Larry Littlefield's blog

We’re Going To Find Out What “Progressive” Means Today

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.”


Bloomberg Mortgaged the City’s Future With the 2008 UFT Pension Deal Not Labor Contracts

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.


New York City and Wall Street: Saved by Cheap Money So Far

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.”


Going Back Into Recession?

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.


One Way to Cut Executive Pay

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.


Public Pensions: Old Dog New Trick

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.


The Shoreham Nuclear Plant and the LIRR

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.


Generation Greed and Student Loans

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.


The 2012 Census of Governments: Some Work, Some Knowledge

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.


New York City Police and Firefighter Pensions: Somebody Call OSHA

This is my third post on a tabulation of Census Bureau data on public employee pension plans in New York and New Jersey over the decades. The first was on the separate pension funds for teachers. The second was on the large plans that cover most state and local government pensions in the two states. This post is on the separate pension plans for New York City and New Jersey police officers and firefighters. Although they have different benefits, police officers and firefighters in the rest of New York State are covered by the same state pension system that covers most public employees, and data for police and fire is not reported to (or collected by) the Census Bureau separately.

The data show that the New York Police Pension Fund Article 2, the New York City Fire Department Article 1B Pension Fund, and the New Jersey Police and Firemen's Retirement System are deep in the hole. In the most recent year for which data is available they paid out the equivalent of 8.0% to 10.0% of their assets, but those assets ought to be sufficient to pay all of the benefits owed to current retirees, most of the benefits owed to those soon to retire, and some of the benefits owed to younger workers. And given how generous pension benefits are for New York and New Jersey’s police officers and firefighters, that means there ought to be enough money in the funds to pay monthly benefits for decades. There isn’t. And in the case of the NYC firefighter’s fund there hasn’t been for decades. The charts and discussion are here on Saying the Unsaid in New York.


Pensions for Non-Teachers: A Slightly Different Road to Ruin in New York City

New York City and New Jersey have more than one pension plan for public employees. There are separate plans for teachers and related workers, for police officers and firefighters, and big plans for just about everyone else. My prior post in this series, which this post will assume the reader has read, was about the New York City, New York State, and New Jersey teacher pension plans, with the New York State plan covering teachers in the part of the state outside New York City. This post is about the big plans for most public workers: the New York City Employees Retirement System (NYCERS), which also covers New York City transit workers, the New York (state) Public Employees Pension and Retirement System, which also covers local government workers (including police officers and firefighters) in the rest of New York State, and the New Jersey Public Employees Retirement System.

I thought this post would be written very quickly, because the trends and situation would be the same as it was for the teachers. But when I put data from the database of long term Census Bureau data into the same charts that I used for the teacher pension plans, I found that wasn’t the case for New York City. The various retroactive pension increases and incentives over the years had less of an effect on inflation-adjusted NYCERS benefit payments than they did on benefit payments by the Teachers Retirement System of New York City. But NYCERS is nonetheless only slightly better funded than the NYC teachers pension plan, because the extent of taxpayer pension underfunding has been greater. Indeed, unlike the pension plan for NYC teachers, NYCERS never really got out of the hole after the big pension increases under former Mayor Lindsay in the late 1960s. Further discussion and a spreadsheet with a series of charts are here on “Saying the Unsaid in New York.”


Teacher Pensions: The Road To Ruin in New Jersey and New York City But Not (Yet) The Rest of New York State

As noted in my previous post, I have downloaded and arranged all the data the U.S. Census Bureau has collected since 1957 on currently active public employee pension plans in New York and New Jersey. I wanted a historical record of how future generations were left with this mess, a record older generations and the political class have little incentive to compile. This is the first of a handful of posts using this data; hopefully someone else will do even more with it sooner or later. This post is about the New York City, New York State, and New Jersey teacher pension plans, which also cover some related employees.

The data shows that in New York City the road to ruin was paved primarily with a series of extremely expensive pension benefit increases, employee contribution cuts, and one time “incentives” that vastly inflated the amount the NYC teacher pension plans paid out. Not shown by this data is a similarly large increase in the cost of retiree health insurance, as the city was forced to pay retirees for many additional years before Medicare picked up most of the burden. The pension benefit increases for the New Jersey teacher pension plan and the New York State teacher pension plan, which covers teachers in the rest of New York State, were not as frequent or as costly. New York City taxpayers may have also underfunded the city teacher pension plan, relative to the state, after a New York State Court of Appeals decision prevented the state pension plans from doing the same. The NYC teacher pension plan has also had lower investment returns over the long term. In New Jersey, taxpayer pension funding virtually disappeared starting in the mid-1990s, and is the primary cause of the crisis there. Further discussion and a spreadsheet with a series of charts are here on “Saying the Unsaid in New York.”


Pensions: The Nature of the Lie

Let say you are in charge of running a pension fund, and it consists entirely of one paper asset that cost $20 to acquire and entitles the fund to a payment of $1 per year, which can be used to pay benefits. How much money is in your pension fund? Twenty dollars. And what is your expected future rate of return on your investment? Five percent, because $1 is 5.0% of $20. But let’s say that as a result of a speculative bubble, people start buying and selling pieces of paper identical to yours – and still only paying $1 per year – for $100? Then how much is in your pension fund? You probably shouldn’t, but you might say $100. But then, how much is your expected future rate of return? If you were honest you might say one percent, because $1 is 1.0% of $100.

But if you were the typical public employee pension fund manager of the past 15 years, and the typical actuary such funds were willing to hire, you would probably say the future rate of return was still five percent -- even though you were only getting one dollar, not five dollars, in cash return, and even though 5.0% of $100 is $5, not $1. Because, it would be assumed, the trading price the piece of paper would keep going up and up. Or you might say that the future return would be ten percent, even though you were only getting one dollar and not ten dollars. Because it would go up even faster. That would allow you to hand out retroactive pension increases for politically powerful public employee unions, even though no money had been set aside for the added benefits during most or all of their career, and claim it would cost nothing. And/or underfund the pension fund, to divert money to other more politically powerful priorities. The nature of the pension lie was double counting: counting both the inflated asset values and the same, or a higher, rate of return from those inflated values. That lie is still being told today. Ordinary people not in on the deals, particularly in younger generations, will pay for the consequences of that lie for decades.


New York: Government Of, By and Exclusively For Today’s Seniors, Leaving Nothing For Those Coming After

Imagine that I were to propose, or some politician were to propose, or some group of politicians were to propose, or some publication were to propose exempting those age 40 and younger from New York’s state and local income taxes, while charging senior citizens the highest taxes in the country. There would be outrage at seniors receiving such a raw deal. There would be questions of fairness. The discussion and attention to the issue would be massive.

In reality, however, what is proposed and enacted over and over again in New York is the opposite: special deals for today’s seniors to the detriment of younger people, in the highest taxed state in the U.S. The latest example of this is the tax changes proposed by the Republicans in the New York State Senate. The pension income of public employees is fully exempt from all New York State and New York City income taxes, no matter how high that income is, and no matter how young the retired public employee is. As a matter of “fairness,” the State Senate Republicans now propose that ALL seniors be allowed to ripoff younger generations in the same way, by exempting private sector retirement income from taxes as well (the first $20,000 of retirement income is already exempt after age 59 ½; Social Security income is fully exempt for public and private employees).


A Progressive Policy Bill DeBlasio Could Actually Afford

People/s expectations around the DeBlasio Administration remind me of the incoming administration of Chicago Mayor Rahm Emanuel in Chicago. All the great things he said he would do, just as soon as he finessed a few financial issues! Of course it didn’t turn out that way, as the Chicago Tribune reported recently, since Emmanuel inherited a bankrupt city. That city has reached the point where Wile E. Coyote realizes he has run off the cliff, and there is nowhere to go but down, despite (in the case of Chicago) an economic boom downtown (which may be sputtering out now that people are realizing what the future holds). I suggest that DeBlasio give Emanuel a call and ask for advice. That advice would probably be much better than it would have been two years ago. (Link not working try http://my.chicagotribune.com/#section/-1/article/p2p-78201526/ )

If you can’t be a “progressive” by giving things to people, how about being a “progressive” by taking things away from people? That doesn’t cost anything. Here is where the new Mayor has a chance to really set the tone. I suggest cutting the pay of the management team he is going to hire -- the Commissioners, Deputy Commissioners, Deputy Mayors, Chairpersons, Directors, Counsels, Public Information Officers and the like, the top 300 or 400 people in city government – by 50 percent compared to the pay level under the Bloomberg Administration. That is the official salaries – I’m not suggesting Mayor-elect DeBlaiso himself work for 50 cents. A quick review of city salaries on See Through New York shows that these sorts of positions currently pay $180,000 to $250,000. Under this proposal, the pay level would drop to $90,000 to $125,000 for the same work, or whatever the new hired had been getting paid in their previous job, whichever were less.


Syndicate content