April 4, 2007

ISM Non-Manufacturing Report for March: Expansion, But Not Really Strong

Filed under: Economy,Taxes & Government — Tom @ 1:04 pm

The 86% of the economy that isn’t manufacturing continues to expand, with an Institute for Supply Management reading of 52.4%, but the degree of its expansion was lower than “expected” — by a lot (54.7, according to this AP article).

This reading, combined with the tepid 1% increase in February factory orders, probably will persuade the Fed that it doesn’t need to raise rates. But I don’t think that the indicators are negative enough to justify a lowering.

Couldn’t Help But Notice (040407)

Stem cell progress:

A British research team led by the world’s leading heart surgeon has grown part of a human heart from stem cells for the first time.

Since it represents real progress, the article naturally does not have the word “embryonic” in it.

Late last week, Don Luskin talked about something that really IS settled science.

A survey estimates that spam costs $712 per employee per year. I’d say it’s at least that. Another Information Week item says that it increased yet another 76% in the first quarter of 2007, and that small businesses are being specifically targeted.


No one can credibly claim that Michelle Malkin is wrong about this.


Of course, Cincinnati Mayor Mark Mallory’s Opening Day pitch was wayyyyy wide of home plateto the left (HT RAB).

Mexico Overcomes a Large Part of Its PDD (Pension Deficit Disorder). Can We?

Filed under: Economy,Soc. Sec. & Retirement,Taxes & Government — Tom @ 6:13 am

In a subscriber-only op-ed a week ago Monday, Mary Anastasia O’Grady noted that Mexico may do for its retirement system what the US lacks the political will to do:

Pension Deficit Disorder
March 26, 2007

….. it looks like (Mexican President Felipe) Calderón, who is less than four months into his six-year term and lacks a majority in Congress, may be about to pocket a major legislative victory. And on no less an issue than the transformation of the pension system covering federal workers from pay-as-you-go to a fully funded system of individual accounts.

….. The catalyst for this reform is the grim outlook for Mexico’s Institute of Social Security for Government Employees (known by its Spanish initials as Issste and pronounced ee-stay), which manages the pension accounts and health benefits of some 2.8 million active and retired federal employees. These include bureaucrats, doctors, nurses, health-care workers and teachers, but not the employees of the state-owned oil company Pemex.

Issste’s pension arm currently provides retirement benefits to 580,000 individuals and like so many pay-as-you-go systems, the agency is operating in the red. With an average retirement age of 56 and retirees living longer, Issste has obligations that far outstrip its income and every year the deficit grows. In 2000, Issste’s pension deficit was 10 billion pesos ($909 million). This year the government has set aside 42 billion pesos to fill the gap. By 2012 the shortfall is forecast to hit 77 billion pesos. According to the Finance Ministry, Issste’s actuarial deficit in pensions is equal to over 50% of Mexican gross domestic product. Issste is a ticking time bomb.

It’s not like Mr. Calderón and Treasury Secretary Agustin Carstens had to convince union leadership of this reality. Mexicans have been known to joke that the best workers in the Issste system could hope for is to die early, before the house of cards collapses. Still, the Calderón government did have to win agreement from the union bosses for individual accounts and it also had to find enough votes in Congress from the opposition to get it through. That’s what makes this victory historic.

The centerpiece of the reform, which passed the lower house last week and is expected to pass the Senate this week, is the establishment of worker-owned, individual accounts to replace the communal pool at Issste. There are no changes for those already retired. Current workers will have the choice of staying with the government’s defined-benefit plan and accepting gradual increases in the retirement age, or migrating to the new individual account, defined-contribution system.

There is no reason why individually controlled investment accounts shouldn’t be employed to avoid a similar (actually probably worse) train wreck that is coming to the US’s Social Security system.


UPDATE: The Institute for Policy Innovation elaborates, and points out something I didn’t know about the private-sector retirement system in Mexico –

Unfortunately, the government will be managing a bunch of the money. That’s a bad idea. But at least Mexico got most of it right.

And this plan comes on top of the creation of personal accounts for the private sector in 1997.

For our part, we think this sounds like a good model for both the public and private sector in the U.S.—all except for the government investing the funds. Much better to leave that money in the hands of approved private sector financial managers, which have a fiduciary obligation to serve the best interests of the account owner, not some politician running for reelection.

I would add a limitation that would force private sector financial managers to invest only in index funds.

The Real ‘Sowell Man’ Nails It (as Usual)

From yet another read-the-whole-thing column:

Until Nancy Pelosi came along, it was understood by all that we had only one president at a time and — like him or not — he alone had the Constitutional authority to speak for this country to foreign nations, especially in wartime.

All that Pelosi’s trip can accomplish is to advertise American disunity to a terrorist-sponsoring nation in the Middle East while we are in a war there. That in turn can only embolden the Syrians to exploit the lack of unified resolve in Washington by stepping up their efforts to destabilize Iraq and the Middle East in general.

….. Today, Nancy Pelosi and the Congressional Democrats are stepping in to carry out their own foreign policy and even their own military policy on troop deployment — all the while denying that they are intruding on the president’s authority.

Good point. Individual Congressmen and Senators have pulled similar stunts, but never, as I recall, a Speaker of the House. Old Media’s reaction to Newt Gingrich visiting with Slobodan Milosevic in the late 1990s would have been unbridled outrage.

Positivity: The president of all the people

Filed under: Positivity — Tom @ 5:58 am

The article about this is certainly not 100% positive, but the underlying act is (HT Anchoress, Don Surber, and too many others to mention).