Mr. Potter Has Won?

My perennial Christmas Missive, returns after a 4 year (can your believe it) hiatus. And who would have thought 5 years after the Great Meltdown produced the Great Recession, , 5 years into the age of Obama and a purported move away from supply-side economics pretty much nothing has changed to reign in the very things – excessive income inequality, unfettered financial speculation and moral hazard policies that reward the affluent investor over the struggling worker—that drove us to the brink Great Depression II, setting us up nicely for another round of financial mayhem within the decade.  Meanwhile 5 years into a recovery plan that has produced recovery for the richest  10% of the population who now take in more than half of all income (up by over 50%) and even more so the top 1% who raked in  over 90% of the gains from the recovery, middle class and working families are enduring stagnant or declining incomes that haven’t seen significant real increases since the dawn of 1980s supply side economics.    I was apparently naively optimistic when I wrote: Perhaps by Obama Christmas II the tides may turn. For now, let us at least raise a voice of prayer and a glass of cheer to the fact the Potters aren’t adding as much to their winning totals as they used to.Who knew Morning In America actually meant a sunset for  middle class expansion and an American Dream  deferred.. And yes, Virginia, income inequality DOES matter as any Feudal peasant or lord could have told you and as a brief glance at a map of global income inequality also tells you.  Excessive income inequality produces and exacerbates  poverty and  authoritarianism.  Period.  But at least there is hope in the coming year, what with that Marxist in The White House (as we always knew, thank you Fox News) and one now in the Vatican (thank you Rush Limbaugh for that bit of analysis), that national and global attention and conversation may actually turn to a meaningful discussion of inequality and—beyond the social justice issues and even bad for capitalism issues (true capitalism being antithetical to monopolies of power and wealth) the anti-democratic tendencies it fosters.  Until then,  let us hope that the Mister Potters haven’t won – for once they do it won’t be the same America we were born in.  Merry Christmas and best hopes for the future.  CL

__________

I watched the perennial holiday chestnut, “It’s a Wonderful Life,” the other day. There was George Bailey, as he is every year, struggling to keep the old Savings and Loan afloat. There was the malicious Mr. Potter, a truly covetous old sinner, trying to put Bailey out of business.  There was Clarence the angel showing, once again, that our world is a better place for the George Bailey’s amongst us.  It’s too bad that in today’s world the Potters are beating the Baileys, hands down.

Old man Potter dismissed the Bailey Savings and Loan as a kind of privatized social welfare program for dumb poor workers who couldn’t cut it on their own. “And what does that  get us,” he asked?  “A discontented, lazy rabble instead of a thrifty working class.  And all because a few starry eyed dreamers stir them up and fill their heads with a lot of impossible ideas? Don’t the  Rush Limbaughs or Tom Delays say the same thing today?

Labor laws, social welfare, retirement benefits, guaranteed healthcare, workplace safety laws, consumer protection–all are dismissed by our modern Potters as so much misplaced sympathy offered to the undeserving by the foolishly starry eyed, thinking that is at best naïve and at worst dangerous.  Any mention of social welfare on AM radio is now associated with Bolshevik Socialism – want to give workers a guaranteed living wage or put any limits at all on the worst excesses of the market and you’re labeled as an advocate of Gulags and death camps.

George, of course, argued back.  “Just remember this, Mr. Potter,” he retorted, “that this rabble you’re talking about, they do most of the working and paying and living and dying in this community.  Well is it too much to have them work and pay and live and die in a couple of decent rooms and a bath?”  Today he could add: is it too much to have them work and pay and live and die with decent healthcare, affordable housing, quality education for their kids and the sure knowledge that when old age comes, there will be some comforts to look forward to?

We don’t have that many George Bailey’s today. Few stand up to our Potters when they tell us workers can’t expect job security, no one is entitled to healthcare and decent pay is whatever the most desperate amongst us is willing to work for.  Even the Democrats, the party of dreams for the working stiff, have fallen in line with the rhetoric of balanced budgets and smaller government (except, of course, if deficits are required to provide tax cuts to the richest Americans) even if the cost are reduced programs to help the disadvantaged.

Can’t anyone makes the simple point George made that helping the least amongst us is not simple altruism, it is Capitalist self interest at it’s best? “Your all business men here,” he reminded the S&L board members thinking of supporting Potter, “don’t it make them better citizens? Doesn’t it make them better customers?”  Heck, wasn’t it that old socialist Henry Ford’s idea to raise worker pay, not because it was the moral thing to do but because it made them better participants in the Capitalist market place?   Like Old Man Potter, much of American corporate business has become warped and frustrated by ruthless competition and now sees its workers only as cattle to be milked for as long as possible before being sent to the layoff slaughterhouse.

Frank Capra understood that the Potters amongst us seldom lose, though the more public-minded like old George could, on occasion, battle them to a draw. Notice that, while George Bailey ultimately survived his battle with Potter, the old man survived unscathed too, his own crime of theft of the Bailey’s deposits unpunished. There have always been the Potters amongst us, those who pursue personal gain at any cost, be they a grasping banker like fictitious  Potter or the greedy executives of a massive corporations like Enron or WorldCom. What’s regrettable is that there are fewer and fewer George Bailey’s speaking up for the little guy.

In the real world the Bailey S&L would have been bought out by the 1980s by PotterCorp, a huge transnational Financial Services leviathan. A PotterCorp holding company would have bought out Bedford Fall’s chief industry, the plastic’s factory old Hee-Haw Sam Wainwright had built at George’s urging and shipped the jobs to Third World sweatshops. Downtown Bedford Falls would now be a ghost town with shops shuttered by a massive PotterMart selling cheap slave-labor produced products to the town’s poorly paid service employees.   Yes, least be there any doubt, in the world of today Mister Potter would have won.  And, least there be any doubt, Mr. Potter voted Republican.

 

Posted in Barack Obama, Supply-Side Economics. Tags: Healthcare Reform, It’s a Wonderful Life, Mr. Potter. Leave a Comment »

Let Them Eat Cake? They Don’t Even Get No Stinkin’ Cake.

While perusing my morning NYT last week two articles jumped out at me.  The pair perfectly capture the Wilted Gilded Age we find our selves in.  The first dealt with the interesting little irony that the rich are actually and calculatingly walking away from more mortgages than average households.  It would appear that the WSJ’s moralizing about moral hazards moralizing ends somewhere west of the Hamptons.  The second article dealt with how the ivy covered towers of Academe are now being turned into the country clubs of the kids of the ruling classes, complete with spa-quality student centers.  Now public schools and community colleges are also spending more on student services  according to the article.  But they are doing so to deal with a) a vast backlog of repair and expansion work that has been sidelined for decades; and b) the crush of lower-income students trying to ride out the Great Recession in a classroom.  (Note to students: choose a major that will take 20 years to complete. If the economy hasn’t recovered by then maybe an elder relative will have kicked off in the interim and left you a small bequest….).  Private schools are putting in tapas bars.  Oh, such a world of difference

Death Tax

Fitting the First Lady was in town  on tax day yesterday talking about nutrition, children’s health and obesity.  That’s because her visit underscored one of the greaqt inequities in our  society: the real death tax.

The First Lady was highlighting all the negative health effects people in poorer neighbors suffer due at least in part to lower income levels, access to reasonably priced alternatives to fast and processed foods and limited  availability of exercise and outdoor  recreational spaces  Dr. Robert Ross, CEO of the California Endowment was more direct stating:  “And so if you live in City Heights I can tell you that you will probably live 12 to 14 years a shorter lifespan than someone from La Jolla.” Ross’ assertion that zip code plays a big role in life expectancy is supported by study after study. Fitzgerald was right:  the rich ARE different than you and I.  They live longer.

So, as the anti-tax and death-tax rhetoric heats up (especially with the expiration of George W’s tax cuts next year—Hey George, way to go forgetting to make the centerpiece of your legislative legacy permanent! Heck of a job there, Bushie!) let’s save a little outrage for the ultimate of death taxes–the one that really does kill people.  But what’s a little death-related social inequity in a country of the people, by the people and for the people dedicated to promoting the general welfare.  So what if  La Jollans live longer than Encantoians—it all averages out.

Come to think of it,  that would be Clairemontians.

Tea Partiers Unite!

Tax  Day!  Yikes.  This is the day I, like all the other outraged taxpayers out  there, must confront the so-called price tag  for living in a civilized society. Civilization—hah?  Civilization is just another fancy name for the undeserving to pick  my hard working pockets every 15^th of April.   Having filed my returns I’ve got to say, paying taxes in the five figures ain’t no walk in the park, by golly. And I’d really like to go off with all those Tea Party activists and demand Big Government leave more of my little paycheck alone.  (I’d love to go but I have a full time job making the money to be taxed, where many of these activists apparently have plenty of free time to protest—likely because a big share of the  Tea Partiers are wealthy old white guys.)  But obligations call closer to home so at least let me offer them my free two cents worth of support.

Now, I want to slash government 50% or 60% or 80% percent as much as the next “make government small enough to drown it in its bath water” crowd.  Luckily, my online tax service happens to throw in a nice little summary at the end of calculating how much of my life’s blood   will be violently extracted by the powers of voracious  government.  With their help I can now see exactly where this socialist tyrannical government is spending my money.  And I want them to stop giving my hard-earned money –and yours too—to all those undeserving welfare  leaches on the body politic

Just look at it.  According to the table 37% percent of my money (and by my I mean my lovely wife’s and mine)  goes to all those greedy old people who have the gall to not only get old but to even get sick every now and then  and whine that because they worked and built our society for forty or sixty years they shouldn’t be left to die in poverty.  Yo Grandmare and Pop Pop: Get off my back!  More civilized cultures used to float you old farts off on ice floes. Hey, I plan to live fast, die young and leave a handsome corpse (ok, those options are becoming increasingly problematic with each passing birthday…) so why should I have to I carry the burden of all these geriatric goldbrickers.  Get a job, Grams.

And how about that 20% that goes to defense?  Talk about the ultimate in social welfare states.  Do you know those lazy, government bureaucrats over at the Pentagon (and in its multitude of regional offices  and camps in cushy  exotic locales—I hear Kandahar is the Club Med of the Himalayas) get cradle to grave government freebies?  Universal government healthcare, housing and shopping subsidies, lucrative government defined benefit retirement plans?  Good lord, the goodies just don’t stop.  Don’t even get me started on that combat pay bonus and all those extra benees they’re entitled to just because they stepped on an IED.  Hey, if you weren’t smart enough to keep your limbs  attached why should I pay for it?  You military guys are volunteers, after all.  So how about we put them all on 401k plans and make them sign up for an HMOs like the rest of us hard working tax payers?.  (By the way, would traumatic brain injury caused by an IED be considered a preexisting condition?)

That 14% for Medicaid, food stamps and the like?  Cut, cut cut! Some little kid is foolish enough to be born into the wrong kind of zip code they don’t deserve  food or medical care.  As that great stalwart of Tea Party activism once said, “Let ‘em die and decrease the surplus population.  Nine percent for physical, human and community development?  Screw it.  You want a park or a road or a senior center hold a bake sale and raise the money yourself, you leaches.  Bighted  urban areas  are just God’s way of telling those people stupid enough to keep living there it’s time to move on out to  the suburbs, after all.    Eight percent on the debt?  Screw that too.  And the people we borrowed the money from. If they were dumb enough to loan money to America then they’re  dumb enough to lose it all.  I mean, if they were smart they would have put their money in Wall Street CDOs, after all.

Geesh.  After all that slashing of bloated, unnecessary government I’m pooped.  I barely have the energy to rant about that absolutely colossal 6% of my taxes that went to people too dumb to make enough money not to be poor.  But what the heck: compared to the 65%  our communist government wasted on Granny, GI Joe and bonds holders, it’s a drop in the bucket, anyway. If you’re serious about cutting bloated totalitarian government like I am you need to go for the big money.  Senior World and NORAD—I’ve got you in my sights!

So I’m right with there in spirit with my fellow Tea Partiers!  I’m outraged my taxes are so high.  I’d like to keep more of my money.  Then I can spend more of it on my cable bill (also way too high) , my cell phone bill (which, with 4 daughters on our family plan approximates the monthly budget of a Central African nation), my Costco runs (where the minimum I seem to spend just to dash in for a couple of 40 gallon mega-jugs of milk runs around $3,000—but my God that Kayak was a good price), or my  incredibly successful investments.  You see I really need to get my portfolio back up so it can be nice and plump so I can lose it all again when the next financial collapse comes –which, as the big honchos have told us should appear with the regularity of locusts  every  five years  or so.

And, best of all, if my Tea Bag Buds get their way and we finally do slay this evil beast of  big government I’ll finally have enough extra moola to go out and buy myself some really, really big guns.  Which I figure I’ll need to fight off all those starving grannies and little sick  kids  who’ll be swarming my house like extra’s from a George Romero zombie flick trying get some of my hard earned and now unshared daily bread.  Lucky for me that, once we get rid of all the Medicare and Medicaid most of ‘em will be too sick and weak to put up much of a fight.

I do worry about all those permanently unemployed ex-military types though.  Maybe I better buy a few extra guns to deal with them.  And, hey—maybe we can organize or Tea Party into our own armed militia to protect ourselves from this rabble.  We could call ourselves the United Tea Partiers of America!  Or TeaTopia—even better. We could elect officers, organize our defense forces, build a few schools to teach our kids the virtue of the Tea Party Dream.  Maybe build a hospital or two to take care of us and throw in a Tea Party Fire Department.   Now, to provide for our common TeaTopian Defense and promote our general TeaTopian welfare we’ll have to pool some of our resources.  We could call that a….er, what?  Fees?  Subscriptions? Or how about Associational Dues for the Underwriting of Our Common TeaTopian Civilization.

Something tells be though,  some people might gripe on Underwriting of Our Common TeaTopian Civilization paying day.

Selfish prigs.

What the DIckens?

So Citigroup repaid the Feds billions last week ahead  of schedule.  They did so to get out from under the cap on executive pay that came part and parcel with taking the greatest  taxpayer windfall bailout in human history.  Citigroup wanted to get out from under the pay cap so they could pay their executives the gazillions of dollars Wall Street says it must pay its senior executives   And when one  says “Wall Street” one really means the  senior executives  of Wall Street firms are saying that they, the senior executives , must receive gazillions of dollars in compensation otherwise they won’t work for they, the senior executives.   And, oh the sweet irony of it all, Citigroup raised the money to pay back the Feds by dumping its own stock sending its embarrassingly low OTC-quality share price  even  lower, thereby putting the shaft to its own stockholders.  And now, because Citigroup has so watered  down its share value that the Federal government is going to have to sit on the shares it still owns longer to keep from sending the stock down even further (necessitating another bailout in the TARP that never ends.)

OK, I watch the actions of Citigroup  have to put on my Columbo hat to ask the painfully dump, plain questions.  Excuse me, but aren’t the Wall Street senior executives who claim that Wall Street senior executives must be paid gazillions of dollars the same Wall Street  senior executives  who drove their Wall Street banks—and the rest of the nation—into the financial ditch last year?  And, let me get this right,  now these same Lords of Finance have tanked their own share price to pay them selves high-fiving bonuses of the sort they paid themselves while driving the economy into the ditch last time?  And aren’t this the same Wall Street executives who, after getting gazillions in bailouts and paying themselves gazillions in bonuses who are still sitting on their money and not loaning to consumers and small business?

And, I don’t want to be a bother about this but I’m just trying to get it straight– no-ones saying a peep about it?  Not one Citigroup executive has been dumped by the Board of Directors over this yet?  No Citigroup shareholders are filing the Mother of all shareholder lawsuits?   Not even one puny Citigroup VP has been lynched from a Central Park tree by a posse of homeless Citigroup shareholders?

Wow.

In the immortal cinematic masterpiece  “History of the World Part I” the Roman emperor is saluted by his centurions with the cry “F- the Poor.” Citigroup ought to change its letterhead to read “F- America.”  I mean, these cats really, really don’t care. 

At this festive time of the year I give my students several holiday-related extra credit writing opportunities.  (For instance,  “Were the Maccabees  freedom fighters or terrorists?”) One sterling classic question concerns  that immortal man of business, Ebenezer  Scrooge: “Was Scrooge a better capitalist before or after the visitation of the three Christmas spirits?”  I personally feel he was a much better capitalist after the visitation  when he spent more on his clerk and the poor than before when he miserly hoarded his money.  You see, the spirits taught Scrooge something about capitalism and money that he didn’t understand: putting a ton of cash into a handful of pockets is not capitalism—its feudalism by another name.

As Dolly Levi used to say, “Money is like manure—it’s not worth a thing unless it’s spread around.  Otherwise she might have added, its just a big, stinking pile of….well, of manure.   And my,  do those Citibank execs, sitting on their pile of bonus manure, smell like do-do or what?

So my final Columbo question of this yuletide is,  “And you me to tell me, after they screwed their government, screwed the American people and screwed their shareholders, Citigroup executives really think they are going to get an uninterrupted nights sleep this Christmas Eve, sans ghosts?

 If there are any spirits of Christmas past, present and future hanging around this year with nothing better to do, might I suggest they make a stop in at the Hamptons a remind a few Citigroup executives how truly replaceable they actually are, least they mend their evil ways?

Calling all ghosts.  Citigroup’s management  needs the Dickens scared out of them.

Best of: The Road To Serfdom

I’m getting bogged down grading  papers again so I’m hitting you with my first “Best of Lunacy” post  to fill the void. (Heck, if the networks can already be putting shows into reruns until after the holidays, why can’t bloggers?!)  I published the piece below during the San Diego grocery workers  strike back in 2003.  The basic theme is pretty much apropo to much of the “who loses what” debate surrounding healtcare today.

The Road to Serfdom, American Style

I’ve lost count of the number of people around me condemning the striking grocery store workers.  “What are they complaining about?”  “They at least got health care – why should they mind chipping in a few bucks a month for it?”  “They make $35,000 a year – that’s too much already!”    And on it goes.

Let’s leave aside for the moment bemoaning paying grocery store employees $17 per hour after several decades of employment in a society where 18 year olds who can bounce a ball can make millions.  Or CEOs who make $3000 or more per hour.  What I find most disturbing of all this worker-bashing going on by other workers, blue and white collar, is what it says about the mindset of average American households. I see it as another sign of the creeping peasantization of the American mind.

I lived for a year in Russia a while back, lecturing on politics as a Fulbright scholar. While there, my students told me a classic Russian folk tale that has always stuck with me.

There are these two Russian serfs – Igor and Ivan.  One day Ivan goes out into the forest and finds a wood fairy.  The wood fairy tells Ivan she will grant him any one wish.  Ivan thinks for a moment.  “With my own goat, I can have milk for my family,” he thinks.  So he wishes for a goat and–poof – a goat appears.  Happy, Ivan goes back to the village where Igor, seeing Ivan and his new goat, becomes enraged.  “Now Ivan has a goat he will sell me the milk and take all my money,” Igor thinks.  “Where did you get the goat?” he yells at Ivan.  Ivan explains to Igor about the fairy and the goat and Igor storms off into the forest to find the fairy. When he does, the fairy tells Igor that she will grant him any one wish.  Without blinking an eye, Igor says, “Kill Ivan’s goat!”

Therein lies the essence of life as a peasant. To be a peasant is to live without any real hope of ever doing better.   Daddy was a dirt-poor peasant.  So was granddaddy – and great granddaddy and great-great granddaddy, and so will the kids and the grandkids.  There is no hope of social mobility, period – what you’ve got is all you’re going to get. In this mindset, if anyone gets more it had to come at someone else’s expense.  If your neighbor does well, you’re doing less well – life is a zero-sum game.

I grew up in the company of used-to-be peasants a generation or so removed–all of my grandparents were Sicilian immigrants.  I remember a basic attitude amongst the older members of this transplanted peasant society.  If any member of the family was doing well—say, got a new car—the old timers would publicly wish them the best but privately pray the car would break down.

The German’s call it Schadenfreude — taking delight in the misfortune of others.  But Schadenfreude begins with others having better fortune than you in the first place and a feeling of unfairness.  “Why them when I can’t have it?” The less likely one thinks it is that fortune will smile on them, the more delight one feels in seeing fortune frown on others.

That’s why the anti-grocery worker sentiment I keep hearing – which basically comes down to “why do they get it when I can’t”—is so disturbing to me.  I see it as another sign that, for many people, the dream that life will get better has simply faded away. Health-care, pensions and expanding wages–the stuff unions members fought (and, in many cases, died) for–are available today to a fraction of the American households that used to look upon such benefits as a standard part of working life.

That was, standard back in the days when unions were strong and even respected and cutthroat business competition wasn’t the be all and end all of human existence. After a solid generation of stagnant household incomes for many Americans, those who have lost that past security increasingly seem to look with envy upon those who still cling to a little bit of past prosperity.   We wish, in other words, that their goat would die.

Fifty years ago, Friedrich von Hayek accurately wrote of how the rising socialist states of the Nazis and Communists would, through the abject mediocrity these systems propagated, take us all back down the road to serfdom.    How ironic, therefore, that, a generation into the take no prisoners free market laissez faire capitalism that dominates today’s business and political culture, so many members of the middle class are showing signs of a growing serfdom in their own outlook towards the future, and towards their fellow citizens.

Throwing Worse Money After Bad

This morning the Obama administration fessed up to what out side critics have been saying for some time:  its efforts to date to stem the mortgage foreclosure crisis hasn’t worked.  “Making Home Affordable” was a seventy-five billion dollar incentive to the financial industry to deal with the fact the a quarter or more  of Americans are now upside down in their homes and millions are facing potential foreclosure in no small part because of actions by the financial industry. 

The Great Double-Ought Bubble was the product of many blowing lips: the irrational monetary exuberance of the Greenspan Fed cutting interest rates to give-away rates; foolishly greedy homeowners and buyers looking to turn hearth and home into equity ATMs; rapacious realtors looking for the next commission come what may.  But the biggest lips blowing up the bubble were those of the financial industry which, from financing ridiculous rates for subprime mortgages complete with their own bubble clauses to the slicing, dicing and splicing of mortgage-backed securities spread the risks of their reckless realty practices far and wide.

So who’d a thunk that the same Wall Street suits sitting in Board Rooms and Fed meeting rooms who came up with the Foreclosure Fiasco would chose to not  sit on their hands—and the throats of homeowners—when it comes to cleaning up the festering mess?  The Obama Administration, of course.  Talk about the audacity of hope.  The “Making Home Affordable” plan relied on financial institutions to take up front risks and forego “lucrative fees”  to help out underwater  homeowners based on an appeal to do the right thing by the government.  So they didn’t, simple as that.   Who’d a thunk that? Oh, right.

Today the Administration now promises to get tough with financial firms by not paying them the cash incentives promised in exchange for modifying distressed mortgages until those mortgages be permanently de-distressed.   That would be the cash incentives that were not big enough to tempt financial institutions to modify a significant number of mortgages in the first place. 

Right.

Six or twelve  months and three or four million more home foreclosures from now, what will the Administration do?  Get really, really tough on the financial industry by halting all deliveries of cappuccinos to their walnut-paneled offices until more mortgages are modified?  That threat might actually work better. Unfortunately, by then, the country might well find itself deep in the second dip of the Great Recession and the Obama administration may find itself facing its own potential pink slip in 2012.

The real scary fact of this great meltdown  has been that, step by step, everyone involved in it, from consumers to businessmen to government officials, essentially took rational, intelligent actions in pursuing their own self interest under the system of the time.  The real scary fact of this great meltdown is that there is no one bad guy—no Enron or AIG or Michael Milken or even a good old Gordon Gecko to blame this all on.  The great meltdown has been the product of systemic failure which has resulted, amongst other things, in the tying of the mortgage industry into a Gordian knot of conflicting interests. 

Only the terrible swift sword of government action can cut through that not.

Relying on the private sector to sort out a housing crisis that it a) made; b) doesn’t fully understand; and c) has no short-term interests in fixing is taking audacious hope to the point of simple blind foolishness.  Government must use the  power of law to modify the very mortgages the financial industry refuses to do.  Without such bold, truly audacious action the  foreclosure crisis threatens to spike again, dragging the housing and financial sectors back down and dropping the entire economy back into the swirling porcelain bowl.

Last year I suggested the government pursue an aggressive National Fair Mortgage Act to, by the power of law,  reset mortgage principals back to pre-bubble assessed home values and structure these mortgages on a 30 year fixed, 4%-5% rate, with mortgage holders being compensated through tax breaks and direct government compensation for any losses.  (See the plan here.)  As foreclosures continue to soar, the economy continues to falter and the latest efforts by the Obama administration to get the banks to fix bad mortgages fail,  the powers that be might want to chew on  this idea a bit.

Continuing to try and get banks to fix loans they have no interest in fixing, however, remains throwing worse money after bad.

401k(illed)

The San Diego County Taxpayers Association has released a new report showing that the increased city pension costs across the county are resulting in increased taxes.

The report provides a good summary of the various pension plans and obligations distributed amongst the county’s 17 municipalities. The report is also thick with suggestions to cut pension costs. The only thing the report lacks is empirical proof of its basic thesis: that pension costs are driving tax increases in specific instances. In other words, the report is long on supposition but short on validation.

But man, is it long on recommendations.

The SDCTA’s argument is essentially reducible to the claim that, because pension costs impact cities’ finances and some cities have raised sales taxes, pension costs are the causal factor. Now, I do not doubt that the SDCTA is right in its basic conclusion that pension costs are a contributing factor in a number of cities increasing sales taxes in recent years. But pension costs are just that: a contributing factor. Declining property tax revenues, Sacramento revenue clawbacks, increased operational costs—like health-care benefits—and increased spending mandates are also contributing factors. The report does not state just how big an impact pension pressures have had on tax hike decisions. Indeed, the report provides no empirical statistical evidence in support of the initial hypothesis except a simple association: Since cities have high pension costs and cities have raised taxes, the tax increases are caused by the pension costs. This may be true (again, I think, to a degree, it is). But it may be a fallacy of false causes. There isn’t a Chi Square or a Pearson’s R—let alone a Yule’s Q—worth of real numbers in the report to validate what is left as ultimately a subjective analysis, let alone justify the sweeping changes to municipal pension plans the SDCTA offers as remedy.

The SDCTA  initially argues in the report that pension plans need be reformed because they are leading to higher taxes (again, a claim unsubstantiated). However, the bulk of the report’s recommendations focus not on a fiscal-efficacy argument but, instead, on a fairness argument which the purported analysis did not address. Stripped of its fiscal-impact component, SDCTA’s argument for pension reform  is reducible to this:

It’s unfair that municipal-worker pensions are better than those of most private-sector workers, therefore the defined-benefit plans most municipal workers have should be replaced with the defined-contribution plans (401k) that most private workers have.

Oh, really? One could just as easily reverse the argument saying it’s unfair that municipal-worker pensions are better than those of most private-sector workers, therefore the defined contribution plans (401k) that most private workers have should be replaced with the defined-benefit plans most municipal workers have.

Why punish municipal workers by taking away the pension plans they were promised—and worked faithfully in exchange for?  Why not improve the retirement plans most private employees have, instead?

Oh, right. We used to do that, back in the days when labor-union membership was stronger, government regulations were tighter and American workers of all stripes—blue collar or white, labor or management—fresh from ending a depression and winning a world war demanded of their employers and government that they be treated with a little (cue Aretha Franklin)  R*E*S*P*E*C*T.  The American post-war social compact was clear: If American workers work hard, they will, in cooperation with the companies they labor for  and the government they vote for, achieve the security of retirement. As a result, more and more workers were protected not only by the safety net of Social Security, but by the guarantee of defined-benefit private retirement plans.

Geez, they were such Mad Men back then.

Over the last generation, corporations (and I’m not bashing them—corporate owners and managers simply did what society and government allowed them to do, so we are all in this together, Mr. Moore), freed of government regulation and the post-war sense of public obligation, shed their defined-benefit plans even faster than they shed American workers. Now the only real vestige of the past golden age of guaranteed retirement is, for the most part, government workers.  No wonder business and capital groups across America would like to see such municipal plans go away: Once defined-benefit plans are banished everywhere in the realm even the concept of them will Orwellianly disappear from the public discourse.

And by the way, one of my beefs about the SDCTA is that it is, ultimately, much more of a business/capital group than a worker/labor group, even though workers—including labor union members—pay a fair hunk of taxes.  Of course, wealthy people pay far more in terms of most taxes than poorer workers do. Hmmm, now just what set of taxpayers does the SDCTA gravitate towards?  The proof of the pudding is in the analyzing, as my pop the chemist used to say. The SDCTA report states:

As one typical example, the report shows that a city administrator with 30 years of service earning $75,000 at the peak of her career would receive an annual pension of $72,900 plus yearly cost of living increases. An equivalent benefit for an employee in the private sector retiring at age 60 would require an individual to have an IRA, 401k or other pension account worth more than $1.8 million.

True dat. But what should really grab attention is not that the city employee with the defined-benefit plan will get 97 percent of their base pay in retirement.  The real shocker is that to get anything near that, an average worker would need squirrel away at least $15k-$30k or more a year for their entire working life to get a good pension—and then pray that they aren’t hit with a Dot.com or Wall Street Meltdown that reduces their 401k to financial road-kill just as they plan to check out.

Now, are some of the negotiated benefits city workers get too generous? Perhaps.  Retirement ages, most certainly, need be looked at. (And not just for municipal workers. If life expectancy is growing, the expectation that people need work longer before retiring needs be considered for all retirement systems, including social security.) But the SDCTA report is a less a real analysis of tax policy and pension plans than a wish-list for those dedicated to the proposition that the only good defined-benefit retirement plan is a dead defined-benefit retirement plan.

Go Fish

Fish left such a thoughtful comment to my last post that I had to take the time to address in an illustrious fashion.

Dear Fish,

You smell like a three-day-left-in-the-sun-real-world-version-of-your-online-avatar.

Sincerely,

Lunacy

No, no. that’s not what I really meant to say.  As far as I know Mr. Fish (who should really pal around with Mr. Chips) is a paragon of hygiene and Body Shop botanical splendor, the mental images of sub par dentistry and grimy fingernails his less than genteel online manor suggests notwithstanding.   A serious statement (or as close to one as Fish seems capable of tapping out with a solitary finger) deserves serious response.

What did then Candidate Obama mean –and his supporters hope for—when promising change?   That would be Change from the worst economy produced by any two term president in modern history?  (And no, this is not the Obama recession any more than the first two years of the Gipper’s Administration are called the Reagan Recession.)  This is not the verdict of left wing hippy type intellectuals.  Check out former Bush speech writer David Frum’s comments last week in which he pointed out:

In terms of income growth and poverty reduction, Bush performed worse than any two-term president of the modern era. Even in the best year of his presidency, 2007, the typical American household still earned less after inflation than in the year 2000. The next year, 2008, American households suffered the worst income drop since record-keeping began six decades ago.

Or maybe it’s change from a litany of some of the biggest mistakes made by any modern administration as summarized  by Craig Newmark, a list which includes:

• Going to war on false premises;

• The greatest disaster relief failure in American history;

• Controversial (and, one might add, potentially dangerous and often unconstitutional assertions of Executive Power;

• Becoming the first administration in modern US history to overtly condone torture;

• Unprecedented politicization of the departments of the Executive Branch (can you say Justice) and political patronage appointments of demonstrably incompetents (see number 2 above) ;

• Fiddling while Wall Street burned and then putting out the fire with a trillion dollars in public money; and

• Gutting environmental policy while exposing millions of Americans to increased health and quality of life risks.

Or how about change in simply ending what an overwhelming numbers of professional historians (more than any other president at this point in the post-presidency) call one of the worst administrations in history.

Of course my own personal favorite bit of change:  having a president who can now use the language of Shakespeare without making the Bard want to switch to French.

Fish,  read a book.  Read history.  Read SOMETHING other than right wing blogs perused while listening to right wing talk radio.  Obama is not the best thing since sliced bread.  He is not the Messiah.  He is making plenty of what I consider to be significant mistakes which all into question his ability to produce the change his supporters hoped for.  But by any objective standard he is so far performing better than his predecessor.  That is a good thing.  Democracy worked.  The people spoke and maybe things improve.

So Fish, I sign off with YAJSCIIYLKJARRWTIJWTDYIMY.EHOC.*

Best, Lunacy

(*You are just so cute in your little knee-jerk and rude reactionary ways that I just want to dip you in my coffee.  Extra hot, of course.)

I

Bonus Round

So AIG took the public money ($170 billion worth) and then gave executive bonuses ($165 million.) So what else is new? Lee “I Did It My Way (With A Paltry $1.2 Billion Dollar Government Loan)” Iacocca and his band of brothers did the same back in 1980. Hey, corporate executives just took billions in the peoples’ money to clean up after your economic incompetence. What are you going to do next? Screw Disneyland. Millions in bonuses for being smart enough to ask government for billions in bailouts are due. Break out the 1907 Heidsieck champagne for one and all. Let the little people sip the Cool Aid.

Obama blasts them. Pundits punish them. Comedians ridicule them. And average people start thinking that a return of the guillotine might be a more timely retro moment than the comeback in ‘80s fashions. But, for all the chest beating and hand-wringing AIG executives simply claim their hands are tied—contracts (the kind Corporate America loves to shred when they involve workers or consumers) force them to pay those huge bonuses out. Contracts they negotiated with themselves to pay themselves huge amounts of money which they now claim they must pay—and receive–the taxpayer be damned.

OK, so be it. You pays your money you takes your chances, taxpayers. Chuck Schumer’s idea that we’ll just tax it back is so much bluster—tax increases aimed at a handful of people will never clear the Senate, let alone the courts. So hang up those angry-tax-payer-we-want-a –lynching-suits, everyone.

And put on your angry shareholder suits, instead.

We the People are now the 80% shareholders of AIG. We the People purchased those shares under false pretenses and assumptions (lack of full disclosure and transparency, fraud, lies, call it whatever legalese is needed.) The government should launch an immediate shareholders lawsuit on behalf of We the People against the AIG management, board and each individual recipient of these bonuses for gross managerial negligence or whatever the shareholder lawyers bash misanthropic managers with.

Hirer the best, highest paid Shareholder Shysters the Treasury can afford, give them 10% of the take and let them loose like the starved wolves Harvard and Yale trained them to be. Tie those bonuses up in court until their would-be recipients are little old derivative managers. Go after their personal assets as civil penalties—let them see what its like to be foreclosed on, to have their limos repoed, their kids told there’s no money to send them to that nice school or for band lessons. Force a Board shuffle that results in everyone at the top, from CEO Hank Greenberg to Chairman Edward Liddy on down being fired for cause. Let them spend a few months/years in the ranks of the unemployed and property-less. It would be a crueler punishment than prison.

You don’t even have to carry through on the lawsuits. The threat alone, properly delivered (if anyone has a few extra horse heads their not using and would like to contribute them to a good cause…) might well shake the AIG gurus of galloping gall out of their “We are the Lords of all we survey” complacency.

And if they are so totally detached from reality as not to realize just how close to a French Revolution moment they have come, then go ahead and sue ‘em. Sue ‘em ‘til their eyes bleed, their wallets implode and they become the most reviled symbols of greed gone bad since Marie Antoinette.

Cry havoc and release the sharks of righteous litigation.