Tidbits Quotations
To Accompany the March 15, 2011 edition of Tidbits
Bob Jensen at Trinity University

Archive of Tidbits Quotations --- http://www.trinity.edu/rjensen/TidbitsDirectory.htm

U.S. Taxpayers are Paying Millions to Restore Mosques around the World --- http://www.wsbtv.com/video/25764282/index.html
Is this separation of church and state?

Paul Johnson --- http://en.wikipedia.org/wiki/Paul_Johnson_%28writer%29

Eminent United Kingdom historian Paul Johnson on the roots and outcomes of U.S. deficit spending
Modern Times:  1920s to the 1990s, by Paul Johnson
There's a paperback version for $13.90 --- Click Here

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"Why America Will Stay on Top," by Brian M. Carney, The Wall Street Journal, March 5, 2011 ---

In his best-selling history of the 20th century, "Modern Times," British historian Paul Johnson describes "a significant turning-point in American history: the first time the Great Republic, the richest nation on earth, came up against the limits of its financial resources." Until the 1960s, he writes in a chapter titled "America's Suicide Attempt," "public finance was run in all essentials on conventional lines"—that is to say, with budgets more or less in balance outside of exceptional circumstances.

"The big change in principle came under Kennedy," Mr. Johnson writes. "In the autumn of 1962 the Administration committed itself to a new and radical principle of creating budgetary deficits even when there was no economic emergency." Removing this constraint on government spending allowed Kennedy to introduce "a new concept of 'big government': the 'problem-eliminator.' Every area of human misery could be classified as a 'problem'; then the Federal government could be armed to 'eliminate' it."

Twenty-eight years after "Modern Times" first appeared, Mr. Johnson is perhaps the most eminent living British historian, and big government as problem-eliminator is back with a vengeance—along with trillion-dollar deficits as far as the eye can see. I visited the 82-year-old Mr. Johnson in his West London home this week to ask him whether America has once again set off down the path to self-destruction. Is he worried about America's future?

"Of course I worry about America," he says. "The whole world depends on America ultimately, particularly Britain. And also, I love America—a marvelous country. But in a sense I don't worry about America because I think America has such huge strengths—particularly its freedom of thought and expression—that it's going to survive as a top nation for the foreseeable future. And therefore take care of the world."

Pessimists, he points out, have been predicting America's decline "since the 18th century." But whenever things are looking bad, America "suddenly produces these wonderful things—like the tea party movement. That's cheered me up no end. Because it's done more for women in politics than anything else—all the feminists? Nuts! It's brought a lot of very clever and quite young women into mainstream politics and got them elected. A very good little movement, that. I like it." Then he deepens his voice for effect and adds: "And I like that lady—Sarah Palin. She's great. I like the cut of her jib."

The former governor of Alaska, he says, "is in the good tradition of America, which this awful political correctness business goes against." Plus: "She's got courage. That's very important in politics. You can have all the right ideas and the ability to express them. But if you haven't got guts, if you haven't got courage the way Margaret Thatcher had courage—and [Ronald] Reagan, come to think of it. Your last president had courage too—if you haven't got courage, all the other virtues are no good at all. It's the central virtue." ***

Mr. Johnson, decked out in a tweed jacket, green cardigan and velvet house slippers, speaks in full and lengthy paragraphs that manage to be at once well-formed and sprinkled with a healthy dose of free association. He has a full shock of white hair and a quick smile. He has, he allows, gone a bit deaf, but his mind remains sharp and he continues to write prolifically. His main concession to age, he says, is "I don't write huge books any more. I used to write 1,000 printed pages, but now I write short books. I did one on Napoleon, 50,000 words—enjoyed doing that. He was a baddie. I did one on Churchill, which was a bestseller in New York, I'm glad to say. 50,000 words. He was a goodie." He's also written short forthcoming biographies of Socrates (another "goodie") and Charles Darwin (an "interesting figure").

Mr. Johnson says he doesn't follow politics closely anymore, but he quickly warms to the subject of the Middle East. The rash of uprisings across the Arab world right now is "a very interesting phenomenon," he says.

"It's something that we knew all about in Europe in the 19th century. First of all we had the French Revolution and its repercussions in places like Germany and so on. Then, much like this current phenomenon, in 1830 we had a series of revolutions in Europe which worked like a chain reaction. And then in 1848, on a much bigger scale—that was known as the year of revolutions."

In 1848, he explains, "Practically every country in Europe, except England of course . . . had a revolution and overthrew the government, at any rate for a time. So that is something which historically is well-attested and the same thing has happened here in the Middle East."

Here he injects a note of caution: "But I notice it's much more likely that a so-called dictatorship will be overthrown if it's not a real dictatorship. The one in Tunisia wasn't very much. Mubarak didn't run a real dictatorship [in Egypt]. Real dictatorships in that part of the world," such as Libya, are a different story.

As for Moammar Gadhafi, "We'll see if he goes or not. I think he's a real baddie, so we hope he will." The Syrian regime, he adds, "not so long ago in Hama . . . killed 33,000 people because they rose up." Then, "above all," there is Iran. "If we can get rid of that horrible regime in Iran," he says, "that will be a major triumph for the world."

Frank judgments like these are a hallmark of Mr. Johnson's work, delivered with almost child-like glee. Of Mahatma Gandhi, he wrote in "Modern Times": "About the Gandhi phenomenon there was always a strong aroma of twentieth-century humbug."

Socrates is much more to Mr. Johnson's liking. Whereas, in Mr. Johnson's telling, Gandhi led hundreds of thousands to death by stirring up civil unrest in India, all the while maintaining a pretense of nonviolence, Socrates "thought people mattered more than ideas. . . . He loved people, and his ideas came from people, and he thought ideas existed for the benefit of people," not the other way around.

In the popular imagination, Socrates may be the first deep thinker in Western civilization, but in Mr. Johnson's view he was also an anti-intellectual. Which is what makes him one of the good guys. "One of the categories of people I don't like much are intellectuals," Mr. Johnson says. "People say, 'Oh, you're an intellectual,' and I say, 'No!' What is an intellectual? An intellectual is somebody who thinks ideas are more important than people."

And indeed, Mr. Johnson's work and thought are characterized by concern for the human qualities of people. Cicero, he tells me, was not a man "one would have liked to have been friends with." But even so the Roman statesman is "often very well worth reading."

His concern with the human dimension of history is reflected as well in his attitude toward humor, the subject of another recent book, "Humorists." "The older I get," he tells me, "the more important I think it is to stress jokes." Which is another reason he loves America. "One of the great contributions that America has made to civilization," he deadpans, "is the one-liner." The one-liner, he says, was "invented, or at any rate brought to the forefront, by Benjamin Franklin." Mark Twain's were the "greatest of all."

And then there was Ronald Reagan. "Mr. Reagan had thousands of one-liners." Here a grin spreads across Mr. Johnson's face: "That's what made him a great president."

Jokes, he argues, were a vital communication tool for President Reagan "because he could illustrate points with them." Mr. Johnson adopts a remarkable vocal impression of America's 40th president and delivers an example: "You know, he said, 'I'm not too worried about the deficit. It's big enough to take care of itself.'" Recovering from his own laughter, he adds: "Of course, that's an excellent one-liner, but it's also a perfectly valid economic point." Then his expression grows serious again and he concludes: "You don't get that from Obama. He talks in paragraphs." ***

Mr. Johnson has written about the famous and notorious around the world and across centuries, but he's not above telling of his personal encounters with history. He is, he says, "one of a dwindling band of people who actually met" Winston Churchill.

Continued in article

Jensen Comment
I think the entitlements crisis in American is currently too unique and too serious to justify such optimism. ---

 I lean more to the prognosis of Harvard historian Niall Ferguson.

Harvard Profession Video:   Niall Ferguson: Empires on the Edge of Chaos ---

Call it the fatal arithmetic of imperial decline. Without radical fiscal reform, it could apply to America next.
Niall Ferguson, "An Empire at Risk:  How Great Powers Fail," Newsweek Magazine Cover Story, November 26, 2009 --- http://www.newsweek.com/id/224694/page/1
Please note that this is NBC’s liberal Newsweek Magazine and not Fox News or The Wall Street Journal.

. . .

In other words, there is no end in sight to the borrowing binge. Unless entitlements are cut or taxes are raised, there will never be another balanced budget. Let's assume I live another 30 years and follow my grandfathers to the grave at about 75. By 2039, when I shuffle off this mortal coil, the federal debt held by the public will have reached 91 percent of GDP, according to the CBO's extended baseline projections. Nothing to worry about, retort -deficit-loving economists like Paul Krugman.

. . .

Another way of doing this kind of exercise is to calculate the net present value of the unfunded liabilities of the Social Security and Medicare systems. One recent estimate puts them at about $104 trillion, 10 times the stated federal debt.

Continued in article --- http://www.newsweek.com/id/224694/page/1

Bob Jensen's threads on entitlements ---

"A Democrat's Triumphal Return to Cairo:  Saad Eddin Ibrahim, the former prisoner of the Mubarak regime, on the Muslim Brotherhood and Egypt's political future," by Bari Weiss, The Wall Street Journal, February 26, 2011 ---

For 18 days, the people of Cairo massed in Tahrir Square to bring down their pharaoh. Many carried signs: "Mubarak: shift + delete," "Forgive me God, for I was scared and kept quiet," or simply "Go Away." Barbara Ibrahim, a veteran professor at the American University in Cairo, wore large photographs of her husband—Egypt's most famous democratic dissident—as a makeshift sandwich board.

Her husband, Saad Eddin Ibrahim, couldn't be there. After being imprisoned and tortured by the Mubarak regime from 2000 to 2003, he went into a sort of exile, living and teaching abroad. But the day Hosni Mubarak gave up power, Feb. 11, Mr. Ibrahim hopped a plane from JFK International. Landing in his native Cairo, he went directly to the square.

"It was just like, how do you say, the day of judgment," Mr. Ibrahim says. "The way the day of judgment is described in our scripture, in the Quran, is where you have all of humanity in one place. And nobody recognizes anybody else, just faces, faces."

And what faces they were: bearded, shorn, framed by hijabs, young, old—and at one point even a bride and groom. "The spirit in the square was just unbelievable," says Mr. Ibrahim, whose children and grandchildren were among the masses. "These people, these young people, are so empowered. They will never be cowed again by any ruler—at least for a generation."

For the 72-year-old sociologist, the revolution against Hosni Mubarak has been many years in the making. His struggle began 10 years ago with a word: jumlukiya. A combination of the Arabic words for republic (jumhuriya) and monarchy (malikiya), the term was coined by Mr. Ibrahim to characterize the family dynasties of the Mubaraks of Egypt and the Assads of Syria.

He first described jumlukiya on television during the June 2000 funeral of Syrian dictator Hafez al-Assad. Then he wrote about it in a magazine article that "challenged all the autocrats of the region to open up and have a competitive election."

The magazine appeared on the morning of June 30, 2000. But it vanished from Egyptian newsstands by midday. By midnight, Mr. Ibrahim was arrested at his home. "Then began my confrontation with the Mubarak regime—the trials, and three year imprisonment, and the defamation, all of that. That was the beginning."

. . .

'Dislikable as [President Bush] may have been to many liberals, including my own wife, we have to give him credit," says Mr. Ibrahim. "He started a process of some conditionality with American aid and American foreign policy which opened some doors and ultimately was one of the building blocks for what's happening now." That conditionality extended to Mr. Ibrahim: In 2002, the Bush administration successfully threatened to withhold $130 million in aid from Egypt if Mr. Mubarak didn't release him.

So what should the White House do? "Publicly endorse every democratic movement in the Middle East and offer help," he says. The least the administration can do is withhold "aid and trade and diplomatic endorsement. Because now the people can do the job. America doesn't have to send armies and navies to change the regimes. Let the people do their change."

"How to Live Freer in New Hampshire:  With all eyes on Wisconsin this past week, overlooked has been the conservative policy changes that are moving ahead in New Hampshire," by Stephen Moore, The Wall Street Journal, February 25, 2011 ---

With all eyes on Wisconsin this past week, overlooked has been the conservative policy changes that are moving ahead in New Hampshire. In recent days the New Hampshire House, where the GOP controls nearly three-quarters of the 400 seats, passed a bill to repeal the state cap-and-trade law that imposes a tax on energy use and a bill to make New Hampshire a right-to-work state.

Democratic Gov. John Lynch has vowed to veto both bills, but my sources in Concord say there's a chance that the vetoes could be overridden. Meanwhile, Republicans are also set to pass a spending reduction bill with the kinds of public sector pension reforms that have incited protests from the labor unions in the Midwest.

New Hampshire has always been the island of liberty and low taxes surrounded by a sea of Northeastern-style socialism. It's the only state in the region without an income tax or statewide sales tax, and per-capita spending is about half of what's found in New York and New Jersey. Republicans won huge majorities in both houses in November after turning blue in 2008 and voting for President Obama.

If New Hampshire becomes a right-to-work state, it would be the only New England state that does not force workers to join a union and pay dues. The bill passed by 221-131 but still lacks the two-thirds majority that's needed for a veto override. House Deputy Speaker Pamela Tucker said that becoming a right-to-work state "would help us become a haven for employers seeking a pro-business environment." She added: "Freedom is a core New Hampshire belief, and freedom of association and choice is a fundamental right of every New Hampshire citizen."

In 2008, New Hampshire joined something called the Regional Greenhouse Gas Initiative, a region-wide cap-and-trade system for state utilities. So far, it's resulted in about $27 million in higher electric costs for consumers, and the environmental benefits have been dubious. "It does nothing to reduce greenhouse gases because jobs and businesses just move to other states," says Corey Lewandowski, the New Hampshire director of Americans for Prosperity. His group is working to make New Hampshire the first state in the nation to repeal an existing global warming law. The repeal bill passed with a two-thirds majority, and the state Senate is expected to follow suit with the necessary margin to override a veto.

Jensen Comment
In spite of now being labeled a conservative Yankee state, New Hampshire is surprisingly liberal on many issues. It has had a succession of senators and representatives that it sent to Washington DC prior to the 2008 election. Governors have be Democrats for decades. And New Hampshire is not only one of the few states sanctifying gay marriage, the Republican-controlled legislature just turn down an effort to repeal the gay marriage law.

More notably, New Hampshire is one of the least friendly states to private sector corporate businesses in terms of business taxes and fees.

Pew Research Center:
Labor Unions Seen as Good for Workers, Not U.S. Competitiveness ---  http://people-press.org/report/705/

"Public Unions Get Too 'Friendly' They resemble 'On the Waterfront' more than 'Norma Rae.'," by Peggy Noonan, The Wall Street Journal, March 4, 2011 ---

Let's look for a second at one of the most famous battles, in New Jersey. A year ago Chris Christie was sworn in as the new governor. He immediately faced a $10.7 billion deficit and catastrophic debt projections. State and local taxes were already high, so that if he raised them he'd send people racing out of the state. So Mr. Christie came up with a plan. He asked the state's powerful teachers union for two things: a one-year pay freeze—not a cut—and a modest 1.5% contribution to their benefit packages.

The teachers union went to war. They said, "Christie is trying to kill the unions," so they tried to kill him politically. They spent millions on ads trying to take him down.

And it backfired. They didn't kill him, they made him. Chris Christie is a national figure now because the teachers union decided, in an epic political drama in which arithmetic is the predominant fact, to ignore the math. They also decided to play the wrong role in the drama. They decided to play the role of Johnny Friendly, on whom more in a moment.

If the union leaders had been smart—if they'd had a heart!—they would have held a private meeting and said, "Look, the party's over. We've done great the past 20 years, but now taxpayers are starting to resent us, and they have reason. They're losing their benefits and footing the bill for our gold-plated plans, they don't have job security and we do, taxes are high. We have to back off."

They didn't do this. It was a big mistake. And the teachers union made it just as two terrible but unrelated things were happening to their reputation. In what might be called an expression of the new spirit of transparency that is sweeping the globe, two documentaries came out in 2010, "The Lottery" and "Waiting for Superman." Both were made by and featured people who are largely liberal in their sympathies, and both said the same brave thing: The single biggest impediment to better schools in our country is the teachers unions, which look to their own interests and not those of the kids.

In both films, as in real life, the problem is the unions themselves, not individual teachers. They present teachers who are heroic, who are creative and idealistic. But they too, in the films, are victims of union rules.

That's the unions' problem in terms of atmospherics. They are starting to destroy their own reputation. They are robbing themselves of their mystique. They still exist, and they're big and rich—a force—but they are abandoning the very positive place they've held in the American imagination. Polls are all over the place on union support, but I'm speaking of the kind of thing that is hard to quantify and that has to do with words like "luster" and "tradition."

Unions have been respected in America forever, and public employee unions have reaped that respect. There are two great reasons for this. One is that unions always stood for the little guy. The other is that Americans like balance. We have management over here and the union over here, they'll talk and find balance, it'll turn out fine.

But with the public employee unions, the balance has been off for decades. And when they lost their balance they fell off their pedestal.

Continued in article

"George Will on progressives' infatuation with high-speed rail projects," by George Will, Newsweek via The Wall Street Journal, February 27, 2011 ---

Generations hence, when the river of time has worn this presidency's importance to a small, smooth pebble in the stream of history, people will still marvel that its defining trait was a mania for high-speed rail projects. This disorder illuminates the progressive mind. . . .

Forever seeking Archimedean levers for prying the world in directions they prefer, progressives say they embrace high-speed rail for many reasons—to improve the climate, increase competitiveness, enhance national security, reduce congestion, and rationalize land use. The length of the list of reasons, and the flimsiness of each, points to this conclusion: the real reason for progressives' passion for trains is their goal of diminishing Americans' individualism in order to make them more amenable to collectivism.

To progressives, the best thing about railroads is that people riding them are not in automobiles, which are subversive of the deference on which progressivism depends. Automobiles go hither and yon, wherever and whenever the driver desires, without timetables. Automobiles encourage people to think they—unsupervised, untutored, and unscripted—are masters of their fates. The automobile encourages people in delusions of adequacy, which make them resistant to government by experts who know what choices people should make.

Time was, the progressive cry was "Workers of the world unite!" or "Power to the people!" Now it is less resonant: "All aboard!"

"How Not to Lay Off Teachers:  New evidence supports merit-based dismissals. Cuomo ducks and covers," The Wall Street Journal, March 9, 2011 ---

The problem isn't unique to New York, and neither is the public sentiment. The federal stimulus dollars that allowed school districts to delay inevitable belt-tightening are running out. The steep deficits that states now face mean that teacher layoffs this year are unavoidable. Parents understandably want the best teachers spared. Yet in 14 states it is illegal for schools to consider anything other than a teacher's length of service when making layoff decisions.

It gets worse. "Many people don't realize that teachers are not evenly distributed nationwide," says Tim Daly of the New Teacher Project, which has released a new report on the nationwide impact on quality-blind layoffs. "Fourteen states have these rules but about 40% of all teachers work in those states, and they're the states with the biggest budget deficits." In addition to New York, the list includes California, New Jersey, Pennsylvania, Ohio, Illinois and Wisconsin.

The unions that support these laws insist that seniority is the only "fair" way to reduce the teaching work force, whose growth in many states has outpaced student enrollment over the past decade. In fact, states already have some objective measures of teacher performance, even if they aren't used when making layoff decisions. All states, for example, possess performance evaluations and teacher attendance data that could potentially inform layoff decisions.

The real problem is the underlying assumption that seniority is a decent proxy for performance. Not surprisingly, research shows that if you look at all first-year teachers as a group, they're not as good as the second-year teachers as a group. But research also shows the folly of basing layoffs on a single variable.

"You don't lay off cohorts; you lay off individual teachers," says Mr. Daly. "So using research about teachers as a group is misleading with respect to any individual teacher." Citing two recent studies on seniority-based layoffs, Mr. Daly explains that "only about 20% of the teachers who have the least seniority are also among the least effective teachers in a district. About 80% of the time, there's a teacher who's worse that you could have laid off but didn't because they had more seniority."

Continued in article

Jensen Comment
What's not clear to me is what happens when there are closings of entire schools such as what will happen in Detroit this year. Are the most senior teachers redistributed among the remaining schools such that the younger and perhaps better teachers are laid off in the surviving schools? I don't know the teacher's union rules on this issue. If the individual schools themselves control the selection of new teachers, it seems a little unfair to force these schools to take some redistributed teachers and fire teachers previously hired by the surviving schools.

Can an older Detroit teacher be forced upon an East Lansing or Okemos school district?
Can an older Milwaukee teacher be forced upon a Madison school district?
I assume school districts have no forced redistribution from outside the district, but I could be wrong.

Bob Jensen's threads on tenure are at

Also see


"Vilsack's Candor The Agriculture Secretary moves on ethanol," The Wall Street Journal, March 4, 2011 ---

By now we're used to hearing (if that's the word) from the ethanol lobby, but the calls don't usually come from the Secretary of Agriculture. Still, our conversation this week with Tom Vilsack was valuable: We didn't expect the former Iowa Governor to renounce the corn-state religion, though he was more candid than most ethanol backers.

"I recognize and appreciate that we'll have to rethink our position on virtually everything we do in terms of where resources are spent," Mr. Vilsack said. "My concern about the tax credit is that we create a cliff rather than a glide path off of that tax credit." Screeching record noise. Was he really suggesting that the Obama Administration is revisiting support for an industry that has been subsidized by both parties since the 1970s, when it was known as gasahol, and whose government crutches now include a mandate to buy its product and protection from foreign competitors?

Mr. Vilsack responded, "I think there needs to be a discussion about what kind of support needs funding. I think we could probably be a bit more creative in how we use this incentive. . . . Maybe we no longer need quite the level of support for blenders." The "third way, a better way" he floated as an option was to phase out the production tax credit and tariff over time. In return, a bargain might include new "incentives [that] are time limited" for flex-fuel vehicles and the special pumps filling stations need to install to sell higher ethanol-gasoline concentrations like E85.

That happens to be Big Ethanol's latest lobbying priority, and the likelihood is that they'll merely pocket the new subsidy and figure out a way to preserve all their other taxpayer stipends. The industry always has. Still, Mr. Vilsack may be the first Agriculture Secretary in generations to concede that ethanol subsidies are not immutable. That's progress.


Video Lecure by Nobel Lauriate Robert Merton
The Future of Finance
MIT World

In his keynote address, Robert Merton chooses not to focus on the financial crisis. It is clear to him there were “fools and knaves,” as well as “many structural elements that would have happened even if people were well behaved and well informed” -- risks are simply “embedded in our systems.” Instead, Merton explores how financial engineering is essential in preparing for the inevitable next crisis, and in solving critical challenges. “The world has changed; we can’t go back. Let’s talk about what we should do going forward.”

To illustrate society’s need for financial innovation, Merton uses “a live case study:” the vast problem of retirement funding. In the past decade, stock market declines and falling interest rates have hit mainstream employer pension plans hard. Municipal pension plans may be underfunded to the tune of three trillion dollars. (“It makes the S&L crisis look like nothing.”) But people seek, and are due, “the standard of living during retirement they enjoyed in the latter part of their work life.”

Generally, determining this standard of living means adding up likely medical, housing and general consumption costs, and Merton describes how to target such retirement income. The main ways to achieve the desired goal are by saving more, working longer or taking more risk. Merton would like to design a software-based tool for ordinary people, simple on the user end, complex on the provider end, which would serve as a “next generation pension solution,” offering a way to manipulate the key variables in retirement income and demonstrate potential financial outcomes. This tool would help users continuously optimize risk to help them reach their retirement funding goals.

There are regulatory obstacles now to the implementation of such a method on a widespread basis, and a gap between how managers, advisers and financial institutions think about pension assets, and what Merton has in mind. Nevertheless, he says, “What we need to do for most of the people who don’t have extra money and must do the most with their assets is deliver a simple, easy to use, and if they don’t use it still gets them there, solution.” Merton acknowledges those who think the giant problem of pension funding can be solved by what’s already available -- bond and equity markets, bank loans – and who hanker “to get rid of all the complexity, go back to 1930, ’50 or ’80.” From his perspective, this means “throwing away a lot of what you could do, because the market-proven strategies people have developed and used…can do a much better job for people.”

Jensen Comment
Contributing to the pension crisis has been a willingness of the accounting and auditing profession to allow both the public and private sectors to deceive taxpayers and investors about the extend to which contracted pension obligations are off the balance sheet and not even disclosed properly.

The sad state of governmental accounting ---

Off Balance Sheet Financing (OBSF) ---

"Un-American Revolutions:  Most rebellions end in carnage and tyranny. So why are Americans cheering on the Arab revolutionary wave?" by Niall Ferguson, Newsweek Magazine, March 7, 2011, pp. 2-3 ---

Americans love a revolution. Their own great nation having been founded by a revolutionary declaration and forged by a revolutionary war, they instinctively side with revolutionaries in other lands, no matter how different their circumstances, no matter how disastrous the outcomes. This chronic reluctance to learn from history could carry a very heavy price tag if the revolutionary wave currently sweeping across North Africa and the Middle East breaks with the same shattering impact as most revolutionary waves.
Benjamin Franklin and Thomas Jefferson hailed the French Revolution. “The French have served an apprenticeship to Liberty in this country,” wrote the former, “and now … they have set up for themselves.” Jefferson even defended the Jacobins, architects of the bloody Reign of Terror. “The liberty of the whole earth was depending on the issue of the contest,” he wrote in 1793, “and was ever such a prize won with so little innocent blood? … Rather than [the revolution] should have failed, I would have seen half the earth desolated.”
In Ten Days That Shook the World, the journalist John Reed was equally enthusiastic about the Russian Revolution of 1917, a book for which Lenin himself (“great Lenin” to Reed) wrote an enthusiastic preface. Reed’s counterpart in China’s communist revolution was Edgar Snow, whose characterization of Mao—“He had the simplicity and naturalness of the Chinese peasant, with a lively sense of humor and a love of rustic laughter”—today freezes the blood.
Time and again, Americans have hailed revolutions, only to fall strangely silent as those same revolutions proceeded to devour not only their own children but many other people’s too. In each case the body count was in the millions.
So as you watch revolution sweeping through the Arab world (and potentially beyond), remember these three things about non-American revolutions:
  • They take years to unfold. It may have seemed like glad confident morning in 1789, 1917, and 1949. Four years later it was darkness at noon.
  • They begin by challenging an existing political order, but the more violence is needed to achieve that end, the more the initiative passes to men of violence—Robespierre, Stalin, and the supremely callous Mao himself.
  • Because neighboring countries feel challenged by the revolution, internal violence is soon followed by external violence, either because the revolution is genuinely threatened by foreigners (as in the French and Russian cases) or because it suits the revolutionaries to blame an external threat for domestic problems (as when China intervened in the Korean War).
To which an American might reply: yes, but was all this not true of our revolution too? The American Revolution was protracted: five years elapsed between the Declaration of Independence and Yorktown. It was violent. And it was, of course, resisted from abroad. Yet the scale of the violence in the American Revolution was, by the standards of the other great revolutions of history, modest. Twenty times as many Frenchmen were killed in battle between 1792 and 1815 as Americans between 1775 and 1783. And, as Maya Jasanoff points out in her brilliant new book, Liberty’s Exiles, the losers in the American Revolution were not guillotined, or purged, or starved to death. Most of them simply left the 13 rebel colonies for more stable parts of the British Empire and got on with their lives.

Continued in article

"The Decline of U.S. Naval Power," by Mark Halprin, The Wall Street Journal, March 2, 2011 ---

Last week, pirates attacked and executed four Americans in the Indian Ocean. We and the Europeans have endured literally thousands of attacks by the Somali pirates without taking the initiative against their vulnerable boats and bases even once. Such paralysis is but a symptom of a sickness that started some time ago.

The 1968 film, "2001: A Space Odyssey," suggested that in another 30 years commercial flights to the moon, extraterrestrial mining, and interplanetary voyages would be routine. Soon the United States would send multiple missions to the lunar surface, across which astronauts would speed in vehicles. If someone born before Kitty Hawk's first flight would shortly after retirement see men riding around the moon in an automobile, it was reasonable to assume that half again as much time would bring progress at a similarly dazzling rate.

It didn't work out that way. In his 1962 speech at Rice University, perhaps the high-water mark of both the American Century and recorded presidential eloquence, President Kennedy framed the challenge not only of going to the moon but of sustaining American exceptionalism and this country's leading position in the world. He was assassinated a little more than a year later, and in subsequent decades American confidence went south.

Not only have we lost our enthusiasm for the exploration of space, we have retreated on the seas. Up to 30 ships, the largest ever constructed, each capable of carrying 18,000 containers, will soon come off the ways in South Korea. Not only will we neither build, own, nor man them, they won't even call at our ports, which are not large enough to receive them. We are no longer exactly the gem of the ocean. Next in line for gratuitous abdication is our naval position.

Separated by the oceans from sources of raw materials in the Middle East, Africa, Australia and South America, and from markets and manufacture in Europe, East Asia and India, we are in effect an island nation. Because 95% and 90% respectively of U.S. and world foreign trade moves by sea, maritime interdiction is the quickest route to both the strangulation of any given nation and chaos in the international system. First Britain and then the U.S. have been the guarantors of the open oceans. The nature of this task demands a large blue-water fleet that simply cannot be abridged.

With the loss of a large number of important bases world-wide, if and when the U.S. projects military power it must do so most of the time from its own territory or the sea. Immune to political cross-currents, economically able to cover multiple areas, hypoallergenic to restive populations, and safe from insurgencies, the fleets are instruments of undeniable utility in support of allies and response to aggression. Forty percent of the world's population lives within range of modern naval gunfire, and more than two-thirds within easy reach of carrier aircraft. Nothing is better or safer than naval power and presence to preserve the often fragile reticence among nations, to protect American interests and those of our allies, and to prevent the wars attendant to imbalances of power and unrestrained adventurism.

And yet the fleet has been made to wither even in time of war. We have the smallest navy in almost a century, declining in the past 50 years to 286 from 1,000 principal combatants. Apologists may cite typical postwar diminutions, but the ongoing 17% reduction from 1998 to the present applies to a navy that unlike its wartime predecessors was not previously built up. These are reductions upon reductions. Nor can there be comfort in the fact that modern ships are more capable, for so are the ships of potential opponents. And even if the capacity of a whole navy could be packed into a small number of super ships, they could be in only a limited number of places at a time, and the loss of just a few of them would be catastrophic.

The overall effect of recent erosions is illustrated by the fact that 60 ships were commonly underway in America's seaward approaches in 1998, but today—despite opportunities for the infiltration of terrorists, the potential of weapons of mass destruction, and the ability of rogue nations to sea-launch intermediate and short-range ballistic missiles—there are only 20.

As China's navy rises and ours declines, not that far in the future the trajectories will cross. Rather than face this, we seduce ourselves with redefinitions such as the vogue concept that we can block with relative ease the straits through which the strategic materials upon which China depends must transit. But in one blink this would move us from the canonical British/American control of the sea to the insurgent model of lesser navies such as Germany's in World Wars I and II and the Soviet Union's in the Cold War. If we cast ourselves as insurgents, China will be driven even faster to construct a navy that can dominate the oceans, a complete reversal of fortune.

Continued in article

From Huffington Post
The most creative and manipulative accountants in the public sector would not have used adopted the ploys used by governmental accountants and teachers' unions to hide horrible performance?

"[R]eally, when you get down to it, the guys at Enron never would have done this.
Bill Gates

Remedying state budget crises will take better accounting, better tools, and more respect for leaders who step up to address these problems, Gates argued. "We need to reward politicians," he said. "Whenever they say there are these long-term problems, we can't say, 'Oh, you're the messenger with bad news? We just shot you.'"
"Bill Gates On States' Accounting: 'The Guys At Enron Never Would Have Done This'." by Bianca Boscar, Huffington Post, March 3. 2011 ---

During a second appearance onstage at the annual TED conference, Bill Gates spoke out against worsening state budget deficits caused by accounting "tricks" he said would make Enron's former executives blush.

The Microsoft co-founder and philanthropist said state budgets have received a puzzling lack of scrutiny and have been "riddled with gimmicks" aimed at deferring or disguising the true costs of public employees' health care and pension obligations, citing California's ongoing budget crisis as an example of creative deficit spending and the subsequent cuts to education spending as an unacceptable cost.

"[R]eally, when you get down to it, the guys at Enron never would have done this. This is so blatant, so extreme," Gates said of state governments' accounting practices generally. "Is anyone paying attention to some of the things these guys do? They borrow money -- they're not supposed to, but they figure out a way -- they make you pay more in withholding to help their cashflow out, they sell off the assets, they defer the payments, they sell off the revenues from tobacco."

Gates argued that government accounting practices should be more like private accounting. "The amount of IQ and good numeric analysis both inside Google and Microsoft and outside ... really is quite phenomenal. Everybody has an opinion. There's great feedback and the numbers are used to make the decision," he said. "If you go over to the education spending and health care spending ... you don't have that type of involvement on a number that's more important in terms of equity and in terms of learning."

The former Microsoft chief executive, now the co-chair of the Bill & Melinda Gates Foundation, said youth and education programs stand to lose the most as a result of the gaping holes in state budgets.

"It really is the young versus the old to some degree. If you don't solve what you're doing in health care, you're going to be deinvesting in the young," Gates said. "With the kind of cuts we're talking about, it will be far, far harder to get these incentives for excellence or to move over to use technology in the new way."

Remedying state budget crises will take better accounting, better tools, and more respect for leaders who step up to address these problems, Gates argued. "We need to reward politicians," he said. "Whenever they say there are these long-term problems, we can't say, 'Oh, you're the messenger with bad news? We just shot you.'"

The bottom line, according to Gates: "We need to care about state budgets because they are critical for our kids and our future."

Get the latest updates from TED here.

Jensen Comment

Take Home 1
Bill Gates claims that good teachers are the most important ingredient of learning in schools (although I don't think he underestimates the even greater importance of the home environment). He therefore recommends both increasing class sizes of good teachers and rewarding them accordingly for the added effort needed to handle larger classes. Bob Jensen conditionally supports this if the good teachers get the added support needed such as multiple teachers aids and software support.

Take Home 2
Get the bad teachers out of the system and, at a minimum, stop rewarding them with automatic raises based on seniority alone. Bob Jensen thinks that protectionism of bad teachers or uncaring teachers or absentee teachers is probably the most harmful program of teachers' unions when coupled with protectionist game playing by unions to protect bad schools along with bad teachers.

Take Home 3
Bill Gates claims it has never been demonstrated that advanced degrees in education that are automatically rewarded with lifetime pay raises are instrumental in improving teaching and learning. Bob Jensen agrees. I've witnessed to many masters programs in education that are tantamount to summer vacations for teachers.

Bob Jensen's threads on the controversies of higher education ---

Bob Jensen's threads on the horrid state of governmental accounting are at

Business Week's Slideshow on Where the Richest People Live ---

America's Most Expensive Blocks by State (note the arrows in the upper right corner) ---

Jensen Comment
This most certainly does not tell us where some of the richest people live most of the time. Many rich people do not buy the most expensive homes. Instead they "live" in luxury hotels, yachts, and expensive rental properties owned by real estate corporations. For many years Mamie Eisenhower lived in the Waldorf-Astoria luxury hotel. A very wealthy woman lived full time on the QE2 cruise liner while it was still in operation. Before he died of a sudden heart attack, Ken Lay was looking forward to joining his friend Jeff Skilling in Club Fed.

And where would you say Ted Turner "lives?" He has at least 15 ranches and owns nearly 2 million acres in various parts of the world, especially in Australia. He also has various homes to go to when he moves about. "Turner's biggest ranch is Vermejo Park Ranch in New Mexico. At 920 square miles (2,400 km2), it is the largest privately owned, contiguous tract of land in the United States," but this does not mean he spends much time at this ranch ---


Medicare is the real killer. According to Eugene Steuerle of the Urban Institute, an average couple retiring last year can look forward to consuming Medicare benefits with a present value of $343,000, having paid Medicare taxes with a present value of $109,000.
Holman W. Jenkins, Jr.  

"Let's Begin Obama's 'Conversation' on Entitlements:  A couple retiring last year paid $109,000 into Medicare but can expect $343,000 back from the system," by Holman W. Jenkins, Jr., The Wall Street Journal, February 26, 2011 ---

Nobody should be surprised that public-sector workers in Wisconsin and elsewhere are fighting to preserve every penny of their promised benefits.

Nobody should be surprised that state governors—and it doesn't matter which party—are trying to trim those privileges and benefits.

Nobody should be surprised by anything.

News reporters may be naïve, and some of the protesters may pretend to be. But this fight was penciled in long ago, when politicians and union leaders made the strategic decision to negotiate benefits without negotiating for the funding to make good on them. The mock shock and horror is all the more laughable given that events in Wisconsin are a perfect microcosm of the battle that every sentient American knows, and has known for a generation, awaits Medicare and Social Security.

In keeping with the theatrics of naïveté, President Obama now calls for "beginning a conversation on entitlements." One wonders what it was, then, that G.W. Bush began at the 2004 Republican convention, or what thinkers and activist groups that have been pushing visions of entitlement reform for decades have been doing.

Has the president not heard of the private sector's pioneering work on "defined contributions"? Or Bill Clinton's landmark Medicare commission in 1999? One might as well wonder what pain is coming to those Obama followers who have yet to suspect their thoughtful liberal might be a visionless apparatchik.

Don't doubt that Mr. Obama's real impulse, like that of most Democrats, is to let things ride and then simply, amid a crisis, start slashing benefits for the "rich" while also raising taxes on "the rich." Unspoken has been a Democratic assumption that an aging electorate, in a crisis, would be willing to tax itself to the hilt to prop up an unreformed or barely reformed Social Security and Medicare.

Even if this assumption were electorally sound, economics won't oblige in the crisis that's coming. The necessary tax hikes would kill any hope of growth. The economy would continue its free fall without root-and-branch entitlement cuts all the more painful for having been delayed.

Let's lay down a couple of markers for "the conversation" Mr. Obama pretends he wants to have. The transition to a new system, in which workers save for their own retirement consumption, will have to be financed—that is, we'll have to borrow to settle the claims of those who are retired or nearing retirement and can't be left in the lurch.

Medicare is the real killer. According to Eugene Steuerle of the Urban Institute, an average couple retiring last year can look forward to consuming Medicare benefits with a present value of $343,000, having paid Medicare taxes with a present value of $109,000.

And don't let that figure get your hopes up, because even that $109,000 is not available today. That money was spent long ago. The government's trust funds are a fraud. Indeed, by some large amount, society missed out over many decades on domestic savings and investment that would have taken place had workers not been relying on unfunded government promises to support them in retirement.

The flip side of this depressing consideration, though, is a happier one. Moving toward a system of real savings, in which payroll taxes would flow into some version of personal accounts controlled by the worker, would bring a big improvement to incentives. We could expect a sizeable growth dividend to help finance the transition.

By "finance the transition," of course, we mean today's workers having to reach into their own pockets twice, paying for their own retirement while also making up for the saving their parents and grandparents didn't do. When people talk about generational injustice, this is what they mean. But the pain can be lightened and spread more evenly with borrowing. Here's where we should not be afraid of debt. The bond market can be trusted to distinguish between good debt and bad debt—between borrowing to fix the system and borrowing to prop it up.

Continued in article

Bob Jensen's threads on entitlements are at

Bob Jensen's threads on health care are at

"Bachmann Exposes $105 Billion Secret," by Phyllis Schlaffy, Townhall, March 15, 2011 ---

When ObamaCare was passed by the Senate on Christmas Eve of 2009, senators had less than 72 hours to compare a 383-page package of amendments to the 2,074-page bill. Public outrage over backroom deals (such as the Cornhusker Kickback and the Louisiana Purchase) led to the election of Scott Brown in Massachusetts.

Democrats then cooked up a plan to link the now-2,409-page Senate-passed ObamaCare bill to dozens of amendments contained in a separate 150-page Budget Reconciliation bill that could pass both houses by a simple majority. That's when then-Speaker Nancy Pelosi famously told the then-Democratic majority, "We have to pass the bill so that you can find out what is in it."

When President Obama signed ObamaCare into law, that set in motion a series of funding triggers and money transfers that add up to $105,464,000,000 in pre-authorized appropriations that are scheduled to be paid up through FY2019. In laymen's language, that means writing postdated checks that are guaranteed to be paid out over the next eight years.

This money was divided into dozens of smaller amounts so the big total would not be apparent. For example, Section 2953 of ObamaCare included a pre-funded appropriation of $75 million a year for five years to "educate adolescents" in "adult preparation subjects" such as "stress management" and "the development of healthy attitudes and values about adolescent growth and development, body image, racial and ethnic diversity, and other related subjects."

Section 4101(a) of ObamaCare prefunded $200 million a year over four years for the construction of school-based health centers. In Section 4002, a total of $17,750,000,000 will be deposited over 10 years to a discretionary account controlled by the HHS secretary (currently Kathleen Sebelius), who may spend that money "to provide for expanded and sustained national investment in prevention" and to "help restrain the rate of growth in private and public sector health care costs."

Continued in article

Also see http://townhall.com/columnists/terryjeffrey/2011/03/16/congress_must_stop_$1055_billion_in_automatic_obamacare_spending

The Unions are Making More Concessions Than They Get Credit for in the Media

"The Wisconsin Idea," by Christopher Phelps, The Chronicle of Higher Education's Chronicle Review, March 2, 2011 ---

They have filled Madison's Capitol Square and spilled down State Street, a sea of Wisconsin Badger red.

They have jammed the Capitol rotunda, remaining around the clock, dozing on hard marble floors in sleeping bags, testifying before the Assembly, and transforming the beautiful Capitol building into a house of the people.

They have let it be known that they consider the right to a union essential to democracy and that they reject Republican Gov. Scott Walker's plan to end collective bargaining for local, county, and state public employees on all issues apart from wages—including pensions, health insurance, and working conditions.

They are still at it, numbering in the tens of thousands, with 70,000 participating in the largest two demonstrations to date. Sons, daughters, husbands, wives, friends, neighbors, students: Wisconsin's public has turned out en masse on behalf of the state's public workers.

What significance do these Wisconsin developments hold?

First, as the largest American labor action in the new century, the activity in Wisconsin is setting an example for a rebirth of labor sentiment after decades of setbacks. A spontaneous outpouring of community opinion, the Wisconsin upsurge recalls the epoch when unions were not stigmatized as special interests but widely understood to express the interests of ordinary people.

Second, this is the first time in the Great Recession that a nationwide protest movement has materialized that does not reflect the agenda of Glenn Beck and Rush Limbaugh. Not only has the Wisconsin movement emerged spontaneously, from below, in contrast to Fox News's relentless touting of the Tea Parties, but it also represents a rebellion directly opposed to the agenda that tipped the national conversation far to the right in the early years of the Obama administration. This is another kind of populism.

What accounts for so stunning a development? A unique confluence: the crystalline clarity with which the issue of labor rights has been posed in Wisconsin, the stirring international context of democratic revolution, and a strong sense that the proposed change would eviscerate Wisconsin tradition.

In a shrewd move, the two leading Wisconsin public employees' unions, in deference to a climate of fiscal discipline, pledged to accept every pay and benefit cut the governor proposed. That left one disputed point and one only: the right to bargain collectively.

To strip most public workers of bargaining rights, as Walker desires, would constitute the most significant rollback of labor protection in the United States in decades. One might think such a prospect would create a sour mood. But the Wisconsin throngs have exhibited only buoyant Midwestern conviction in the pleasant surprise of finding one's instincts confirmed by a sudden torrent of humanity. They have politely picked up their own trash. They have laughed and chatted with the police.

It is no accident that the democratic uprisings in Tunisia and Egypt were the immediate backdrop to the immense show of support for workers' rights in Madison. This international example recalls 1848, the year Wisconsin's first state constitution was adopted, when Europe's republican-democratic "springtime of peoples" inspired the first women's-rights convention at Seneca Falls, N.Y. The Mideast's balm to Midwestern spirits has been a source of sustenance and humor. "Mubarak for Governor," read one euphoric sign.

The crowds in red, as in the old Bangles song, are walking like an Egyptian. But they are also engaging in something we haven't seen on this scale in a very long time: a dignified outpouring of a whole American community on behalf of labor. The events of late February are a striking example of what the English labor historian E.P. Thompson called "customs in common," the web of shared traditions whose violation can propel people into the streets.

Custom in this case is the Wisconsin Idea, a notion that sometimes refers to the relationship between university and state but has a richer and more resonant history tracing to the state's pioneering Progressive tradition. Its personification was the Republican Robert M. La Follette, who served as congressman, governor, and senator between the 1880s and 1920s. Through direct primaries, voter recall, civil-service standards, corporate taxation, regulation, and expert policy counsel from university scholars (rather than, say, corporate lobbyists)—a set of reforms together known as the Wisconsin Idea—La Follette sought to deal with what he called "the problems of vast financial power in private hands" on behalf of "the common man­—the worker, the farmer."

It has been a very long time since a Republican senator from Wisconsin has said, as did La Follette, "The only salvation for the Republican Party lies in purging itself wholly from the influence of financial interests." But Madison is a capital city filled with public employees who take pride in the knowledge that Wisconsin was, in 1959, the first state to recognize public workers' collective-bargaining rights. The Wisconsin Idea—a classroom staple of the very schoolteachers whose labor rights are now threatened—has been given new life by the multitudes chanting, "This is what democracy looks like."

Those who have been peopling ("occupying" is not quite the right word) the Wisconsin Capitol represent a remarkable diversity of professions and callings: corrections officers, graduate teaching assistants, letter carriers, carpenters, steelworkers, and students. This array cuts against the teaching of Selig Perlman, an eminent labor scholar who taught at the University of Wisconsin in the 1920s, who held that American workers were only capable of "job consciousness," not class consciousness. Perlman would be surprised to see the firefighters marching in uniform, bagpipes playing—even though Walker exempted them, along with most police officers, from the bill's worst provisions.

In an equally arresting development, many school-board and county officials, although they might have been expected to welcome the prospect of weakened unions, have warned that the governor's proposed dismantling of labor rights might mean a return to the disruption of basic services from strikes, as happened often in the era before collective bargaining.

The recent weeks of action haven't seen strikes, exactly, but they have been propelled by a mass exodus from work. When Madison teachers called a "sick out," a judge declined to issue an injunction against them on the basis that they were not violating their contractual obligation not to strike because they made no demands upon the school district and were instead protesting before the state government. Richard Trumka, president of the AFL-CIO, promised when visiting Madison that on whatever day the measure is signed into law, "We will be in the streets."

Whether the bill can be stopped remains to be seen. It has already passed the GOP-controlled Assembly. Meanwhile, all of Wisconsin's 14 Democratic state senators have fled across state lines to Illinois, preventing a quorum and halting legislative action to bide time so as to persuade three out of the 19 Republican state senators to vote against the measure.

Wisconsin's GOP, however, is no longer La Follette's. The Progressive temper, once stiffened by competition with Milwaukee's Socialists, was interrupted by the ascendance of Sen. Joseph McCarthy of Wisconsin and, much later, the New Right. Moderate Republicans still exist in Wisconsin, but independent-minded legislators will be threatened with hard-right primary opposition if they strike a compromise.

Quite apart from the legislation's fate, it remains to be seen whether the GOP will have overreached in its aggressive push against labor rights.

Wisconsin is a red state only in the Badger sense. The state went Democratic in the last three presidential elections. Its governor, Senate, and Assembly were Democratic-controlled until 2010, when all three branches of state government shifted to Republican in the context of hard times and heavy spending. In the same election, the maverick liberal Sen. Russ Feingold was unseated by ultraconservative Ron Johnson. But the 2010 results in Wisconsin, as elsewhere, were not an endorsement of Republican ideology so much as a referendum on the economy. Governor Walker, who promised hundreds of thousands of new jobs, made no mention of any attack on collective-bargaining rights, often valued by conservative white working-class voters.

Conservative commentators like Amity Shlaes suggest that long-term advantages accrue to politicians who confront public workers, as proved by Calvin Coolidge, who took on Boston's striking police as Massachusetts governor in 1919, and Ronald Reagan, who destroyed the federal air-traffic controllers' union in 1981.

Continued in article

Jensen Comment
Note the wide ranging comments that follow the above article.

The Illinois Idea Overlooks Investment Multipliers
"Caterpillar's Problem With Peoria:  Why an American icon is looking beyond Illinois for its future," The Wall Street Journal, March 7, 2011 ---

Just over 100 ago, the company we know as Caterpillar began building track-type tractors at a plant on the banks of the Illinois River. From these humble origins in East Peoria—the factory had 12 employees when it started—this icon of the American Midwest has grown into one of the world's most competitive manufacturers, recently forecasting record profits for 2011.

The question is, how come its home state of Illinois has so little to show for it?

Part of the answer has to do with the unvirtuous circle created when organized labor—public as well as private—forgets it has an interest in a growth-friendly environment. We saw some of this in Madison this weekend, when filmmaker Michael Moore showed up on cue, urging protesting government workers to show a "little bit of Egypt" in their confrontation with Republican Gov. Scott Walker.

In Peoria that same weekend, it was a different story. Not long after Mr. Moore delivered himself of his rhetorical pyrotechnic, the United Auto Workers quietly ratified a new, six-year contract with Caterpillar. A news article in this newspaper rightly described the agreement as "the smoothest contract negotiations between the UAW and the Peoria, Ill.-based company in recent memory."

Indeed it is. For a simple reason: Today's UAW is not nearly as strong as it was in the 1990s, when it took its Caterpillar workers out on two bitter strikes. A big reason is that, over the past few years, the bulk of Caterpillar's investing has gone either overseas or to more business-friendly states at home.

Selling overseas, of course, is not new to Caterpillar. The Peoria Journal Star once noted that in 1975 fully 57% of the company's sales were abroad. Back then, however, production was still based out of Illinois. These days it's a more complex story. It's not just most of its sales that are overseas. So are most of its employees and many of its new manufacturing facilities. China alone has a dozen.

Some of this shift would have occurred anyway, simply because U.S. companies are finding to compete overseas they need to be close to their customers. Caterpillar, however, is also investing in right-to-work states such as Arkansas, North Carolina and Texas. Though Caterpillar jobs in Illinois are certainly fed by the company's prosperous operations elsewhere, with each year the work force in its home state appears more and more a legacy of the past rather than an investment for the future.

John Tillman of the free-market Illinois Policy Institute credits Caterpillar executives for having had the foresight to push for greater labor flexibility in previous negotiations. He also credits the UAW for agreeing. "In contrast to its deals with Caterpillar, the deals the UAW reached with Detroit ended up leaving auto workers worse off when GM and Chrysler went bankrupt—and all the promises made by management and labor were rewritten."

So why isn't Illinois doing better when it has thriving companies like Caterpillar that still call it home? Maybe it's because of an environment that doesn't encourage new investment.

When asked recently by Neal Cavuto on Fox News about the recent tax hike pushed through by Gov. Pat Quinn, Caterpillar CEO Doug Oberhelman observed that "having the 36th highest tax rate, overall, out of 50 states in the U.S. is not good, and it doesn't promote job creation." He went on to add that while the company is not aiming to leave its home, Illinois will have to compete hard for new investment.

When companies stop investing in a state, their workers take the first hit, whether they're unionized or not. Because members of public-employee unions draw their pay and benefits from governments, there is a much longer delay before they feel any pain from an economic downturn. Sooner or later, however, a declining private sector will mean a declining tax base, and a squeeze on public finances.

That's exactly what's happening in the Midwest, once the heart of American industry. The more successful business leaders have largely done what Caterpillar has done: expand operations to friendlier climes. Governors and mayors, however, are stuck. Their employees work for public monopolies. The only time a governor gains any bargaining leverage is when the money well runs dry, and overly generous public pay and benefits begin to crowd out core government services such as education or law enforcement.

In the midst of tough budget negotiations forced by tough economic times, Mr. Tillman hopes that public-sector unions may finally learn something the members of Caterpillar's UAW had forced on them a while ago: Without growth, there will be nothing to fight over.

"We can fight over the pie," he says. "But first we need to bake it."

Labor Practices After Near Bankruptcy --- http://en.wikipedia.org/wiki/Caterpillar_Inc.#Labor_practices

Caterpillar came close to bankruptcy in the early 1980s, at one point losing almost US$1 million per day due to a sharp downturn in product demand as competition with Japanese rival Komatsu (who at the time used the internal slogan "encircle Caterpillar") heated up. The company also suffered when the United States declared an embargo against the Soviet Union after they invaded Afghanistan, causing the company to be unable to sell millions of dollars worth of pipelaying equipment it had already built. The impact of the embargo on the company was about $400 million.

The results were layoffs and massive labor union strikes, primarily by the United Auto Workers against plants in Illinois and Pennsylvania. Several news reports at the time indicated that products were piling up so high in facilities that replacement workers hired to work the lines could barely make their way to their work stations.

In 1992, Caterpillar fought the United Auto Workers in a five-month strike, threatening to replace its entire unionized work force. Over ten thousand UAW members struck again in 1994-1995 for a record 17 months, which ended when UAW called off the strike without a contract in the face of record revenues and profits by Caterpillar.[80] Caterpillar offered a contract that would have raised the salary of top workers to $39,000 in 1994 from $35,000. But the union was seeking the same top wage of $40,000 that was paid workers at Deere & Company in 1994.

Caterpillar's response to these labor conflicts was to "farm out" much of its parts production and warehouse work to outside firms: Rather than fighting the union, Caterpillar has made itself less vulnerable to the tools traditionally available to organized workers. Caterpillar also made effective use of office staff during the disputes, suspending research and development work to send thousands of engineers and others into their factories to fill in for striking or locked out union members.

Caterpillar also embarked on its "southern strategy," opening new small plants, termed "focus facilities", in right-to-work states such as North Carolina (Clayton and Sanford), South Carolina (Greenville), Mississippi (Corinth), Tennessee (Dyersburg), Georgia (Griffin LaGrange), Texas (Seguin), and Arkansas (North Little Rock), where labor laws provide more protection for workers not wanting to join unions.

Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

Return to the Tidbits Archives ---


Shielding Against Validity Challenges in Plato's Cave ---

·     With a Rejoinder from the 2010 Senior Editor of The Accounting Review (TAR), Steven J. Kachelmeier

·     With Replies in Appendix 4 to Professor Kachemeier by Professors Jagdish Gangolly and Paul Williams

·     With Added Conjectures in Appendix 1 as to Why the Profession of Accountancy Ignores TAR

·     With Suggestions in Appendix 2 for Incorporating Accounting Research into Undergraduate Accounting Courses

Shielding Against Validity Challenges in Plato's Cave  --- http://www.trinity.edu/rjensen/TheoryTAR.htm
By Bob Jensen

What went wrong in accounting/accountics research?  ---

The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most Accountants ---


Bob Jensen's threads on accounting theory ---

Tom Lehrer on Mathematical Models and Statistics ---

Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---

Bob Jensen's economic crisis messaging http://www.trinity.edu/rjensen/2008Bailout.htm

Bob Jensen's threads --- http://www.trinity.edu/rjensen/threads.htm

Bob Jensen's Home Page --- http://www.trinity.edu/rjensen/