Don't Try To Draw Any Conclusions From Government Poverty Data

One of my favorite sites, Instapundit, has two links today to posts that attempt to draw conclusions from government poverty data.  Unfortunately, as I have discussed many times, the government poverty data are completely fraudulent.  These data provide no meaningful information as to how many people suffer from some kind of financial or physical deprivation or hardship.  If you attempt to draw conclusions about deprivation or hardship from government poverty data, you are just showing that you don't know what you are talking about. 

In linked article number 1, we have Jordan Weissmann of the Atlantic opining that "Yep, Being a Young, American Adult Is a Financial Nightmare."   That's a proposition I could agree with, but I would base my agreement on the fact that young adults are getting buried by student loans, and they also have to pay for their parents' social security and Medicare, and they are set to be gouged by Obamacare, and then none of the entitlements will still be around when today's young adults need them.  But Weissmann has something completely different in mind -- he's talking "poverty." 

Poverty is an astonishingly common experience here in the world's richest country. As I wrote this morning, almost 40 percent of American adults experience it for at least a year by age 60.

But you know who poverty is especially common among? Young adults.

Jordan, it's only "astonishing" because government-defined "poverty" has nothing to do with poverty.  Weissmann presents some graphs based on government "poverty" data that he claims "illustrate the difficulty of making ends meet in your twenties and early thirties."  Along the way he calls living "under the actual poverty line" the equivalent of being "really truly broke."  The key statistic he cites, from a forthcoming book by Rank, Hirschl and Foster called "Chasing the American Dream," is that some 41.3% of Americans will "spend at least a year earning less than 150% of the poverty line" between ages 25 and 34.  

Sorry, you've just been duped by the government's fraud.  By the way, his article has over 300 comments as of this writing, and not a single one of them has picked up on the problem.  The big problem here is that the "poverty" data count most adult students as being in "poverty."  Federally-measured "poverty" is determined by "cash income" of your "household."  If you are over 21 and living apart from your parents, then your "poverty" status turns on your own cash income.  Of course, students don't have much of that.  Are you a medical student whose parents pay for everything?  That's poverty.  A graduate student with a fellowship?  Fellowships don't count as income -- you're in poverty.  Getting a big government-subsidized student loan?  Doesn't count -- poverty!  Harvard Law student who works for "Big Law" for the summer at $3000 per week?  OK, you will earn enough to not be in poverty.  Harvard Law student who takes one of those really nifty unpaid internships with a federal judge for the summer?  Poverty!  Parents send you an allowance of $300 per week?  Doesn't count -- you're still in "poverty."  You get food stamps?  (Why not?  You qualify!)  They don't count either.  You're in "poverty."

Are there really enough students in the 25-34 age group to swing these data meaningfully?  Absolutely.  According to Education Department data here, the number of 25-34 year-olds enrolled in a degree-granting institution in any given year is about 4 million, out of total population in that age cohort of about 40 million.  That's about 10% in any given year.  But Weissmann is quoting a statistic based on being in "poverty" or "near-poverty" in any one year out of the ten from 25 to 34.  So how many people will be a student for at least one year out of the ten between 25 and 34?  It could easily be 25% or more, plenty to swing Weissmann's statistic by as much as half.  (Think about this:  if everybody were a student for the one year from age 25 to 26 and not after, and therefore in "poverty" for that one year out of the ten from 25 to 34, then the education statistic would be exactly as we see -- 10% of the 25-34 cohort in school each year -- and Weissmann's statistic would show that 100% of 25-34 year-olds spent "at least one year in poverty" during that decade.)  

And of course that's far from the only problem with the government "poverty" data.  As big problem number 2 we have the failure to count in the measure of poverty all in kind handouts.  As relevant to young adults, these include not only food staps but also educational grants, even the part of the educational grants that pay for housing and food.  Weissmann's statement that being in federally-measured "poverty" means "difficulty in making ends meet" is just appallingly ignorant. 

As with my previous posts on poverty, I am not saying that no young adult in the United States suffers from real poverty, by which I mean financial or physical deprivation.  I'm only saying that the official "poverty" data are wildly inflated and do not provide any useful information on how many people are in the category of actual deprivation.  Nobody can say how inflated the data are, because the government does not provide enough information to figure it out.  I'm just trying to educate people a little so that they can stop making fools of themselves.

Then in Instapundit-linked article number 2, we have cnsnews.com reporting on September 17 on the Census Bureau's release that day of the household income and "poverty" data for 2012.  The official number of people in "poverty" in the U.S. in 2012 was 46,496,000.  That represented an increase of 6,667,000 people in "poverty" from 2008 to 2012. 

Now that's rather a large increase on Barack Obama's watch -- almost 17% in four short years.  Can you recall reading about this a month and a half ago when it came out?  It did appear somewhere in most major news sources, but somehow was not really big news.  Am I just a cynic in thinking that if there were a Republican president a 17% increase of people in "poverty" during his first term would be gigantic news?  

On the other hand, I also don't think that the increase in Census-definition "poverty" has much if anything to do with real poverty, in the deprivation sense.  Far more likely that it derives primarily from people's efforts to manipulate their reported income and/or their family definition in order to qualify for various handouts.  The hugely anomalous statistic from Obama's first term is the explosion in food stamp recipients from under 30 million to almost 50 million, with recruiters combing the country looking for people to sign up.  Could there be some family re-definition going on?  (Hey, if sonny is away at college, he could qualify for food stamps if we say he is not part of the family!) 

If I'm right about why "poverty" has increased (and I am), better look for more big increases to come.  Obamacare gives tremendous incentives to manipulate income below thresholds and/or define families into smaller units in order to qualify for subsidies and "free" plans.  I'm predicting a very big jump in "poverty" in the coming few years.

New York Bent On Self-Destruction

Tomorrow is our day to dodge the bullet of Bill de Blasio, and in the best New York tradition we're not going to do it.  The good news is that even the worst left-wing policies do not lead to immediate economic collapse, but rather to slow gradual decline.  It took decades of Rockefeller/Wagner/Lindsay overtaxing and overspending before New York City lost 10% of its population in the 1970s, and that one proved possible to correct.  Still, you would think we had learned those lessons. 

To prove that the New York mind is incapable of learning, the Daily News serves up one of the most preposterous editorials imaginable, endorsing de Blasio for mayor.  The gist of the editorial is that they are against every specific policy proposal that de Blasio has put forward, yet they support him because, I guess, he can't really mean it and he seems like a bright guy and we hope that he will wise up once in office.  They characterize his expensive and vapid educational agenda ("after-school programs!", "parental involvement!", "teacher retention!") as "wishful thinking."  They point out that Bloomberg had educational reforms that actually worked (charter schools, closing failing schools), but at the demand of the teachers union de Blasio opposes continuing with them.  Well, he'll just have to "be a fast learner."  They characterize his approach to security (a federal monitor for the Police Department!) as "display[ing] a frightening ideological bent."  Massive retroactive raises for the workforce (the unions are demanding $7.8 billion)?  de Blasio has refused to rule them out, even though "the right response is zero."  No mention in this editorial of the actual main issues confronting the city government, overspending on education and on pensions and retiree healthcare.  From all indications de Blasio has never heard of these issues.  It would be way too impolite to point such things out to him.  He's too busy crusading to "save" a hospital in Brooklyn that is way beyond saving.  And by the way, there are four more behind it in deep financial trouble and not a chance the city can or will divert money from other needs to save any, let alone all of them.        

Conclusion: "De Blasio's potential to rise to that challenge is the critical factor for an endorsement extended with trepidation.  Great good luck to all."  Well, I've got news for them: de Blasio is a true believer in his rhetoric.   You make your own luck, and we're making ours here, but not the good kind.

Also not mentioned by the Daily News is another of de Blasio's favorite causes, "affordable housing."  The Wall Street Journal surprises over the weekend with some information on how much this game costs.   I previously estimated the cost of "affordable housing" in Manhattan at $40,000 to $80,000 per beneficiary family per year, based solely on the differential between the subsidized rents and market rents for similar apartments in the same buildings.  But of course the direct and indirect subsidies are far greater even than this, although very difficult to find and quantify.  But the WSJ got hold of Housing Finance Authority board materials for a meeting in October that approved financing for a project on Sixth Avenue with 375 apartments, 75 of them "affordable."

Board materials show that the 80-20 program would allocate $2.5 million in tax-exempt financing, plus $18,573 in federal annual tax credits for 10 years, for each of 75 affordable units.

Assuming a 2% interest rate differential between the tax-exempt financing and what would be available in private financing, that's $50,000 per subsidized apartment, plus the $18,573 makes $68,573.  And did I mention that in return for making 20% "affordable" apartments they get to pay no real estate taxes on the whole building for at least 10 years?  That could easily be $2 million per year, or another $27,000 per "affordable" apartment.  Seems like the total comes pretty close to $100,000 per year per apartment.  And the beneficiaries are not even poor!

Can someone here in New York possibly notice?  Yes.  Here in the WSJ article, we have Benjamin Dulchin of the Association for Neighborhood and Housing Development, referring to this 80-20 program in Manhattan, saying "It is about the most inefficient way from the taxpayer's point of view to provide affordable housing."    This is actual real progress, since ANHD is basically a coalition of "affordable housing" promoters.

But don't worry:  de Blasio will not notice.  

Obamacare And Progressive Disdain For The Peasants

In the disastrous Obamacare rollout, there has been much reporting on the falseness of the president's promises ("If you like your plan, you can keep your plan."), but much less on what that falseness reveals about the underlying game.  That game, of course, is to force some large percentage of the population to overpay for healthcare so that others can be subsidized. 

But with all the publicity about the false promises, and the accompanying cancellation of millions of policies now deemed non-compliant with Obamacare, it seems that more people are starting to catch on.  And now we are starting to learn what is the Official Progressive Answer upon exposure of the lie:  We had to do this to you because you are too stupid to do what is good for yourself. 

So one after another the spokesmen for the administration put forth the new line, that we are protecting you from your own folly.  The rhetoric attempts to direct anger at the evil insurance companies, but no one was forced to buy these prior policies.  So in fact what we have is a demonstration of oozing progressive contempt and disdain for the ignorant peasants.  As example number one, here is President Obama himself yesterday in Boston:   

One of the things health reform was designed to do was to help not only the uninsured, but also the underinsured.  And there are a number of Americans –- fewer than 5 percent of Americans -– who've got cut-rate plans that don’t offer real financial protection in the event of a serious illness or an accident.

Or Jay Carney in his daily press briefing:

What the President said and what everybody said all along is that there are going to be changes brought about by the Affordable Care Act that create minimum standards of coverage.

Or Congressman Henry Waxman (D, Hollywood) at yesterday's House hearing, who characterized what is going on as no longer "allowing insurers to continue offering deficient plans next year." 

So the peasants have been buying "cut-rate" and "deficient" plans that don't meet "minimum standards."  Good try, but the peasants as usual aren't as dumb as their masters think.  Take a look at the list of "essential health benefits" that must be included in any Obamacare plan.  The majority of them are things that no rational person would insure against, any more than you would insure against the cost of buying lunch.  Insurance for "preventive and wellness services" is a license for neurotic hypochondriacs to force you to pay for their many useless doctor visits.  Prescription drugs are exactly the sort of ongoing and non-catastrophic expense that nobody would try to "insure" against outside the weird healthcare world; ditto for laboratory services.  Then there are the things that you can know with 100% certainty that you will not use during the coming year, for example, maternity services or birth control if you are a single man, or substance abuse services if you are a teetotaler. 

In fact the peasants know exactly what they are doing, and the elite progressives are the fools.  But the peasants are going to have the last laugh, because starting now from day one, people are going to do what they always do, which is to behave rationally to maximize their position in the world given the various constraints that they face.  The people will do lots of things, some of which are good for the country and some bad, but all of which are bad for the survival and success of the Obamacare coercive enterprise.  As a few examples: 

(1) As mentioned here many times, if you are young and healthy (with few assets), don't sign up.  Wait until you are sick and then sign up. 

(2) Will some enterprising people in Canada please set up a few black market insurers up there and sell policies over the internet?  The Canadians are doing this right now with ridiculously overpriced U.S. prescription drugs, making a bundle and completely getting away with it.  There are billions of dollars to be made here.   If Canada cooperates with the U.S. goons to shut this down, try Cyprus.  What are you guys waiting for?

(3) In one of its much underappreciated idiocies, Obamacare defines the entitlement to government subsidies based on "household income."  The concept of the "household" is subject to manipulation and redefinition by intelligent enterprising individuals seeking to maximize their government handouts.  Are a man, woman and two children with a $50,000 income one middle-class family or a middle-class man and a woman and two children in poverty?  If it enables you to qualify for a $10,000 per year subsidy, then get a divorce or build a temporary wall through the middle of the apartment.   The handout-receiving "poor" in this country have long since figured this out, and thus have a reported 72% "illegitimacy" rate; now the middle class can have that too! 

And those are just the ideas that occur to me off the top of my head.  We now have 300 million people at work in the best tradition of capitalism to get around this monstrosity.  Social structures that are based on demanding people to act against their own economic interest to benefit others do not work.  They won't work here either.  I'm betting on the peasants, and against their would-be masters. 

Should A Federal Prosecution, Or Even A Guilty Plea, Entail Reputational Damage To The Target?

When you read about the latest federal prosecution or investigation of some or another big alleged wrongdoing, do you find yourself instinctively thinking that the target undoubtedly must have done something wrong?  After all, our prosecutors and regulators are trained experts lacking even a hint of self-interest.  Why would they conceivably invest all this energy in a major prosecution if there wasn't something really bad going on? 

And beyond that abbreviated thought process, it's very difficult for even the well-informed citizen to invest enough time and energy in studying the facts of any of these prosecutions to form a real independent judgment on whether the defendant did anything wrong.  So our instinct is to trust the government, and thus for the reputations of entities under investigation or prosecution to suffer or die, along with their businesses.  Combine this dynamic with a few dozen rounds of piling on useless and destructive regulation (see, e.g.,  Dodd-Frank), so that now scores of federal and state regulators and prosecutors have been given life and death powers over most large businesses, and you have an environment ripe for extreme corruption.     

How bad is the corruption?  Fortunately, from time to time big cases come along that are so obviously preposterous on their face that no great amount of study of the facts is needed to know that something is going terribly wrong here.   

I have previously written about the government's "sick game" with the big commercial banks.  That is the game whereby the government passes the banks billions upon billions of dollars by artificially keeping their cost of funds at or near zero for years (aka QE I, II, III,. . .,n) and then every prosecutor in the country gets to go collect a few hundred million, or a few billion dollars from one or more of them every so often in order to keep the prosecutor's name in the papers.  And thus, to take the example of just one of the banks, I commented on July 1 on J.P. Morgan's participation in a $25 billion settlement with 49 state AGs, Justice and HUD over alleged wrongful practices in enforcing underwater mortgages; and then on July 25 on JPM's settlement with FERC for about $500 million for alleged manipulation of trading in the California electricity spot markets (the alleged manipulation having had the potential effect of raising electricity prices to any given consumer by perhaps a few dollars, all while the state of California and the Obama administration seek an artificial doubling of electricity prices by imposition of a "cap and trade" carbon restriction regime);  and then on September 24 on JPM's settlement for $920 million with the SEC, where the SEC decided that the right "remedy" to punish JPM for the "London Whale" trading losses of about $6 billion was to force JPM to fork over yet another $920 million to the SEC.   

Each of these three settlements had some rather obvious facial absurdities.  But now we're coming to the big one:  the criminal -- yes, criminal -- investigation of JPM by U.S. Attorney Preet Bharara of the Southern District of New York, for alleged failure to discover and report the Ponzi scheme of Bernard Madoff.  The New York Times covered the story on October 23, and Professor Richard Epstein of NYU Law School has a long comment on the affair at the Hoover Institution site here.

The central irony of this one, of course, is that the government itself, in the person of the SEC, had both better information and better access to information about Madoff than JPM or anyone else.  The SEC had the right to inspect books and records.  The SEC had subpoena power.  The SEC actually sent people in to Madoff's offices no fewer than five times to conduct examinations or investigations.  The SEC had a well-informed guy named Harry Markopolos writing it one letter after another setting forth in layman's terms why Madoff's operation was and had to be a Ponzi scheme.  And compared to JPM or anyone else, it's actually the SEC's job, if they have any job, to figure out which operators are crooks and stop them. 

In 2009 the SEC's Inspector General put out a 457 page report on the agency's incredible failure to figure out Madoff over three decades (linked in Epstein's article).  Epstein summarizes the report as follows:  

 [T]he OIG found that the SEC had ample information in the form of “detailed and substantive complaints” from 1992 to 2008, all of which raised “significant red flags” about Madoff’s operations that the SEC then overlooked in “three examinations and two investigations” that turned up nothing. JPM is not mentioned once in that 457-page study.

But of course the SEC is the government so nobody can do any wrong.  Nobody even got fired!  Well, what good would that do, since they've never discovered any other single Ponzi scheme ever?  Could the next group of bureaucrats really do any better?

Epstein points out that Bharara is working on this one hand in glove with the Office of the Controller of the Currency, which has the ability to suspend JPM's charter and put it out of business without need for evidence, proof, or a trial.  So how much will JPM fork over on this one?  A good bet would be multi-billions.  If there's one sure bet, it's that JPM will not submit itself to a criminal trial and take any risk whatsoever of conviction, even .0001%.

The question is, when JPM (or some other big company) settles this one or the next five, to what extent should the informed public consider its reputation to be diminished by the assumption that it may have done something wrong?  There really isn't any reason to think that any one of these coerced settlements had any more solid basis than any other one, or than this latest absurdity.  Way too many ambitious prosecutors have figured out how easy this is.   Really, to the informed public, it's only the government's reputation that should be getting diminished.        

Understanding Political Priorities In Manhattan

Actually, there is no understanding political priorities in Manhattan.  I was kidding with that title. 

Our local newspaper The Villager this week has a long report on an interview with Gail Brewer, the recent winner of the Democratic primary for the nomination for the office of Borough President of Manhattan.   The office of Borough President has almost no responsibilities, but it is the only office whose geographical boundaries are (almost) co-terminous with Manhattan Island, so the thoughts of this candidate can give us some insights into the mindset of the Manhattan voter.  Ms. Brewer's prior job has been as member of the City Council from the Upper West Side, a neighborhood that was seedy when I moved to New York in the 70s, but today is quite wealthy.

In the article, Ms. Brewer lays out her three top priorities for Manhattan.  This against a backdrop of the highest state and local taxes in the country, sluggish economic growth, public school spending almost double the national average per student for inferior results, and a serious crisis of excessive and accelerating spending for pension and health benefits of retired workers who no longer provide any services to the taxpayers.  So what are Ms. Brewer's three top priorities?

First up is -- affordable housing!  And or course that housing must be located here in the most expensive place in the country, Manhattan. 

 In a city saturated with luxury housing development, Brewer’s top priority is to ensure affordable housing is obtainable in Manhattan.

Yes, it is the very thing that I nominated as "the worst possible public policy" just a month ago.  Can she really justify the implicit subsidy of $40,000 to $80,000 per family per year as a good use of public funds, when much less expensive places are available right across one of the rivers?  You can be 100% sure that she has never tried to make that calculation.  The whole idea is to hide the subsidies so deep off balance sheet that nobody can figure them out.      

Priority number two?  Brewer "wants to focus on preserving mom-and-pop stores."   

“The loss of mom-and-pop stores in Manhattan, I hear about it everywhere I go,” she said. A study found that there were 72 bank branches in her Council district, only confirming the obvious — that there were far too many.

It seems that banks have been on a tear opening branches around Manhattan.  But has Brewer forgotten that throughout the 70s and 80s, and as recently as about a decade ago, it was considered a crisis by trendy left-wing thinkers that there were not enough bank branches in New York, particularly in poor areas?   Consider this from Louis Jacobson in the Prospect in 2001:

Thanks in part to deregulation, bank branches have closed in low- income communities since the early 1980s, and check-cashing outlets have often taken their place. . . .  The flight of the banks not only means that the poor must now pay more for financial services; it also means their communities are losing the institutions that promote personal savings.

Well, fortunately for us Ms. Brewer appears to know the perfect number of bank branches for each neighborhood, although she has not yet chosen to reveal that information.  Perhaps after she wins the office. 

So on to priority number 3.  Drum roll!!!!!!!  Yes, it's "local food."  You can't make this stuff up.  Does she know that no food is produced in this county -- or for that matter in any of the six counties immediately across the water from us?  Or that our part of the world has a six month non-growing season when there is no produce available from hundreds of miles around unless you happen to have stored some squashes or potatoes in your root cellar?   Whenever I hear talk of "local food" on this paved-over island, I'm reminded of this conversation I had recently with a woman on the subject of her recent-college-graduate daughter:

ME:  Has she found a job yet? 

HER:  She is working at a food store that specializes in locally sourced food. 

ME:  Interesting.  What does she do there? 

HER:  She works at the coffee bar. 

ME:  Does she realize that no coffee is grown within a thousand miles of here? 

HER:  It's brewed locally. 

It seems that Brewer actually claims an accomplishment on the "local food" front, which is a bill passed by the City Council requiring that "food in city contracts must be purchased from within New York State, unless the item is too difficult to find here."  So I guess that Buffalo (400 miles away) is more "local" than New Jersey (2 miles away) or Connecticut (30 miles away). 

Meanwhile Brewer actually has a Republican rival, David Casavis  (The Villager says that Brewer is expected to "win easily.")  Casavis' entire campaign consists of calling for the abolition of the office of Borough President.  Clever, but you'd think he could at least have a good time making some fun of Ms. Brewer.

Can A Federal Bailout Of State And Local Public Employee Pensions Be Stopped?

I have nominated so-called "Affordable Housing" in Manhattan as the worst possible public policy, but suddenly there is a second nominee:  A federal bailout of state and local pensions. 

This is one you probably have not heard of yet.  Time to wake up. 

Previous Manhattan Contrarian articles on the looming state/local pension crisis are collected here.  How big a problem is it?  A 2011 CBO report available here puts the nationwide underfunding figure at "only" $0.7 trillion, using the numbers reported by the states and localities themselves, which include discounting liabilities at an average of at or close to 8%.  I would call that methodology completely fraudulent.  To its credit, CBO also gives numbers at discount rates of 7, 6, 5, and 4%, and by the time you get to 4% the underfunding figure has gotten to $2.9 trillion.  By the way, at this point are you, like me, asking what possible legitimate interest CBO has in this subject to begin with? 

Meanwhile, an NBER/Cato Institute study available here puts the underfunding number at +/- $3 trillion.  Basically, they take the view that liabilities that must be paid come hell or high water must be discounted at a (kind of) risk free rate, which sounds right to me.  Separately, Moody's announced in 2012 a plan to recalculate government pension liabilities at a 5.5% discount rate as part of its bond rating processes.  That rate gives an underfunding number of around $2 trillion. 

Importantly, the problem is not spread uniformly among the states, but rather is heavily concentrated in (surprise!) a handful of big deep-blue states.  Illinois has the worst problem, California second, while New York, New Jersey and Connecticut vie for third, fourth and fifth place.  Pennsylvania is probably sixth.  Many red states have no pension problem at all, although Texas is not without its issues.

Yesterday the Manhattan Institute and Real Clear Politics co-sponsored a conference on this subject here in sunny New York City.  A panel on "How Bad Is It?" did not cover much that would be new to Manhattan Contrarian readers.  But then came a panel on "How To Fix It" -- and suddenly the number one topic of discussion became the seemingly inevitable "federal role."   

Former Mayor (1993-2001) Dick Riordan of Los Angeles spoke by video feed from California.  Apparently he is making a big personal push for California pension reform.  After describing a failed effort last year to gather signatures to get a pension reform measure on the California ballot, he moved on to his current ideas, prominent among which was a plan to get the federal government involved in some kind of insurance scheme for state and local pensions.  Although the proposal was vaguely described, and he never used the acronym, it sounded to me very much like the PBGC.  When other speakers' turns came, I was fully expecting them to dump well-deserved scorn and ridicule all over this idea, but no!  The opposite -- one after the other they said something like, "well, it may be necessary," but "of course, if they do this they will have to impose stringent conditions."  (Other panelists who spoke to this issue included generally sensible types like Dan DiSalvo of City College and Steve Malanga of the Manhattan Institute.)  One participant, Joshua Rauh of Stanford Business School, described meetings with Congressional leaders, including, he said, Republicans, where the discussion was more what form the bailout should take as opposed to whether there should be such a thing at all.  One speaker said that Governor Quinn of Illinois had included a line item in his most recent budget for an assumed federal contribution to alleviate the state's pension woes.  Asked (by me of course) how anybody could possibly think federal intervention in state and local pensions would be a good idea, the answers mentioned "preventing another financial crisis" or "avoiding a meltdown."    

Yikes!   Like many other gigantic federal power grabs, this proceeds to seeming inevitability before anybody even finds out about it.  Any sort of a federal bailout for state and local pensions is a world class bad idea.  Let me count the ways:

(1) Politicians in general have no ability to run (or guarantee) any pension system because they cannot resist the temptation to buy votes today with current payouts and hide and delay the funding until after they have left office.  But at least the states have the semi-discipline imposed by not being able to borrow in a currency that you can print, which is why the state/local pension problem is "only" around $3 trillion.  The feds, as we all must know, having the ability to print the currency in which their obligations are denominated, therefore have the illusion of the infinite credit card, and have used it to turn their pension and health care programs into Ponzi schemes with unfunded liabilities of $80 trillion or more.  So the right answer to the state/local pension problem is to turn it over to the feds?  And why exactly won't the feds then promptly turn it from a $3 trillion problem into, say, a $50 trillion problem? 

(2) I loved the business about the feds supposedly imposing "stringent conditions."  Because, I guess, federal congressmembers and bureaucrats are responsible people who just want to do the right thing with taxpayer money?  It was like it hadn't occurred to anybody that the public employees who are the beneficiaries of these pensions, and their unions, are the core constituency and prime operatives of one but not the other of the political parties.  Money going to public employee union members is not just buying individual votes, it is buying political contributions, phone banks, driving people to the polls, and everything else needed to swing elections and entrench incumbents and enhance their power.  Politicians simply cannot behave responsibly when faced with these kinds of temptations. 

(3) Any federal pension bailout will be a massive wealth transfer from the responsible to the irresponsible and from the red states to the blue.  The Republicans cannot possibly be stupid enough to go along with this.  (I know, don't underestimate them.)  Can they not perceive the political advantage of pointing to the upcoming struggles of the big blue states and saying, that's what happens to you when you vote for the Progressives?

I could think of a bunch more reasons, but that's enough for now.  Of course, the prime argument of the forces of bailout will be to stampede their opposition with fear of a "crisis" or a "meltdown."  All I can say is, back in the days before the federal government bailed everybody out, we had very sharp contractions, followed by equally rapid rebounds and booms.  Now that downside risk is gradually being eliminated from life we have endless sluggishness.  Maybe if we can socialize all risk we can achieve the high-tax collectivist nirvana of the Eurozone, which according to the August 14  Wall Street Journal, still has not recovered to pre-recession 2008 gdp.