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.
COLIN CAMPBELL (Oct
I generally don’t pay much attention to the sludge of misinformation and deception that now passes for politics and journalism. I prefer to try to figure out what is actually true myself. But suddenly last weekend, it occurred to me that the massive propaganda war against Obamacare, Citibike and the Common Core are essentially the same. Those waging it may be different – the Tea Party, Tabloids and Teacher’s Union – but the goals, tactics and vested interests are more alike than different.
In each case, an attempt has been made to delay and then kill a different way of doing things before it got started, not because it might fail but because it might succeed. In each case, the group putting out the propaganda has an interest in keeping things as they are: older and wealthy Americans who already benefit from massive direct and indirect government health care spending on themselves and don’t want any benefits for others. Those who believe their own driving and parking is the most important (and only valid) use of the public streets that everyone pays for. And a New York City teacher’s union that has provided the people of New York City with inferior schools for nearly 50 years, generally in exchange for low funding but more recently – over the past decade -- in exchange for high funding. And the similarities don’t end there.
Now that the general election is nearly upon us, it is probably time to finish up my analysis of this year’s primary returns.
I was intrigued by an article by a New York-based City Planner in the latest issue of Planning magazine (no link -- subscribers only). He was on a bicycle trip to Cuba when his friend dropped dead of a heart attack. “The experience, while traumatic, would take me into places difficult for a foreigner to reach.” Although Cuba has a reputation for excellent medical care he found “a country that was shockingly primitive. The medical attention my friend received was rudimentary, in a facilities that were skeletal.” He was “shocked at the worn, run down hospital corridors and the appearance of staff simply standing around, doing nothing.” He had to move his friend’s body into the hospital himself. “Parts of the hospital were dirty. To cite one vivid example: Directly across from the examining room where doctors tried to revive my friend was an overflowing toilet with a broken sink; there was no place for visitors to wash their hands.”
And yet, according to the article, "Cuba’s life expectancy matches the U.S., according to United Nations statistics.” Hmmm.
2013 Primary Analysis (Part Two): We Are Still a Tale of At Least Two Cities (and Probably More That That)
SHARPTON: What the election showed the other night is that a lot of the identity politics of 20 years ago, 30 years ago, has now become identity politics of policy…You can no longer take yesterday’s maps for today’s politics…It’s a
When the federal shutdown ends and monthly employment data is once again released, we will probably find that New York City’s unemployment rate is still high. What is interesting, however, is why it is so high. According to the survey of business establishments, the number of people working at payroll jobs in New York City (including those who commute in) is the highest it has ever been. And according to data based on the survey of households, the number of city residents who were employed in June 2013 was only slightly below the pre-recession level of June 2007, while for the U.S. as a whole the number employed was 1.8 million lower. New York City’s unemployment rate is high because the city’s labor force, including those looking for work but not employed, has soared. In a country that is suffering a far greater economic decline than New York City, the city has become an economic refugee camp with young workers trying to find some economic hope.
But they aren’t earning so much. Before shutting down, the U.S. Census Bureau released American Community Survey data for 2012. The data showed that New York City’s median household income fell 5.5% from 2008 to 2012 when adjusted for inflation. The median work earnings per household fell 6.9%, and since full-time full-year workers showed some modest gains in earnings, the share of workers able to maintain that status must have fallen significantly. Moreover, inflation adjusted mean household income, affected to a greater extent by earnings of the rich, fell 7.7% from 2008 to 2012, showing that even the one percent have not been spared. This is the case nationally as well, according to data cited by this article. Some spreadsheets and additional commentary may be found here on “Saying the Unsaid in New York.”