Author: Larry Littlefield

Another Question No One Will Ask or Answer

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From the Assembly press release on Tier V: "Assembly Speaker Sheldon Silver and Governmental Employees Committee Chair Peter J. Abbate today announced the passage of legislation they sponsored (Extraordinary Session Bill A.26) that would enact a new and cost efficient tier of pension benefits for public employees which could save the state and local governments $48.5 billion over the next 30 years."

For more than a decade, this generation of state legislators have awarded one pension enhancement after another to their generation of public employees throughout New York State. These enhancements were granted retroactively, and not worked for or earned. And now, to ensure they in fact get to be paid for decades for doing nothing to benefit anyone else, they have taken back SOME of those pension enhancements for SOME of the FUTURE public employees, while their geneation has given back NOTHING. They say this will save $48.5 billion, which is the amount that will be transferred from future public employees unless they somehow reduce the quality of the work they do by that amount. If taking away SOME of the enhancements will save $48.5 billion, how come Silver, Abbate and the rest claimed that GRANTING those enhancements to begin with would cost ZERO? We have not yet begun to pay that zero.

The Reason For Gay Marriage is Tier V

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There is certain to be at least a vote on Gay Marriage today. How do I know? So that all the State Senators, and all the Assembly Members, and the Governor, can talk about Gay Marriage, and only Gay Marriage, and explain why people should support them because of their stand on Gay Marriage. And nothing else.

Certainly not the decade-plus of pension enhancements for those cashing in and moving out, all in deals done in the dark, without debate and based on fradulent assumptions. Followed, this very day, by a new pension tier that will dramatically cut the lifetime total compensation of future public employees compared to those who are retiring. Again. They don't want to be asked why that is fair, and what it says about their values, and the unions' values, and their generation's values. They don't want to be asked what effect that will have on future public services. They don't want to be asked why existing and retired employees aren't being asked to give anything back. They don't want to be asked about the debate that didn't occur. Tehy don't want to be asked how this could possibly help the fiscal disaster that is going to gut public services, given that no new employees will be hired anyway. And they won't be, will they MSM?

Sucking Money from the Future: Albany Does It Again

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Now that I have realized that public services and benefits face years if not decades of decline, the biggest issue in public finance, the one that concerns me personally and I think about every day, is whether the NYC public schools will begin their downward spiral to the 1970s in FY 2011 or FY 2012. If the latter my younger child, having chosen to leave the Catholic system and enter public high school, would get through her junior year. I’ve already given up on her senior year, and most of her generation of NYC kids didn’t get a public elementary school education either.
I’ve accepted that my taxes will soar (sales and property taxes have already increased and this is just getting started), the transit system will degrade as a result of all the debts dumped on the MTA, the parks will be unusable unless I donate to them (and perhaps even if I do), and the libraries will be open three days a week.

I don’t expect to get much of anything from Social Security, and much less from Medicare, as a result of what Generation Greed has promised itself by not paid for, expecting to grandfather itself from any sacrifice when the bills come due (already under discussion – Social Security and Medicare at 70, if you are still alive). It wouldn’t surprise me if Generation Greed’s representatives in Congress vote health care reform down. And I now know that I can’t be consoled that my paying more and getting less is a result of money being distributed to those less well off. In the era of Generation Greed, that’s not what government does anymore. So for me the whole public sector comes down to that one year of school. And now:

America’s Debts: Past and Present Views

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Suddenly, there is a great deal of concern about America’s federal debt, not only among the Chinese to whom a great deal of it is owed, but also among older generations of Americans, who worry that growing debts will hurt the federal government’s ability to provide them with everything they have promised themselves, without quite being willing to pay for it. A few years ago, many of our members of Congress were wholeheartedly in favor of adding a prescription drug benefit to Medicare and not paying a cent of it, funding it entirely with borrowing to be paid back by someone someday. Now many of those same members of Congress say we cannot do anything for the health care of those under age 65, who if they are fortunate to be working actually pay for Medicare, because the federal deficit is too big. This week’s edition of the The Economist concedes that younger generations will have to pay higher taxes than whose who came before, but also asserts that those who now expect to receive Social Security at age 67 (instead of the 65 older generations received) should instead get nothing until age 70. Perhaps, according to this source, they could be forced to wait until age 70 to collect Medicare as well, “so they will have to work longer.” Conveniently ignoring the fact that as it is businesses are more willing to hire those age 65, with federal health insurance, than those age 60, uninsured and with high average health care costs.

One of the few capabilities I have that is better than most of my peers is my long-term memory. It doesn’t get in there easily, but when it does get in, it seems to stay there. For those of you who, in contrast, can remember the name of the person you met ten minutes ago but not the early 1980s, I thought I might provide a few reminders of what prominent people said about America’s federal debts in the past, while they were running them up and enjoying the proceeds. In each case politicians, and wonks seeking employment with them, provided rationalizations for growing debts. Excuses more like it. Providing rationalizations and excuses, in fact, seems to be the job requirement of a successful wonk, actuary, bond rater, appraiser, mortgage broker, securities underwriter, etc. etc. etc.

A Decent Interlude?

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So it turns out that “unexpectedly,” the city and state budgets are not balanced and we will have to accept some combination of paying more, getting less — or having the problem swept under the rug and paying more and getting less later with interest. Word came out after Election Day, and after I guess the folks in charge thought was a decent interlude.

Just remember this next year. Compared with what’s coming next year at this time, this is nothing.

We Demand A Salary Cap

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Once the wealthy have earned (or at least gotten) their net worth into the nine-figure league, a question arises as to what to do with it. Some turn to philanthropy, and some to purchasing or funding the arts, but many try to relive their boyhood by buying professional sports teams. These owners want to win, and if the labor market is allowed operate freely, pay such high salaries to attract the most gifted players that the teams end up operating at a loss, and become very expensive toys. Which is why wealthy sports team owners in the NFL, NBA, NHL and Major League Baseball have all come up with the same solution to restrain themselves – a salary cap to keep those labor costs down.

It seems we Americans have the same problem with our business executives. The executive pay consultants they hire to decide what to pay each other advise that they have to pay each other more and more, or the limited number of great players in business will go elsewhere. Even at financial firms whose leadership has bankrupted them, and extorted government bailouts, it seems that pay has to be kept at astronomical levels, levels that ensure that other workers, consumers, and investors will get less and less. As far as I’m concerned, the United States needs to impose on the executives, collectively, the same solution they always impose on others when they get the chance. We need an executive salary cap. Particularly since, unlike in sports, the pre-salary cap market for talent isn’t free, and most of the players earning massive salaries in business aren’t great.

Pew Or Not New York Stinks

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Some Vampire (not Empire) State apologists are crowing about a ranking of state fiscal distress by the Pew Charitable Trust that purports to show that there are states in worse shape than New York, based on the size of their budget gaps and cuts. What that organization failed to consider, however, is that New York has the highest state and local taxes in the country, as a share of its residents’ personal income, save for (in some years) Alaska and Wyoming, where most of those taxes are on oil extractions not residents or businesses. You can see this for FY 2006 in the spreadsheet attached to this post. (New York does not have the worst financial reporting – other states are holding up detailed data from the 2007 Census of Governments). Those states in more trouble than New York could get out of it simply by raising their tax burden to New York’s levels. In FY 2006, New York’s state and local taxes absorbed 15.9% of the personal income of NYC residents, and 13.4% of the residents of the rest of the state, compared with 11.4% in California, 11.7% in New Jersey, 10.1% in Arizona, and a national average of 10.9%. Those states have budget crises because they have resisted tax increases; New York has already imposed them from already high levels.

“Health Care Reform Is Happening Anyway.”

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I can’t find the quote, but I remember a health care executive saying it after cost cutting followed anyway in the wake of the health care reform defeat under Clinton. The health care industry, including the Greater New York Hospital Association and Local 1199, worked to defeat reform. The industry, at the time, had been given an unlimited budget and was exceeding it. With that sweet deal no wonder, given the amoral self interest of those organizations, that they opposed any change, regardless of how poorly the system served others. But managed care followed, and for a time at least, the income of health care workers was cut, if they could collect what they were owed at all. And today? Those who benefit from the system as it is continue to oppose health care reform. They’d better beware.

One Win in Nine Tries

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The post-election recriminations and spins are underway, with some spinning Bloomberg weakness in a narrow victory and some decrying Democratic divisions in a narrow defeat. My question is simply this: does the Democratic establishment in this city have any capacity for self-examination? In a city where the vast majority of voters are registered Democrats, where voters waited in line to vote for Barack Obama one year ago, the people have recoiled from electing a Democrat as Mayor, the only other elected office most pay attention to, for five consecutive elections.

But this goes back farther, because a reading of The Bronx is Burning shows that former Mayor Ed Koch gained election in 1977 by running against the Democratic Party establishment, both its machine/public employee union wing and its non-profit wing. He subsequently gained re-election by running as a Republican as well as a Democrat. That means that candidates opposing the New York City Democratic Party establishment have won eight of the last nine elections, a streak interrupted only by former Mayor Dinkins, gaining the votes of tens of thousand of people who gladly vote for Democrats from anywhere else. Will any Democrat give a reason for this that is not just an excuse? How do you explain a record of one win in nine tries, a wining percentage of 11.1%, .111 expressed as a batting average, 1/11?