Sunday, June 23, 2013

Pesachim 3: Choosing One's Words Wisely and Reframing Perspective on Life

It has been a while, but I finally picked up my chevruta study again for Daf Yomi [as opposed to studying by myself]. It's nice to study Tractate Pesachim because the last tractate was so dull and insipid in comparison. So I'm studying with my chevruta today. Unsurprisingly, the Talmud goes on a tangent from talking about the Hebrew word אור in the context of Pesach practice to talking about why it's halachically proper to apply euphemisms (לשון נקיה) in one's speech. As Rabbi Yehoshua ben Levi brings up (Pesachim 3a), one should not express not express a crude [or distasteful] matter, which is why Genesis 7:8 refers to the animals as not pure (אשר איננה טהרה) instead of impure (טמא). The Gemara continues listing further proof-texts, whether in baraita or Biblical form, to convey the use of euphemisms to avoid more blunt or crass language. However, an exception is made for when a teacher is teaching a student because in that instance, the teacher should strive for brevity and conciseness, although the caveat of "this only applies when a teacher teaches his student."

Since Chazal spends a good portion of this Talmud portion focusing on usage of euphemisms, the lesson I draw from today's Daf Yomi portion is that it's not simply what we say, but how we say it, which further illustrates that complexity known as Jewish speech ethics. Without sounding too much like a "bleeding heart," what the Gemara is conveying is that in many instances, there is no need to be "blunt and to the point." One can find a way to express the same exact sentiment or thought without the coarse language that the Talmudic sages want us to avoid.

At the end of the Daf Yomi portion, there is an exchange in which Yochanan ben Chakuk is talking to some villagers. The villagers ask Yochanan ben Chakuk about how the wheat crops are doing. He could have said they're not doing well or even that the crops are doing absolutely terrible. He brought up that the barley crops were doing well, but the villagers derisively mocked him by quoting I Kings 5:8. As the Gemara points out, what he should have done instead is divert the villagers from the bad news and said that the lentils are developing nicely.

What the situation with Yochanan ben Chakuk did was, at least in my humble opinion, genius. Instead of focusing on the bad, what he should have focused on were the lentils because the villagers could actually do something beneficial with them, such as use the substitution effect to consume the lentils instead of the wheat. What Yochanan ben Chakuk should have done was turned a problem into a solution: he should have focused on the good instead of the bad, which is an essential to the Jewish concept of gratitude (הכרת הטוב). This sort of "more positive reframing" that the Yochanan situation exemplifies probably explains why upon hearing bad news, Jews utter the formulation of ברוך דין האמת. In some instances, we have to view the glass as half full. In others, we can find a pitcher of water to fill up the remainder of the glass.

Bringing these ideas to the broader picture, Judaism recognizes that we have the potential to elevate the mundane into the holy. Our words, as well as our outlook on life, are no exception. We can express our thoughts, sentiments, and emotions in a crude, crass, or angry manner. Alternatively, we can express all of that by wording it slightly differently (e.g., euphemistically) and getting a better result. When we opt for the latter, we not only bring a sense of equanimity within our own souls, but we also usher in a sense of peace and tranquility amongst our fellow human beings.

Wednesday, June 12, 2013

Why Low Rates of Return Merit More Social Security Privatization

You know you're a policy nerd when you have a dream, and it consists of a political debate of whether Social Security is a good investment or not. I assume that my subconscious is telling me something, and as such, I figured that I ought to bring that debate to my blog, so here we are.

In the past, I have discussed such Social Security-related issues as erosion of economic freedomcreating further dependency on government, and long-term solvency. Rather than get into a deontological debate about whether we should be coerced to put 12.4% of our earned wages into Social Security or whether one's retirement account should be at the mercy of political whims, what I would like to do today is take a more consequentialist approach and postulate whether Social Security is a sound retirement investment, or if there are alternatives to retirement accounts.

Retirement age and amount of taxes put into the system complicate the analysis, but when looking at the typical American, the average rate of return is about an annual real return of 1.2%. However, this depends on when you retire. As the nonpartisan Congressional Research Service (CRS) points out, if you retire at age 65 in 2003, it takes 17.4 years to break even, and for an individual who retires in 2020, it will take 21.6 years (p. 14).  One can argue that for being a low-risk investment, the rates of return on Social Security are not terrible. However, that assertion takes Social Security out of context, particularly in comparison to other options that provide a better rate of return than Social Security.

In spite of the fluctuations of market cycles, the S&P 500 index shows an average annual rate of return between 5-9%. As the Federal Reserve Bank of St. Louis shows, a private portfolio with diversified stocks has a better payoff than Social Security. If you are looking for something less volatile than the stock market, you can voluntarily put your savings in longer-term Treasury Bonds, for instance, and your rate of return would be higher than what it would be under Social Security. Investing in AAA corporate bonds yields an even higher rate of return than Treasury bonds.

Let's also not forget that it's not just markets that are prone to risk. With markets, at least we know that there are booms and busts, which would make the moral of the story "diversify one's portfolio." The current rates of return on Social Security make the assumption that the status quo of the law will by and large be maintained. Governments are prone to political risk, which means that factors such as demographic shifts, economic stagnation, or insolvency can lead to longer-term problems. Also, the only guarantee the government makes is that the Social Security Administration will invest the Social Security taxes in Treasury bills. The longevity of Social Security is up to 535 politicians in DC, and Social Security is not even a constitutional guarantee (Flemming v. Nestor).

Rather than invest tax dollars in an insolvent system with low rates of return, we should follow the examples of Chile, Sweden, and the United Kingdom and implement policies that ease Americans into privatization of retirement accounts so that we can create a new source of capital, not to mention an increase in national savings. By phasing out Social Security while still providing promised benefits to current retirees, we can reduce the debt burden while simultaneously providing Americans with better retirement prospectives.