Miscellany: 12/20/10

Quote of the Day

Treasure the love you have received above all. It will survive long after your gold and good health have vanished.
Og Mandino

60 Minutes on the Looming Local/State Pension Day of Reckoning

I have written a number of critical post comments on the issue of public pension reform, as recently as yesterday's second segment (referencing a New York Post op-ed). Over the past several years, I don't think I've even interviewed with a prospective employer with a pension plan. Most private-sector companies have been aware of the long-term pension funding liabilities and converted to a 401K style plan (which in many cases match up to 3 points of employee salary, vested by the employees in a few years of employment).

The 60 Minutes piece focuses on risk analysis for the (tax-advantaged) municipal bonds market; in fact, as the segment makes clear, there is a lot of smoke and mirrors putting lipstick on a pig (public sector financial statements). The fear most of us conservatives have is that states, cities and counties will be looking to Uncle Sam for bailouts in dealing with situations caused by unrealistic, overgenerous benefit promises promised by Democratic politicians to their public sector union supporters.

One economist (Joshua Rauh) and his collaborators have estimated nearly $600B in underfunded county and city pension plans (in particular, Chicago and Philadelphia are in trouble) and  from $750B to nearly $3T in underfunded state pension plans. We are talking about tens of thousands per household to support generous pension benefits that are not only beyond those for the vast majority of employees in the private sector, but in a large number of cases exceed the income of actively working households.

The writing is on the wall: first, government systems have to start putting all new workers and those with limited tenure, at minimum, on a defined contribution (e.g., 403-B) plan where public matching contributions are limited. Second, we need union givebacks; Chris Christie is far too nice a guy. I have no problem with going to bankruptcy court to be rid of unafforable pension obligations. If the unions were smart, they would negotiate a buyout to a lump-sum contribution related to tenure, roughly a standard employer contribution plus interest. A buyout is better than losing everything in bankruptcy court. There will be no more Obama union-favored bankruptcies.




An Ominous Beachhead By the Federal Government On the Internet:
Net Neutrality: Thumbs DOWN!

I have previously expressed opposition to so-called net neutrality in prior posts. There's an important vote tomorrow where the FCC will likely  expand its authority over the Internet as an alleged logical extension to their authority over telecommunications. I see it as an unnecessary, unwarranted, counterproductive intrusion by the federal government.

There are a couple of salient issues beyond the arcane high-sounding policy. First, ISP's have sought to put restrictions on the excessive use of its limited capacity by certain users (often swapping music or video files); this is seen as a slippery slope towards arbitrary restrictions by providers on the Internet, a type of censorship. In fact, the Internet has had robust growth without the innovative-freezing involvement of the federal bureaucracy. Second, ISP's have considered a premium access model to charge Internet content providers (e.g., Google and Apple) for guaranteed, almost immediate delivery (not unlike charging more for overnight delivery of Express Mail versus first-class mail). Clearly Google and other content providers reject paying for something they now get for free.

If there's anything worse than pushing on a string, it's the federal government pushing on a string. (I also see this as an unconstitutional Executive Branch intrusion on the responsibilities of the Congress.)

Political Humor

Just a periodic reminder: you can find summaries of late night jokes at portals like newsmax, about.com, and (in a more abbreviated format) Giglish.

"President Obama met with leaders of 60 American Indian tribes. I don't want to say the country's in bad shape, but he offered to give it back to them." - Jay Leno

[They were initially confused when Obama started discussing outsourcing and the disputed territory of Kashmir.]

The EPA just announced that the artificial sweetener saccharin is not a cancer threat after all. Or as I’ll be reporting the story 10 years from now, “The EPA just announced that the artificial sweetener saccharin is definitely a cancer threat after all.” - Jimmy Fallon

[For ten years the Democrats have been saying that the Bush tax cuts have been bad for the economy. They just extended them for another 2 years.]

Musical Interlude: Holiday Tunes

The Three Tenors, "Wiegenlied (Brahms's Lullaby)"