Author: Larry Littlefield

Now A Word From Our Creditors

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China bluntly criticized the US on Saturday one day after the superpower's credit rating was downgraded, saying the "good old days" of borrowing were over. Standard & Poor's cut the U.S. long-term credit rating from top-tier AAA by a notch to AA-plus on Friday over concerns about the nation's budget deficits and climbing debt burden. "The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," China's official Xinhua news agency said in a commentary.

Those messes aren't the U.S. Government's messes. The mess in the U.S. government is just part of Generation Greed's messes. And they didn’t happen this week. They happened over 30 years.

Walls Closing In Again

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It's getting tough to just keep repeating myself, and what you'll read below is nothing that I haven't said here for years. But I just posted a comment on another blog that I think is worth thinking about for those who haven't been reading my posts in the past. According to The Economist magazine, writing about the terrifying state of the U.S. and world economy, "Barack Obama or one of his Republican challengers may yet discover the courage to tell the truth about the American economy in next year’s presidential election."

My response: So what is the truth? I suspect that if Barack Obama were to tell it, he would be labelled a Socialist. And there is no chance of a Republican candidate telling the truth.  The truth is this… 

Cuomo, The Times and the Non-Profiteers

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Prodded by a New York Times article, it appears that Governor Cuomo is prepared to ask why heads of non-profit organizations — charities in theory — should be paid more than the President of the United States. This represents quite a reversal for, among others, the Times, which had been the mouthpiece of the non-profiteers, uncritically reporting on their "studies," for decades. As I have noted, adjusting for inflation since the last time the President's salary was increased (it tends to be frozen by politics for a long period), that level of pay is $500,000 plus a house. Which is plenty.

Next question: why should public pension funds invest in private companies with employees that are paid imore in guaranteted compensation than the President of the United States, if those companies are unable or unwilling to pay dividends in excess of the 10-year U.S. Treasury bond yield? If the investors have to wait, the executives should have to wait, with some kind of conditional compensation that only pays off years down the road if there is also a payoff for investors.

The City That Doesn’t’ Work No Longer?

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I was surprised to read in the newspaper that the June 2011 employment-population ratio, the ratio of people age 16-plus who were working to the total population that age, had fallen to the lowest level since June 1983, when I graduated from college into unemployment. Part of this is cyclical – this is the worst recession since the early 1980s debacle, and has arrived just into time for the children of the benighted 1970s generation – the first to be worse off than those who came before – to repeat that young adulthood experience. But I believe there is also something structural going on.

In the past 15 years (the business cycle adjusted for), I am aware, New York City’s employment-population ratio and its labor force participation ratio – the share of its residents age 16-plus who are either working or looking for work – have been moving up. This is significant because one of New York City’s chief economic liabilities for the past half-century has been its need to carry a large economically inactive population. Through 1960, New York City residents had been more likely than the U.S. average to be working or looking for work, mostly because its women were more likely to work outside the home. But during the mass population migrations of the 1960s and 1970s this changed, giving New York the status of the city that didn’t work. Is it changing back? I downloaded the data in the linked at the end of the post spreadsheet to find out (had trouble attaching).

Generation Greed: Political Affiliation

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Some essay writers for the Wall Street Journal have noted an ace in the hole for the Republican party: the “flower power” generation of the 1960s is increasingly right wing. The article is behind a pay wall, but let me summarize. This generation was left wing in the 1960s and early 1970s, because they objected to the Vietnam War and Watergate. But once they became older and started families, they became increasingly Republican and Conservative. The trend has continued into old age, an asset for the GOP since older voters vote in large numbers, younger Americans don’t bother, so both parties have to compete to meet the preferences of the old.

I agree with the trends, but not with the reasons for the trends. The party loyalists who wrote the WSJ article see changes in ideology, but I just see the continued pursuit of unenlightened self interest. At every point, but particularly back in the 1960 and early 1970s, it is a mistake to judge the intentions of this generation by what certain high profile members said, rather than what the vast majority did. Peace, love and understanding? Anti-materialism? There were some who pursued those ideals, and continue to do so. But getting laid and getting high, and avoiding personal responsibilities, were the real goals of the “Silent Majority” in the 1960s. They later moved on to avoiding social responsibilities, and thus became more likely to vote Republican.

Generation Greed and the Debt Ceiling

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Imagine this. In mid-2013, President Mitt Romney asks to increase the debt ceiling so he can borrow money to provide benefits for today's seniors while continuing to collect taxes as the lowest level relative to GDP in 60 years. "We owe it to our children to make a deal," he illogically claims. And a large rump of newly elected Democrats in the house threaten to depose Speaker Nancy Pelosi, now back in charge, unless the federal income tax rate is increased to 90 percent on those earning more than $500,000 per year, with no spending cuts. The impass leads a possible financial and economic meltdown. Until Romney knuckles under and agrees to tax increases (with no spending cuts), but only on the politically powerless and younger generations. (Just as Obama is being pressured to agree to just spending cuts, but only for the politically powerless and younger generations).

Enough of this nonsense. As a result of Generation Greed, our taxes are going up, our public services and benefits are going down, and our standard of living is going down, unless our cronies on the corporate board vote for our salaries or we have a public employee pension. But Generation Greed politicians would rather engage in theatrics and finger pointing than face the reality of what they have collectively done. Let the meltdown happen now. Otherwise the rot just continues. They staved off collapse in 2008, and merely preserved the wealth of the wealthy. Bail out the wealthy, or you get another Great Depression. And here we are three years later, blackmailed again. And here we will be in two years. In a collapse everyone gets hit. Perhaps it isn't the worst case scenario after all. Perhaps only a disaster will stop the "I want for me now!" chant we've been hearing for 30 years.

Job Posting

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Wanted, politically savvy transit manager willing to preside over the gradual re-collapse of New York City's transit system due to deferred maintenance while denying it is occuring, be publicly blamed for the consequences by those actually responsible (all of whom drive everywhere to parking spaces reserved for them by placard), and hated by the suckers who believe them. In exchange for decent pay, little work, and a fat pension.

The successful applicant is expected to live outside New York City in an undisclosed location, and not appear in public except during the first half hour of public hearings, during which elected officials castigate them for the very situation they created while the MTA head sits in silence. Among the key selection criteria are the willingness to not object to an assertion that a 20/50 pension enhancement wil cost nothing, the willingness to go on borrowing money the MTA cannot possibly repay, and the ability to make sure those affluent municipal bond holders and Florida residents get paid, no matter what. Any interest in actual transportation is optional, as most public services are optional as well. However, the ability to come up with cutsey distractions like shifting the transit map around to generate favorable New York Times press is always helpful. Apply to Sheldon Silver and Dean Skelos Andrew Cuomo.

Pension Deceiver as Scapegoat

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Those who read my posts consistently know I'm not pleased with Comptroller Liu. His union backers decided to destroy public services despite the highest tax burden in the country by getting their retirements, already richer than just about anyone gets, enriched further. But they don't want to admit that's that they have done, so Liu has used misdirection in a series of reports to pretend that isn't what has happened, hoping they'll back him for Mayor.

Today I note that the fact that the New York City pension funds are in a far deeper hole than the New York State pension funds has hit the blogosphere (if not the MSM). And New York City's Deputy Mayor is trying to pin the difference on one year's worth of returns and Comptroller Liu, who oversees the city pension funds. Well, sorry but inadequate returns are NOT the reason for the city's greater pension hole, and taking more risk in a situation in which assets are overvalued is NOT the solution. This problem has been building up for decades, and Liu just got there.

Generation Greed and the Family

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Those of you who have read my posts on Room Eight over the years, and/or might have read essays I produced previously, know that generational equity in public policy has been a recurring theme – and a theme that in my view has been virtually ignored in political discourse and the media. For 30 years, I find, virtually every major fiscal decision has provided more benefits in good times, and no reduction in benefits in bad times, for older generations – those now 55 and over. And every reduction in benefits and well-being has applied to future generations only. When I write about generational inequity, I don’t write about policies that transfer resources from working age adults to the elderly in a broad general sense; these can be justified as long as the transfers are sustainable and those who sacrifice when young can expect to receive the same benefits when old. As I showed in my general overview of what the government does in August 2007, in fact, the majority of U.S. government activities transfer resources from working age adults to the young (public schools and universities) and the old (Social Security, Medicare, nursing home care under Medicaid). I called this the lifecycle of need. When I write about generational inequity, on the other hand, I refer to public policies that have left younger generations worse off than those who came before at every point in their lives, from childhood through middle age, with the worst damage likely to occur when they themselves are old.

That is public policy. I have also noted that in the private economy for most (the non-rich) earnings per worker peaked nearly 40 years ago, with the effect on the typical standard of living covered over first by more hours worked (as women entered the workforce), then by the loss of compensation to be paid out in the future (pension and retiree health insurance) which did not affect current spending, and then by borrowing. This post is about the family. Like our federal, state and local governments, families transfer well-being from working age adults to dependent children and seniors. How have the collective personal decisions of those now age 55 and over, whom I have come to refer to as “Generation Greed,” differed from those who came before, and how do they compare with their collective decisions in public policy? How have those coming after been affected? And, returning to public policy, what will happen as those in Generation Greed reach deep old age when many will require custodial care, which is either extremely personally draining or extremely expensive to provide?

My Guess On Redistricting

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As secretly agreed, I suspect, Cuomo will veto the usual incumbent protection redistricting plan, the legislature will over-ride, Cuomo will condemn, and that will be the end of it. Those who believe there should be actual elections in New York will have to find a way to create them otherwise, and it won’t be easy. Perhaps the media might consider encouraging challengers and challenging incumbents rather than the reverse. Perhaps someone might raise money to provide lawyers when the incumbents work to kick challengers off the ballot. Perhaps the ease of writing in candidates with the new machines might provide an avenue to an actual election. There will be no actual elections if the state legislature can avoid it.