I don't typically find Peter Wallison's Wall Street Journal editorials to be particularly sensible or well reasoned.
Yesterday's, however, critiquing Chris Dodd's financial regulatory "reform" bill, was an exception. Wallison correctly excoriates Dodd for creating unworkable new entities (FSOC), giving the failed Fed more control over the financial system, and providing alternatives to bankruptcy which will reward overly-large banks with lower-cost borrowed funds.
As Wallison points out, those institutions judged "too big to fail" will attract plenty of lower-cost funds from bond investors, because they will correctly expect to be repaid, in full, by the federal government, should the institution fail.
Finally, Wallison notes the idiocy of Congress rushing to write and pass a regulatory "reform" bill before receiving a report from its own Financial Crisis Inquiry Commission, due in mid-December of this year.
It's hard to believe our Congress, and, in particular, retiring Senator Dodd, could deliberately be this obtuse and stupid. But there's no denying the content of Dodd's bill, and the likelihood that it will, if passed, be the source and cause of even more large-scale financial sector disasters to come.
Only, this time, everyone will know in advance who will win- bondholders- and who will lose- taxpayers.
Friday, March 19, 2010
Thursday, March 18, 2010
Tyler Mathisen Must Go- Part 2
Only a month after I wrote this post, Ole' Ty, a/k/a Tyler Mathisen of CNBC, has provided still more evidence that somebody at CNBC needs to give the old campaigner the hook.
This afternoon, while discussing Aetna's decision to change its planned communications with investors, in light of the attacks from Washington Democrats, Ty managed to totally misunderstand the nature of the evolving risks in the health insurance sector.
While Michelle Caruso-Cabrera sensibly noted the assault on all health insurers, and their reasonable profits, by Congress and the administration, Ole' Ty weighed in with the hopeful thought that Aetna and its ilk will receive many more customers from ObamaCare.
Ty rambled on about how, whether those customers are subsidized, or not, they still represent new revenues.
If only Ty had a full brain, he'd remember that profits are revenues MINUS costs! And that the longer term aim of Washington's bureaucrats is to, first, direct subsidized new customers to insurers like Aetna. Then they will observe how much federal money Aetna receives, and squelch premium increases, while expanding mandated coverage.
It won't take very long for insurers like Aetna to begin losing money, as their premiums are capped and their payouts are increased.
Ole' Ty doesn't get this. So, in addition to being irascible, churlish, curmudgeonly and cranky, you may now add....stupid.
It's clear that CNBC's on-air cupboard has become barren, what with the loss over the past year of Bill Griffeth, Charlie Gasparino, Becky Jarvis, Dylan Ratigan (no great loss), and another female anchor whose name escapes me who left to join the Fox Business News startup at its inception.
But, surely, CNBC's management can do better than dragging Ole' Ty out of his dotage and propping him up in front of a camera each afternoon?
This afternoon, while discussing Aetna's decision to change its planned communications with investors, in light of the attacks from Washington Democrats, Ty managed to totally misunderstand the nature of the evolving risks in the health insurance sector.
While Michelle Caruso-Cabrera sensibly noted the assault on all health insurers, and their reasonable profits, by Congress and the administration, Ole' Ty weighed in with the hopeful thought that Aetna and its ilk will receive many more customers from ObamaCare.
Ty rambled on about how, whether those customers are subsidized, or not, they still represent new revenues.
If only Ty had a full brain, he'd remember that profits are revenues MINUS costs! And that the longer term aim of Washington's bureaucrats is to, first, direct subsidized new customers to insurers like Aetna. Then they will observe how much federal money Aetna receives, and squelch premium increases, while expanding mandated coverage.
It won't take very long for insurers like Aetna to begin losing money, as their premiums are capped and their payouts are increased.
Ole' Ty doesn't get this. So, in addition to being irascible, churlish, curmudgeonly and cranky, you may now add....stupid.
It's clear that CNBC's on-air cupboard has become barren, what with the loss over the past year of Bill Griffeth, Charlie Gasparino, Becky Jarvis, Dylan Ratigan (no great loss), and another female anchor whose name escapes me who left to join the Fox Business News startup at its inception.
But, surely, CNBC's management can do better than dragging Ole' Ty out of his dotage and propping him up in front of a camera each afternoon?
The CBO, Deficits & Transfer Payment Programs
"Social Security and Medicare were popular from the start and passed with bipartisan support."
That statement, buried in Fred Barnes' editorial in this morning's Wall Street Journal, jarred me.
Why, I mused, were these gargantuan transfer payment programs so popular at their inception, in contrast to the current abomination, Obama's health care proposal? Especially as crafted by the Senate, and filled with bribes to selected states whose Democratic Senators required those payoffs to vote for the bill?
A little research reminds us that Social Security became law in 1935, while Medicare was enacted in 1966. Both of those years were in eras distinctly different from our own.
Social Security was passed in the midst of the Great Depression. People were worried, extrapolating then-current experience, about providing for their aged years. The country had what is now viewed as essentially no external debt. Additionally, not a trivial point, the program was only meant as a safety net, not a universal entitlement. Ostensibly, FDR and his ilk foolishly believed that that average American would continue saving as if nothing had changed, with Social Security only intended to pay those who, through bad luck, ill health or stupidity, failed to save enough for their later years.
So much for good intentions. And a first taste of the sting of unanticipated consequences.
Medicare passed during what I view as the height of America's post-WWII salad days. I learned from people like my late father how unimpeded US business was abroad. With Germany and, for that matter, most of Europe still recovering from the war, and Japan exporting copycat transistor radios and silly little Toyota Corollas, American business reigned supreme, and American labor demanded and received extravagant promises of future pension and health care benefits.
So, ironically, our two largest social welfare transfer payment programs were passed with widespread support in two distinctly different, but each uniquely accommodating eras.
Thus, Fred Barnes' quote, so simple in its candor, expresses, really, the profound naivete of the American people and Congress in 1935 and 1966.
In the former, nobody thought it appropriate to be against such a simple, small old age pension scheme thought to only be needed for a few extreme cases. Nobody noticed that the very first Social Security check ever cut was for more than that first beneficiary had paid into the system in her lifetime. The pattern was set from the very start.
In the latter, a lucky nation mistook that luck for its lasting position as a supreme economic power spewing out uncountable wealth, and simply promised a sizable share of that presumed future wealth to oldsters for their medical care.
Everyone in business who is at all effective knows that implementation matters. It's not just superior concepts that profit, but well-implemented ones.
How often do we hear an aphorism such as, "better lucky than smart?"
Or, "Better to have a bad strategy implemented well, than a good strategy implemented badly?"
In the case of both Social Security and Medicare, stupid Congressmen designed and implemented a 'communal pot' scheme. That is, rather than providing individualized accounts for each program's transfer payments, so that individuals had a cap on benefits, and owned them, Congress just tossed all the payments into a pot, then dipped into the pot for payouts, too.
No caps nor any notion of limitations on individual claims were considered. Worse, because Social Security wasn't yet broke by the time the geniuses in Washington dreamt up Medicare, they did the same thing with that, as well.
Since then, both programs have vastly outrun their initial spending projections, and are deeply in deficit. Because they are not accounted on the federal government's balance sheet, their deeply-unfunded liabilities are not shoved in the faces of taxpayers and voters. But, like the unsightly children (Ignorance and Want) beneath the cloak of the Ghost of Christmas Passed in Dickens' A Christmas Carol,
"The live....oh they live."
And grow, as well. The deficits grow because, as Barnes noted, the programs are so popular. Yes, transfer payment programs sure do engender behavior that swells their usage far beyond the limited spending projections naive Congressmen used to pass them, don't they?
Now health care is becoming the third in a series of disastrous, ultimately economy-wrecking social transfer payment programs.
It's bad enough that Congress is still full of members who, in their majority, are too stupid to realize the necessity of individual, benefit-capped accounts.
But now they've added a new disastrous wrinkle. They lie about the program's structure, then rely on the Congressional Budget Office to certify the lies as fiscally responsible.
Yesterday morning, on CNBC, a former CBO official served as guest host. He confirmed that the CBO has two unyielding dicta: it can't question assumptions of Congressional schemes given to it to estimate costs, and; it can't make a 'good/bad' judgment.
Thus, the widespread knowledge that the current Senate health care bill is unsustainably expensive is not reflected in this morning's new CBO 'scoring' of the bill.
Rather than highlight the front-end loaded new taxes and Medicare cuts, combined with only 6 years of benefits, and explain that this results in a fraudulent 'savings' of $100B, the CBO can only state the alleged savings.
Further, the CBO is not allowed to inject the effects of realistic human behavior on the scheme. That is, seeing how Americans behaved with respect to other free-ride transfer payment schemes, i.e., Social Security and Medicare, it's reasonable to expect that Americans will overuse and overspend estimated usage of this new proposed program.
Which brings me, again, back to Fred Barnes' statement.
When government alleges it can give you something for apparently nothing, who doesn't like that? In the 1930s, nobody really grasped the long run costs of Social Security. The envisioned usage of the program just didn't seem to be very much to spend in order to keep a few oldsters off the streets in their waning years.
Instead, as long ago as 1975, when I was a freshman in college, I had a classmate who was paying for his tuition with Social Security benefits from his father's death.
Huh?
I seriously doubt that's what the Congress of 1935 ever envisioned for Social Security.
Of course there was widespread popular approval for Medicare. The US seemed economically invincible, so Congress enacted another 'bread and circuses' program to appease voters and promise to remove the burdens of health care costs in old age.
Once again, linkages between behavior and consequence, and the notion of individual responsibility affecting risky behavior, vanished.
And you wonder why we have an obesity crisis today?
Now we combine the elements of the perfect economic/transfer payment scheme storm. A misleading CBO report of alleged 'savings' for a new, vast health care and insurance transfer payment program which will destroy the private health insurance business, heap the resulting risks onto the taxpayers, promise open-ended benefits for all forever. And presume to borrow from investors in the rest of the world to fund it.
Barnes is right when he asserts that, unlike Social Security and Medicare, this new entitlement program will spark annual funding fights and crisis from the moment it passes, if it passes.
And its repeal will become the Republican party's major, focusing objective for the next three years.
As I said to my business partner at lunch yesterday, it's just possible that this bill must pass, in order for health care entitlement to finally be vanquished when it is repealed in three more years.
Otherwise, the dimwitted, gullible American public won't understand the horrifying loss of liberty and imposition of huge taxes to fund this mistake. Not to mention the fiscal emasculation of our country and downgrading of its debt, as the world wisely declines to fund our misguided entitlement programs.
That statement, buried in Fred Barnes' editorial in this morning's Wall Street Journal, jarred me.
Why, I mused, were these gargantuan transfer payment programs so popular at their inception, in contrast to the current abomination, Obama's health care proposal? Especially as crafted by the Senate, and filled with bribes to selected states whose Democratic Senators required those payoffs to vote for the bill?
A little research reminds us that Social Security became law in 1935, while Medicare was enacted in 1966. Both of those years were in eras distinctly different from our own.
Social Security was passed in the midst of the Great Depression. People were worried, extrapolating then-current experience, about providing for their aged years. The country had what is now viewed as essentially no external debt. Additionally, not a trivial point, the program was only meant as a safety net, not a universal entitlement. Ostensibly, FDR and his ilk foolishly believed that that average American would continue saving as if nothing had changed, with Social Security only intended to pay those who, through bad luck, ill health or stupidity, failed to save enough for their later years.
So much for good intentions. And a first taste of the sting of unanticipated consequences.
Medicare passed during what I view as the height of America's post-WWII salad days. I learned from people like my late father how unimpeded US business was abroad. With Germany and, for that matter, most of Europe still recovering from the war, and Japan exporting copycat transistor radios and silly little Toyota Corollas, American business reigned supreme, and American labor demanded and received extravagant promises of future pension and health care benefits.
So, ironically, our two largest social welfare transfer payment programs were passed with widespread support in two distinctly different, but each uniquely accommodating eras.
Thus, Fred Barnes' quote, so simple in its candor, expresses, really, the profound naivete of the American people and Congress in 1935 and 1966.
In the former, nobody thought it appropriate to be against such a simple, small old age pension scheme thought to only be needed for a few extreme cases. Nobody noticed that the very first Social Security check ever cut was for more than that first beneficiary had paid into the system in her lifetime. The pattern was set from the very start.
In the latter, a lucky nation mistook that luck for its lasting position as a supreme economic power spewing out uncountable wealth, and simply promised a sizable share of that presumed future wealth to oldsters for their medical care.
Everyone in business who is at all effective knows that implementation matters. It's not just superior concepts that profit, but well-implemented ones.
How often do we hear an aphorism such as, "better lucky than smart?"
Or, "Better to have a bad strategy implemented well, than a good strategy implemented badly?"
In the case of both Social Security and Medicare, stupid Congressmen designed and implemented a 'communal pot' scheme. That is, rather than providing individualized accounts for each program's transfer payments, so that individuals had a cap on benefits, and owned them, Congress just tossed all the payments into a pot, then dipped into the pot for payouts, too.
No caps nor any notion of limitations on individual claims were considered. Worse, because Social Security wasn't yet broke by the time the geniuses in Washington dreamt up Medicare, they did the same thing with that, as well.
Since then, both programs have vastly outrun their initial spending projections, and are deeply in deficit. Because they are not accounted on the federal government's balance sheet, their deeply-unfunded liabilities are not shoved in the faces of taxpayers and voters. But, like the unsightly children (Ignorance and Want) beneath the cloak of the Ghost of Christmas Passed in Dickens' A Christmas Carol,
"The live....oh they live."
And grow, as well. The deficits grow because, as Barnes noted, the programs are so popular. Yes, transfer payment programs sure do engender behavior that swells their usage far beyond the limited spending projections naive Congressmen used to pass them, don't they?
Now health care is becoming the third in a series of disastrous, ultimately economy-wrecking social transfer payment programs.
It's bad enough that Congress is still full of members who, in their majority, are too stupid to realize the necessity of individual, benefit-capped accounts.
But now they've added a new disastrous wrinkle. They lie about the program's structure, then rely on the Congressional Budget Office to certify the lies as fiscally responsible.
Yesterday morning, on CNBC, a former CBO official served as guest host. He confirmed that the CBO has two unyielding dicta: it can't question assumptions of Congressional schemes given to it to estimate costs, and; it can't make a 'good/bad' judgment.
Thus, the widespread knowledge that the current Senate health care bill is unsustainably expensive is not reflected in this morning's new CBO 'scoring' of the bill.
Rather than highlight the front-end loaded new taxes and Medicare cuts, combined with only 6 years of benefits, and explain that this results in a fraudulent 'savings' of $100B, the CBO can only state the alleged savings.
Further, the CBO is not allowed to inject the effects of realistic human behavior on the scheme. That is, seeing how Americans behaved with respect to other free-ride transfer payment schemes, i.e., Social Security and Medicare, it's reasonable to expect that Americans will overuse and overspend estimated usage of this new proposed program.
Which brings me, again, back to Fred Barnes' statement.
When government alleges it can give you something for apparently nothing, who doesn't like that? In the 1930s, nobody really grasped the long run costs of Social Security. The envisioned usage of the program just didn't seem to be very much to spend in order to keep a few oldsters off the streets in their waning years.
Instead, as long ago as 1975, when I was a freshman in college, I had a classmate who was paying for his tuition with Social Security benefits from his father's death.
Huh?
I seriously doubt that's what the Congress of 1935 ever envisioned for Social Security.
Of course there was widespread popular approval for Medicare. The US seemed economically invincible, so Congress enacted another 'bread and circuses' program to appease voters and promise to remove the burdens of health care costs in old age.
Once again, linkages between behavior and consequence, and the notion of individual responsibility affecting risky behavior, vanished.
And you wonder why we have an obesity crisis today?
Now we combine the elements of the perfect economic/transfer payment scheme storm. A misleading CBO report of alleged 'savings' for a new, vast health care and insurance transfer payment program which will destroy the private health insurance business, heap the resulting risks onto the taxpayers, promise open-ended benefits for all forever. And presume to borrow from investors in the rest of the world to fund it.
Barnes is right when he asserts that, unlike Social Security and Medicare, this new entitlement program will spark annual funding fights and crisis from the moment it passes, if it passes.
And its repeal will become the Republican party's major, focusing objective for the next three years.
As I said to my business partner at lunch yesterday, it's just possible that this bill must pass, in order for health care entitlement to finally be vanquished when it is repealed in three more years.
Otherwise, the dimwitted, gullible American public won't understand the horrifying loss of liberty and imposition of huge taxes to fund this mistake. Not to mention the fiscal emasculation of our country and downgrading of its debt, as the world wisely declines to fund our misguided entitlement programs.
Wednesday, March 17, 2010
Boeing's Vulnerability
Yesterday's Wall Street Journal carried an article discussing Boeing's newly-vulnerable single-aisle airplanes. If only because this type of piece has become a vanishing breed in the Journal, it was welcome.
The piece noted an unanticipated consequence of the expensive, overdue, over-budget Dreamliner project. That is, Boeing is being pressured by airlines to replace its 737 with a new airplane. But, according to the Journal piece, Boeing can't afford the cost of such a new development project at this time.
Meanwhile, Canada's Bombardier has developed an all-new plane, the CSeries, which can service the lower end of the 737's market.
Now, Boeing faces erosion of a very profitable, old cash cow when it still needs those profits to offset the Dreamliner woes.
The nearby price chart for Boeing and the S&P500 Index for the last five years shows that the company has squandered whatever outperformance it managed to effect by 2007. Now, Boeing is barely positive and outperforming the index over the period.This can't bode well for the firm, as one would expect Dreamliner sales to already be factored into its equity price.
Whether losses of volume on its 737 are also already "in" the equity price is unclear, but quite possibly not yet fully understood.
Who would have guessed that Jim McNerny's failure to get the Dreamliner on track and budget earlier would end up complicating the company's defense of a bread and butter segment, the short haul, single-aisle jet market?
The article contends that neither Boeing, nor Airbus can easily design a brand new plane just now. Allegedly, needed technological breakthroughs are a few years away. Thus, in what has been a duopoly since Boeing bought McDonnell-Douglas 13 years ago, the multi-line Canadian transportation manufacturer seems to be sneaking into the big leagues of jet airplane production.
Could it be that the scope of larger, longer-range jet design and manufacture is changing the nature of competition in the sector, leaving smaller, simpler jets to be profitably built by smaller, newer entrants? Is a full-scale Schumpeterian evolution afoot in airplane design and manufacture? Will we soon see Asian entrants, as well?The nearby chart, stretching back to the early 1960s, illustrates that Boeing's period of significant, consistent outperformance of the S&P500 primarily occurred between 1971 and 1980. After that decade, while Boeing has enjoyed a slightly steeper slope in its equity price curve, compared with that of the index, the observed volatility certainly has substantially offset that slight advantage.
Given Boeing's struggles to offer shareholders a reason to buy the company's equity over the past half decade, or even the past thirty years, one wonders if its seen its best days already.
Tuesday, March 16, 2010
Dennis Berman's Scary Visit to The Philly Fed
The Wall Street Journal's Dennis Berman wrote a rather disturbing story in today's edition concerning the actual work of bank oversight, as performed by the Philadelphia Fed's corps of bank examiners.
When an examiner describes himself not as an auditor, but as a "government-paid consultant," you should be worried. Very worried.
Berman really conveys a sort of quill and inkwell style of 'bank examination.' Instead of, say, resident software programs which flag questionable money flows or worrisome rates of loan delinquencies or defaults, you get the sense that these guys are literally poring over paper printouts generated by bank employees. That they can, and are, easily overwhelmed by data.
Then there is Berman's observation that the examiners are motivated by their senior managers. And since the Fed's main mission is monetary policy, examiners generally feel they are second-class citizens to begin with.
I must admit, if only for this reason, I would understand moving primary bank oversight and examination into another entity. Perhaps the FDIC, whose insurance role makes it a reasonable domicile for examining the risks of those institutions it is charged with ultimately underwriting.
Berman's very brief piece contains outsized weight by virtue of his writing. In a few paragraphs, he paints a picture of a few lone, under-armed road warriors trying to ferret out warning signs of bank health erosion.
As I wrote last week in this post, it supports and reinforces my own view that bank regulation requires far more a priori research in order to provide clearer, more objective knowledge about what signals predict bank failure or malfeasance.
It's not a pretty picture at all.
When an examiner describes himself not as an auditor, but as a "government-paid consultant," you should be worried. Very worried.
Berman really conveys a sort of quill and inkwell style of 'bank examination.' Instead of, say, resident software programs which flag questionable money flows or worrisome rates of loan delinquencies or defaults, you get the sense that these guys are literally poring over paper printouts generated by bank employees. That they can, and are, easily overwhelmed by data.
Then there is Berman's observation that the examiners are motivated by their senior managers. And since the Fed's main mission is monetary policy, examiners generally feel they are second-class citizens to begin with.
I must admit, if only for this reason, I would understand moving primary bank oversight and examination into another entity. Perhaps the FDIC, whose insurance role makes it a reasonable domicile for examining the risks of those institutions it is charged with ultimately underwriting.
Berman's very brief piece contains outsized weight by virtue of his writing. In a few paragraphs, he paints a picture of a few lone, under-armed road warriors trying to ferret out warning signs of bank health erosion.
As I wrote last week in this post, it supports and reinforces my own view that bank regulation requires far more a priori research in order to provide clearer, more objective knowledge about what signals predict bank failure or malfeasance.
It's not a pretty picture at all.
David Malpass For Senate!
I know this seems to be a political post, but there are business aspects to this headline.
This morning, on CNBC, it was announced that "a former chief economist for Bear Stearns has filed to run for a Senate seat."
Initially, I wondered if they were referring to their CNBC colleague, Larry Kudlow. But with his age and substance abuse/rehab background, I thought this was unlikely.
Turns out it's the well-respected economist David Malpass. He has filed to run for the New York Senate seat currently filled by a political appointee.
When asked why he'd be more effective as one Senator among 100, as opposed to continuing to freely express himself as an independent economist, Malpass earnestly stated that he felt it was important to make that Senate seat vote correctly. As an example, he criticized Hillenbrand's recent consent to raise the debt ceiling. A vote Malpass characterized as reaching into every American family's home and slapping a higher tax on its children and grandchildren, in order to eventually service and retire the extra trillions of debt recently enabled by Congress.
Further, Malpass alluded to being able to provide better economic knowledge in the Senate than currently exists.
It should be a very interesting race to follow. As a Republican, Malpass already has an uphill fight. Then, again, with the state's horrendous financial mess as a backdrop, it's just possible even New York Democrats will vote for national fiscal restraint, in the person of Mr. Malpass.
Put another way, if we have a second-rate standup comic in the Senate, albeit under a cloud of election-theft, why not a respected economist in a straight-up, legitimate victory?
This morning, on CNBC, it was announced that "a former chief economist for Bear Stearns has filed to run for a Senate seat."
Initially, I wondered if they were referring to their CNBC colleague, Larry Kudlow. But with his age and substance abuse/rehab background, I thought this was unlikely.
Turns out it's the well-respected economist David Malpass. He has filed to run for the New York Senate seat currently filled by a political appointee.
When asked why he'd be more effective as one Senator among 100, as opposed to continuing to freely express himself as an independent economist, Malpass earnestly stated that he felt it was important to make that Senate seat vote correctly. As an example, he criticized Hillenbrand's recent consent to raise the debt ceiling. A vote Malpass characterized as reaching into every American family's home and slapping a higher tax on its children and grandchildren, in order to eventually service and retire the extra trillions of debt recently enabled by Congress.
Further, Malpass alluded to being able to provide better economic knowledge in the Senate than currently exists.
It should be a very interesting race to follow. As a Republican, Malpass already has an uphill fight. Then, again, with the state's horrendous financial mess as a backdrop, it's just possible even New York Democrats will vote for national fiscal restraint, in the person of Mr. Malpass.
Put another way, if we have a second-rate standup comic in the Senate, albeit under a cloud of election-theft, why not a respected economist in a straight-up, legitimate victory?
Monday, March 15, 2010
The Long Road Ahead For Government Pension Obligations
The US fiscal dilemma involves, as several pundits have recently noted, municipal defaults. Obviously, US states, such as California, New York, Illinois, Michigan, New Jersey and Massachusetts are also on the list of governmental entities in deep fiscal trouble.
Thus, as an economic society, we not only have the US federal deficit and spending with which to contend, but our smaller governmental entities. Among the liabilities weighing heavily on municipalities and states are pensions promised to government-related workers, such as police, firemen, teachers, sanitation workers and administrators.
One of my close friends is a teacher in one of the nearby northern New Jersey school districts. She works in the public school system so, of course, she is a union member, although, personally, she is a pretty solid political conservative.
This makes for some truly shocking behaviors and attitudes within a single person. For example, my friend has remained in the same school, in the same district, for her entire career. Holding several masters degrees and being a very intelligent person, she quickly grasped the essence of succeeding in a union-controlled environment. In a single word- seniority.
Thus, she has never contemplated moving to a closer school system. She currently earns the maximum allowable compensation for her work, yet she is not even 50 years old. Her cash compensation puts her, on an annualized basis, well above the US average. She only has to work 9 months per year. On top of the cash compensation, she has enviable pension and medical benefits.
Recently, she began expressing concern over recently-elected Governor Chris Christie's sequestering of unspent education funds. My friend alleges that Christie lied, because he said no jobs or programs would be curtailed, but, now, programs are being cut back, and teachers laid off.
From what she explained, it appears that something like this has been going on for years. The state tops up local school district budgets. Those districts squirrel some of the money away to spend on discretionary programs and hiring of teachers. In effect, New Jersey residents are taxed, or pay interest on borrowed funds, which are shipped to school districts which don't actually use all the money as intended. Or at all.
Christie, being extremely budget-conscious, is apparently freezing and recovering every unspent state dollar in sight.
My friend moans that her district's children's test scores are among the best in the nation. We can't simply abandon their efforts or afford to lose that status.
I carefully replied that this may be laudatory and desirable, but, actually, unaffordable. I tried to explain to her that the overwhelming majority of New Jersey and, I dare say, US adult voters feel their education-directed taxes are largely wasted. If anything, education spending needs to be pared back.
Everyone is aware of the numbers showing massive spending/pupil in urban districts whose test scores are abysmal.
If I wrote what my friend's actual compensation is, most readers would make a note to consider becoming a primary school teacher in the next life. It's very cushy. But my friend feels she is underpaid, reasoning that she could have earned much more in the private sector.
This is the mindset with which Christie, and his ilk across the US, must contend. Well-meaning, unionized employees feeling that every dollar of state spending cut from their budgets is a mistake.
It shouldn't be a surprise that my friend's contribution to her pension has risen in the wake of her union's fund's value drop during the recent financial sector meltdown. She informed me over the weekend that the state had borrowed liberally from the fund for years, and, thus, it's not even well-funded.
Chalk up another one for deceitful governing by Corzine, McGreavy, Florio, Whitman and Kean.
Speaking gingerly, so as not to end a friendship, I tried to explain to my teacher/friend that every group from which Christie is taking funding must feel like her. They all want to keep their budgets and salaries. My friend is genuinely scared that she, or some of her friends, will lose their jobs. When I shared some data I recently read with her about New Jersey job creation over the past decade or so, it made little impression. That data showed how there has been no net private sector job creation over the past 7-10 years, but something on the order of 50,000 new public sector jobs.
This didn't make a significant impression on my friend. She asked the enduring, rhetorical question of why those who teach our children aren't worth more than they currently are paid?
When I carefully offered an alternative view of education, free of unions and mandated public school monopolies, I was greeted with incomprehension. When I suggested specialists like my friend, free of unions and monopolies, could organize into special schools priced to offer premium services, she simply said that the low-priced teachers would always be hired before the more expensive ones.
She simply had no grasp, I believe thanks to her union brainwashing, that quality commands a premium. When I noted that unions penalize the best teachers, like her, and protect the least competent, she was silent.
New Jersey has too much government. And it's not alone.
Too many fire and police departments, departments of public works and local government administrators for tiny municipalities. In the ten miles between my town and Basking Ridge, there are six other small towns, each possessing their own fire, police, sanitation and council infrastructures. Overlaid on this are townships and counties. More councils. More police. More pensions and budgets.
It's no wonder the US has looming debt and deficit problems. At local levels, we've allowed ourselves to make government a better paying career than the private sector. Now, your and my friends include people who live off of our taxes. So when we want to pay less for less government, we're forced to feel that's a bad thing, because it's a friend's rice bowl we're taking away.
How did we get to this sad and untenable state of affairs? How can we return from this situation, when so many intelligent and educated fellow citizens, colleagues, and friends, make their living from bloated and unaffordable levels of state and local government spending?
Forget about the faux-crisis of government health insurance or medical spending. Existing overspending on federal, state and local government is a far more urgent, observable and, dare I say, more easily corrected crisis.
One which, when turned back, will instantly release funds back to individuals to create jobs, spending, and, in time, personal wealth. Real economic activity.
But when we spend so much on government, under whatever name you wish to hide it, we simply have less for private economic activity that creates business, jobs and wealth.
Thus, as an economic society, we not only have the US federal deficit and spending with which to contend, but our smaller governmental entities. Among the liabilities weighing heavily on municipalities and states are pensions promised to government-related workers, such as police, firemen, teachers, sanitation workers and administrators.
One of my close friends is a teacher in one of the nearby northern New Jersey school districts. She works in the public school system so, of course, she is a union member, although, personally, she is a pretty solid political conservative.
This makes for some truly shocking behaviors and attitudes within a single person. For example, my friend has remained in the same school, in the same district, for her entire career. Holding several masters degrees and being a very intelligent person, she quickly grasped the essence of succeeding in a union-controlled environment. In a single word- seniority.
Thus, she has never contemplated moving to a closer school system. She currently earns the maximum allowable compensation for her work, yet she is not even 50 years old. Her cash compensation puts her, on an annualized basis, well above the US average. She only has to work 9 months per year. On top of the cash compensation, she has enviable pension and medical benefits.
Recently, she began expressing concern over recently-elected Governor Chris Christie's sequestering of unspent education funds. My friend alleges that Christie lied, because he said no jobs or programs would be curtailed, but, now, programs are being cut back, and teachers laid off.
From what she explained, it appears that something like this has been going on for years. The state tops up local school district budgets. Those districts squirrel some of the money away to spend on discretionary programs and hiring of teachers. In effect, New Jersey residents are taxed, or pay interest on borrowed funds, which are shipped to school districts which don't actually use all the money as intended. Or at all.
Christie, being extremely budget-conscious, is apparently freezing and recovering every unspent state dollar in sight.
My friend moans that her district's children's test scores are among the best in the nation. We can't simply abandon their efforts or afford to lose that status.
I carefully replied that this may be laudatory and desirable, but, actually, unaffordable. I tried to explain to her that the overwhelming majority of New Jersey and, I dare say, US adult voters feel their education-directed taxes are largely wasted. If anything, education spending needs to be pared back.
Everyone is aware of the numbers showing massive spending/pupil in urban districts whose test scores are abysmal.
If I wrote what my friend's actual compensation is, most readers would make a note to consider becoming a primary school teacher in the next life. It's very cushy. But my friend feels she is underpaid, reasoning that she could have earned much more in the private sector.
This is the mindset with which Christie, and his ilk across the US, must contend. Well-meaning, unionized employees feeling that every dollar of state spending cut from their budgets is a mistake.
It shouldn't be a surprise that my friend's contribution to her pension has risen in the wake of her union's fund's value drop during the recent financial sector meltdown. She informed me over the weekend that the state had borrowed liberally from the fund for years, and, thus, it's not even well-funded.
Chalk up another one for deceitful governing by Corzine, McGreavy, Florio, Whitman and Kean.
Speaking gingerly, so as not to end a friendship, I tried to explain to my teacher/friend that every group from which Christie is taking funding must feel like her. They all want to keep their budgets and salaries. My friend is genuinely scared that she, or some of her friends, will lose their jobs. When I shared some data I recently read with her about New Jersey job creation over the past decade or so, it made little impression. That data showed how there has been no net private sector job creation over the past 7-10 years, but something on the order of 50,000 new public sector jobs.
This didn't make a significant impression on my friend. She asked the enduring, rhetorical question of why those who teach our children aren't worth more than they currently are paid?
When I carefully offered an alternative view of education, free of unions and mandated public school monopolies, I was greeted with incomprehension. When I suggested specialists like my friend, free of unions and monopolies, could organize into special schools priced to offer premium services, she simply said that the low-priced teachers would always be hired before the more expensive ones.
She simply had no grasp, I believe thanks to her union brainwashing, that quality commands a premium. When I noted that unions penalize the best teachers, like her, and protect the least competent, she was silent.
New Jersey has too much government. And it's not alone.
Too many fire and police departments, departments of public works and local government administrators for tiny municipalities. In the ten miles between my town and Basking Ridge, there are six other small towns, each possessing their own fire, police, sanitation and council infrastructures. Overlaid on this are townships and counties. More councils. More police. More pensions and budgets.
It's no wonder the US has looming debt and deficit problems. At local levels, we've allowed ourselves to make government a better paying career than the private sector. Now, your and my friends include people who live off of our taxes. So when we want to pay less for less government, we're forced to feel that's a bad thing, because it's a friend's rice bowl we're taking away.
How did we get to this sad and untenable state of affairs? How can we return from this situation, when so many intelligent and educated fellow citizens, colleagues, and friends, make their living from bloated and unaffordable levels of state and local government spending?
Forget about the faux-crisis of government health insurance or medical spending. Existing overspending on federal, state and local government is a far more urgent, observable and, dare I say, more easily corrected crisis.
One which, when turned back, will instantly release funds back to individuals to create jobs, spending, and, in time, personal wealth. Real economic activity.
But when we spend so much on government, under whatever name you wish to hide it, we simply have less for private economic activity that creates business, jobs and wealth.
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