Things to Read on the Morning of February 26, 2014

Must-Reads:

1. Evan Soltas: Why Unions Can’t Be Saved: “I’m grateful to Michael Wasser of ‘Jobs With Justice’, a labor-rights organization, for writing a reply to my Bloomberg post this week on the death of American labor unions. Wasser’s argument is straightforward: Unions aren’t dead yet, and they are the only way to get public policies that advance labor and reduce inequality…. I disagree…. I think unions are far more likely to grow weaker over, say, the next ten years than they are to grow stronger. And I think that there are many other ways to advance labor–ways that are, to my taste, preferable to re-unionization…. [I think the] union decline has been driven by economic competition… [and] that U.S. labor law had limited impact. If the decline is permanent, furthermore, Wasser’s claim about uniqueness… is merely a statement of pessimism. Yet I still find that pessimism implausible if one considers this graph (via Jared Bernstein) showing the broad increase in wages in the 1990s…. Unionization was also low then. How did wages rise so quickly, then, for the bottom half of the wage distribution? You can thank full employment. The chart Wasser puts at the top of his post–the strong negative relationship between unionization and inequality–is the reason he thinks unions are needed. As for me, it’s the reason I think unions are doomed.”

2. Elizabeth Nolan Brown: Weak Government Regulations Made Me Do It, Legal Sea Foods CEO Claims: “Over the weekend, a carbon monoxide leak in a Long Island Legal Sea Foods restaurant resulted in 27 hospitalizations and one death. Now the head of the upscale chain is trying to pin the blame for the leak—the result of a defective heating system, authorities say—on inadequate government regulations. New York state fire code requires carbon monoxide detectors in locations where people sleep but not in restaurants, shops, or other commercial establishments. In a statement Sunday, Roger Berkowitz, president and CEO of Legal Sea Foods, said the tragedy ‘highlights the inadequacy of the codes for carbon monoxide detectors in commercial spaces’. How about the inadequacy of Legal Sea Foods’ efforts to protect its customers and workforce? Conspicuously lacking from Berkowitz’s statement was any hint of personal responsibility for the poisonings…. It’s absurd to suggest this tragedy is rooted in a failure of regulatory oversight…. The Long Island mall in which Legal Sea Foods operates is fitted with multiple carbon monoxide detectors, according to Newsday. And it seems the mall’s owners got the gumption to do this without any sort of legal requirement. After all, not killing or sickening employees and customers is only good business sense…. For under $25 and 10 minutes of forethought, this Legal Sea Foods tragedy could have been prevented. Instead, the restaurant’s leadership decided to meet only the bare minimum of safety requirements—and that’s on them.” 

3. Daniel Kuehn: Facts & other stubborn things: Caplan on the college premium: “The earnings advantage of college students has been substantial, but graduation rates have barely moved. Why? Bryan offers evidence that these earnings are highly conditional on graduation, and that since expected graduation rates vary many students with low expected graduation rates are not going to be enticed by the premium. I think this is a great example of differentiating between marginal behavior properly understood and naive assumptions about what the outcomes of marginal behavior should be…”

4. Joe Deaux: The Story of the Federal Reserve the Day After Lehman Brothers Collapsed: “Hours after Lehman Brothers tumbled into history as the largest bank failure in U.S. history, Federal Reserve Chairman Ben Bernanke’s concerns focused elsewhere. Opening remarks on Sept. 16, 2008, according to transcripts released by the central bank on Friday, revealed that Bernanke and members of the Fed’s policy-making wing–the Federal Open Market Committee–were uncertain how the Lehman bankruptcy would affect the broader economic system…. The Fed… turned its attention to a discussion of whether to raise the federal funds rate, which on that day sat at 2%…. Lockhart predicted that the federal funds rate target would remain around the current 2% level for ‘several months’ going into 2009, and he recommended that the Fed not change the rate at that meeting. Boston Fed President Eric Rosengren, whose comments pushed for the most accommodative monetary policy, offered a grim outlook…. ‘The failure of a major investment bank, the forced merger of another, the largest thrift and insurer teetering, and the failure of Freddie and Fannie are likely to have a significant impact the real economy…. Individuals and firms will become risk averse, with reluctance to consume or to invest’ Rosengren said he supported a 25 basis-point cut to the Fed funds rate…”

5. Jose Pagliery: Mt.Gox Site Disappears, Bitcoin Future in Doubt: “What was once the world’s largest trading platform for bitcoins is now a blank page. The Bitcoin-trading website Mt.Gox was taken offline late Monday…. The exchange also deleted all of its tweets…. Mt. Gox CEO Mark Karpeles resigned from the Bitcoin Foundation’s board of directors on Sunday…. An unverified document called ‘Crisis Strategy Draft’ that is being circulated online claims Mt.Gox has lost 744,408 of its users’ bitcoins, worth nearly $367 million…. Mt.Gox has been mired in problems ever since Feb. 7, when it halted withdrawals from its trading accounts…. By the time trading at Mt. Gox was halted entirely late Monday, the price of a Bitcoin there had dropped significantly, to $130. Meanwhile it was trading for more than four times that on other exchanges. Late on Monday, several other Bitcoin exchanges sought to reassure investors and took a harder line with Mt. Gox. ‘This tragic violation of the trust of users of Mt.Gox was the result of one company’s abhorrent actions and does not reflect the resilience or value of Bitcoin and the digital currency industry’, the groups said in a statement…”

Should-Reads:

• Atif Mian and Amir Sufi: “Cash on Hand” and Consumption: Evidence from Mortgage Refinancing
• Andrew Caplin and Roy Lowrance: The Mortgage Mess, the Press, and the Politics of Inattention
• Joseph E. Gagnon and Brian Sack: Andrew Caplin and Roy Lowrance: Monetary Policy with Abundant Liquidity: A New Operating Framework for the Federal Reserve

• Jason Furman: The Economic Outlook and the President’s Agenda

• Eric Loomis: This Day in Labor History: February 26, 1972: “On February 26, 1972, a Pittston Coal Company slurry dam collapsed in Logan County, West Virginia. The ensuing flood of coal slurry would kill 125 people and demonstrate once again the horrific contempt the coal industry has for the people of West Virginia…. When the dam caved, 132 million gallons of slurry entered Buffalo Creek. Downstream lay 16 small towns with a total of 5000 people. 125 would die that day. 1121 were injured 4000 people lost their homes. These little towns were all old coal company towns. The companies had divested any responsibility for the towns before this, but most the people who lived either worked in coal or had family members in the industry. Already these towns were dying as mechanization replaced thousands of jobs in the 1950s and people left, largely for the northern industrial factories. Pittston Coal called the mine collapse ‘an act of God’ in its legal filings, saying the dam couldn’t hold all the water ‘God poured into it’. As if it was God who constructed unsafe dams and then filled them with coal sludge…”

• James Kwak: Rich People Save; Poor People Don’t | The Baseline Scenario: “I’m all for living within your means and saving for retirement and all that. But it’s a myth to say, as America Saves does on its home page, “Once you start saving, it gets easier and easier and before you know it, you’re on your way to making your dreams a reality.” The underlying problems are stagnant real incomes for most people, rising costs (in real terms) for education and health care, increasing financial risk due to the withdrawal of the safety net, and increased longevity (good in some ways, but bad if incomes aren’t rising and you want to retire at 65). That’s why households are showing up at age 64 with less in retirement savings than they had just last decade. And why, if you feel like you’re not saving enough, it’s probably not your fault…”

• Ross Douthat: The Games Putin Plays: “”Events in Kiev have been a lesson in the limits of Russian influence, and the implausibility of Putin’s claim to offer a rival civilizational model…. After a century in which Russia styled itself a revolutionary power… the former K.G.B. man has sought a return to the ideological role his nation played under the czars — as a conservative bulwark against the West’s revolutionary liberals…. Crucially, this rhetoric isn’t just for domestic consumption: it’s also pitched to the developing world…. There is a vast difference between Putin’s grand strategy and both its Czarist and its Soviet antecedents. The czars sought a ‘Holy Alliance’ to defend a still-extant ancien régime…. But today’s Russia… is not a traditional society in any meaningful sense of the term, and the only thing it has in common with many of its potential developing-world allies is a contempt for democratic norms. In the Romanov era, the throne-and-altar idea still had a real claim to political legitimacy. But there is no comparable claim Putin can make…. A few voices on the American right have praised his traditionalist rhetoric — but only a few. As beleaguered as America’s social conservatives sometimes feel, we’re a long distance from signing up as useful idiots for a thuggish, obviously opportunistic ‘family values’ crusade…”

Josh Marshall: Goodbye to All That–Why I Left the Academic Life | Noah Smith: 2008: Liquidity crisis, or solvency crisis? |

Should Be Aware of:

1. James Kwak: The Costs of Bad 401(k) Plans: “many 401(k) plan fiduciaries—roughly speaking, employers and other parties with a management role in a 401(k) plan—are not meeting their legal obligations to protect the interests of plan participants. The key legal problem is the existence of the section 404(c) safe harbor, which exempts employers from liability for losses that are due to participants’ investment decisions. As currently interpreted by most courts, the safe harbor protects employers from liability for negligently constructing menus of investment options, so long as the resulting menu meets certain criteria met by the Department of Labor—criteria that allow plans to be stuffed with high-fee, actively managed mutual funds.”

2. Teresa Nielsen Hayden: A spelling demonology: “bazaar, bizarre, accede, precede, supersede, barbecue, acquaint, accessory, necessary, desiccate, Cincinnati, occurrence, inoculate, accommodate, recommend, harassment, espresso, embarrass, corollary, grammar, hemorrhage, artillery, battalion, broccoli, guerrilla, iridescent, abattoir, miscellaneous, millennium, vermilion, millenarian, dilettante, minuscule, parallelism, a cappella, commitment, committed, committee, satellite, poinsettia, counselor, calendar, cemetery, stratagem, sorcerer, restaurateur, sergeant, prophesy, pharaoh, camouflage, pronunciation, fluorescent, suede, eulogy, pseudopod, bureaucracy, prophecy, fuchsia, feud, silhouette, jodhpurs, liaison, hierarchy, sovereignty, sacrilegious, deity, sieve, frieze, receive, seize, siege, weird”

3. Rudyard Kipling: A Dead Statesman: “I could not dig; I dared not rob:/ Therefore I lied to please the mob./ Now all my lies are proved untrue/ And I must face the men I slew./ What tale shall serve me here among/ Mine angry and defrauded young?”

And:

I Think the Financial Times’s headline writers do not like Michael IgnatieffMichael Ignatief: We need a new Bismarck to tame the machines | Benjamin Kroll: Research Suggests Nativism Drives Opposition to Health Care Reform |