Larry Littlefield's blog
Mayor Michael Bloomberg via ABC News: "The protesters are protesting against people who make $40- or $50,000 a year and are struggling to make ends meet. That's the bottom line. Those are the people who work on Wall Street or in the finance sector.” In fact the mean payroll per worker in the Finance and Insurance sector in Downstate New York was $231,822 in 2010, according to the Bureau of Labor Statistics. For all private workers outside the Finance and Insurance sector, the mean payroll per worker in Downstate New York was $57,806 in 2010, or 30 percent above the U.S. average. An advantage indicative of and cancelled out by a higher cost of living. There used to be a lot of people in finance in NYC who earned $40,000 to $50,000. They were back office workers, who did things like due diligence. What ever wasn’t automated was outsourced following the early 1990s recession, and NYC lost tens of thousands of those “pink collar” jobs.
From the NY Times City Room, “when asked about the latest budget cuts, Michael Mulgrew, president of the United Federation of Teachers, said that city schools ‘have been cut to the bone’ and were already stretched to their limit.” Actually spending on the city’s schools is going up by a $billion this year and went up by $billions more in the past few years, but it is all being diverted to the retired as a result of a UFT “victory” in a 2008 retroactive pension enhancement that allowed teachers to retire at age 55 after 25 years of work rather than 62 after 30, and other previous pension deals.
Also from the Times: “Patrick J. Lynch, president of the Patrolmen’s Benevolent Association, warned of projected cuts to the Police Department. “The last thing this city should plan to do for the future,” Mr. Lynch said, ‘is to reduce the staffing of the N.Y.P.D., which has already been stripped to the bone in our local neighborhood precincts.’” According to Census Bureau data I published last week, NYC has nearly 2 ½ times the U.S. average number of police officers relative to population.
If you haven’t already, you should download this spreadsheet linked in the first paragraph of this post and print out the “local output” and “state output” tables, before reading what I have written here. The data shows that according to public employment data from the Governments Division of the U.S. Census Bureau, there were 3,980 full time equivalent local government workers per 100,000 people in the United States in March 2010, about the same proportion as in March 2002. In 2010 local government employment was somewhat higher relative to population in New Jersey at 4,414, and substantially higher relative to population in New York City at 5,135, and in the rest of New York State at 5,084.
New York City’s higher local government employment is explained by the broad range of municipal services provided here, including public water, public sewer, public transit, professional fire protection, municipal garbage collection, and extensive public housing, hospitals and social services for the poor. The city’s local government employment, moreover, was slightly lower relative to population in 2010 than it had been in 2002. Extensive services are much less of an explanation for the high level of local government employment in the rest of New York State, since not all areas of the rest of New York State have all these services. Local government employment in the rest of the state, moreover, has been soaring for two decades, with increase from 4,683 per 100,000 residents to 5,084 just over the eight years in the table.
The governments division of the U.S. Census Bureau has released state and local government employment and payroll data for March 2010. I’ve compiled it for New York City, the rest of New York State (by subtraction), New Jersey and the United States, along with some related and relevant private sector data, and added 2002 data for comparison. Due to technical difficulties, the spreadsheet is located off site at this location. Follow the link to download it and save it. The “local” worksheet (see tabs at the bottom) shows data for local government, and includes a four page (hopefully) printable table. The “state” worksheet includes data for the State of New York and the State of New Jersey compared with the total for all state governments in the U.S., and prints on two pages.
The rest of this post is a discussion of how the data was compiled (mostly copied from a post on a similar exercise for the March 2008 data). I might follow this with a couple of more posts if I can, but I spent a lot of time compiling the information and wanted people to have it now.
In today’s NY Times, Mark Bittman debunks the myth that poor people are getting fat because junk food is cheaper. It isn’t. People just don’t want to be bothered cooking, and more affordable junk food makes that possible – at the expense of people’s health. This is, I believe, just one example of people doing what is easy rather than what is best. The easy life, intensively marketed, is killing us.
According to the Daily News, the popular televangelist said it was OK to divorce a spouse who was suffering with Alzheimer’s, subject to certain conditions. “’I know it sounds cruel, but if he's going to do something, he should divorce her and start all over again - but make sure she has custodial care and somebody looking after her,’ Robertson said.” Now one can debate the ethics of this on several levels, not the least from the point of view of the Gospels, since opposition to divorce is one of the few moral absolutes directly attributed to Jesus. But Robertson is best known not for his philosophical views, but for his political views. His view that God wants taxes to be lower, and public aid to the needy to be diminished. Who, then, is it that foots the bill for custodial care when a spouse refuses to do so?
Medicaid. Divorce is often a part of Medicaid planning, accessing a program purportedly intended for the poor while not actually being or becoming poor. In fact, the taxpayer burden of the custodial care of those who did not make sacrificing for family a priority in healthy adulthood – who went through divorces or became absent parents during their children’s childhood – is one of the most difficult issues we face going forward. What will happen when those children say sorry, but you put yourself first when I needed you, and I’m struggling now, so don’t expect me to diminish my life if great sacrifices are required to ease your later years? Even in New York, where rules have been in place to allow cost shifting to the government without the formality of divorce, this is now recognized – even by many Democrats -- as a financial burden this high tax state cannot afford.
According to Bloomberg News, federal legislation to force New York City to allow anyone from other states to carry concealed handguns has 243 sponsors in the U.S. Congress. Among those sponsoring the legislation are U.S. Representative Heath Shuler, a North Carolina Democrat, Representative Cliff Stearns, a Florida Republican, and two Republican senators, David Vitter of Louisiana and John Thune of South Dakota. As the attached spreadsheet from the latest Statistical Abstract of the United States shows, North Carolina, Florida, and Louisiana all have New York City beat – in murder and rape. South Dakota has a low crime rate overall and below New York City in murder, but is sky high in rape. Needless to say, a comparison between central cities in these states and NYC would be far worse. The Northeast U.S. is generally lower than other parts of the country in crime.
Perhaps the Mayor should warn New York area residents against visiting these states, as well as being forced to follow their example.
According to the Wall Street Journal, “over the next decade, Mr. Bogle said stocks are likely to generate an average annual return, including dividends, of around 7%. ‘Your money will double in 10 years,’ he said. ‘How bad is that? People ought to get over the illusion [of higher expectations] and realize that they may have to invest for longer time periods, start earlier and save more.’"
That is an optimistic forecast. But New York’s public employee pension funds assume a much higher rate of return, for a mixed portfolio of stocks and lower yielding bonds. So politicians can avoid admitting how much they have harmed taxpayers and those who rely on public services and benefits, by retroactively enhancing the retirement benefits of those who already had the richest retirement benefits, as part of political deals. In New York they keep denying, even as required pension contributions soar and services are cut despite the nation’s highest tax burden. After all, those with privileges expect rationalizations to go along with them. Remember that when politicians and public employee unions organize protests against layoffs, cuts and pay and benefits for new hires, service cuts, fee increases and tax increases. And if you point out what has been done, they cover their ears and scream.
The 9/11 attack was a disaster by any measure, with nearly 2,000 people killed in NYC, the loss of 15 million square feet of office space, and months of disruption. But was the response, and the fear, disproportionate, with two wars and a host of new security intrusions? Is the actual toll of what happened on that day, as large as it was, small compared with the negative effect on the United States, economically, fiscally, psychologically, and in global relations? What shouldn’t be forgotten is that what actually happened that day was only one tenth what most people believed had happened, and/or feared might happen soon.
That was a warning from a friend from Louisiana the last time a tropical storm approached. The wind can launch stuff left outdoors through windows, perhaps yours and perhaps someone else's. That stuff, including outdoor furniture, garbage pails, etc. needs to be moved and secured. It's the first thing people who are used to hurricanes do, I was told, but it isn't mentioned in the city's literature. Move it inside, or at least out of the wind.
While New York’s pension funds continue to assume that they will achieve an 8.0% rate of return from peak values, there is realism elsewhere. The Federal Reserve Bank of San Francisco has released a paper that predicts two more decades of weak stock market returns as the relatively large Baby Boom generation cashes in its retirement savings -- leaving the smaller generations coming after as buyers. The paper doesn’t even consider the relative wealth of different generations, with the second half of the Baby Boom worse off on average than the first half, Gen X worse off than the second half of the Baby Boom, etc. And one of the ways those born after 1956 are worse off than those coming before is they are less likely to have pensions, or increasingly even employer contributions to their 401Ks. Therefore, they will have less money to invest in stocks – unless the Republicans can force them to use their Social Security money to buy stocks from older generations at inflated prices. (Government policy is already to try to get young adults to impoverish themselves buy buying houses at inflated prices relative to their smaller incomes).
Meanwhile, the Federal Reserve Board in Washington has voted to keep short term interest rates are zero for two additional years. But according to today’s Wall Street Journal, that zero return on cash looks pretty good to most investment professionals when deciding what to do with their own money, even as they urge their customers to invest in riskier assets for the long run. And you can’t really choose not to, because the politicians overseeing public employee pension funds are doing it for you, and will come after you and your children for any losses even as any temporary gains are cashed in with retroactive pension enhancements described as costing nothing. The Wall Streeters, according to the article, have shifted to cash, and are scared with their own savings.
The Securities and Exchange Commission is taking written comments on its regulation of bond rating agencies, and one of the submissions was from a former Moody’s senior analyst with something to get off his chest. As noted by one reporter who read the testimony, “the comment is a scathing indictment of Moody's processes, conflicts of interests, and management” and will make the former employee “a star witness at any future litigation or hearings on this topic.”
The analyst rated mortgage backed securities during the housing bubble, with those issuing the securities paying the rating agencies to provide ratings. That is the way bond ratings now work. The conflict of interest is that those issuing the securities might not hire agencies willing to warn investors by issuing low ratings. “Moody's analysts whose conclusions prevent Moody's clients from getting what they want,” according to the former analyst’s comment, “are viewed as ‘impeding deals’ and, thus, harming Moody's business. These analysts are often transferred, disciplined, ‘harassed,’ or fired.” The submission confirms what many if not most people suspected.
Within days after Tea Party Republicans nearly drove the federal government into default to gain political advantage, they have been topped by presidential candidate Rick Perry. “Texas Governor Rick Perry, the latest entrant in the fight for the Republican presidential nomination for 2012, said it would be ‘almost treacherous -- or treasonous’ for Federal Reserve Chairman Ben S. Bernanke to increase stimulus spending before the 2012 election.” Because by helping to prevent recession, doing so might be part of a plot to help Barack Obama win re-election.
Now for reasons of lack of expertise, etc., I generally don’t write about Federal Reserve monetary policy. But since Perry has broken what has been considered a taboo by responsible politicians and politicized that policy, let’s take a look at how the federal funds rate has been changed since 1987 – under Republican Fed chairmen – in the run-up to Presidential elections.
This article in the Financial Times is well worth a read. It is behind a pay wall, so let me hit the highlights (you can register and read the whole thing for free if you want to). Someone told the author that the people of the United Kingdom were mature enough to distinguish between problems caused by long term global trends and the decisions of their leaders. “I question whether such rationality is the norm among the British, American and European peoples. Our societies cherish a gross sense of entitlement…if today’s leaders told their peoples the truth, and articulated the most plausible and bleak scenarios for their economic future, I will bet my socks most would be electorally trounced by rivals claiming to offer panaceas.”
The reality, this author asserts and I agree, is that the “fundamental task is to reconcile electorates to accepting less of everything than they have had in the past.” “We get the political leaders we deserve. Recent evidence suggests that in America, especially, charlatans prosper on the hustings, while good people flinch from exposing themselves to the humiliations and deceits essential to secure public office. Unless or until electorates become more rational, I doubt we shall see leaders much better – though, please God and the Tea Party, no worse – than today.”
Has the Obama Administration lost its mind? “Uncle Sam is landlord for at least 90 thousand homes that owners lost to foreclosure, and tens of thousands more in the pipeline as families are evicted and properties are appraised…Today the Federal Housing Finance Agency (FHFA) is asking for information from industry and the public on what might be done with the inventory currently held by mortgage giants Fannie Mae, Freddie Mac, and the Federal Housing Administration…One option: turning foreclosures held by the government into rental homes. That way, cheap foreclosures would not compete with other houses on the sales market. Local companies would probably be asked to manage any government rentals.”
Here’s the Republican commercial: “At one time this was a solid neighborhood of decent, law abiding families who took pride in the homes they owned. But then the federal government took over a bunch of houses and started renting them out to poor transient people from out of town. Now crime is up, there is trash in the street, property values are collapsing and people have started to flee. It’s this neighborhood today; it could be your neighborhood tomorrow if Socialist social engineer Barack Obama remains President.”
There are many who are getting a sense of deja vu about the Obama Presidency. Like President Jimmy Carter, President Obama is dealing with quagmires that have built up over many years that will make the American people worse off for some time to come. The weight of those challenges, and the unwillingness of Congress to impose the measures needed to turn things around, is making him seem hapless and impotent. Moreover President Obama underestimated just how rotten our economy has become at its core, and what a hard slog it will be to find a bottom. The measures he managed to get passed were conventional measures for a conventional recession, not an economic structure in collapse at the end of a 30-year debt binge. That 30 year era followed another era that collapsed under President Carter.
But Jimmy Carter had a Democratic congress, whereas Barack Obama is facing a Republican congress. That makes his situation more like that of President Harry Truman, whose term I didn't live through personally but read about in the award winning book. Truman was unpopular due to the problems in the country, including a far more brutal war than the one we are in, and yet could run against a "do nothing Congress." At the time, as well, part of the Republican Party had fallen into McCarthyism. You can't say politics today are more divisive than that. To put on a respectable face the Republicans nominated a respected and reasonable figure, Thomas E. Dewey, the Mitt Romney of his day, but Truman won anyway.