Author: Larry Littlefield

What Has Happened and Will Happen: New York Government History Lessons from the Current Employment Survey

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The Current Employment survey data has been rebenchmarked for this year, and the annual average data for 2008 has been released. Meanwhile with a recession underway and public money increasingly tight, politicians and lobbyists are once again spewing nonsense about where our tax dollars go, talking about anything and everything other than the categories of expenditure in which New York City and State are far above average, and on which spending has increased the most. And the news media is reporting some of the nonsense that is spewed, converting the press releases from PR people into stories. So I have decided to once again say the unsaid, since no one is paying me to say otherwise, in the hope that someone, somewhere will get it. And just in case there are some people who read my posts who can’t make sense of (or are bored by) tables of numbers, this time I am trying a simple chart.

In the attached spreadsheet the table and chart show 1990 to 2008 annual average employment, for New York City and the rest of the state; and for public schools, other local government, the substantially government-funded (via Medicare, Medicaid, and public employee and retiree health benefits) private health care and social assistance sector, and the rest of the private sector — the part generating the tax dollars that pay for all preceding. In the chart all of these are put in an index, with their level of employment in 1990 set to 100, so one can see how they have changed in the years since, in and of themselves and relative to each other. New York City is in black with solid lines, the Rest of New York State in gray with dashed lines, with different markers showing the different sectors. Hey media, want to present some facts? Please download the spreadsheet, print the chart, and read on.

Behind the Charter School Freakout

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If anyone is wondering why the previously-tolerant United Federation of Teachers (UFT) is suddenly desperate to sink charter schools, you need to remember what has been the most important decision about the New York City schools in the past decade, the one that has sealed the fate of the city’s schools for the next decade or two. Not the increase in charter schools. Not mayoral control. Not the Campaign for Fiscal Equity court decision. The most important decision is the shift from a teacher retirement age of 62 to a teacher retirement age of 55, with teachers then 55 or over at the time of its enactment not required to put in an extra dime, and those near retirement required to put in extra for just a few years. The result of that decision is a sweet deal for those cashing in and moving out, but will be devastating for New York City’s children – and for younger and future teachers (if the city can even afford to hire teachers to replace those who retire), particularly when the federal stimulus dollars expire. The city’s schools have been, in effect, re-Lindsayed, and will face a repeat of the 1970s as a result.

The UFT wants desperately to disassociate the pension deal with the coming consequences. So does the Bloomberg Administration, which agreed to the deal (why I don’t know). So do the Democrats and Republicans in the New York State legislature, who approved it unanimously. Charter schools, however, operating in the same city with less money but less of that money going to the retired, will be in a position to offer a better education and better pay and working conditions to those teachers actually on the job.  As the walls close in on the 25/55 pension deal, that is a comparison the UFT desperately wants to stop.

The Consequences Arrive, and Generation Greed Politicians Look At Social Security, Pensions, Taxes and the MTA

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For those of you who missed it, there was a rare matter of fact statement of fact in the Washington Post last week. As a result of the recession Social Security payroll tax revenue is falling, and “the trust fund's annual surplus is forecast to all but vanish next year — nearly a decade ahead of schedule — and deprive the government of billions of dollars it had been counting on to help balance the nation's books.” To balance the nation’s books? You mean there aren’t trillions being saved in the Social Security “trust fund?” “The Treasury Department has for decades borrowed money from the Social Security trust fund to finance government operations. If it is no longer able to do so, it could be forced to borrow an additional $700 billion over the next decade from China, Japan and other investors. And at some point, perhaps as early as 2017, according to the CBO, the Treasury would have to start repaying the billions it has borrowed from the trust fund over the past 25 years, driving the nation further into debt or forcing Congress to raise taxes.” Isn’t this what I said two years ago here? (And other thoughtful people have said over and over again for two decades, but been largely ignored).

America Rebenchmarked

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The U.S. monthly employment and unemployment totals have been in the news in recent months, mostly for startling declines in the former. The employment numbers are compiled by state departments of labor, based on surveys of businesses, and then aggregated by the federal Bureau of Labor Statistics. They are based on the unemployment insurance tax records, but that information doesn’t come in until long after the surveys, when all the taxes are paid. Every March the past survey data is “rebenchmarked” back to what it should have been based on the unemployment insurance tax data that had arrived afterward. It is very difficult for the survey to completely identify a big short run changes in the economy, not the least because those doing the surveying can’t know how many new businesses have started recently, and are thus not included in the list of businesses to be surveyed. This year’s rebenchmarking, as shown by the attached spreadsheet, produced some stunning revisions.

The Serfs Get Angry; The Predators Point Fingers At Each Other

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I was asked yesterday why there is suddenly so much talk, in publications like the Wall Street Journal, about the unearned privileges and exploitations of the “political class?” And why there is so much populist posturing by Washington Democrats against executives at companies such as AIG, from which they were accepting campaign contributions in large denominations just a year or two ago? Let’s review. For 30 years, two kinds of people have been getting richer. Top executives who sit on each others’ boards and vote each other an ever larger share of private sector wealth. And today’s senior citizens, the richest in history, particularly retired public employees, and public employees who do not deign to do their jobs, who suck up a larger and larger share of public sector resources as a result of their control state legislatures and Congress, in the absence of contested elections (which are no longer permitted for such offices).

Everyone else has been getting poorer, but this has been covered up in two ways. By having their losses postponed to the future — in the form of lost pensions and health benefits that aren’t so important when one is young and healthy. And by having people go deeper and deeper into debt so their spending doesn’t decline with income. But today the cover up is no longer possible. The standard of living of most Americans is dropping severely, their taxes are rising, their public services and benefits are being cut, and their paper wealth is disappearing. Neither the political class nor the executive class is willing to give anything back, but they do want to deflect blame. So they are pointing fingers at each other.

Connecticut Worried About Losing the Young

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While no New York elected official can get through any public statement without using the words “senior citizen,” other states are very concerned with keeping and attracting the young. Connecticut for example, based on this article in the Hartford Courant: “State Has To Reverse Aging.” Is the Courant concerned about the young leaving because that might mean Connecticut isn’t a good place for them? No. They are worried for a reason that even the New York State Legislature could appreciate: the need for someone to pay taxes for older generations to go on living the style they have promised themselves. “OK, you may say, we have a smaller state, so what? Less traffic. Easier to get UConn tickets.” But “with the best and brightest in San Jose, and a large elderly population here, who will pay the taxes? The casinos? So before the state turns into one big Medicaid nursing home, we need to get moving. We need to improve the business climate and enhance the quality of life so we can create and attract real jobs. We need to stop building so much ‘active adult’ housing for people leaving the workforce and build something for the people trying to enter the workforce.”

Housing is a reason for young people to leave Connecticut, a reason the housing bust might reverse. But there are many reasons for young people to leave, or not move to, New York, a place where they are seen as cows to be milked by everyone who matters in Albany. While they have abandoned the rest of the state, the young continue to arrive in New York City — for reasons having nothing to do with Albany. I guess we’re going to find out how desperate they are to live here in this recession, as the vested interests take from those without deals more and more and offer less and less in return.

The MTA And the Past

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According to an article in Newsday, the current MTA funding crisis is the result of decisions made nine years ago, when the state legislature passed the 2000 to 2004 MTA Capital Plan. “Nine years ago, in collaboration with state officials, the mighty investment company Bear Stearns played a special role in shaping the course on which the region's transit system now finds itself” according to this source. “Not only did this financial titan advise the Metropolitan Transportation Authority on a five-year, $17-billion capital program, but more notably its executives personally sold the plan to state lawmakers – helping generate commissions for the firm while temporarily funding mass transit. From today's perspective, of course, the deal represents fiscal risk and folly. Bear's collapse a year ago signaled other global financial failures to come, and the debts carried by the state-run MTA drive its latest threat of massive fare hikes and sharp service cuts.” That’s true as far as it goes, but a highly incomplete picture. In fact, that capital plan was one of a series of similar decisions and deals that sold out the future that has now arrived. Every decision has been like that, for closer to 25 years than nine. And not just at the MTA.

Beating Dead Horses

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As Albany goes around and around, looking for a way to seize more from the future to offset the damage they did to the present in the past, you may ask “what should they do” about the MTA meltdown. Take a time machine back and undo what they have done is the most reasonable answer. But back in early 2008 I did write a series of posts describing the problem with the MTA Capital Plan and stating what should be done about it. Things the state legislature would never do. Here was my review of the MTA Capital plan proposed along with congestion pricing who says there is no plan?), the MTA’s capital plan costs, and the way the plan should be financed. In the latter case, the words “tolls” could be substituted for “congestion pricing.”

On a related subject, my proposal for what the state ought to do about the pension disaster can generally be found at the end of rants about the pension issue overall. For those who don’t read to the end, however, here it is: the state should mandate by legislation that the employer’s contribution to such pensions should, in all years regardless of returns, be 8 percent for most employees, 12 percent for those who lift heavy loads or work outside in all weather, and 15 percent for public safety jobs such as police and fire. (Except that New York’s governments should also pay back all the years in the past 15 when their contributions were below this level, and thus too low). The employees should be required to pay the rest, whatever is required based on investment returns and other factors, each year. Thus, they would also pay for any pension enhancements, not just in theory based on an excessive “presumed” rate of return, but in reality based on the actual rate of return.

Since the Future Is Now the Past, It’s OK in Backward-Looking New York

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The New York Observer is reporting that New York City will propose a relaxation of regulations that limit the opening of new supermarkets in low- and moderate-income neighborhoods. Leading the charge is City Planning director Amanda Burden. “With land use rule changes a centerpiece of the plan, Ms. Burden’s agency, the Department of City Planning, has been pushing the effort with the city’s Economic Development Corporation. Now, a Planning spokeswoman said the city hopes to launch the plan in coming months.” The proposal will apparently reduce parking requirements for new supermarkets, and allow them to open in manufacturing districts without a special permit that takes years to obtain, a restriction dating back to 1974 and the fear that competition from stores was responsible for the decline of manufacturing in the city. Among those quoted in the article is Richard Lipsky, who said “the draft policies were a ‘good step,’ but do not go far enough” to turn around the shrinking number of submarkets in the city. He wants the city to give precedence to new supermarkets when selling off new land.

I guess that since no one remembers what happened at point in time A people can pretty much ignore it once they get to point in time B, whether in public finance or in zoning. I don’t run into my former colleagues who still toil at DCP that often these days, but I can imagine how exasperated some of them are. Let’s take the Wayback Machine to the early-to-mid 1990s to put this issue in perspective, and then go Back to the Future an imagine what else might be prevented from coming along.

Wen Jiabao Should Be Worried

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For those of you wondering how I can see stuff coming, all that is required is that you pay attention. One might have noticed, for example, Secretary of State Clinton imploring the Chinese government to keep buy U.S. Treasury bills, notes and bonds — in effect a poorer than average country lending money so one of the world’s richest countries can spend. I had predicted earlier that as a result of 25 years of deficits that don’t matter, the next U.S. President would end up begging for money around the world. This was followed, yesterday, by Chinese Premier Wen Jiabao admitting that he was worried about whether the $1 trillion China was already lent the United States will be paid back, and asking for “guarantees.” That is the lead story in the Financial Times today. Larry Summers, President Obama’s economic advisor, and several other administration officials released statements that the administration is committed to “long-term” fiscal stability in reply. Looks like the Republican “starve the beast” plan to destroy the government might succeed just in time.

Meaning younger generations can expect drastically higher tax rates, and perhaps will not receive benefits like Social Security and Medicare, so China can be paid back, but please keep sending money now so Generation Greed can continue to receive everything believes it is entitled to without paying for all of it. The kids will pay it back in the long run, guaranteed. Or is it?