Author: Larry Littlefield

From Bloomberg/Business Week: "New York’s 8 percent assumed rate of return on its pension investments is so unrealistic that the city may have to spend even more than the $1 billion it has in reserve for its retirement plans, Mayor Michael Bloomberg said." I can't argue with that. "Officials are waiting for chief actuary Robert North to recommend how much the city can expect to reap on its pension assets, which were valued at $120 billion as of June 30. North hasn’t issued a recommendation in more than a year." Waiting for a miracle.

"Each quarter-point drop in the assumed rate of return would cost New York at least $350 million to be set aside to pay benefits, said Marc LaVorgna, a mayoral spokesman." Wrong! The cost to the city depends on the cost of benefits. Inflating the presumed future rate of return doesn't change the actual cost one cent. It just changes the extent to which you can cover up the cost and shift it to a future you don't care about. Which, along with retroactive pension enhancements in deals between unions and politicians, are the reasons we got in this mess to begin with.

Mayor Michael Bloomberg via ABC News: "The protesters are protesting against people who make $40- or $50,000 a year and are struggling to make ends meet. That's the bottom line. Those are the people who work on Wall Street or in the finance sector.” In fact the mean payroll per worker in the Finance and Insurance sector in Downstate New York was $231,822 in 2010, according to the Bureau of Labor Statistics. For all private workers outside the Finance and Insurance sector, the mean payroll per worker in Downstate New York was $57,806 in 2010, or 30 percent above the U.S. average. An advantage indicative of and cancelled out by a higher cost of living. There used to be a lot of people in finance in NYC who earned $40,000 to $50,000. They were back office workers, who did things like due diligence. What ever wasn’t automated was outsourced following the early 1990s recession, and NYC lost tens of thousands of those “pink collar” jobs. 

From the NY Times City Room, “when asked about the latest budget cuts, Michael Mulgrew, president of the United Federation of Teachers, said that city schools ‘have been cut to the bone’ and were already stretched to their limit.” Actually spending on the city’s schools is going up by a $billion this year and went up by $billions more in the past few years, but it is all being diverted to the retired as a result of a UFT “victory” in a 2008 retroactive pension enhancement that allowed teachers to retire at age 55 after 25 years of work rather than 62 after 30, and other previous pension deals. 

Also from the Times: “Patrick J. Lynch, president of the Patrolmen’s Benevolent Association, warned of projected cuts to the Police Department. “The last thing this city should plan to do for the future,” Mr. Lynch said, ‘is to reduce the staffing of the N.Y.P.D., which has already been stripped to the bone in our local neighborhood precincts.’” According to Census Bureau data I published last week, NYC has nearly 2 ½ times the U.S. average number of police officers relative to population.

In today’s NY Times, Mark Bittman debunks the myth that poor people are getting fat because junk food is cheaper. It isn’t. People just don’t want to be bothered cooking, and more affordable junk food makes that possible – at the expense of people’s health. This is, I believe, just one example of people doing what is easy rather than what is best. The easy life, intensively marketed, is killing us.

According to the Daily News, the popular televangelist said it was OK to divorce a spouse who was suffering with Alzheimer’s, subject to certain conditions. “’I know it sounds cruel, but if he's going to do something, he should divorce her and start all over again – but make sure she has custodial care and somebody looking after her,’ Robertson said.” Now one can debate the ethics of this on several levels, not the least from the point of view of the Gospels, since opposition to divorce is one of the few moral absolutes directly attributed to Jesus. But Robertson is best known not for his philosophical views, but for his political views. His view that God wants taxes to be lower, and public aid to the needy to be diminished. Who, then, is it that foots the bill for custodial care when a spouse refuses to do so?

Medicaid. Divorce is often a part of Medicaid planning, accessing a program purportedly intended for the poor while not actually being or becoming poor. In fact, the taxpayer burden of the custodial care of those who did not make sacrificing for family a priority in healthy adulthood – who went through divorces or became absent parents during their children’s childhood – is one of the most difficult issues we face going forward. What will happen when those children say sorry, but you put yourself first when I needed you, and I’m struggling now, so don’t expect me to diminish my life if great sacrifices are required to ease your later years? Even in New York, where rules have been in place to allow cost shifting to the government without the formality of divorce, this is now recognized – even by many Democrats — as a financial burden this high tax state cannot afford.

According to Bloomberg News, federal legislation to force New York City to allow anyone from other states to carry concealed handguns has 243 sponsors in the U.S. Congress. Among those sponsoring the legislation are U.S. Representative Heath Shuler, a North Carolina Democrat, Representative Cliff Stearns, a Florida Republican, and two Republican senators, David Vitter of Louisiana and John Thune of South Dakota. As the attached spreadsheet from the latest Statistical Abstract of the United States shows, North Carolina, Florida, and Louisiana all have New York City beat – in murder and rape. South Dakota has a low crime rate overall and below New York City in murder, but is sky high in rape. Needless to say, a comparison between central cities in these states and NYC would be far worse. The Northeast U.S. is generally lower than other parts of the country in crime.

Perhaps the Mayor should warn New York area residents against visiting these states, as well as being forced to follow their example.

According to the Wall Street Journal, “over the next decade, Mr. Bogle said stocks are likely to generate an average annual return, including dividends, of around 7%. ‘Your money will double in 10 years,’ he said. ‘How bad is that? People ought to get over the illusion [of higher expectations] and realize that they may have to invest for longer time periods, start earlier and save more.’"

That is an optimistic forecast. But New York’s public employee pension funds assume a much higher rate of return, for a mixed portfolio of stocks and lower yielding bonds. So politicians can avoid admitting how much they have harmed taxpayers and those who rely on public services and benefits, by retroactively enhancing the retirement benefits of those who already had the richest retirement benefits, as part of political deals. In New York they keep denying, even as required pension contributions soar and services are cut despite the nation’s highest tax burden. After all, those with privileges expect rationalizations to go along with them. Remember that when politicians and public employee unions organize protests against layoffs, cuts and pay and benefits for new hires, service cuts, fee increases and tax increases. And if you point out what has been done, they cover their ears and scream.

The 9/11 attack was a disaster by any measure, with nearly 2,000 people killed in NYC, the loss of 15 million square feet of office space, and months of disruption. But was the response, and the fear, disproportionate, with two wars and a host of new security intrusions? Is the actual toll of what happened on that day, as large as it was, small compared with the negative effect on the United States, economically, fiscally, psychologically, and in global relations? What shouldn’t be forgotten is that what actually happened that day was only one tenth what most people believed had happened, and/or feared might happen soon.