with nonbusiness fliers making up about 88 percent of passengers.

 

What this means is that airlines have very little reason to care about any given interaction with a flier who isn’t linked up with its frequent-flier program.

 

If you have rented an expensive apartment for a couple of years and might be expected to rent it for a few more, and if you pay your rent on time and don’t generate a lot of complaints, then your landlord is going to be inclined to go to some trouble to keep you as a tenant. But if you are staying one night at a cheap roadside motel in some town you’re never going to see again, then the management doesn’t have much incentive to go the extra mile for you. For most passengers, airlines are cheap motels. While the airlines themselves are (almost) criminally mismanaged, consumers are part of the problem too: An airline isn’t going to spend $100 to do a good turn for a flier who will choose a different airline next time around to save $12.42.

 

The days of the glamorous “jet set” are long behind us, and air travel is an ugly, stupid, inconvenient business most of the time, three dashboard saints and one poultry crate short of the Guatemalan “chicken bus.”

 

As usual, the real problem is complex—and, as usual, the political conversation wants this to be a case of black hats vs. white hats.

 

Progressive critics always want this to be an executive-compensation story, because big paychecks are something we all understand and because this being a fallen world, envy is something we all feel. But, in spite of the usual talk about the dictatorship of quarterly numbers, Southwest’s executive-compensation practices aren’t especially short-term, and much of the compensation of its top officers is tied not to quarterly reports but to corporate income measured over years rather than quarters. Go read Southwest’s proxy statements to get an idea of how they handle executive pay. (What did you think I’d be doing on New Year’s Eve?) The whole idea of equity compensation is to align executives’ incentives with those of investors. The problem is that neither executives nor investors have incentives that are, in many cases, strongly aligned with those of consumers when it comes to any given transaction.

 

As noted above, this is partly the result of consumer preferences. But it isn’t only that. Most consumers prefer cut-rate seats on cut-rate airlines to paying full fare for first class on American or Delta, but the front cabin is, maddeningly, attached to the rear cabin, and American isn’t any better at getting its first-class passengers there on time than it is at getting the job done for the guy back in 32B. (Greetings, Sen. Romney!) The airlines are bad, and their executives are bad—but so are the unions, the airport authorities, the TSA, the FAA, and practically every other major player in the business. There’s political corruption, crony capitalism, the usual bureaucratic shenanigans, and, of course, private-sector incompetence.

 

The capital requirements necessary to run a major airline would by themselves present a real barrier to robust competition. Then add in the heavy regulatory burden, the complexities of dealing with labor unions, the predictable deficiencies in politically managed infrastructure, etc., and what you have is a lot of taxes on innovation and competition along with a lot of subsidies for scale. American Airlines employs more lawyers—and better lawyers—than a lot of pretty serious law firms, and they work on the “company’s corporate governance, securities and corporate finance, commercial, litigation, competition and antitrust, compliance, privacy, environmental, labor and employment, and intellectual property legal issues.” The next Google or Facebook or Apple might be started in a garage in Austin, but the next American Airlines surely will not.

 

The behavior of Southwest—and of airport authorities threatening to have stranded passengers arrested—has been truly outrageous, and if Southwest shares go all the way to $0.00 and Bob Jordan gets run out of town on a rail, I’ll take the afternoon off to pluck a chicken before we tar and feather the rotten so-and-so. But it won’t solve the problem. Neither will changing executive-compensation rules, however much that might speak to the punitive instinct. This is a complex, multipart problem requiring a complex, multipart response.

 

What really makes people angry in these situations is the asymmetry. When Southwest decides to screw you—and it is a decision—you don’t really have any recourse. In some truly unusual circumstances, you might be able to sue. You can write a letter to your congressman and ask him to complain to the FAA or another regulator. If American decides to screw you—and it is a decision—you might get a couple thousand bonus miles if you’re a very pissed off “executive platinum” flier. But if you treat the airline’s picayune demands the way the airline treats its schedule? You might very well end up in jail.

 

The airlines, banks, and insurance companies are particularly big offenders—the cause of socialism never had a better friend than an American health-insurance company—but there’s a lot of shameful stuff that goes on in the pursuit of profit. It’s worse in mature, highly regulated industries, where there’s little incentive for innovation but lots of incentive for petty chiseling and undignified grubbing. But if you’ve ever had to rely on Amtrak or Metro North or the New York City subway system, you know that state-owned enterprises and government-run systems are subject to most of the same problems and some particular to the public and semi-public sectors. Two cheers for capitalism and all that.

 

There isn’t any very obvious fix to any of this, but one option we should consider: Stop bailing them out. The Southwest story would rankle a lot less if not for all those billions of taxpayer dollars the airline has consumed. The major (and many minor) U.S. airlines have been slowly failing for a generation. We should think about letting them fail and seeing if the market can make some more intelligent use of all the capital that is locked up in these moribund enterprises. That might not scratch the populist itch the same way as a week’s worth of vitriolic denunciations on Capitol Hill, but, on the other hand, it might actually produce some real-world results.

 

Southwest once was one of the most admired companies in the United States, and now it is a joke, a cartoon villain of a corporation known for treating its customers with contempt and cruelty. Let nature run its course: Et in Arcadia ego, etc.

Democrats Stay Silent as Unprecedented ‘Benefits Cliff’ Approaches

By Matt Weidinger

Wednesday, August 25, 2021

 

On Labor Day, an estimated 7.5 million individuals are expected to see their temporary federal unemployment benefits come to an abrupt end. But even though that will mark the largest shutoff of such benefits in American history, two political dynamics have made mention of the approaching benefits cliff all but taboo in progressive policy circles: The cliff was designed by the Democratic authors of the March 2021 American Rescue Plan, and it will disproportionately affect residents of blue states.

 

The 7.5 million Americans poised to lose benefits in two weeks is a huge figure, exceeding the combined population of the cities in Major League Baseball’s two Central Divisions — Chicago, Milwaukee, Pittsburgh, St. Louis, Cincinnati, Cleveland, Detroit, Minneapolis, and Kansas City. As the chart below shows, the coming benefits cliff is almost six times “steeper” than the next-steepest such cliff in American history:

The primary cause of this predicament is that more people have been made eligible for, and continue to collect, the federal benefits in question than ever before. As a result of the pandemic and unprecedented new federal benefit programs, recipients of unemployment checks peaked at almost 33 million in June 2020 — more than two and a half times the prior record. Today, despite 10 million job openings and an unemployment rate that has fallen to 5.4 percent, 12 million Americans remain on benefits — a figure that approaches the pre-pandemic record for recipients, set in January 2010 when unemployment was a far-higher 9.8 percent.

 

About three-quarters of current recipients collect only federal benefits, and thus stand to lose all unemployment checks when temporary federal programs expire on Labor Day. Others will remain eligible for up to 26 weeks of state unemployment checks, but lose a $300-per-week federal supplement.

 

One of the ironies of the coming cliff is that it was intentional. The Democratic authors of the March 2021 American Rescue Plan that extended benefits through Labor Day insisted on replacing the “soft phaseouts” created in a bipartisan December 2020 law, which would have allowed current recipients to continue collecting benefits for some time after the program closed to new applicants, with a “hard cutoff” that took away all recipients’ benefits at the same time. Why? Because in the bizarre logic of some liberal policymakers, hard cutoffs improve the odds that Congress will approve another extension. The more acute and widespread the pain of a program’s expiration, the malign thinking goes, the greater the political pressure to extend it.

 

That logic has been undercut by many states’ decision to simply opt out of paying federal benefits in recent weeks. The opt-outs include most red states, whose leaders argue that expanded federal unemployment benefits have kept people from returning to work. And as a result, they have reduced many red-state representatives’ incentive to support another extension of benefits, since the checks wouldn’t be going to their constituents regardless.

 

That contributes to the second irony behind the coming benefits cliff: The vast majority of those about to lose benefits as a result of the Democrat-designed law are residents of blue states, including populous California, New York, Pennsylvania, Illinois, Michigan, and New Jersey. In the week ending July 24, over 80 percent of those receiving major federal benefits were in states led by a Democratic governor.

 

With vaccines widely available and record job openings, it is well past time for these extraordinary benefits to end. President Biden dismissed the possibility of another extension in May. Senator Joe Manchin (D., W.Va.) recently seconded that, when he suggested “I’m done with extensions.” Just last week, the Biden administration formally pulled the plug on further federal funding, stating in a letter to Congress that the $300 bonuses “will expire” as scheduled. The fact that it is Democrats who are nixing any chance of another extension has undoubtedly contributed to what some call the “current silence of federal policymakers” about the upcoming benefits cliff. But two lesser-known truths — that the cliff was designed by Democrats, and that it will disproportionately affect the residents of blue states — also explain why Washington lawmakers who usually cheer on more benefits have been notably silent about the “hard cutoff” to come.

Congrats, You’re Paying for California’s Governor to Bribe the State’s Voters

By Charles C. W. Cooke

Tuesday, May 11, 2021

 

I’ve spent much of the last week arguing that the federal government needs to stop: to stop undermining the miracle that is the COVID-19 vaccine; to stop sending money to people who don’t need it and preventing them from returning to work; to stop borrowing trillions of dollars during an expansion and risking utterly disastrous inflation.

 

Now we learn that California — which received $42.3 billion in the Democrats’ recent “relief” bill, as a “bailout” of its supposedly damaged budget — has an enormous budget surplus, thanks mostly to the stock market having boomed last year and driven up capital gains tax revenues. From Politico:

 

California expects a staggering $75.7 billion surplus despite a year of pandemic closures — an amount that surpasses most states’ annual spending and prompted Gov. Gavin Newsom on Monday to propose sending cash back to residents as he faces a recall election.

 

California’s coffers are bulging thanks to the high-flying Silicon Valley, surging stock market and a large share of professionals who were able to continue working remotely during Covid-19. The state has a progressive income tax structure that leans heavily on top earners, allowing the state to enjoy record revenues despite widespread job losses in the travel and service industries that have kept California’s unemployment rate among the nation’s highest.

 

I’ll say it again: Stop! California’s government is now so flush with cash that it is considering spending more than 11 billion dollars sending every single Californian a $600 check.

 

Or, to put it another way: The Democratic Party has used its control of the federal government to borrow billions and billions of dollars so that the Democratic governor of California can try to bribe his way out of a recall election by sending his voters cash. There are many words for that sort of behavior, but “relief” is not among them.

The Split-Screen Presidency

By Charles C. W. Cooke

Tuesday, March 16, 2021

 

It’s difficult to hide these days. Time was when a politician could tell two different audiences two different things and get away with it. Now, we live in split screen.

 

During the recent presidential election, we were treated to a startling illustration of this each time then-candidate Joe Biden told the country he was a moderate, only to be corrected by friendly pundits and devout advocates who, unlike him, seemed to have read his platform. In essence, the year 2020 brought us two candidacies: On the right side of the screen, there was Joe Biden, who talked of decency, unity, moderation, and normalcy; on the left, there were his party and its vanguard, who talked of renaissance and reconstruction. From the start, the two were at odds. Only time could tell which would prevail.

 

And already, time is telling. Today, defending the proposition that Joe Biden is instinctively a moderate but that his party is the problem is akin to defending the proposition that Macbeth is a peaceful man but that his wife is the problem. In a highly technical sense it is defensible, and yet in practice it means nothing of consequence, for no amount of vehemence will bring Banquo back to life. We are now 45 days into Biden’s presidency, and his accomplishments and ambitions are being openly compared to FDR’s. Having spent $1.9 trillion on progressive priorities on the waning pretext of COVID-19, Biden, we are now told, has his sights on another $2–$4 trillion in spending on infrastructure; on a public option of the sort that could not get through a filibuster-proof Senate a decade ago; on the wholesale (and likely unconstitutional) rewriting of the American election system; on a federal takeover of local police departments; on the national prohibition of the right to work, which has been explicitly protected since 1947 and was protected de facto before 1935; on a $15 minimum wage; on the dramatic narrowing of traditional freelance work; on the prohibition, and maybe confiscation, of the most commonly owned rifle in the country; and on the first major tax hike since 1993 — all on the heels of a flurry of hard-left executive orders so relentless and so prolific that even the New York Times urged him to tap the brakes. A reasonable polity can debate the efficacy and desirability of these measures without fear or favor, but a reasonable polity will not misdescribe them — and “moderate” is by no means the mot juste.

 

If the recently passed “COVID relief” bill is any indication, the Democratic Party intends to have it both ways in government, as well as on the campaign trail. Before the law passed, Biden and his team were careful to cast it as a discrete measure designed to address a discrete problem. The president, his team liked to say, was “laser-focused” on fighting COVID-19, and the “American Rescue Plan” — note the name — was “an historic piece of legislation that addresses a major crisis.” In an attempt to imply that the bill was as lean it could be, Biden liked to demand rhetorically, “What would you have me cut?” Meanwhile, those who opposed it were held to be misreading the room. “Trying to apply political lessons from the past to the situation we face now is a mistake,” the White House’s Anita Dunn told CNBC. “It just isn’t analogous. The country has never been through this before.” (That “it,” lest anyone wonder, was the pandemic.)

 

Once the bill had passed, however, the portrayal shifted instantly. The day after passage, the New York Times’ news team described the package as “a rapid advance in progressive priorities but also a realignment of economic, political and social forces” and acknowledged that it had happened because “an energized progressive vanguard pulled the Democrats leftward, not least Mr. Biden, who had campaigned as a moderating force.” Meanwhile, on the paper’s opinion pages, Nick Kristof argued that the bill represented “a revolution in American policy” — indeed, that it was nothing less than the first step in a resetting of the political baseline — while Jamelle Bouie proposed that it “compares favorably with the signature legislation of Roosevelt’s first 100 days, in that its $1.9 trillion price tag dwarfs the mere tens of billions (in inflation-adjusted dollars) spent by Congress during the earliest period of the New Deal.” At New York magazine, Eric Levitz echoed these characterizations, portraying the bill as “the largest anti-poverty program in a generation,” and noting that it was of a piece with a president who had “packed his Cabinet with a cornucopia of progressive wonks” and “full-employment fanatics” who “occupy damn-near every economic post in the White House.” As might be expected, Bernie Sanders did the best job of illuminating just how widely the notion of emergency had been stretched. “This country today,” Sanders said, “faces a series of unprecedented crises.” Or, to update a famous phrase from the last Democratic administration: Never let a good crisis end.

 

The core problem with our previous president was that there was far too much of him — so much, in fact, that at no point during his tenure did he deign to adapt to his office. The core problem with our current president is that he doesn’t seem to exist at all, except as a carapace under which the real movers and shakers in his party might hide. I have long desired a return to the days of the quiet chief executive, who understands the limitations of his role, feels no eagerness to commentate on all of civil society’s twists and turns, and willingly defers to Congress on all questions over which he lacks explicit control. Superficially, Biden exhibits some of these tendencies, but in truth he represents the worst of both worlds: He is an avatar, there to draw the public’s attention away from the nature of his party and its policies, so that other people might govern in ways that no one quite sees. At some point, when the left and the right screens so directly contradict each other that the ruse can no longer be sustained, this game will be up, and the screens will melt slowly into one. What the country looks like after that fusion happens will depend on when, and how fast, it comes.

The Politics of Pensions

By Kevin D. Williamson

Tuesday, March 09, 2021

 

A real-estate developer asked a consultant what he could do to make a planned building more durable. How durable? Durable enough to still be standing centuries from now, or even a millennium hence — a tall order considering that the average life expectancy of a new commercial building in the United States is measured not in centuries but in mere decades, and not very many of those. But there are things you can do to make critical components last a very long time: For example, you could cover the roof in gold, which, thanks to its remarkably nonreactive nature, isn’t much bothered by atmospheric chemicals, ultraviolet light, or moisture.

 

It’s good stuff, gold. But you do not see very many gold-roofed buildings around the world, and those you do see tend to be built or patronized by men bearing such titles as emperor or maharaja. Gold is expensive, of course, but even after the initial construction costs, gold imposes other long-term commitments: Thieves steal the roofs off churches for the copper, and gold would provide a much stronger lure; a gold-roofed building is going to cost more in taxes and insurance; in the event of physical damage to the roof (say, from an asteroid or a World According to Garp–type mishap) repairs are going to require more gold, and will be more expensive than fixing shingles would be. You don’t build a gold-roofed building to flip it. You need a pretty long-term point of view to put up a golden roof, which is why you mostly see them commissioned by religious leaders and heads of dynasties.

 

People who take a less magnificent view of the world are not so inclined to such grand gestures: If the Sistine Chapel were a Presbyterian sanctuary, Michelangelo would have been ordered to put up wood paneling.

 

Instead of buildings that look like the Golden Temple in Amritsar, Americans tend to put up a lot of commercial buildings that look like Home Depots and Walmarts, often employing what is known as “tilt-wall” construction, which is faster and more economical than other kinds of construction but which also produces buildings that are likely to require work in a relatively short period of time. It may sound shoddy, but it is in many cases the intelligent choice: We build according to our known needs rather than according to unknown needs, and it is very difficult to say what commercial life will look like ten years from now (consider the radical shift in the retail environment in the past year) much less 100 years from now. We could put up buildings designed to last 500 years, but we could not say with any confidence that these buildings would be genuinely useful, no matter how durable they are. I live in a 100-year-old house that has required many renovations over the years, not because it was built incompetently but because it was built reasonably well during the Harding administration, when there was no air-conditioning.

 

I trust the application to the ridiculously named “American Rescue Plan” is perfectly obvious.

 

No?

 

The so-called American Rescue Plan, which would be more accurately called the Democrats Looting the National Fisc to Pay Off Demanding Constituencies and Grease Every Squeaky Wheel to the Left of Mitt Romney (DLNFPODCGESWLMR) Act, contains a few nickels and dimes for coronavirus vaccinations and billions upon billions of dollars to bail sundry labor bosses and financial managers out of the most recent episode of financial trouble associated with union pension plans, a decades-long parade of organized crime and disorganized incompetence brought to you by the Teamsters, the mafia, Wall Street, and the most ruthless mob of them all: the U.S. government.

 

This is straight-up piracy, but it is also more than that. Like their public-sector counterparts, these union-run multi-employer plans are in trouble not because of the coronavirus epidemic or some other unforeseeable circumstance but simply because they have promised extraordinarily generous benefits and failed to put aside money to pay for them. Under pressure from previous underfunding, the managers of these pensions (a committee that has over the years included everyone from Goldman Sachs to Labor Department regulators) have sought out riskier and riskier investments, hoping to achieve higher returns and help them close the gap. That has — contain your jactitations of shock and alarm! — not always worked out as intended. (The thing about risk is, it’s risky.) In effect, they took their money to the casino, came up short, and now are using their political clout with the Biden administration and congressional Democrats to demand that somebody else — you taxpaying suckers — make good on their losses.

 

Democrats in Congress — and, especially, those who hope to one day become president — take their orders from the union goons because while the American labor movement represents relatively few private-sector workers, it can end any given Democrat’s career in elected office pretty easily. (See: California, hilariously incompetent misgovernance of.)  And, increasingly, the labor movement is dominated by public-sector employees rather than private-sector ones, public-school teachers and police rather than factory workers and truck drivers. These public-sector workers are naturally comfortable with the forced transfer of wealth from the public at large to rapacious and highly organized political constituencies — that is their business model.

 

But the piracy is only the beginning of the problem. The larger problem is that both public-sector and private-sector actors are making plans for golden-roofed palaces in a mobile-home world.

 

One of the difficulties faced by some of these pensions is that most of the large employers that were expected to pay into them no longer do so, many of them having ceased to exist. As Elliot Blair Smith put it in a 2016 MarketWatch write-up of the sorry history of the Central States pension fund: “Only three of the plan’s 50 largest employers from 1980 still pay into the plan. And for each active employee, it has 5.2 retired or inactive participants.”

 

If corporations did nothing but grow and stack up profits, then this would be a pretty good system. But that isn’t how things actually work.

 

In spite of the sci-fi trope of immortal, galaxy-spanning corporations, the modern business firm is in fact a relatively vulnerable and short-lived thing. In the middle of the 20th century, a big corporation might be expected to stay in business for the better part of a century; today, the average big corporation will not live long enough to legally order a beer. McKinsey has estimated that three-fourths of the companies listed in the S&P 500 in 2017 will disappear within ten years. This is an inconvenient thing for people who expect to be taken care of for all of their adult lifetimes by a single employer, but it is the result of improved business practices rather than defective ones. As businesses become more focused on their core competencies and learn to adapt more quickly to changes in the market, they become ever more temporary partnerships among different kinds of capital: physical, financial, and human.

 

In the old days, big corporations thought of themselves as being as permanent a part of national life as the Washington Monument or the Department of Defense: U.S. Steel really thought of itself as the U.S. steel company, an assumption that was reflected in everything from its magnificent corporate headquarters to its grand business plans. U.S. Steel, which was once so dominant a player that on Wall Street it was called, simply and reverently, “The Corporation,” has gone through a number of reorganizations and evolutions, and remains in our time as the world’s . . . 27th-largest steel producer. Its former headquarters in Manhattan is best known today as the apartment building where Dominique Strauss-Kahn served his house arrest.

 

Things change.

 

A defined-benefit employer-based pension plan may have made sense when retirements typically lasted maybe ten years (a man born in the United States in 1950 had a life expectancy of 65 years and change) and corporations lasted 100 years. In our time, retirements may last 40 years, while big businesses often vanish before they are old enough to drive. (Corporations are teen-agers, my friend.) Policies that bind retirement benefits, health care, and the like to employers are based on faulty assumptions about the real position of corporations and the long-term relationship between businesses and employees. Some conservative policy proposals are oriented toward delinking Americans’ long-term economic interests (retirement, health care) from their employers, ideas that have proved much more popular among think-tanker personnel than voters.

 

Writing in the New York Times, Paul Krugman complains that Americans are cursed with too many choices, including choices about how to prepare for retirement. Faith in individual choice, he writes, is a product of right-wing ideology. “The spread of this ideology has turned America into a land where many aspects of life that used to be just part of the background now require potentially fateful decisions. You don’t get a company pension, you have to decide how to invest your 401(k).” Professor Krugman seems to me to be a man who very much values his position, so he does not even whisper the name “Charles Murray,” but he does make a pretty forthright case for wider corporate and political paternalism to relieve the “cognitive burden” (a term Professor Krugman does use) on the poor and the middle class, who are unprepared to carry the load. Professor Krugman is plain in his conclusion: that “in America we probably have more choices than we should.” I do wonder if he has thought about how this ought to apply to things like choosing political representatives, but the more immediate question is: If Americans are to be relieved of the burden imposed by these choices, who is to be empowered to make such choices on behalf of those who are not packing the gear to hack it, cognitively speaking?

 

In the golden age of American progressivism, the reformers and managers were for the most part forthright corporatists, meaning that they sought to work out a mutually acceptable modus vivendi between business owners, workers, and government in pursuit of what they believed, sometimes sincerely, to be the “public interest.” (“Corporatism” is the old name for “stakeholder capitalism,” abandoned because Oberlin graduates shudder at the word “corporation” and because of the term’s association with 20th-century fascism.) And so rather than have the state provide cash benefits to low-income workers — and account for those benefits on both the taxing and spending side of the ledger — the government simply orders employers to pay them more (or, more precisely, forbade them to pay them less than a certain minimum), and, over the years and in a piecemeal fashion, the state has added things such as health insurance and retirement benefits to the mix. This may continue to work reasonably well for short-term benefits that workers rely on during their active working years, but it is a poor strategy to stake your long-term security in retirement on a company that is, statistically speaking, unlikely to survive as long as you do.

 

As the Biden bailouts show, these employer pension plans have a way of becoming government pension plans. The workers aren’t to blame — they signed up for certain pensions and expect to receive them — and many of the employers aren’t around to blame, either. The unions bear some responsibility, but the real problem is that all the incentives encourage everybody to make big promises now and put aside the money to meet them . . . someday, in the Keynesian long-term when all who were at the table when the deal was done have gone on to their eternal reward.

 

Which leaves us with bailouts.

 

The U.S. government has been in the pension business for a long time, and it is even worse at it than the Teamsters are. The unfunded liability of Social Security (meaning the amount of money the system would need to have right now to secure its long-term solvency) is $38 trillion. The unfunded liability for Medicare adds another $53 trillion to the burden. For perspective, the unfunded liabilities for those two programs — by themselves — add up to about three times the total value of the S&P 500. The U.S. Pension Benefit Guarantee Corporation, a privately funded, government-managed insurance scheme that pays out promised benefits for certain insolvent pensions, has liabilities that exceed its assets by tens of billions of dollars — better than tens of trillions, but still a poor position.

 

And so our choices look like this: (1) We can make long-term bets on increasingly short-lived corporations; (2) we can make long-term bets on the U.S. government, the mendacity and financial irresponsibility of which are among the most redundantly documented facts of modern financial life; (3) we can, with the tut-tutting disapproval of Professor Krugman, encourage those poor cognitively burdened Americans out there in the dank and wooly wilds of the real America to take principal responsibility for their own households.

 

Or we could try to come up with policies that reflect the real limitations on what can be expected of employers, that account for the indiscipline of the U.S. government, and that are well-suited to the habits and lives of a people who spend an awful lot of money on lottery tickets and currently are suffering an emotional convulsion over the content of Dr. Seuss books. Which is to say, we could come up with policies that work in a country where the corporate headquarters are not roofed in gold.

 

That would probably mean replacing defined-benefit plans with defined-contribution plans and then applying to these the paternalism that Professor Krugman argues for, mandating substantial retirement savings and giving workers fewer choices about how much to save, how to invest it, and how to spend it in retirement. The politics of that are going to be pretty hairy, so expect to hear a lot of homilies about greed and the horrors of unregulated capitalism as practiced by . . .  the Department of Labor.

 

Maybe we could outsource this mess to the Swiss.