If Mario Proccacino Was Alive Today, He'd Be Turning in His Grave [2013 General Election Analysis, Part Two]
In our last visit together, we began our exploration of the November election returns with a look at the most interesting local race; we now turn our attention from the undercard to the main event:
This is the first of Rock Hackshaw's three-part series on the passing of Nelson Mandela.
In this country, whenever I want to find the best coverage of unfiltered news on cable television, I go to CSPAN. For the most part you only have to bring your intellect to the viewing chair. It seems as though most of the other networks aim to either indoctrinate or proselytize. I doubt that’s an objective at CSPAN.
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.”
It’s a little late but I wasn’t able to really dig deeply into the NYC Primary numbers until recently, so here’s some of what I found by matching the 2013 Primary voter history to the Prime New York Voter File.
A Surprisingly Large Number of Non-Prime Democrats Voted
It was one of the moments I have cherished my entire life. The crowning achievement of a career. An audience with Nelson Mandela that first requires some initial perspective.
GATEMOUTH (December 20, 2009): Listening to the complete Aladdin Recordings of Charles Brown; essentially what the King Cole Trio would have sounded like if they were black
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.”
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).
In anticipation of the soul-deadening process of public school middle school admissions in the City of New York (the single greatest cause of middle class flight from the City), ten year old Dybbuk’s been attending a math tutor to boost his chances for the Mark Twain math program.
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.
The hospital worker’s union was the only big union to back Bill DeBlasio in the primary for Mayor, so after a brief period out of power it seems that they are once again our overlords. So what do they want? They would probably have us believe that they want better health care, but despite their reversal on health care reform between the early 1990s (against) and the late 2000s (for), I’m not inclined to believe them. We might suspect that their real issue is more jobs for members, and thus more dues revenue for the union, but I have reason to believe something else is on their minds. Something like this from the U.S. Department of Labor:
Notice of Critical Status for the 1199SEIU Greater New York Pension Plan: This is to inform you that on March 29, 2013, the Plan actuary certified to the U.S. Department of the Treasury, and also to the Plan sponsor, that the Plan is in critical status for the Plan Year beginning January 1, 2013. Federal law requires that you receive this notice. The Plan is considered to be in critical status because it has funding problems. More specifically, the Plan's actuary determined that the Plan has an accumulated funding deficiency for the Plan Year beginning January 1, 2013. This 1199 plan, one of three plans the union runs (as best as I can determine), is number one on the critical list. Since this post includes a spreadsheet attachment, the rest of it is here on “Saying the Unsaid in New York.”
Over the past few decades I’ve seen a number of studies, generally produced for those in marketing trying to find someone who still had money they could sell to, showing that the inflation adjusted work earnings of ordinary Americans, at each phase of their life, has been falling generation by generation, starting at the back end of the baby boom and working its way up the educational and income scale. The peak earnings were had by those who came of age in the 1950s and 1960s, which is to say those who were born between the mid-1930s and mid-1950s, those whom I have referred to as “Generation Greed.” The same generations that, when running the country, have essentially bankrupted the U.S., while shifting the sacrifices to those who will follow. The Federal Reserve Bank of St. Louis recently released yet another study showing the same thing, this one a highly technical multiple regression analysis that adjusts for education, whether or not one is a saver, and other demographic and social factors. It puts the start of falling income a little earlier, in 1950, with the losses accelerating later.
The Fed’s main question for this analysis is the economic status of older Americans, and indeed since the young have other advantages the diminished status of younger generations will really hit home when they become old themselves. The diminished income and wealth of younger cohorts (based on birth year) at each point in the lifecycle is summarized starting on the bottom of page 26 and shown graphically in figures 29 and 30 on pages 73 and 74. But most people don’t like to look at graphs and think about multiple regression coefficients. They like to talk about celebrities. So I thought to myself, “which celebrity most exemplifies the direction of the country over the past 45 years or so?” And then it hit me.
Whoever you are. Probably DeBlasio, but let’s count the votes. In a recent article, the New York Times reported that his margin in the polls means he is “flirting with a record win for a non-incumbent; that record is currently held by Abraham D. Beame, who won election in 1973 with a 40-point victory margin, the largest in an open race since five-borough elections began in 1897.” It is fitting. Another long time Room Eight poster predicted DeBlasio would be another Lindsay, but as far as I’m concerned that job has already been taken. Giuliani, Bloomberg, and the New York State Legislature have already re-Lindsayed with regard to the debts and pension enhancements/underfunding that the next Mayor will inherit.
In keeping with a tradition that goes back all the way to Wagner in the mid-1960s, the current Mayor will leave the next Mayor a city that is going broke. Bloomberg has vastly increased the city’s debt, in some cases to pay for investments that will pay off in the future, but in other cases to just get by for a few years. After underfunding the pensions following the massive retroactive pension increases of the 1995 to 2000 period, Bloomberg is again currently underfunding the pensions by $1 billion per year according to the BS estimates of the city actuary (the reality is more). Including underfunding the huge 2008 pension increase for NYC teachers that Bloomberg went along with. Moreover, Bloomberg has also cashed out the entire retiree health care fund he built up earlier in his terms. He leaves behind public employees who have become vastly richer relative to the average New York City resident, given their pension increases and the stagnation of everyone else’s wages, and who are nonetheless demanding in the press to become richer still – and that the next Mayor not negotiate in the press. And that is just part of it, as explained further on Saying the Unsaid in New York.