As Larry Summers prepares to follow the rest of Obama’s economics team into richly deserved unemployment (okay, not really, they’ve mostly got tenured professorships to fall back on, Summers at Harvard, Romer at Berkeley), who is the president going to name as a replacement? The smart money apparently is on Anne Mulcahy, the former CEO of Xerox.

But that’s not all she’s done with her business career: She was, until a few months ago, on the board of directors at Citigroup, the $45 billion bailout baby that is still partly owned by Uncle Sam, who is desperately trying to dump the stock but keeps driving the price down every time he tries to offload it.

What, Lloyd Blankfein and Tony Hayward turned the job down?

That thundering sound you hear is Republicans across the fruited plains dropping to their knees praying that Obama appoints her.

Thomas Aquinas warned against homo unius libri — the “man of one book.” Harvard president Edward Everett followed that up, warning against “not only to the man of one book, but also to the man of one idea, in whom the sense of proportion is lacking, and who sees only that for which he looks.”

God defend us from man of one datum, particularly if that man is an economist, and particularly if the datum is wrong.

Exhibit A is the constantly repeated but entirely untrue statement that consumer spending represents 70 percent of the U.S. economy, and that it is therefore imperative that we give consumers some stimulus, in the form of tax rebates, more generous unemployment checks, or cocaine-monkey research grants, in order to put some schmundo in Joe Consumer’s hip pocket, the better for him to carry that seven-tenths of the economy he allegedly holds upon his shoulders like some debt-ridden Atlas chained to Mount Wal-Mart, his liver pecked by a winged and deathless Visa bill.

Who is guilty of repeating this? My occasional sparring partner Robert Reich, for one, who recently sent my head spinning all the way around by writing: “The problem is consumers, who are 70 percent of the economy. They can’t and won’t buy.” This is a problem, Reich argued, because Americans need to be driven further into debt: “Without consumers, businesses have no reason to borrow more. Except to speculate by buying back their own stock and doing mergers and acquisitions, which is exactly what they’re doing.”

The New York Times repeated the same idea in Sunday’s editorial denouncing the Republicans’ new Pledge. The Times’ editorialists probably heard it from Robert Reich, and they framed their argument similarly: “The pledge asserts that letting the high-end tax cuts expire would kill job creation. With the economy weak, letting all the tax cuts expire would be a big hit to consumer spending and, by extension, job growth. But richer Americans tend to save, not spend, their tax cuts.”

Reuters repeats this canard. Martin Crutsinger, the clueless economy reporter for the Associated Press, publishes it all the time. Fareed Zakaria and Pauly K. sing from this hymnal. Practically everybody saying the stimulus should have been bigger (and, for those of you outside New York and Washington: yes, such creatures walk among us) cites that datum.

It is not true.

As Michael Mandel documents copiously in his Bloomberg Businessweek column, what government statistics call “consumer spending” is not — get this! — consumer spending. Most of it isn’t, anyway. Lots of that so-called consumer spending is in fact government spending; Medicare and Medicaid, for instance, are lumped in there, as is most health-care spending, which amounts to, oh, $2 trillion a year, which might tend to throw the consumer-spending numbers off a bit. Health-care spending isn’t really driven by consumers (which is why our health-care market is so messed up, incidentally!), but by insurance companies, government, and other non-consumer enterprises. Something on the order of 15 percent of health-care spending actually comes out of consumers’ pockets. Chickenfeed, in the vulgate.

All sorts of other stuff is dumped into that category: the money spent by nonprofits, for instance, along with political parties and campaigns. Never mind, for the moment, that a big chunk of that actual consumer spending goes to things like clothes and electronics and shoes made abroad (and the consumption of which therefore has little direct impact on domestic economic activity), the truth is that consumer spending, in reality, represents less than half of U.S. economic activity, probably around 40 percent.

That’s a specific kind of error to make. But let’s take a step back from the specific to the categorical: Whatever fraction of our economy is represented by household consumption, 100 percent of our economy — and every economy — is represented by production. We cannot consume that which has not been produced. Consumption is not really the problem: People like to consume. Americans consume eagerly, even to excess. In fact, when the economy is good, these same liberal scolds fretting at present about our momentarily lean consumption will lecture us about the evils of over-consumption, which makes Americans obesely face-stuffing SUV-ridden despoilers of pristine rainforests and Makes Them Hate Us, etc.

The problem of economic policy is not getting people to consume. It is getting them to produce. You can train a monkey to consume. (In fact, he requires no training, especially once you get him coked up on the taxpayers’ dime.) Americans are extraordinarily productive people, but our economy has taken a hit because we have a couple of trillion dollars’ worth of capital locked up in dead real estate, dead securities, and the swelling sovereign debt upon which our pet Leviathan battens. If you have a trillion dollars locked up in residential real estate that still is over-valued — its inflated price being sustained by hook and by crook by the geniuses in Washington — that capital can’t be put to real productive uses. (Also, people who could otherwise buy or rent cheap real estate will be paying too much for housing, taking yet more potentially productive capital out of the markets.)

It’s worth revisiting the sage words of the New York Times and its horror of the fact that “richer Americans tend to save, not spend, their tax cuts.” But jobs don’t come from consumption; jobs come from production. People have jobs because they make useful things and provide useful services, which people want, in any event (but not at any price). You want people to produce, you need capital. You need investments.

And you know where investment capital comes from? Savings, geniuses. Real savings, i.e. the savings that come from consuming less than you produce. Reich, the Times, Krugman, and every stimulus-happy pundit on the Democratic side of the aisle is arguing for an economic policy specifically and particularly designed to discourage saving and discourage investment, while encouraging consumption and encouraging borrowing. That’s the ultimate in magical thinking: We’ll just borrow another few trillion dollars and consume our way out of what ails us! You want fries with that?

I’ve got some bad news for you, Sunshine, some ancient and unalterable and inescapable bad news: As ye sow, so shall ye reap. We’re presently sowing jack, and the Obama administration, the Pelosi-Reid Congress, the Krugmans and Reichs of the world are working hard to make sure that we sow even less. Real prosperity only comes from real productivity, which means real savings and real investment. Everything else is a Beltway full-employment program for social engineers, unicorn wranglers, and fairie-dust sprinklers.

I might point out that Robert Reich was secretary of labor, is presently a chancellor’s professor at Berkeley’s Goldman School of Public Policy, is a former Harvard professor, and a former Brandeis professor, and apparently does not know what is in the U.S. Bureau of Economic Analysis data. But he wants a government composed of wise men such as himself to spend your money on your behalf, because you are too stupid to invest it yourself. Hell, a rube like you — you might even save it, much to the horror of the New York Times.

– Kevin D. Williamson is deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, to be published in January.

I like the Young Guns, and I love a tax cut, but what’s missing from the agenda? Let us ask a grown man called Bobby.

Bobby Schilling, Republican candidate for Congress in the Illinois 17th District, discussed his positions on tax policy. Schilling signed a pledge with Americans for Tax Reform promising not to raise taxes on anyone in a recession. Schilling said he believes JFK, a Democrat, had it right when it comes to tax cuts.

“President Kennedy embraced tax cuts during a tough economy in the early 1960s because they work,” Schilling said. “The truth is that tax cuts stimulate the economy while high taxes discourage further growth. Putting money in people’s pockets will allow them to buy more goods and services. As businesses see more revenue, they’ll be more likely to expand and create new jobs. If we increase taxes in the manner my opponent wants to, we won’t see any new jobs and many businesses will actually be forced to cut back the amount of workers they employ. Some businesses may even give up on our business climate entirely and move their operations abroad. If we want to create jobs and stop outsourcing, we have to start by creating a positive business climate.” Schilling said we can’t afford tax increases while our economy experiences double digit unemployment.

“We have to extend the 2001 and 2003 tax cuts for every income bracket, and we need to repeal the 22 new taxes from the healthcare bill,” Schilling said. “Our economy can only recover if we keep taxes low, stop the out of control deficit spending in Washington, and work to foster a positive business environment so small business can expand and hire more workers. Anything else will make a bad economic situation much worse.”

Bobby Schilling, a native of Rock Island, graduated from Alleman High School and attended Black Hawk College. Schilling, a local business owner, is the Republican candidate for the 17th Congressional District in Illinois. Bobby is running on a platform of bringing jobs and real representation back to the 17th District. Earlier this year, Schilling conducted a 34-city “Bob’s for Jobs” tour, where he met with voters and employers all across the 17th District. Schilling was recently named an official ‘Young Gun’ by the National Republican Congressional Committee in their Young Guns program of top tiered races. 

The Republicans’ recent argument, which goes, roughly, “JFK Was One of Us When It Comes to Taxes, Yee-Haw!” is mostly right — and that is a bad thing. Tax cuts as economic stimulus for the most part amounts to short-term, naïve Keynesian claptrap — especially when the proposal is for temporary or one-time tax cuts. Bobs-for-Jobs says ‘putting money in people’s pockets will allow them to buy more goods and services,” and he even calls it stimulus. Well, Bobs-for-Jobs, your running mate is Brett-for-Debt. What’s the difference between a tax-cut stimulus and a spending stimulus? Some efficiency, sure, less rent-seeking and pork-barreling, no doubt. But if we cut taxes without cutting spending, we are not cutting taxes. We are deferring taxes. Taxes are not the problem; spending is the problem. Taxes are a symptom.

So, what we want is permanent, long-term, significant reductions in tax rates, along with a more sane and simple tax system, right? Which requires us to — sing along with me, Bobs-for-Jobs Schilling of Rock Island — cut spending. A lot. New Exchequer rule: Any Republican who sends me a press release talking up tax cuts without a word about spending cuts gets to be jackass of the day. (Democrats obviously are ineligible; you can’t be jackass of the day when you’re a registered jackass for life.)

Oh, and there’s a junk-bond bubble blowing up because we’re using ultra-low interest rates to combat the recession that was caused by the housing bubble enabled by ultra-low interest rates, which were used to combat the dot-com recession that was enabled in part by . . . .

Bobs-for-Jobs and the junk-bond bubble are not unrelated subjects: Both are the product of magical thinking, the quest for a get-out-of-jail card for economic troubles. Both are going to cost us in the end.

Here’s the problem: Real growth and real productivity cannot be magicked into existence or politicked into existence. Real growth and real productivity come from real investment, which comes from real savings. You want to discourage savings? You want a real good way to discourage savings? Try ultra-low interest rates and tax cuts that are specifically designed to encourage consumption rather than savings, brought to you by Bobby Schilling & Co. There is no substitute for consuming less than you produce, either at the individual level, the household level, or the national level. JFK never really understood that, very probably because he had servants to lift his fingers. Those days are gone. The sooner we start living in the real world, the better.

Now, Bobs-for-Jobs, it would be thrilling if you decided to go by a grown-up name: Mr. Schilling for Deficit-Killing. You’ve told us about your tax cuts. Let’s hear about the spending cuts. Because, I’ve been reading your web site, and I do not see one serious proposal for cutting a dime of federal spending, and do see lots of special pleading on behalf of favored constituents. How about we start with your precious farm subsidies?

– Kevin D. Williamson is deputy managing editor of National Review.

The New Republic on the “wildly important” infrastructure bank proposal:

A well-designed infrastructure bank’s benefits could go even farther, says [Brookings infrastructure expert Emilia] Istrate. “The current type of investment is … more like spreading peanut butter,” she says. “It’s not really based on strategic economic criteria.” She argues that, assuming the bank is truly independent and decisions are actually made by experts, it will lead to a projects being selected “based on a cost-benefit analysis,” and their “national and regional importance.”

That’s how the system’s supposed to work now, isn’t it? Well, yes, but that hasn’t been how things have actually turned out in Congress. Remember the infamous “bridge to nowhere” we almost funded or the even more senseless “road to nowhere” that got built with some of the money that had been intended for the bridge? They were a result of the appropriations process and pork-barrel politics run amok, not any kind of reasonable economic analysis.

A national infrastructure bank would, in theory, mean less money spent on these projects—and more spent on investments that actually make the country productive. Even Republicans can get behind that idea. Or so you would think.

About that, two thoughts:

First: Another way of saying this is: The bank will work better the more robustly and pitilessly undemocratic it is. The problem with the appropriations process is that it is too democratic, dominated, as it is, by the House, our most democratic organ of government. I do not disagree with that analysis. In fact, I’d like to extend that line of thinking to all sorts of other sectors of economic and national life, too: Really, why should the gentleman-scholars in Congress be making decisions about energy policy, what kind of jobs Americans should have, how we manage schools, the agriculture markets . . . management of banks, hedge funds, health insurance? If Alexander C. Hart of The New Republic believes that it is best to keep democracy’s grubby paws off of infrastructure decisions — and I’m with you, Hart! — why not these other areas as well?

Second: “Assuming the bank is truly independent and decisions are actually made by experts . . . .” Who wants to place a bet on whether that happens? How much of your own money, as opposed to the taxpayers’ money, would you wager on that being the outcome? And what if it isn’t? The SEC and Fannie and Freddie and the Fed and the banks and the hedge funds and the REITs and such were just chock flippin’ full of experts — including a lot of highly paid genius quants in the private sector — which did what, exactly, for the housing/CDO bubble? (Don’t worry, I’ll wait. Cue Jeopardy! theme: What is absolutely nothing, Alex?)

The FDA is full of experts who make extraordinarily stupid and destructive decisions on a regular basis. They don’t do it because they’re bad people or because they are being corrupted by corporate money or because they are closet Maoist revolutionaries. They do it because you cannot repeal the fatal conceit. Is there any reason — a single one — that makes us think that the infrastructure bank experts will be immune to the defects that plague experts on Wall Street, experts in Washington, experts in the federal agencies, experts in the states, the experts to which Congress has all the access it could possibly desire?

The answer to this question is not: In the ideal world, things work out ideally.

If only there were a process by which economic decisions could be made on economic criteria, by the parties with the most knowledge about the questions at hand and the strongest incentives to seek rational financial outcomes. What might such a process look like? Somebody should write a book about that. (Or, at least, a book about the opposite.)

Rep. Gerry E. Connolly, a Northern Virginia Democrat facing a tough re-election challenge, has come out against letting the Bush tax cuts expire — even for the top brackets. This puts him right up in the teeth of the Obama administration and Nancy Pelosi. Why would a Democrat resist ORP’s (ORP = Obama-Reid-Pelosi) soak-the-rich agenda? Have a look at Connolly’s district: Fairfax County, part of the vast, soulless suburbs of Washington, D.C., is pretty high-income.

As our Battleground blogger Andrew Stiles reports today, the average household income in Connolly’s district is more than $100,000 a year. And there are a lot of families with incomes over $200,000 a year and over $250,000 a year. In Washington, it’s not that hard to end up with a family income over  $250,000 a year: Mr. $130,000 Bureaucrat  marries Miss  $130,000 Bureaucrat, and they join the ranks of “the rich.”

And under Obama, official Washington is getting a lot richer, with average federal compensation packages now worth about $120,000 a year — more than twice the going rate in the private sector. And it’s not just high salaries, pensions, and generous benefits: It’s private-sector-level bonuses, too:

Under the Obama administration, the government is doing such a good job that it’s decided to reward itself. Last year, Uncle Sam paid out $408 million in bonuses to 1.3 million federal workers, according to the Asbury Park Press, which obtained the information through a Freedom of Information Act request. That’s about $80 million more than the previous year. About one in four federal workers received a bonus, and awards ranged from $25 to, in the case of one lucky State Department worker, $94,500. . . .

Federal bonuses are being doled out liberally, even as federal salaries are exploding. From December 2007 through June 2009, the number of federal workers earning six figures increased from 14 to 19 percent. In 2008, average federal compensation, including pay and benefits, was $119,982 — considerably more than the $59,909 average in the private sector, according to the Commerce Department’s Bureau of Economic Analysis. In the midst of a brutal economic downturn that saw millions of jobs lost and unemployment soar above 10 percent, the Office of Personnel Management data shows the federal workforce actually added nearly 100,000 jobs from December 2008 to December 2009.

This is how Obamaism eats itself: Fattening the federal workers who are his natural constituency, Obama has helped to create a lobby for tax breaks for “the rich,” now defined as those who earn about the same income as a married couple consisting  of two federal middle managers. Federal workers already receive a big piece of their compensation tax free (through extraordinarily generous benefits that are not taxed as income) and they are not eager to pay the taxes that fund their own inflated salaries and those of their colleagues. Taxes are for you serfs in the private sector, and Rep. Connolly  is one Democrat who can be counted on to defend the tax preferences of the new ruling class in the Washington suburbs.

Jon Chait over at The New Republic has what he apparently supposes to be a rigorous and clever takedown of Gov. Mitch Daniels’s brief outline of an economic plan spelled out in the Wall Street Journal. Writing with the characteristic humility for which we have all come to appreciate him, Chait proffers, among other gems, the observation that Daniels is being held to standards that might be applied otherwise to the mentally retarded or severely disabled – his piece is headlined “Mitch Daniels Wins The Fiscal Special Olympics.”  “A proposal that seems remotely close to reality will be widely praised,” he writes, “as if we were watching a person with severe disabilities manage to finish a race. Wow, look at that! You have a plan! With numbers! Hooray for you!”

Chait has made a classic error here: Before one attempts to condescend, one must ensure that one is in the proper position from which to condescend. Chait is not. Let us count the ways.

At the core of Daniels’s plan — and Chait gets at least this much right — is a proposal to suspend or reduce the payroll tax for a year, and, because Daniels is not a naïve supply-sider, not only offset those lost revenues, but offset them twice over. This gets Chait into a bit of a huff, and there is nothing quite like a New Republic huff for pure amusement value:

Okay, let’s look at Daniels’ plan. He says we should suspend or reduce the Social Security tax for a year. In order to compensate for the lost revenue, Daniels proposes to make it up “twice over.”

The Social Security tax is projected to bring in $934 billion next year. If we “suspend” the tax, that means we need $1.8 trillion in savings to meet his target. If we merely reduce it, we need less. Keep that in mind while we go through Daniels’ proposed savings, which are these:

And then he quotes from Daniels’s WSJ piece:

• Impoundment power. Presidents once had the authority to spend less than Congress made available through appropriation. On reflection, nothing else makes sense. Plowing ahead with spending when revenues plummet is something only government would do. In Indiana, we are still solvent, with no new taxes, money in reserve, and a AAA credit rating only because our legislature gave me the power to adjust spending to new realities. I promise you that a president who wanted to could put the kibosh on enormous amounts of spending that a Congress might never vote to eliminate, but the average citizen would never miss.

• Recall federal funds. Rescind unspent Troubled Asset Relief Program (TARP) funds and any unspent funds from last year’s $862 billion “stimulus” package, as well as large amounts of the hundreds of billions of “unobligated funds” unspent from previous appropriations bills.

• Federal hiring and pay freeze. Better yet cut federal pay, which now vastly outstrips private-sector wages, by 10% during the emergency term, and freeze it after that.

• A “freedom window.” Might we try some sort of regulatory forbearance period in which the job-killing practice of agonizingly slow environmental permitting is suspended, perhaps in favor of a self-certification safe harbor process? Businesses could proceed with new job creation immediately based on plans that meet current pollution or safety standards, or use best current technology, subject only to fines and remediation if a subsequent look-back shows that the promised standards were not met.

Chait’s objections are these: 1. Daniels does not specify what spending he would impound, and such discretionary power resembles the line-item veto that has been thrown out by the courts; 2. There’s only $200 billion or so in unspent TARP and stimulus funds; 3. Federal workers are not actually overpaid (ho, ho, ho!); 4. The regulatory holiday is not a revenue plan.

Let’s take the low-hanging fruit first.

As evidence that federal workers are not overpaid, Chait cites a study from an organization whose board of directors is composed entirely — without exception — of representatives from government-employees’ retirement associations and their money managers: the president of the National Association of State Retirement Administrators and treasurer of the North Carolina Retirement Systems, the executive director of the National Council in Teacher Retirement, the executive director of the National Association of State Retirement Administrators, The CEO of the California State Teachers’ Retirement System, the executive director of the Minnesota Teachers Retirement Association, the secretary of the Kentucky Teachers’ Retirement System, and, drum roll, a guy from the Council of Institutional Investors, i.e., the guys who handle money for government-employee retirement systems.

Even if we were to assume that these guys are an entirely disinterested bunch, the study Chait cites is (pay attention, now!) not a study of federal employees’ compensation. It is a study of state and local government compensation. Mitch Daniels proposes to cut federal pay, a subject about which the study Chait cites tells us what is known in technical economic jargon as approximately squat.

Chait’s take is: But government workers have college degrees! Lots of them! Well, raise my rent! There’s a big difference between the sorts of people who have masters’ degrees and work in local government and people who have masters’ degrees in the private sector: No doubt the high-school career-guidance counselor who set Chait on his woeful course in literary life had a very impressive piece of sheepskin on his office wall. He is still overpaid, I will wager. What all this is supposed to tell us about the economics of federal government compensation — rather than about the entitlement mentality of the precious middle-class snowflakes turned out by our universities each year — is a mystery.

Chait calculates that Daniels only accounts  for about 10 percent of the double-offset he proposes, which is true — if you only count the stuff Chait counts. Daniels has his eye on hundreds of billions in unobligated funds and as much, possibly much more, in spending offsets through his impoundment proposal. These are the big-ticket items: Chait’s take only makes sense if you ignore them.

Likewise, Chait’s protestation that the regulatory holiday is not a revenue program ignores the fact that what Daniels is most interested in — as his op-ed makes abundantly clear — is achieving higher levels of economic growth, which will contribute to tax receipts (and also help to head off economic catastrophe!). Chait, no doubt a college graduate himself, should be able to identify the thesis statement here: “A time-limited, emergency growth program aimed at triggering new private investment should be a primary goal of the next Congress.”

Also, unless I’ve missed something, there is nothing in Daniels’s plan that indicates he thinks we need to achieve that double-offset in a single year, which makes Chait’s exercise in arithmetic totally meaningless. Presumably, Chait does not believe that each year’s federal borrowing needs to be offset fully in the following year; I’m not crazy about the logic behind stimulus borrowing, but the process of paying back borrowing for a spending program is precisely the same as the process for paying back borrowing to finance a tax holiday. Taxing is taxing, spending is spending.

So, other than ignoring the fiscal timeline, conflating federal and state/local workers, and leaving out the biggest pieces of the economic picture — other than getting every single aspect of the proposal wrong that it is possible to get wrong – Chait wins the gold medal.

Here’s a prediction: In the final analysis, Bush’s wars will come closer to meeting their goals and will cost far less than Obama’s stimulus.

You know that bank we own? No, not that one, this one. There seems to be some trouble:

An all-out war has broken out between Citigroup CEO Vikram Pandit and a prominent securities analyst who is saying that the big bank may be cooking the books by inflating its earnings through an accounting gimmick, FOX Business Network has learned.

The analyst, Mike Mayo, of the securities firm CLSA, has been telling investors that Citigroup (C: 3.70 ,+0.04 ,+0.96%) should take a writedown, or a loss on some $50 billion of “deferred-tax assets,” or DTAs. That is a tax credit the firm has on its financial statement that Mayo says is inflating profits at the big bank by as much as $10 billion.

For that critique, Mayo has been denied one-on-one meetings with top players of the firm, including CEO Vikram Pandit, Chief Financial Officer John Gerspach, and any other member of management, while other analysts enjoy full access to the bank’s top executives, FBN has learned.

In fact, Mayo hasn’t had a meeting with Pandit or anyone in Citigroup management since around the time of the financial crisis, in the fall of 2008, when Citigroup was on the verge of extinction and needed an unprecedented series of government bailouts to survive.

You know who ought to be able to get a meeting with Vikram Pandit? Tim Geithner. And if not Tiny Tim, then his boss, Barack Obama, who was the top recipient of Citigroup campaign contributions in the last election cycle, having taken in more than $730,000. You know who else might be able to get a meeting? New York Sen. Kirsten Gillibrand, who is the biggest recipient of Citigroup money in this election cycle so far.

Obama and Gillibrand should know: If you’re going to bail out the bank and take the bank’s money, then when it’s time for due diligence, you need to make sure that somebody steps up.

Salon has an article today predicting the future of an economic commodity. I have a recollection that they are not always very good at predicting such trends. What was that earlier article headlined? Ah, yes: You Really Should Buy a House. I Mean It. Highlight: Foreclosure is no big deal for the banks!

So now that the state of New Jersey has been charged by the SEC with lying to bond investors about the (desiccated, horrific, probably insolvent) state of its pension funds, the guessing game begins: Who is next? Exchequer readers will not be surprised to learn that Illinois, the place where Barack Obama developed his famous financial acumen, is on the list of potential targets.

When Illinois passed its pension “reform” law a few months ago, it decided it could skip an additional $300 million in pension contributions this year, and many millions more in the future. This, for a pension system that already is less than half funded. The New York Times asked a few actuaries about that decision, and the bean-counters are crying foul:

Paradoxically, even though the state will make smaller contributions, the report forecasts that Illinois will get its pension funds back on track to a respectable 90 percent funding level by 2045. It projects that costs will increase slowly and an economic recovery will make cash available for the state to make the contributions it has failed to do in the past.

Whether that is even possible is contested by some actuaries who note that its family of pension funds is now only 39 percent funded. (If a company let its pension fund dwindle to that level, the federal government would probably step in, but federal officials have no authority to seize state pension funds.)

Some actuaries who have reviewed the state’s plans said that shrinking contributions would make the pension funds shakier, not stronger.

Indeed, one of them, Jeremy Gold, called Illinois’s plan “irresponsible” and said it could drive the pension funds to the brink.

Further, Mr. Gold pointed out that Illinois’s official disclosures said that its pension calculations used an actuarial method known as “projected unit credit,” but that the pension reform report used another method, which had not been approved for disclosure.

“According to Illinois statute, the prescribed contributions are determined under a method that may not be in compliance with the pertinent actuarial standards of practice,” Mr. Gold said.

The Wall Street Journal has more on state pension shenanigans here.

Hey, taxpayer: How’s your retirement fund looking these days? Anything left to put in it after the state-workers’ unions are done with you? Heck, you’re probably the kind of sucker who pays his mortgage with his own money.

The Land of Lincoln (or, if you prefer, the Origin of Obama) is going broke, in a big, big way, as I have noted earlier. The main reason is it going broke is because its public-sector caste is robbing the rest of the state blind.

Have the taxpayers finally had enough? Is nearly a half-million dollars a year for a suburban Chicago parks director too much?

Dozens of Highland Park residents confronted their Park District commissioners Thursday night, demanding that they resign for approving a series of exorbitant bonuses, salary increases and pension boosting payouts to top district executives between 2005 and 2008.

. . . former executive director Ralph Volpe, finance director Kenneth Swan and facilities director David Harris were awarded bonuses that totaled $700,000 during a four-year span.

Additional salary increases during that time have or will provide the three executives with pensions that rival or surpass their total salaries to run the district in 2005. By 2008, Volpe’s total compensation topped $435,000.

Swan’s salary, which was $124,908 in 2005, spiked to $218,372 in 2008. Harris’ pay jumped from $135,403 to $339,302 during that time.

Even though Harris resigned in 2008, Park District officials confirmed that he was paid the remaining $185,120 left on his three-year contract. The district also gave him a sport utility vehicle while his compensation without the SUV in 2008 still totaled $339,302 for eight months on the job, officials said.

As Derb says: We’re in the wrong business. Get a government job.

Highland Park has 34,000 residents. Its park system is not exactly monumental. Get this: By way of comparison, the head of the Central Park Conservancy in New York City earns only  (only!) $364,000 — and the conservancy itself raises most of the park’s $25 million annual budget. New York is not exactly famous for the austerity of its public institutions. That Central Park boss must feel like he’s getting the short end compared to that Highland Park parks tycoon.

Two things to keep in mind in light of today’s news: One is that the CBO keeps ringing the alarm bells — even today, in the course of trimming, a little bit, its deficit estimate for 2010: “Continued large deficits and the resulting increases in federal debt over time would reduce long-term economic growth.”

Which is to say, Paul Krugman & Co. aside, spending and deficits can be a brake on growth as well as an accelerator of it. Today’s stimulus is tomorrow’s burden.

The second thing: Take another look at Greece. Greece is falling apart. Krugman & Co. will tell you that’s the result of too much austerity and not enough stimulus spending. But there is another lesson to take away from Greece: When you let the public sector get that big — so big it dominates the economy — then it is nearly impossible to cut back public-sector spending without creating an economic crisis. Our stimulus programs are geared, in no small part, toward achieving permanent expansions of the public sector. Which is to say, we’re stimulating ourselves into a Greek corner. Best to reverse course now before we’re locked in good and tight.

Sen. Robert Casey (D., Pa.) and Rep. Earl Pomeroy (D., N.D.) are pushing legislation that would commit taxpayers’ dollars to bailing out the Teamsters’ retirement pension fund. The financial crisis and the Great Recession may have upset your retirement plans, but that’s not reason that politically connected union thugs have to share the pain.

Here’s the deal, as former Department of Labor official Vincent Vernuccio, now an analyst at the Competitive Enterprise Institute, tells Exchequer: Under the Democrats’ plan, the U.S. Pension Benefit Guaranty Corp., which is basically a pension-insurance fund run by the federal government, would be able to receive tax dollars to bail out so-called orphan pensions — pensions for which employers have ceased making contributions, usually for reasons of insolvency. Under normal circumstances, PBGC does not use taxpayer money to bail out pensions; it charges an insurance premium to the funds it covers and uses that money to make good on pension obligations if a particular pension fund goes bankrupt. It’s like an FDIC for pension funds: If a fund is sufficiently mismanaged, PBGC can step in, take it over, and take care of its obligations.

The Casey bill would change all that, creating a “fifth fund” within PBGC that would receive taxpayer support. Currently, federal law carefully specifies that PBGC obligations are not obligations of the U.S. government. Casey-Pomeroy would reverse that, mandating that “obligations of the corporation that are financed by the [fifth fund] shall be obligations of the United States.” In other words: You, sucker, are paying the bill.

This is worrisome for a lot of reasons, as Vernuccio points out: First, it establishes a precedent for taxpayer-funded bailouts of union pensions. As galling as it would be to bail out the Teamsters and their other private-sector union buddies — whose meatheaded management of their pensions has left them with as much as $165 billion in unfunded obligations, according to Moody’s — things would immediately get much, much worse if that precedent were used to justify a bailout of the public-sector unions, whose unfunded pension liabilities run into the trillions. (President Obama’s home state of Illinois is leading the way down the toilet when it comes to state-employee retirements. California’s pension shortfall, Vernuccio notes, is larger than the GDP of Saudi Arabia.) Casey-Pomeroy wouldn’t authorize public-sector bailouts, but it would establish an all too easily expandable template.

Second, Casey-Pomeroy almost certainly would lead to a broader union bailout. PBGC already has more obligations than it can meet, and its operations already are larger and more complex than most Americans imagine. According to its web site, “PBGC pays monthly retirement benefits, up to a guaranteed maximum, to nearly 744,000 retirees in 4000 pension plans that ended. Including those who have not yet retired and participants in multiemployer plans receiving financial assistance, PBGC is responsible for the current and future pensions of about 1,476,000 people.” Unsurprisingly, PBGC already is more than $20 billion in the red — which is to say, the guys who are supposed to cover you when your pension fund cannot cover its obligations cannot cover their obligations — and its own analysis suggests it will be $34 billion short by 2019. Guess who they’ll be going to for that money?

And that is the truly worrisome part: Casey’s bill would allow for the transfer of money from the “fifth fund” to other PBGC funds. In other words, we could end up paying for the whole thing. “It takes a couple of leaps,” Vernuccio says, “but, long term, you can see this being a backdoor bailout of PBGC.” There is no statutory limit on the amount of taxpayer money that could be committed to bailing out union pensions under the Casey bill. Taxpayers already have an unlimited commitment to bailing out Fannie Mae and Freddie Mac — do we really want to offer a bottomless well of public money to the Teamsters, too?

– Kevin D. Williamson is deputy managing editor of National Review.

I was struck by a particularly interesting stream of nonsense emanating from the mouth of the head of the Democratic Congressional Campaign Committee, Rep. Chris Van Hollen of the extraordinarily poorly governed state of Maryland. If we were to privatize or partially privatize the nation’s public-pension system, he argued, that would be the equivalent of “gambling.” Not investing, but gambling.

“If you privatize Social Security,” he said, “the end result will be that that money is not there. There is not a stable source of retirement money because we’ll be literally gambling it on Wall Street.”

Gambling. Literally?

Representative Van Hollen, as a pampered member of Congress, one day will enjoy a very nice pension funded by taxpayers. But he’s also an alumnus of a powerful Washington lobbyist/law firm, the well-connected son of an ambassador, and, even though he is not particularly well off by the standards of congressional Democrats (his ethics filings show his net worth to be considerably less than the price-tag on John Kerry’s yacht or Charlie Rangel’s sundry real-estate holdings) he’s not going to starve to death. If ever he leaves Congress, he will have a very lucrative career ahead of him. Chances are, he’ll retire a rich man. Is he going to invest all the money he makes in Treasury bonds? Does he invest all of his money in Treasury bonds today?

Presumably not. Most wealthy people invest their retirement savings in a mix of stocks, bonds, and other investments. The smart ones start off investing aggressively when they are young, getting more conservative and more liquid as they get older. That’s how you retire rich. That is not gambling. That is investing.

But many Americans, particularly Americans of modest means, find it difficult to save and invest. One of the reasons that they find it difficult to save and invest is that Uncle Sam skims 12 percent off the top of their paychecks and forces them to “invest” in Social Security — which, for most Americans, is an investment that provides embarrassingly low returns; for many Americans (such as black men, who are relatively short-lived), Social Security is a money-losing proposition.

Americans should keep this in mind: There is risk when investing in stocks and bonds. But there is also risk — real, terrifying risk — when “investing” in Social Security. Social Security’s unfunded liabilities are $108 trillion; if it were a bank or an insurance company selling retirement annuities, it would have been shut down long ago, and its executives probably would have been charged with crimes.

There is no corporation in the world that I am aware of with $108 trillion in net liabilities.

If you invest in a diversified basket of corporate bonds, there exists a possibility that some of them might go bad and default. (Speaking of which, junk bond issues are at an all-time high; what is it going to take to get Ben Bernanke’s attention? A giant flashing neon sign in the sky? A personalized message from God? An unexplainable rash in the shape of Milton Friedman?) Stocks and bonds go bad sometimes; that’s why you don’t put all of your money into one company. But for people of modest means, who will be almost entirely dependent on Social Security, all of their eggs are in a red, white, and blue basket — and they’re about to get scrambled by Congress and the Obama administration. When the time for choosing comes, and Washington has to decide whether to pay its bondholders in Beijing or little old blue-haired ladies in Muleshoe, Texas, waiting for their Social Security checks, who do you think is going to get shorted? The bond markets have the power to end Congress’s ability to borrow money on amenable terms — and that prospect scares the political class more than anything short of manual labor.

Don’t fall for the false-choice argument: There is risk to investing in stocks and bonds, but there is risk — probably greater risk — in counting on Social Security. You own your stocks and bonds, but Social Security can be taken away from you at the whim of Congress — or its value diluted by inflation when we start printing money to pay for all of the spending that Obama & Co. have been up to for the past couple of years.

Americans understand this, I think. Let me ask you to engage in a little thought experiment: Imagine that you are 25 years old. Given a choice between having the value of your future Social Security benefits in-hand today, either in the form of cash or in the form of a soberly diversified investment portfolio, or the promise of a Social Security check in 40 years, which would you choose? Why? Once you answer that question, you will know that Representative Van Hollen is talking through his hat.

– Kevin D. Williamson is deputy managing editor of National Review.

Maybe we’ll try to use ethanol when it’s our turn:

NKorea wants to use ginseng to pay Czech debt

You don’t say:

Democratic U.S. Rep. John Yarmuth lashed out at President Barack Obama’s economic team Thursday, saying they show more concern for Wall Street than average Americans in a blunt election-year assessment from an Obama loyalist frustrated by a tepid economic recovery.

What started out as a bashing of Senate Republican leader Mitch McConnell by union activists, who pressed for more public transportation projects, shifted gears briefly when Yarmuth took aim at Obama’s inner circle of economic aides.

“I’m not real happy with our economic team in the White House,” Yarmuth said. “They think it’s more important that Goldman Sachs make money than that you make money. And that’s where we’ve got to change the attitude of this country.”

Dear Representative Yarmuth: There is a reason that Goldman Sachs acts like it owns the Democratic party. It does:

Goldman Sachs is one firm that’s learned that politics matters: The sinking investment bank received some $12 billion in bailout funds while its competitor, Lehman Brothers, was allowed to go bankrupt. Goldman operators move easily between government and the private sector and have played key roles in both Democratic and Republican administrations. But like the rest of Wall Street, they have tilted heavily Democratic of late. Goldman Sachs was the biggest business donor to Democrats in 2008, according to a Center for Responsive Politics report. Some 73 percent of Goldman Sachs’s millions in 2006–08 donations went to Democrats, but its outlook has been informed by bipartisan pragmatism: The banking bailout came from a Republican administration and was marketed by Goldman Sachs alumnus Hank Paulson, who literally begged, on bended knee, for the money. It was managed by assistant treasury secretary and former Goldman Sachs foot soldier Neel Kashkari and was politically nudged along by Bush’s chief of staff, Josh Bolton, another Goldman veteran.

With Democrats now controlling the elected branches in Washington, Goldman has an even stronger hand: Former chairman Robert Rubin is the dean of the Goldman Sachs Democrats, the group that ran economic policy under the Clinton administration and is doing the same under Obama. Rubin acolytes Larry Summers, Timothy Geithner, and Peter Orszag already are filling key economic-policy positions, and Rubin’s son, Jamie, is raising money on Wall Street for Democrats and acting as a talent scout for the Obama administration. The elder Rubin is sure to have the ear of all the major players. Geithner, hurt in the ruckus over his unpaid taxes, has turned to the bank for a reliable loyalist, hiring former Goldman lobbyist Mark Patterson as his top aide. And Geithner’s replacement at the New York Fed? William C. Dudley, former managing director of Goldman Sachs.

Other major nodes on the Goldman-Democratic nexus include Al Gore’s London-based private-equity firm, Generation Investment Management, which was founded with assistance from former Goldman boss Paulson and includes in its ranks a half dozen prominent Goldman veterans. Former Goldman Sachs Asset Management CEO David Blood is its CEO, earning the firm its nickname, “Blood and Gore.” Goldman Sachs is a significant investor in E+Co, Blue Source, and APX, all firms positioned to profit from the cap-and-trade schemes that are at the heart of Gore’s global-warming crusade.

You get what you pay for.