Tag: Albany

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?

For the past three years I’ve tried to call attention to the inequities in the tax code at the expense of younger generations. But it seems no one who matters really cares about younger generations. There are, however, also tax inequities among older generations. And to see what those inequities are, one merely needs to fire up the Turbo Tax and compare the New York state and local income tax liability for two fictional couples, the Goldrakers and the Schlubs.

The Goldrakers are former New York City school teachers who happened to turn 55 right when the pension plan was changed by state legislation, allowing them to retire with a full pension at that age, rather than age 62, without contributing an extra dime. With an average salary of $110,000, if overtime/summer school/after school are included, they are now entitled to $110,000 in combined pension income per year, and health insurance without charge. They took the deal (along with how many others and at what cost no one has said). The less affluent Schlubs, an administrative office worker and a store clerk, were pushed into retirement at age 60 in 2007, in the early phase of the recession. Though not entitled to pensions, the Schlubs had diligently saved $500,000 for retirement on their modest salaries, subsequently reduced to just $360,000 by investment losses. Forced to pay $15,000 to continue their modest health insurance in 2008, they withdrew $60,000 to live on that year.

The New York State legislature is frequently called dysfunctional, but that assumes its function is to make the people of the state better off. In fact, the goal of the state's Republicans has been to force most New Yorkers to accept less in public services and benefits, and the goal of its Democrats has been to force them to pay more for it, particularly in the long run, all while rewarding insiders. And both have succeeded. For example, the Associated Press reports that, adjusting for lots of things, "New York's Medicaid program spends more on long-term health care than other states, but it delivers only average or slightly above average quality." The analysis was not complete because it did not adjust for power and a sense of entitlement, the factors most critical in Albany.

As it turns out, our transit authority isn’t the only one going down the tubes, and for many of the same reasons that the future of the MTA, and those who depend on it, is troubled. A local NYC weatherman, MIT executive and fellow transit fan sends word of the financial condition of the MBTA up in Boston, as described in this Boston Globe article. If Pataki, Bruno and Silver haven’t been in change of Massachusetts, apparently people very much like them have been. Because they’ve done all the same things, with the same results. Rich, undeserved, enhanced, pensions, generally handed out by Democrats, proposed to be offset by lower pay and benefits for future employees. Massive debts run up by Republicans who claimed to cut taxes but in reality merely deferred them. Pandering to riders with cheap fares — leading to massive increases later. And money drained off to the automobile, in this case for the massive over-runs on the Big Dig (not mentioned in the article linked above but very important).

Finally some good news out of Albany. The Binghamton Press-Connect reports that according to Governor Paterson, without a change to the “orgy of self-interest” in state government, which will not happen, New York will be bankrupt in 18 months. “I'd say without a reversal of the traditional process of delaying trouble into the future, I'd say about 18 months away,” the Governor said at a meeting. New York might follow California “into receivership or some sort of development corporation.” He seemed to imply this would be a bad thing. But in bankruptcy, all the existing deals, favors, exemptions, contracts, and privileges would be swept away, and everyone would start over at zero. As painful as that would be, the more likely scenario is even worse — most of those privileges remain in place, and others — and younger generations — will be left with a level of taxes and public services and benefits so awful that no bankruptcy court or other body of reasonable people would think to impose it.

It’s tax time again, and time to take stock of how the events of the past year have affected two fictional couples, the Young Hopefuls, now both age 29 with a three-year-old child, and the Senior Voters, now both age 69. You may recall from last year’s post on this subject that in 2007 each couple had an income of $100,000. The Young Hopefuls, with no savings or health insurance or pension, and living in a rented one-bedroom apartment, paid $22,214, or 22.2% of their income, in federal taxes that year based on a TurboTax analysis, while the Senior Voters, who owned their home, had a pension, and benefited from Medicare, paid $11,791 on the very same level of income, or 11.8% of it. The Young Hopefuls paid $10,814 in state and local income taxes and (indirectly as part of their rent) property taxes, or 10.8% of their income. The Senior Voters paid just $2,378, or 2.4% of their identical income, in state and local income and property taxes, one quarter of what the younger couple paid. That is $33,028 in taxes for the Young Hopefuls and $14,169 for the Senior Voters on the very same cash income, even though the senior citizen couple in this example had far more wealth and non-cash benefits. After paying for taxes and housing the Senior Voters had $83,405 left to spend, the Young Hopefuls $46,980. So what happened to these couples in 2008?

In mid-June 2008 a total of 44 states had reported their 2006 Medicaid data in a form acceptable as final by the federal Department of Health and Human Services. That’s where the number still stands today seven months later, and rather than wait any longer, I’ve decided to summarize and describe what we have. Unfortunately, because I like to compare New York State with surrounding states as well as the national average, Massachusetts is among the non-reporters. The data, attached in two spreadsheets, includes each state’s percent share of the 44 states’ total Medicaid beneficiaries and expenditures, and its average cost of service per beneficiary, by type of service (nursing home, hospital, etc.) and age group. Additional data from other sources are included to put those numbers in context — each state’s share of the 44 states’ population, population in poverty, population age 65 or over and in poverty (recall that Medicaid was originally a program for the poor), personal income and per capita income (which correlates with the overall cost of living and what each state can afford). The summary tables, in the worksheets titled “output,” are primed to print, and compare the 44-state total with New York State and the sum of New Jersey, Pennsylvania, Vermont, and Connecticut. The finding is that longstanding patterns remained in place in 2006, but with some new twists. A brief discussion follows.

I have questioned, on this blog, whether my teenage children will still have health insurance as young adults. The answer, provided by Governor Paterson, is yes. Because my wife and I have health insurance through our employers, under Paterson's proposal we would be able to pass that gift onto them through age 29. Presumably with tax advantages, which means (given our marginal tax rate) the federal, state and local governments would in reality be paying for about half of it. Meanwhile, those whose parents do not have health insurance, or who have moved here from other states and countries, would not receive this benefit and its back-door taxpayer subsidy. And not just them. It is estimated that 800,000 would be eligible for the program, but just 80,000 would take advantage. Which 80,000? The richest of course, since they could afford it! This is what I fear about the Democratic road to "universal health care." Rather than figure out what the government can provide for everyone, and leave other to pay for more themselves, an open-ended commitment to ever rising expenditures (or back door tax expenditures) could be kept open for those who matter, even as others get nothing once limited resources intrude. More deals and breaks, and programs, layered onto the current mess, could take the place of root-and-branch reform. Governor Paterson's heart may be in the right place, but ironically our first Afro-American Governor has just proposed a Grandfather Clause for health insurance in New York.

The New York State Department of Education has released its public school finance “masterfile” for the 2006 to 2007 school year. It may be found here. I’ve taken some of the data items in the file, attached more easily understood titles from the glossary, and done some summations, calculations and adjustments. The results are attached, and are discussed after the break. The data is for the school year impacted by former Governor Pataki’s last budget. It was Pataki’s first budget that slashed New York City’s state school aid, always low in proportion to its number of children, while increasing aid to the rest of the state. The observable results, among other things, sent my children out of the public school system and some of their friends out of the city. Later, Pataki instituted the STAR program, which directed more resources to school districts with the most, sending spending outside New York City to the moon. For a while it seemed that total state aid per student to the affluent downstate suburban counties, on average, would exceed the amount provided to New York’s generally impoverished children. But perhaps under pressure from the Campaign for Fiscal Equity lawsuit, Pataki reversed course. For fiscal equity, ironically, his last budget may be as good as it gets for the city’s children.

Anyone who knows even a little about public finance, and cares even a little about public services, particularly future public services, is sick of this bullshit. But if you feel the need to hear it from someone other than me, read this.