Sippin’ on tea, the kids watching Dangermouse….got a little too much sun yesterday which doesn’t mesh well with someone as pale as I.
Yeah, I’m logy.
But these posts pretty much write themselves, don’t they?
PUBLIC FINANCE AND THINGS FALL APART
Greek bonds downgraded (warning: NYT link), and not by a little — Fitch dropped them down three notches, which is a rather large movement. Sure, they were already in the junk range, but still. Things aren’t going well there, and for all the whining over DSK’s troubles being behind this — no. Greek’s clusterfark (attendant with pro-sucking-on-govt-teat-”anarchists”) has nothing to do with Mr. Strauss-Kahn’s belt issues, for all we’d like to say “entitlement” yadda yadda yadda. Even without DSK, this crap would have happened.
Reality hits Spain as well, as its social welfare system is unsustainable. I find it interesting how Socialists are in charge when the culmination of their systems have hit a demographic wall….and people get sour as the promises can’t be fulfilled. Can get dangerous as other populists try to ramp up the promises, which are still undeliverable, sorry. You can’t create 30-year-olds from thin air. Except in sci-fi novels.
Let’s not get too uppity about European social welfare programs. Ignoring the whole “adult baby” brouhaha this week, there’s something more structural awry given we are paying benefits for dead people in significant amounts.
From the WSJ, Jason Zweig writes why holders of U.S. Treasury bonds should be concerned about the possibility of different kinds of default. I think everyone is going to get a lesson in what structural default, technical default, outright default, etc. are in very short order. Bondholders should already know about this, but I’m sorry to say that those holding government bonds are not necessarily the most sophisticated of investors.
Joe Mysak calls Meredith Whitney to task about the very specific predictions she made re: municipal bonds, as Whitney goes to the pages of the WSJ to remind people that the muni armageddon is still to come, and that, yes, there are many ways to default. Going back to Mysak, I’m pulling this quote:
In the modern era, there is little to suggest that serious public officials will shirk their duty to bondholders.
AH HA HA HA. “serious public offiials” Owie. Oh my side. Yeah. Serious public officials. You mean the ones who fashioned the back-DROP benefits? Those serious public officials? The ones who “funded” the plans with pension obligation bonds? Are those the serious public officials we’re talking about? Do tell.
Right-to-work to make inroads into New England?
How do unions affect state budgets? The duh conclusion:
“The main differences between public and private sector come from economics,” said Norcross. “Private sector unions can raise their wages, but not their employment. By contrast, public sector unions can increase both wage and employment outcomes.”
Well, yeah, in the short run. But when fiscal reality hits, you can get a massive readjustment of those outcomes, as in Costa Mesa, California. Recently, after looking into a budget abyss, the city council laid off nearly half the current city workforce and outsourced their functions. And note, that doesn’t mean a 1-to-1 replacement of jobs. And definitely not necessarily a replacement with a union job. Funny how assumptions can get altered in a hurry when reality hits and the money runs out. Rent-seekers have to be careful, otherwise they create their own destruction.
GENERAL PENSION ISSUES
U.S. Postal Service warns of potential default on retiree obligations
After all the fun beating up on state workers and their benefits, it’s the federal workers’ turn to become punching bags! And then a guy whose main constituents are federal workers objects! Shocker! Another shocker: federal employees aren’t happy about it. I like how people mention that cutting benefits will make government jobs less attractive, as if that’s a bad thing.
National teachers union realizes that spiking and double-dipping makes them (and DB pensions) look bad, so they say that it should be looked into.
Finally. Pensioners in bankrupt Prichard have gone almost 2 years without payments, and there may be a deal on the table. They will probably never get their full promised benefits, but at least it’s not zero.
The Golden State Blues: George Will on how it fell apart in California
Request for investigation into disability pensions in that cesspit of government corruption, Bell, Calif.
It’s going to be an interesting November in San Fran as Mayor Ed Lee says he’s putting a pension reform proposal on the ballot with or without union agreement. Other groups have their own competing proposals they intend to get on the ballot.
Capitola working on lowering pension costs ahead of contract negotiations in 2012. Watsonville looking at its own costs. Ventura County has some eye-popping numbers itself. It’s like it’s some sort of widespread problem or something.
Steven Greenhut says yeah, it’s kind of a widespread problem. And while it may look puny compared to the state budget, it’s outsize for local budgets.
Rahm was sworn in as Chicago’s non-Daley mayor. Can he deal with the fiscal issues, and the pension problem in particular?
Consultant says retirees should pay more for their health benefits.
Emergency financial manager’s blanket powers in Benton Harbor bring spotlight and cries of oppression…. oppression of the fiscally inept. Poor babies.
Detroit Mayor Bing proclaims that there are savings in pension contributions because they changed the smoothing period for actuarial losses…. but no. No there aren’t. Changing the method of funding the pensions doesn’t change the cost of the pensions. You have to change the actual pension benefits to change their costs.
Minneapolis pension tension - two closed funds taking an outsize portion of the city budget, and an attempt to fold them into state funds. Minneapolis contribution to these funds would drop a great deal if this occurred.
Negotiations on pension reforms continue. Both groups agree that public employees should work longer, contribute more to pensions, and for most plans, receive lower benefits. They’re just wrangling over details now.
In pensions corruption news, Liberal Party ex-boss Ray Harding avoids jail time.
A proposal to yank the pensions of corrupt pols — I say let’s be proactive. No pensions for any pols.
Pittsburgh may have gotten over their math problems, but they still have huge fundedness issues with their pension plan and are trying to avoid being taken over by the state. Still. At some point, you’d think they’d just give up.
Something to look forward to: a report to be released on Monday by the state treasurer on just how much Rhode Island pension systems suck (just being a psychic here). A think tank already has put out its own report on the suckitude.
How much do they suck? The per capita debt is $30K.
Legislature passes bill to curb teachers unions, stripping them of most collective bargaining rights.