Friday, January 28, 2011

States allowed to declare bankruptcy? Class war?

Last week in the New York Times, Mary Williams Walsh wrote about state bankruptcies. The biggest financial liability for all states in trouble, and most that aren't troubled, is unfunded pension liability. Some states collected the fees (call it premium) for funding the pensions in the first place. They were allowed to use the funding for these obligations for other purposes. These are like 401K plans, but supposedly administered by the state. Now the fund is a sitting duck in a class-based skirmish between unions and state treasuries. Seen in perspective, it's a pretty despicable picture.

Now that these unfunded liabilities are under close scrutiny, many believe we should reduce or jettison these plans altogether; plans that were part of state employee pay packages 20 or more years ago and right up to the present. Reducing the benefits of these people, mostly after they've retired, is cruel and arbitrary. It also risks breaking labor law. One could argue, possibly, they'd suffer no more than private sector 401K plans, which were hit hard during the housing collapse. These have mostly recovered their value.The subtext here, the only bargaining chip held by pro-bankruptcy stalwarts is the inevitability of the loss of the unfunded pensions.

Well, apparently Ms. Walsh isn't the only person thinking about this, because today in the L.A. times, Jeb Bush and Newt Gingrich have co-written an opinion piece which touts the possibility of reducing
$100,000+ pensions to more than 12,000 state and municipal retirees this year. A Stanford study puts the state's unfunded pension obligations at more than half a trillion dollars.

Watch for this to blow up in a big way in the next year. Watch your wallet.Some call it the GM way-- reflecting that company's use of bankruptcy to rid itself of mountains of unfunded employment related and pension debt. Gingrich and Bush are even asserting state bondholders need protection as well as pensioners.


At issue isn't fairness or even actual dollars, this sudden aversion to funding employment related costs, even contractual obligations, is presented as a union vs. the state taxpayer issue, tapping into recent voter dismay at having to pay people who seem not much worse off than the taxpayer herself. But this is deeper, this is looking for bad guys, and the bad guys are being set up for a fall.
Second, as with municipal bankruptcy, a new bankruptcy law would allow states in default or in danger of default to reorganize their finances free from their union contractual obligations. In such a reorganization, a state could propose to terminate some, all or none of its government employee union contracts and establish new compensation rates, work rules, etc. The new law could also allow states an opportunity to reform their bloated, broken and underfunded pension systems for current and future workers. The lucrative pay and benefits packages that government employee unions have received from obliging politicians over the years are perhaps the most significant hurdles for many states trying to restore fiscal health.
[Ed. Emphasis mine]

It's a convenient explanation, but it's classist and it's wrong. The labor unions made the mistake of allowing the funding of their retirement plans to stay in state treasuries. Now their retirement and health care funds are exposed to politicizing.

But think of this-- do we think it's wise, as a society to cut the benefits of teachers, kitchen workers, prison guards, truck drivers, and police and fire personnel?

It might be enlightening to remember 2 1/2 years ago when AIG was obligated to pay the bonuses to their sales and executive staffs even after a $180 billion bailout. "It's all in an air tight contract" the government overseers shrugged. I believe the public employee unions will also find they've got strong contracts. What I don't like is the smell of class war going on here-- money grabs, balancing the budget on the backs of the elderly and retired. Taxpayer against union employee. In fairness here, the taxpayers were not in favor of paying the AIG bonuses either. The insurance salesmen just got better legal work done. I hope the union contracts are at least legally protective.

The Bush/Gingrich piece is written to look like an outline of the bare legal mechanics involved in a state bankruptcy. A close reading reveals depths of animosity and greed. They're targeting unions and union employee contracts.
If Californians were given the opportunity to do an end run around the politicians in Sacramento and vote to reform their state government under the U.S. Bankruptcy Code, it would almost certainly trigger a proposition fight. In such a circumstance, the proposition could provide that a yes vote would trigger the cancellation of all state government employee union contracts. Even if the proposition were defeated, the debate surrounding it would make abundantly clear to the people of California and the rest of the country just how much of a stranglehold government employee unions have on state and federal budgets.
Add to this the way the recent tax cut compromise cut a significant portion of the funding of Social Security (that's the 1-2% raise you got this year if you're lucky enough to be employed), such that we are now about to spend it faster than it comes in, and it will gut any efforts to prop up Social Security later. What was cut was part of the individual taxpayers contribution to Social Security. I believe it used to be called FICA. If you file a Schedule C, you may pay self-employment tax. That's what they cut. That forms perhaps 12% of the funding for Social Security. That funding has not been "replaced" it has been terminated.

And please note that no one has bothered to bring this relatively large alteration in a 75 year old system to anyone's attention.No one is naming this, what is perhaps the biggest victory in the smaller government movement, and surely a weight off the chests of many who oppose massive government entitlements. I believe Social Security was shown in 2009 to be solvent well past mid-century. It will no longer be that resilient. I believe this was the most cynical part of the tax cut compromise (which is saying a lot!), and will be the one with the most undesirable effects in the shortest term.

Monday, January 17, 2011

Rise of Tea party-ism enables doofus behavior!

Admit it, the level of public political discourse has descended into the toilet. Sarah Palin is an ignoramus. Michelle Bachman is an idiot-harridan (she;s the one who wants to administer loyalty oaths to all of the federal government). Christine O'Donnell... I'm not even going to name it (though it's a relief we don't have to call her Madame Senator!). The conservative resurgence among American voters has been accompanied by a breath taking descent of the level of political discourse to, frankly, the toilet.

Witness the new Governor of Maine, Paul LePage, whose previous job as head of Marden's, a chain of Maine remainder and deep discount job-lot stores, gives him just the kind of "business savvy" conservative voters think we need. And they especially like his folksy ways of speaking. He's gruff, dismissive, and never appears to be at a loss. He's too dumb to try and pull a fast one on this perennially-duped electorate, so they are blindingly loyal.

Since his election, though, his biggest problem hasn't been the projected deficit, sluggish economy, the arterial bleeding of Maine jobs into thin air, or even the perception that Maine is anti-business even though it's not. His biggest problem has been removing his shoe from his mouth every time he speaks in front of more than five people. The most recent flap is described here (with some video). So what if he tells the NAACP to "kiss my butt" right before MLK Day, no less? He has a black son, and Maine is the whitest state in the union. The video shows he was being the gruff/ur-charming guy he's trying to promote as his persona. The problem is, like Rand Paul and others of the new conservatives, he doesn't know when to shut it and take a "no comment."

Will a conservative please stand up and suggest he STFU? I don't think he's evil, I just think he's angry and pugnacious. But he may need a PR hack to stand in for him at speaking engagements-- all of them. Think about it Mr. LePage. I don't mind if we spend some public funds on that post. It would be money well spent.

Wednesday, January 12, 2011

Advertising is following me around

Roughly six weeks ago I started looking for a certain household product by clicking on an ad in the New York Times. I went to the manufacturer's website and did some research. Clicked around the internet to read reviews and user comments. I had basically made up my mind, and a week or so later, I ordered the product. It's great and I'm glad I bought it. What's interesting however, is the ads are following me around. Many sites now advertise this product to me, when I go to other news sites, Facebook, even blogs. One website used a Google text ad to show me the product, though on many sites they're advertised with photo art. I wonder how you signal to the advertising machine that it's succeeded and maybe advertise something else. I hesitate to call it evil. More likely it's just persistent. Hello? Google? I bought it. Thanks.

[Ed. I cleared my cache, cookies, sessions, etc., and now the ads have gone away.  And oddly, Google still doesn't know I already bought the product.]

Saturday, January 08, 2011

Politically correct?

My experience of iTunes is of a large, nearly overwhelming effort at legally mandated political correctness. From the elaborate measures taken to safeguard access to a user's account (while simultaneously allowing them to purchase and download music, movies, books, and apps to any device they may own), to the way they force you to acknowledge you've read changes in their privacy policy, this is clearly a vendor who is protecting itself from lawsuits. Everything about the site feels like it's been touched by the legal department.

That's no so unusual, given the truly innovative iTunes business model-- and a couple of billion dollars in direct sales where the average transaction probably hovers around $0.99 cents.

So there I was, poking and sliding my finger over the face of my iPod, looking at tunes (albums actually, since I don't buy singles) for purchase and download, and looking in the Jazz section. And what do I find but the unmistakable cover art for a Miles Davis album from the 70's (or late 60's?), and there I see the title, "B*****s Brew" displayed for me to pick. I already own the album, Bitch's Brew, a classic and a ground-breaker. But why, oh why, does Apple/iTunes have to use asterisks to tone down the title of one of the top 10 most influential jazz albums of all time? Is the iTunes legal team so paranoid of lawsuits they have to bastardize in such a condescending way the title of this album? The implication is our culture, which owns the title, can't protect itself in the face of rapacious legal assaults on the correctness of a catalog listing. Next we'll be offered the book Moby D**k. Yuck.

I don't think this is about moralism, I think it's about legalism. Highway robbery is no longer carried out by highwaymen, it carried out by civil-suit lawyers. And one of the tools of the new klepto-legal class is moral outrage on the part of customers. If a vendor says "bitch" in front of a customer, even if that's the name of the product, the customer must be expected to hire a lawyer to sue the vendor and take his money. When a culture becomes a commodity, the spreading of culture becomes a cash market. Security bristles around the exchange of cash. And something as basic as the title of Miles Davis' stunning album of experimental jazz is diluted and, frankly, devalued.

F**k that!