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In 2008, I showed up a 6 a.m. at PS 154 Windsor Terrace to cast a vote I knew wouldn’t matter, because everyone knew Obama would take New York. There was already a line around the corner.
Today, I grudgingly rolled down to the same location at 7:30 am. There was no line, and I was told there had been no line all morning.
So it has come down to this. I check out The Housing Bubble Blog to look over today links and street level comments on the real estate collapse, and who has purchased the banner ad? You guessed it, Mike Bloomberg. Aside from myself, how many NYC residents are likely to see it? The man may have run out of places to advertise.
Holy smokes: I looked again, and Corzine’s on there too.
With the State of New York approaching bankruptcy, members of the state legislature are calling for “innovative ideas” to prevent the interests that have backed them over the years from having to give anything up. By innovation, they mean deferring costs to the future, spending future revenues today, and making sure that when their generation walks out of there laughing all the way, there will be nothing left for anyone that follows them. Since Governor Paterson was a member of that legislature and participated in all those deals and favors over the years, the legislature believes he will be once again easy to roll. What choice does he have?
There are any number of ways that Generation Greed has financed its lifestyle demands by sucking resources out of the future and away from those who will live in it, with many listed and described here. (If you haven’t read that post, please do so). The generational inequity most likely to lead to an institutional collapse at the state and local level is the practice of assuming an unjustifiably high rate of return for public employee pension fund assets, using that assumption to hand out permanently vested pension enhancements to those cashing in and moving out, and then raising taxes, slashing services, and cutting the pay and benefits of future public employees when those mythical returns fail to materialize. In New York State, since the disastrous pension deal of June 13, 2000, the assumed rate of return – from the peak of the stock market bubble – has been 8.0% or more.
High returns are used not only to hand out pension deals to public employee unions in exchange for perpetual incumbency, but also to justify lower than necessary government contributions to the funds, allowing the cost to be deferred and hidden. Since the union members are guaranteed ever-sweetened pensions, not paying for it now just means more must be paid for it later. I challenged the candidates for City Comptroller to announce what they thought a fair assumption for the rate of return on pension assets is. None did so, implying that they want to continue or enhance the fraud — at the expense of younger generations they don’t care about, with the possible exception of their own children. But in case likely Comptroller Liu has other plans, I’ll answer my own question for his benefit.
It looks like the Monsters of the Universe are raking in big bucks for their Wall Street firms, and rewarding each other with massive bonuses once again, despite the ongoing recession in the economy. And how are those saints, heroes and geniuses doing this? By making sound loans to U.S. consumers? By making shrewd investments in existing U.S. companies, new firms, new technologies and small businesses? Not based on what you read. My guess, based on history, is that they are merely taking advantage of the ultra-low interest rate policy of the Federal Reserve, and using the money to buy U.S. Treasury Bonds, making money off the spread.
Keeping short-term rates low, at the expense of savers, future inflation, and asset price distortions, to increase that spread is a common way for central bankers to help banks get out of trouble. One only need look back to the early 1990s to see this, with the help of the New York Times archive (no I didn’t pay for it; sorry about the wage cuts and layoffs guys). In late 1992 this source reported that in “a dramatic turnaround for the banking industry from the gloomy forecasts of just 12 months ago, Federal regulators said today that 1992 would be the most profitable year ever for the nation's banks. As a consequence, they said, fewer institutions would fail in 1993 than had been expected, even though new regulations that go into effect next week require officials to seize weak, but solvent, institutions.” A Congressman named Chuck Schumer responded as follows: “the banks' heavy reliance on Treasury instruments reflected the fact that there were few other long-term investments strong enough for investing insured deposits… ‘Any idiot can make money by taking in money at 3 percent and lending it at 7 percent…But anyone who looks at the last four quarters and thinks the banking industry is back on track is making a mistake.’"
If the Bloomberg or Thompson campaigns have bothered to read my prior two posts in this series, I can imagine what they think of them. Who is this nobody to critique our leadership, when the one organization he has ever led was the Park Slope-Windsor Terrace babysitting co-op, and even that for just one term? Who is this nobody to critique our management, when he has never hired anyone, only once led a work team (and found the experience sufficiently frustrating that he would probably not wish to repeat it), and has probably spent less than $500 lifetime on behalf of anyone other than himself, in stamps, paper clips and photocopies as treasurer of the local chapter of the American Planning Association? Well I haven’t been a manager but I have been managed, though I’ll admit to being not much of a follower as well as not a leader. So take my views for what they are worth.
I am, however, an expert in state and local policy, and I did run for (or rather against) the state legislature, for what is (or should be) primarily a public policy position. When doing so, I set out four themes I promised to guided by on every issue without exception, in opposition to a state government that was and is doing the opposite: equity and simplicity in government (against special deals for some but not others), generation equity (in opposition to added privileges for older generations and a diminished future for those who follow), personal and social responsibility (in opposition to something for nothing pandering), and fair value in public services for taxes paid (in opposition to officials whose campaigns are funded by producer interests). It is against these principles, my principles, that I will evaluate the policies of the Bloomberg Administration.
I got a call from Alma Mater last night, and once again offered to substantially increase our modest contribution if it would only hold its cost increase to the rate of inflation. Yes costs are going up less this year, but that is because inflation is zero, and they are once again going up by three percent over that.
What I told the student caller is that we are all going to die, because some powerful interest is going to capture 100% of GDP, leaving the rest of us no money for food. The race is between housing costs, the health care sector, executive pay, public employee pensions and other retirement benefits, debt service, and the cost of higher eduation. Each thinks it get more and more without limit, until they get all there is, but they can't all be right, even if the rest of us are dead. Housing costs have already become winded, keeled over, and dropped out, although not everyone in NY knows it yet. Any bets on what is next?
This is the second post of my review of the Bloomberg Administration. The first post was on its management of the City of New York as a $60 billion per year multi-function enterprise. This post is on leadership. By leadership, I mean the ability to give direction and inspire community spirit among 8 million New Yorkers, to encourage them to contribute to common objectives, without being in a position to force them (through laws), and without them feeling they would become mere tools of those who extract more from and contribute less to the community. A second aspect is to identify and promote what is unique and desirable about the city, to make existing residents and businesses proud and happy to be here, and those elsewhere interested in coming. To identify and promote a way of life in New York City, in other words.
Since this is a role beyond the functions of local government, one may wonder what business an elected official has being a leader in the first place. I’ll answer that in two ways. First, as our social collapse proceeds, people increasingly look to the advertising for advice as to how to live, and this has resulted in an “I want for me now” culture that is in danger of collapsing under its own weight. We need alternatives. Second, we are paying for leadership. To the extent that we still have real elections, which is the case for Mayor more than most offices in New York, our elected officials are selected and paid to be the leaders. The fact that Mayor Bloomberg only accepts $1.00 per year does not diminish the responsibility.
I generally try to avoid simply discussing other people's information rather than creating my own, but there is a need for fair, non-ideological discussion of the most important issue in public finance and services, and I feel the need to call attention to it. From an honest actuary (how does he make a living?) on pensions:
"Generation X and Gen Y are getting fed up and might not take much more. That's what I'm hearing from a number of younger public employees who responded to my column last month on the incumbent employee conundrum. The gist of their feedback was this: They don't appreciate bearing the brunt of pay cuts and benefits reductions — the ones imposed by employers who try to balance the books on their pension and retiree medical plans by slashing compensation for younger employees and new hires. They'd like to see their elders share in the pain — or at least pay their share."
With the Mayoral election nearly upon us, it is time to review what the Bloomberg Administration has done, and what (based on limited information) a Thompson administration might do. (Forget the campaign literature and promises: it’s misleading nonsense). The review is in three parts because the Mayoralty is in reality three jobs. Management, since the Mayor is the CEO of a $60 billion multi-function enterprise, the City of New York. Policy, because in combination with the City Council, State Legislature, Governor, and other local officials, the Mayor of New York City helps to determine the priorities and values of state and local government in New York. And Leadership, because the Mayor is a leader (one of many leaders in both the public and private sectors) of 8 million New Yorkers, with an ability to influence how they live and what they believe, above and beyond the role of local government to compel people to do or not do things. This post is on management.
Throughout this review, you will read about many, many examples of ways in which Mayor Bloomberg has been a great mayor of New York City, including some only those with experience in government are in a position to appreciate. But you will also hear about two disastrous, unjust, self serving, future-wrecking deals – deals with consequences that may be sufficiently severe to undo or exceed, over time, any and all of the good things Mayor Bloomberg has done. (The Mayor has done other, similar things, but has been able to reverse them at least in part; these are far worse and probably cannot be reversed). In recent decades, based on the decisions and non-decisions our elected officials have made, I’ve generally been able to follow a simple rule when voting: don’t vote for any NYC Democrats at the local level, don’t vote for any Republicans at the national level, and don’t vote for an incumbents of either party in the State of New York. The question I’ll have to answer by November 3 is whether to depart from that rule.