Archives: 02/2009

Masters of the Universe - On the Dole

In one of the most “you’ve got to be kidding me!” stories that I’ve come across in a while, The New York Times reports that New York City wants to spend $45 million to retrain laid-off Wall Street financiers.  This is so incredibly offensive that I don’t know where to begin.  But I’ll give it a try nonetheless. 

First, just because they are laid-off does not mean that they are poor.  Won’t a lot of this taxmoney be going to, well, rich people who don’t really need it?  Second, even if they now find themselves with nothing, why should the taxpayers come to the rescue?  If they didn’t manage to sock away anything for a rainy day, then tough.  Third, exactly what is New York going to retrain these masters of the universe to do?  This ought to be well worth watching.  Fourth, if they’re smart enough and savvy enough to be the master of the universe, they are smart enough and savvy enough to get back on their own two feet without the hard earned cash pinched from some cabbie somewhere. 

It’s as if The New York Times has become The Onion.

The Increasing Burden of Government Employees on Taxpayers

Dennis Cauchon of USA Today and Stephane Fitch of Forbes recently penned articles on the excessive nature of state and local government employee benefits and the threat taxpayers face as a result.

First, Cauchon reports that “State and local governments have set aside virtually no money to pay $1 trillion or more in medical benefits for retired civil servants…With bills coming due as Baby Boomers start to retire, states, cities, school districts and other governments may be forced to raise taxes, cut benefits or both — a task made especially difficult in an economic downturn.”

I would add that the task of cutting benefits for government employees is especially difficult because state and local politicians are generally beholden to the government employee unions.  Even those policymakers not predisposed to carry water for the unions are hesitant to ruffle the feathers of a sizable voting block, not to mention a vocal one that still has a lot of regular citizens conned into believing government employees are underpaid, selfless, public “servants.”  Trust me, I’ve witnessed this game first hand.

Cauchon also spotlights the big picture problem: “These medical costs are part of a larger burden taxpayers face in providing health care for an aging population. The federal government has a $1.2 trillion unfunded obligation to pay medical costs for retired federal workers and military personnel. Medicare and Social Security push the nation’s unfunded promises above $50 trillion.”  He also notes that the same private sector employees who pay for these benefits via taxes are not so lucky: “Unlike private companies, most governments subsidize health insurance for retired employees.”

For more Cato work on unfunded medical benefits for state and local government employees, see here and here.

Second, Fitch reports on the outrageous pension benefits state and local government employees are receiving.  This piece should be read in its entirety (warning: don’t read it standing up), but I’ll list a few tidbits here:

“Goss retired four years ago, at 42, from a $90,000 job as a police commander in Delray Beach, Fla. He immediately began drawing a $65,000 annual pension that is guaranteed for life, is indexed to keep up with inflation and comes with full health benefits…Given that the average man his age will live to 78, Goss is already worth nearly $2 million, based on the present value of his vested retirement benefits. Looked at another way, he is a $2 million liability to Florida taxpayers.”

“In private-sector America your job, assuming you still have one, hangs on the fate of the economy. If your employer ever offered a pension for life, like young officer Goss is receiving, odds are it has stopped doing so, or soon will…Four in five public-sector workers have lifetime pensions, versus only one in five in the private sector. The difference shifts huge risks from government to private-sector workers.”

“In public-sector America things just get better and better. The common presumption is that public servants forgo high wages in exchange for safe jobs and benefits. The reality is they get all three. State and local government workers get paid an average of $25.30 an hour, which is 33% higher than the private sector’s $19, according to Bureau of Labor Statistics data. Throw in pensions and other benefits and the gap widens to 42%.”

“The recent market meltdown erased $1 trillion from municipal pension funds, Boston College’s Center for Retirement Research figures. That has left the average public plan 35% underfunded. With benefits inexorably rising, the shortfall will balloon to 41% by 2013 if stocks and bonds stay at current levels, representing an unfunded liability of roughly $1.7 trillion, according to the Boston College center.”

As I blogged back in October, shed no tears for state (or local) government employees.  A former California state government employee cited in Fitch’s piece agrees with me:

Don’t shed too many tears for public employees, says Gary Clift, a 52-year-old Californian who speaks with an insider’s authority. Clift spent 26 years working for the state’s Department of Corrections & Rehabilitation, retiring in 2006. He’s now collecting 78% of the $112,000 salary he earned before stepping down and full health care coverage for life. Clift is thinking about using some of the public’s largesse to write a book about the outrageous ways public employees milk California.

Clift holds special vitriol for a state program that lets employees retire and return to work part-time as “consultants.” Some of the “retired annuitants,” known as retired irritants to full-timers, deliberately get themselves laid off to collect unemployment pay without having to even show up, Clift says.

Near the end of his career Clift spent two years in the Department of Corrections’ Sacramento headquarters analyzing legislation. The office’s mandate was to provide the governor with insights into how proposed laws would affect the giant prison system. Not surprisingly, Clift says his colleagues took another agenda more to heart: doing their union’s bidding and heading off anything that hinted at job cuts or lower salaries. Clift says he was the only manager at his former prison that he is aware of who didn’t put in for disability on retiring.

The prevailing attitude, according to Clift: “It’s just taxpayers’ money, so nobody cares.”

That would be the same state of California that just passed tax and debt increases to close a budget gap that was caused by a decade of runaway spending.  The next time you read a story bemoaning the plight of “cash-starved” state and local governments and the possibility of tax increases to bail them out, bear these stories in mind.

Omnibus Spending Bill in the Works - Unseen

GOP leaders are calling on the House majority to give them and the American people a look at the omnibus spending bill in the works. It’s likely to see votes in the next week or two. The bill will spend somewhere in the range of a half-trillion dollars on the operation of the government for the rest of the fiscal year.

“New” NCLB Findings

You probably don’t need to read it unless you really want the details, but the Thomas B. Fordham Institute just released a report finding that academic standards vary widely from state to state under the No Child Left Behind Act, creating an “accountability illusion.” I say you probably needn’t peruse the paper not because it doesn’t have solid data or a decent analysis – Fordham has put out a lot of fine studies on the state of state standards – but because it doesn’t really tell us anything new. We’ve known for years that NCLB is essentially a big lie.

Unfortunately, the findings aren’t the only slightly stale bit in this report. The recommendations are also warmed over, and they’re just as logic-defying as they’ve always been. From the press release for the paper:

In their foreword to the study, Finn and Petrilli wrote that the solution to this dilemma is not to scrap NCLB or to federalize tests and standards. Instead, they argue, the Obama Administration and Congress should create incentives for states to voluntarily sign on to rigorous, comprehensive common standards and tests. Washington should then publish the results for every school in the land but allow states to decide what to do with schools that don’t meet those common expectations. This would ensure greater transparency and reinforce state responsibility. “Best of all,” they note, “it would end the gamesmanship that has characterized the federal-state relationship for the past seven years.”

“Finn and Petrilli” are Fordham President Chester Finn and Vice President Michael Petrilli, and I’ve been over this nationalizing-without-federalizing approach with them before.

First off, when “the Obama Administration and Congress…create incentives,” that is federalizing tests and standards. One need look no further than the last forty-plus years of federal involvement in education, or in almost everything else for that matter, to see clearly that Washington has constantly used monetary “incentives” – change your laws or you don’t get your taxpayers’ dollars back! – to control countless things over which it has no constitutional authority. Whether it’s withholding highway funds to alter drinking ages, or threatening to keep money from states that don’t sign on to NCLB, “incentives” have equaled “control.”

And who would decide whether standards and tests were “rigorous” or “comprehensive” in Finn and Petrilli’s scheme? If federal ducats are the adoption bait, it would almost certainly be the feds. But it doesn’t really matter: As I’ve written many times before, all the standards-setting evidence we have screams that standards set by government, whether states or the same feds who brought us NCLB, will almost certainly be low. Indeed, as I reminded readers just a few days ago, Fordham itself has only been able to point to three out of fifty states with laudable standards. In light of that pitiful batting average, why would we ever think that nationalized standards-making is a promising solution? When we consider how standards are made in a government-run system, we definitely wouldn’t: Special interests employed by the system, ranging from teachers, to principals, to state bureaucrats, have the most motivation and clout to influence political control over the system, and it’s in their greatest interest to have low standards that are easy to hit. Hence, the dismal state-level performance.

At this point, frankly, it’s pretty darn clear that NCLB is a failure. It should also be obvious that further centralizing political control would just be dumping more water into the already submerged ship. Unfortunately, the latter seems to keep escaping the notice of far too many people.

Fighting for Economic Liberty

While assaults on economic liberty from the Bush-Obama administration continue in Washington, the Institute for Justice is taking on another fight for the right to earn a living, this time in Boston. Erroll Tyler wants to use state-of-the-art amphibious vehicles to pick up and drop off passengers in Kendall Square in Cambridge and tour historical sites along a fixed route in Boston and Cambridge. But the city won’t issue him a sightseeing license, ostensibly because of a moratorium on such licenses instituted because of the disruptive Big Dig project – which finally ended six years ago. Ironically, one of the sights Tyler would like to show to visitors is the USS Constitution.

The Institute for Justice has come to his aid, with a lawsuit in federal court and this video, featuring Cato senior fellow Randy Barnett, author of Restoring the Lost Constitution:

The Boston Globe asks, “What does it say about the climate for small businesses in Boston and Cambridge that a guy with a promising business plan needs to turn to out-of-state libertarians to protect his interests in federal court?”

One might also ask what it says about the liberals and conservatives in Massachusetts. Don’t they want to help entrepreneurs?

January Op-Eds of the Month

Congratulations to Jonathan Slemrod and Charles Johnson for winning the January Op-Eds of the Month contest.

Jonathan Slemrod is a junior at the University of Michigan, Ann Arbor.  His op-ed in the Michigan Daily, “Cap-and-Trade Fantasies,” cites Patrick J. Michaels (who also spoke at the University of Michigan) to argue that Obama’s plan to impose cap-and-trade regulations to protect the environment will not provide the many benefits its supporters claim and will only further harm the U.S. economy.  Jonathan received an autographed copy of Chris Edwards and Daniel J. Mitchell’s book, Global Tax Revolution.

Charles Johnson is a sophomore at Claremont McKenna.  His op-ed in the Claremont Independent, “FIRE and Free Speech on Campus: Are the Claremont Colleges Violating the California Constitution?,” takes a look at several historical examples where Claremont Colleges limited student free speech and the role that outside organizations like the Foundation for Individual Rights in Education have played in checking the university’s actions.  He blogs at The Claremont Conservative. Charles received an autographed copy of The Dirty Dozen by Robert A. Levy and William Mellor.

Both Jonathan and Charles’s op-eds will also be considered for the Cato on Campus Op-Ed of the Year, with a chance of receiving a full scholarship to Cato University.


Sebelius at HHS

The New York Times and others are reporting that Kansas Governor Kathleen Sebelius will be President Obama’s choice for HHS secretary.  Obama’s first choice for secretary of HHS, former Sen. Tom Daschle, was an expert on health care reform; indeed, he had written a book on the topic, which laid out specific ideas, and provided fodder for opponents of Obama’s reform plans. Sebelius represents a very different approach. While she is a former state insurance commissioner and dealt with health programs as governor, she is associated with few specific proposals.

A preliminary look at her record suggests that she is a member of what my colleague Michael Cannon calls the Church of Universal Coverage, and has regularly pushed for the expansion of government programs such as Medicaid and SCHIP. She sought to have Kansas taxpayers cover all children up to the age of five, but her proposal was rejected by the legislature. She also has been sympathetic to the ideas of both an employer mandate (she imposed a mandate for companies receiving state contracts) and an individual mandate. As insurance commissioner she had a reputation for supporting increased regulation. Nothing surprising in this record at all.

An interesting question will be whether Sebelius will also inherit Daschle’s role as White House “health czar,” or whether that position will go to Daschle’s coauthor, Jeanne Lambrew, currently the “deputy czar.” If Sebelius doesn’t get the second post, expect health care reform to be driven out of the White House, while Sebelius, generally given high marks for bipartisanship, tries to corral moderate Republican votes.