Author: Larry Littlefield

I wrote the post "Hedge Funds Kiss Our Assets Goodbye" back in 2007. I was reacting in terror to the fact that then-NYC Comptroller William Thompson was shifting to "alternative" assets such as hedge funds and private equity. In an effort, I believe, to hide or deny the fact that the retroactive pension enhancements his union supporters got in deals up an Albany would wreck public services, by somehow getting the fantasy 8.0% rate of return.

Well now the New York Times has found those pension funds that shifted to alternative investments ended up paying higher fees to Wall Street while getting lower returns. Which is just what anyone who wasn't being paid to say otherwise would have predicted. I'm hardly a financial whiz, but the ripoff was clear to me. The Times article talks about what happened to public employee pension funds in Georgia, Pennsylvania, Oklahoma, California and Austin Texas — but not New York — over the past five years. So can someone tell me…how screwed are we?  The ongoing spiral of tax increases and service cuts to pay for those deals is bad enough as it is, without Wall Street ripping us off more.

President Obama and the Democrats thought they could mute opposition to health care reform by adopting the Heritage Foundation Romney plan, and imposing a regressive mandate instead of a progressive or proportional tax. It seems that may not turn out to be the case. Romney now claims it is fine for states to provide/require universal health insurance, but not the federal government.

But what about the Supreme Court case overturning a key part of the Welfare Reform Act of 1996? The Court ruled that states could not limit the benefits of those who move (or are sent) from less generous states to more generous states when they were in need, while benefitting from the lower taxes of the less generous states before and after. How does Massachusetts prevent South Carolina from sending its citizens north to that state when they fall ill? Why do they end up in New York, on our Medicaid plan, instead? New York had better find out, and take action.

Perhaps now that one part of the MSM has broken the wall of silence, the sad reality will come out in the open. The young are clueless, but always have been. That's why in the past it was up to those older to look out for their best interests. Then the majority decided to stop doing so.

"Nobody ever talks about generational conflict. Who wants to bring up that the old are eating the young at the dinner table? How are you going to mention that to your boss? If you're a politician, how are you going to tell your donors? Even the Occupy Wall Street crowd, while rejecting the modes and rhetoric and institutional support of Boomer progressives, shied away from articulating the fundamental distinction that fills their spaces with crowds: young against old." Actually, it should be the young and the old who care about their own kids against those who don't. 

Ryan's plan still exempts those 55 and over, the generation that wanted tax cuts and got them, from any restraint on its future increases in taxpayer-funded spending. All the sacrifices are foisted onto the increasingly poorer generations who are age 54 and younger, because those older demanded what they were unwilling to pay for. It's just like all those retroactive pension enhancements followed by Tier V and Tier VI. Just like the falling private sector wages generation by generation for those at the same age.

We have a budget crisis right now, not 20 years from now, because of the selfishness and entitlement of Generation Greed, not younger generations. And no, the problem isn't that younger generations deserve less. Every indicator shows they are in fact better behaved than those 30 years ago, and faced with higher expectations for what they will contribute and lower expectations about what they will receive.

Looks like some economists are testing my view that you can't pay most people less, use advertizing to convince them they have to spend more and more, and have them go deeper and deeper into debt to cover the difference, indefinately. Read this.  What an era.

He we go again. Thanks to the unwillingness of most Americans to arrange their lives, and/or pay extra for alternative technologies, to reduce our dependence on imported oil during the 39 years since the Arab Oil boycott of 1973, the U.S. once again faces a potential economic and foreign policy crisis. Iran is threatening to close the Straight of Hormuz, gas prices are rising, and the U.S. is facing the possibility of yet another recession caused by oil prices and yet another war to keep its economic drug coming. It is a political crisis too, because many Americans seem to believe it is the federal government’s job to keep gasoline cheap, and blame the President when the price goes up. A recent poll referenced in this article said that Americans considered gas prices the third most important issue. So what do I want President Obama to do about it? Show leadership, as I define it, for perhaps the first time in his administration.

As I noted in my review of Mayor Bloomberg’s first two terms, the job of a public executive is in reality three jobs. Management, as CEO of a large multi-function enterprise. Policy, because in combination with the legislative branch the executive helps to determine the direction of the government. And Leadership, because the President is a leader (one of many leaders in both the public and private sectors) of Americans, with an ability to influence how they live and what they believe, above and beyond the role of government and its ability to compel people to do or not do things. What I want the President to do about gas prices is help Americans, not all of them just those willing, to organize themselves to use less gasoline. Right now, independently of government policy or programs. Those unwilling, the whiners, would benefit from lower prices as well.

It’s time to conclude my overview of U.S. federal finance for this year, and for a while, with a discussion of the national debt in the context of all our other debts, and the values of those who are running them up. One spreadsheet with data and charts on federal revenues, expenditures and debts from the 1970s to the present, previously linked in this series, is here. A second, new spreadsheet, on U.S. debts of all kinds from 1952 to the present, is here. I suggest grabbing these spreadsheets and printing out the charts in the latter before reading on.  In prior posts, I showed how U.S. federal taxes as a percent of GDP had fallen to the lowest level of my working lifetime, and of the current political era, by fiscal 2011, at just 14.4% of GDP. And federal spending had soared to the highest level in recent history, at 25.3% of GDP. As a result, over the past five years the federal deficit has soared to levels unheard of for a half century, and the total federal debt as a percent of GDP has jumped to levels not seen since the aftermath of World War II.

Some of this is the result of the Great Recession and the response to it, and may pass. But some of it is merely a culmination of a “buy now, pay later” era that has gone far beyond the finances of the federal government. As a result, the United States is at risk of financial disaster. The biggest difference between us and Greece is that, for the moment, other countries and the people within them are willing to lend to the U.S. federal government at zero percent interest. On the assumption that the government will impose whatever harm is necessary on younger generations in the future to pay them back.

The New York Times had an article on Sunday about the ongoing fiscal crises and service cuts that are wiping out public services throughout the state, in large part due to past debts and pension costs. But the Times doesn’t tell the why straight. First of all, pension costs are much lower as a share of payroll in the rest of the state than in New York City, and the pension plans for the rest of the state are better funded. No one wants to talk about how much worse off NYC is. Second, in mentioning reasons the Times mentions the stock market decline of 2008 but not the bubble that preceded it, nor the retroactive pension enhancements. The Times doesn’t want to mention the retroactive enhancements because the older generations it cares about made out like, well, bandits, younger generations are being sacrificed, and that is what the Times favors. And the News and the Post, and the legislators and the Mayor and the Governor and the unions. Governments are not going broke because of low stock prices, because stock prices are not low. They are high, relative to dividends paid, and temporarily inflated by Fed policy.

“These municipalities will not recover when the economy recovers,” said Richard Brodsky, a former assemblyman who is advising Yonkers. “Everybody was complicit in this tsunami, and now it’s landing, but not in Washington or Albany,” he said. “It’s in places like Yonkers, where the choice is between school kids and safe streets.” Wrong. Everyone who was around you working the system in Albany was complicit. You were complicit. Wall Street was complicit. The one percent were complicit. The retired and soon to retire public employees were complicit. The unions were complicit. They made out. Others are victims, irrevocably. You did the deal Brodsky, and you benefitted. Celebrate, you have no right to commiserate! There is one thing we cannot tolerate, just cannot. We cannot tolerate the idea that it was a mistake. It might have been a mistake when their predecessors did it, in the 1960s, leading New York City public services to collapse in the 1970s. But this time, they knew exactly what they were doing. And by the way, slashing benefits for new public employees will not stop public services from being gutted. In fact, they’ll probably just end up being retroactively enhanced again, with not enough money having been set aside, by the next set of Brodskys.