Larry Littlefield's blog
There are two points of view with regard to how much of the cost of subway and commuter rail mass transit, ideally, would be covered by the fare. One viewpoint is that the fare should be as subsidized as possible, or even eliminated, and that the transit system should be as dependent as on funds allocated by politicians )whose backers tend to be other, more powerful interests.) That is the point of view held by politicians themselves, who like to cast themselves as “fighting for the people” to “save the fare” while never actually coming up with the money, forcing the MTA to borrow instead. And the Straphangers Campaign, the very effective lobbyist for past transit riders in competition with the interests of current and future transit riders. And some of those affiliated with organizations like Streetsblog, who believe that transit is so morally superior, in an environmental sense, to driving that mass transit should be paid for entirely by drivers. And, contradictorily, that driving should be drastically reduced.
I, on the other hand, believe that the higher the share of subway and commuter rail transit costs that is covered by the fare, the better off transit riders will be, now and in the future. Covering costs frees the transit system from having to beg a political class that drives everywhere and believes mass transit if for the serfs. It frees the transit system from attack from those living in places with less mass transit. And it ensures the viability of the transit system, and the city’s economy, in a future characterized by shrinking public resources and lower incomes.
Metro New York’s mass transit ridership has been booming. The condition of its infrastructure hasn’t been this good for 80 years. Significant improvements in the quality of the transit experience continue to be added, most recently with the “Bustime” system. And yet the metro area’s mass transit network, and thus its economy, may face a bleak future. As I noted in this post, for 20 years, the city and state governments (and the generations their politicians represented) have been unwilling to pay for the ongoing replacement and renewal of the transit (and road) infrastructure. They have borrowed for it instead. And as a result, younger generations face a choice between ending ongoing renewal and replacement, and allowing the system to deteriorate until its eventual collapse (the path the New York City Housing Authority is on), or paying twice – once for their own obligations, and a second time for the obligations shirked in the past.
We got into this situation because Generation Greed insisted on an “everybody wins” deal for itself, with big fare cuts relative to inflation, pension increases for unionized employees, tax revenues diverted to other things, and soaring payments to contractors for MTA projects. Getting out of this situation is still possible, but it would require sacrifice across the board. Although it is probably a waste of time, given that the same politicians backed by the same interests are still in charge, I’ve decided to write about what some of those sacrifices could be, starting with a contribution by the City of New York.
In my prior post, I noted that from 2007 to 2012 overall U.S. inflation was 10.7%, and the average annual pay of most Downstate New York workers increased just 8.0%. Wall Street pay fell. But based on data from the National Transit Database (NTD), the total operating cost per employee work hour for MTA component agencies increased by 15.2% for Metro North, 15.5% for the Long Island Railroad, 21.8% for the NYC subway, 24.8% for New York City Transit buses and 4.8% for MTA Bus, the former private bus companies in New York City. Mostly due to soaring retirement costs thanks to pension enhancements retroactively granted in the past but not paid for at the time, and past pension underfunding. That’s the bad news.
Now for the really bad news. Those operating costs, as measured by the NTD, do not include soaring interest payments on MTA bonds. As of this January, the MTA has $32.8 billion in debt outstanding, of which $2.5 billion is variable rate, according to information on its website. Little of that debt has been incurred to expand the system to new areas and riders, which might result in more tax and fare revenues. Most of the money has been borrowed to merely pay to replace buses, subway and rail cars, and other components of the transit system as they wear out. The MTA even borrows for painting under its capital plan. In the most recent MTA capital plan, the cost of this type of this (in reality) maintenance spending was about $4.4 billion per year. Nearly all of it was borrowed. And with the interest on past debts (along with the retirement benefits) soaking up more and more of the MTA’s annual revenues, no one knows where the money to maintain the system for the next 30 years (while the existing debt is paid off) is going to come from. And no one in politics wants to talk about it. Further commentary and a spreadsheet are on “Saying the Unsaid in New York.”
In my prior post, I examined the cost of MTA and other New York metro area transit services in 2012. In this post, I’ll examine the trends in those costs during the 2007 to 2012 period, a time when most Americans and most New Yorkers were struggling with the Great Recession and its aftermath.
The data shows that while private sector workers have struggled, with wage gains below inflation, transit costs have soared far in excess of inflation. The result has been fare increases, service cuts, and increases in subsidies. Based on other information I have compiled for other public services, the cost of retired transit workers probably accounts for the majority of the rising burden on taxpayers and transit riders, as shown by operating costs (the soaring cost of debt service is another factor related to the capital plan). As transit workers demand even more, it is worth reviewing how much the transit systems have already taken. Commentary and a series of charts may be found on “Saying the Unsaid in New York.”
Another real estate bubble is underway, thanks to low interest rates, and the MTA’s real estate-related taxes are temporarily up as well. And as has been the case for 20 years, everyone related to state and local government wants to grab money from the MTA’s future – a future that includes an almost completely unfunded capital plan, starting next year, that would consist mostly of ongoing normal replacement.
Even so, the Transit Workers Union wants raises for past years, over and above the 8 percent increase they got in the recession. The Long Island Railroad unions are threatening to strike. The contractors and their unions are turning East Side Access into a perpetual bonanza. Staten Island wants more special deals to pay lower tolls, and the suburbs want more special deals to pay less in dedicated MTA payroll taxes. The Governor has taken some of those dedicated taxes, only collected in Downstate New York, for the state’s general fund, to be spent in Upstate New York. The MTA recently announced lower fare increases. And everyone thinks its fine because the MTA could always just borrow more and more and more. While Generation Greed continues to do what it does, I have compiled some facts about the financial transit situation based on the Federal Transit Administration’s National Transit Database. Those facts are discussed in the next two posts, on “Saying the Unsaid in New York,” where spreadsheets can be attached and charts inserted.
The New York Post reports, without checking if it is true or thinking about it much, that Park Slope is the most adulterous neighborhood in the city. "Park Slope, Gramercy Park and Tribeca are the top Big Apple neighborhoods for cheaters, according to the adultery-promoting matchmakers at AshleyMadison.com. The site claims it has 840,300 members in the five boroughs, Long Island and southern Westchester County. Park Slope in Brooklyn has 10 percent of the local unfaithful, according to the Web site." This news was picked up by a blog. “A couple summers ago, we had some fun at author Amy Sohn’s expense, after she wrote a rather tame article about how all of her Park Slope friends were sluts and dope addicts, despite a lack of much sex or drugs. But, if the New York Post, is to be believed, Park Slope really is full of slutty spouses, because the neighborhood leads New York in most members registered to married person affair website Ashley Madison."
Ten percent of 840,030 is 84,000. The population of Park Slope is about 84,000. Including the infants.
Now year after year I put up numbers, which happen to be true, that often fly in the face of at least some of what the MSM and various political actors have to say about our city and state, but no one is interested. It is pretty clear that journalism today is about what people are interested in, and the facts don't get in the way of of a good story.
In preparation for the release of the employment phase of the 2012 Census of Governments, I downloaded some Employment and Wages data from the Bureau of Labor Statistics last weekend. According to the data, if one excludes the high-paid Finance and Insurance sector the average annual pay per private sector worker increased 6.1% in Downstate New York from 2008 to 2012. The inflation rate for the period was 6.6%, meaning that in “real” dollars average annual pay fell. This confirms the American Community Survey data I cited earlier in this post, showing most New Yorkers have gotten poorer. For the same period, most unionized city workers received 8.0% wage increases, and those represented by the United Federation of Teachers received a retroactive pension increase that, for those who benefitted, was worth far more. And yet they want even more money for those years, at the expense of those unrepresented people who would have to pay for it.
So we are going to find out what being a “progressive” means today. The original progressives, a century ago, were against the abuse of ordinary people and the common future by those who had gained concentrated power in our institutions. Not only the corporate “trusts” busted by Teddy Roosevelt, but also the political machines with their patronage workers providing poor services. Progressive Democrats wanted more fair and effective government so it could do more things. Progressive Republicans wanted more fair and efficient government so it could do the things it must do at a lower cost. Back then progressives weren’t people who thought that instead of having just some people get ahead of others at their expense by manipulating the business world, additional people should be able to get ahead of others at their expense by manipulating state and local government. That was Tammany Hall. The public employee unions, contractor organizations, and unions representing workers employed by contractors, have taken its place. And if there are any reductions in public services, and any tax increases that don’t go exclusively to additional services, and/or any increases in public compensation beyond what most other New Yorkers are receiving, what was once machine politics will now be “progressivism.” That will be true even in another recession. Additional commentary, and a spreadsheet, can be found on “Saying the Unsaid in New York.”
Mayor Bill DeBlasio accused Mayor Bloomberg of mortgaging the city’s future by not paying its unionized employees more money before he got there. But that is not so. Did Mayor Bloomberg not settle the contracts so he could cut taxes? No, Mayor Bloomberg increased taxes, including an 18.0% property tax increase that we were promised would go to better schools. Schools that Bill DeBlasio and ever other candidate for Mayor except Christine Quinn said were not better, despite a big increase in per student spending. Sales taxes were increased. State income taxes were increased. Did Mayor Bloomberg not settle the contracts so he could reduce fees? No, fees were increased. Did Mayor Bloomberg not settle the contracts so he could hire more public employees and increase services? No, because the number of public employees has gone down.
So where did all that money that should be already be going to unionized public employees, according to Mayor DeBlaiso, actually go? You know where.
Perhaps you heard about the drop in the stock market and the growing financial crisis in emerging markets last week. Basically U.S. businesses and the global economy are so addicted to Americans spending more than they can afford (which is to say more than businesses are paying them) that they can’t cope with the Federal Reserve raising interest rates to zero. Which in effect is what is happening by having the Fed taper off the latest round of “quantitative easing.”
The emerging markets are most affected thus far, but sooner or later Wall Street will be affected as well. Most New Yorkers won’t notice, because the NYC job base has been broadening and is less dependent on finance than 20 years ago. But the NYC and NY State tax base are more dependent on taxes on the undeserved profits in that industry, and the undeserved pay packages of those who work there. Which makes this Marketwatch.com article worth a read. “In a 2013 study, McKinsey Global Institute found that between 2007 and 2012, interest rate and QE policies resulted in a net transfer to U.S. financial companies of $150 billion from households, pension funds, insurers and foreign investors.” And the interest rate margin on cheap Federal Reserve money amounts to 60 to 130 percent of last year’s profits on the country’s biggest banks. “The analysis highlights how a focus on earnings changes without regard for true earnings potential can be misguided.”
As I write about the regional economy and commercial real estate market of different metro areas around the country, I am struck by a little-noted trend. In most parts of the country, while the widely quoted survey of business establishments showed that employment was higher in October 2013 than it had been in October 2012, the household-based data, also from the Bureau of Labor Statistics, shows a decrease. I’ll give one example. In metro Atlanta, the establishment survey shows the number of wage and salary jobs increased by 62,200 (2.6%) from October 2012 to October 2013. But household-based data shows employment fell by 12,200 (0.5%) during the same period, and the labor force fell by 36,835 (1.3%). I’m seeing the same thing all over the country. The establishment survey is considered more accurate, but it is often late to show a sharp turn in the economy, and is subject to large revisions when those sharp turns occur. And it does not include the self-employed, a growing share of the workforce.
In most metro areas the household-based data for October showed employment is falling when compared with a year earlier, but the labor force is falling even faster, which is why unemployment is edging down. At the national level, the sharp turn to the negative for in October was camouflaged by ongoing employment and labor force growth in some places, including California, New York, Texas, Florida, Michigan, Wisconsin, Indiana, the Dakotas, Utah. Those gains balanced the job losses elsewhere. Recently released national data for December, however, shows a bigger decline. I suspect most of the country is losing jobs again, a trend likely to make its way here eventually. The U.S. economy, and in some ways the global economy, is depending on selling Americans more than their employers pay them. This false economy was unsustainable and has been kept of life support, barely, for five years.
According to MSNBC "GM has revealed that its new CEO Mary Barra stands to earn as much as $4.4 million in her first year on the job. That’s if she collects on the full $2.8 million that’s set aside as part of a short-term incentive plan. (She also could collect a potential $1 million in a new stock offering.) But Barra’s base salary is $1.6 million — a full $100,000 less than outgoing CEO Dan Akerson earned in 2012."
If shifting to female leadership reduces executive pay and frees up money for dividends to shareholders, I say go for it. The pace of decrease ought to be greater than $100,000 per change at the top, however, and not just apply to the CEO. If there is some equally capable person willing to do your job for less money, you are overpaid. Such as been the attitude for everyone but those at the top for 30 years. But it works both ways. And as for the rest of us getting a better deal, whatever works.
After some prompting I consulted someone in their early 20s and learned how to insert charts right into a post on Wordpress. Since the posts I wrote in December, based on long term Census Bureau data on public employee pensions in New York and New Jersey over 50 years, are still what most people are reading on “Saying the Unsaid in New York” one month later, I have edited them to embed the charts.
They are, in sequence, a post of the use of a fraudulent rate of return and asset value combination to cover up the selling out of the common future, which includes the entire database, a discussion of teacher pensions in New York and New Jersey, a discussion of the big general pension plans that cover most public employees in New York and New Jersey, and a discussion of police and fire pension plans. The latter three posts now have charts in the text, rather than just in the spreadsheet attachment. If that's helpful, you can read the posts now if you have not already.
When Newsday reported that the East Side Access project for the Long Island Railroad, already years late and nearly double the original budget, would take yet another year and cost even more money to complete, what did that make me think of? Unfortunately, and I hope it’s not the same thing, I thought of the construction of the Shoreham Nuclear power plant in the 1970s and 1980s, milked by Long Island’s grifter culture to the detriment of non-grifter residents of Nassau and Suffolk Counties and the entire state.
According to a 1985 report by 60 Minutes as cited by the Associated Press (I remember watching it and was able to Google it up), “unions controlled by organized crime helped stretch out construction time to 15 years and add to the $4 billion cost overruns of Long Island's Shoreham nuclear power plant.” Among the tactics – theft of materials and equipment, and destroying completed work so it would have to be done again. A whistleblower “said he witnessed sabotage and saw workers perform the same task four or five times, just to stretch out work.” He later left the job after he was nearly killed twice. The utility, the Long Island Lighting Company, didn’t care because it had been guaranteed “cost-plus” rate increases by the State of New York at the time the plant was approved, and because the money was all borrowed. It’s nearly 30 years later, and Nassau and Suffolk County residents and businesses are still paying for that particular crime.
Yet another alleged scam is in the news. One that is, frankly, no surprise. Nor is it a surprise that the alleged ringleaders were from Long Island, where a grifter culture seems to have taken root that is draining both Nassau and Suffolk Counties and New York City alike. So what is the likely outcome of this investigation? My guess is that most of the older perpetrators will get away with it. And as a result, in an over-reaction, future generations of legitimately disabled New York City police officers and firefighters will have difficulty getting the benefits they actually deserve. To make up for the financial damage that older generations have caused. Consistent with 1,000 other examples all across our society.
Rather than write about something that is already in the news, lets move on to a possibly related subject. Every wonder why the terms of student loans are so draconian with regard to adjustment in bankruptcy? Why young borrowers who get in over their heads and face setbacks are essentially sentenced to a life of indentured servitude without parole? You guessed it. The system is beating on them in reaction to another generation that set out to beat the system. Generation Greed.
Starting soon the U.S. Census Bureau will begin posting the results of the 2012 Census of Governments. That effort occurs every five years. And as I have the previous three times it was undertaken, I intend to download and compile this information for state and local governments in New York City, the rest of New York State, and related areas. Because I believe it is important that this information be made available in a way that makes fair and relevant comparisons between places possible.
No one else seems to work very much with this data. And to me, that is a problem. Shouldn’t the compilation and publication of this information be institutionalized somehow? Shouldn’t someone else in this city have the knowledge I have gained in 20-plus years of working with this dataset? Therefore I once again offer, to those with the interest and ability, the opportunity to work with me in compiling this information over the next year. If you are interested, I’m not hard to find with a little effort. Or people could just compile the data themselves after studying the background information and spreadsheets I produced five years ago, which I have posted here.