9/29/09
This morning’s (i.e., Tuesday, 9/29’s) Wall Street Journal reports on page A4 that stockbroker and “financial planner” Frank Bluestein, whose business was apparently domiciled in Pontiac, Michigan, has been accused by the SEC of persuading more than 800 investors, many of them elderly, to invest in a Ponzi scheme. Mr. Bluestein’s “brokerage” was known as “Fast Frank, Inc.”
If these allegations are true, Mr. Bluestein’s conduct was despicable and reprehensible, especially when one considers that many of his clients would not by any definition be considered “financially sophisticated” (unlike Bernie Madoff’s “victims”) and that, in order to increase the size of his “clients” investments, “financial planner” Mr. Bluestein urged them to refinance their mortgages, insuring their actual or figurative bankruptcy. This case is further illustration of a point I repeatedly make to my students, friends, and anyone who will listen: Anyone can call himself or herself a “financial planner.” While there are many good financial consultants, planners, etc., out there, assume anyone who brandishes the title of “financial consultant,” “financial planner,” etc., is a thief, a mountebank, and a knave until you accumulate substantial evidence to the contrary.
In furtherance of the above, I ask the “victims” of Mr. Bluestein’s alleged felonious finagling one question:
You deal with a broker called “Fast Frank” and you are surprised when he absconds with your money?
Oh, yes, the future looks bright indeed.
Tuesday, September 29, 2009
“TAX THE RICH; FEED THE POOR…’TIL THERE ARE NO RICH NO MORE”
9/29/09
Much was made earlier this week of a poll that purported to show that 51% of Americans think that the “very rich” ought to be taxed at the rate of 50%.
First, a clarification of terminology. These polls are often inane, as is much discussion of “the rich,” a concept that seemingly confuses most people. Being “rich” refers to wealth; it is a balance sheet concept. One who has a high net worth is rich. If we are talking about taxing the “rich,” we ought to be talking about wealth taxes or personal property taxes, not income taxes. Income taxes hit people with high incomes (an income statement concept), who are not necessarily rich; i.e., they have not accumulated much wealth either because they have not been earning high incomes for a long time and/or they have, rather than accumulate wealth, elected to squander their incomes on the typical fluff and baubles that preoccupies so many high income, and faux high income, Americans. Note that, as my Dad used to say, people with money didn’t get that way by spending it. However, since most people are incapable of making the distinction between the “rich” and those with high incomes, and because of the wording of the polls, we have to assume that the pollsters and respondents are using the term “rich” to mean “high income earners.” Perhaps this level of financial illiteracy is fortunate; if people knew the difference between “rich” and “high income,” they would be pushing for wealth taxes, which would be the ultimate economic, financial, and political lunacy.
Taxing people at a 50% marginal rate is both misguided and unconscionable. It is misguided because it is horrible fiscal policy; at rates of 50% and higher, many high income people, and probably the most productive, would decide that it makes more sense to turn off the alarm clock and go back to sleep rather than get out of bed and face the world. A 50% rate is unconscionable because there is no justification for the government to seize 50% of anyone’s income; in the 19th century, the serfs in Russia rebelled at tax rates much lower than 50%. The government is not entitled to 50% of anyone’s income, especially when that rate was set, under our “democratic” system, by people other than those earning income taxed at 50%. One, of course, could argue by logical extension that no tax on income is justifiable, and that might be a worthy, but ultimately pointless, argument that we can save for another day. But half one’s income seized through the coercive force of government? Even the most ardent populist has to have misgivings, even if secret misgivings, about such an idea.
That having been said, can one blame the average person for feeling that such an onerous rate of taxation is justified in the wake of the behavior of our high income earners? Has there ever been time when high earners made such an extravagant effort at audaciously, and gauchely, displaying their “wealth” (or, in reality, access to liability creation, as I have said ad nauseam in the past)? The McMansions, the summer homes, the trips, the cars, the electronics, the clothes, the food, the restaurant meals in which the size of the portions and the price of the entrees seems to be inversely related, the hookers, the gambling, the expensive booze that differs only in labeling from the cheap hooch that did the job just as effectively on the residents of the skid rows that used to occupy the space now filled with the manses of the nouveau in debt, the cocaine, and all the tiresome detritus of the modern “rich” seem to be designed simply to tell other people: “I have money and you don’t. Chump.” Or, perhaps even more true, “I have more money than you! Don’t I? Don’t I? Please tell me I do or I will just fall apart. Wah! Wah! Wah!”
Yes, we are all familiar with the gilded age, but were even the exemplars of that era as audacious as these simpering wunderkinds? Certainly, the denizens of that age were eager to display their wealth, but there were fewer of them, they tended to display their wealth only to their approximate peers (out of a display of common sense completely foreign to today’s aspiring Gatsbys), and, unlike today’s “rich,” the Vanderbilts, the Rockefellers, the Carnegies, etc., actually contributed something to our economic development; they made their money laying the foundation of our prosperity rather than ripping out that foundation to squander the proceeds on their ephemeral pleasures.
Further, this display of wealth not only incites the typical person, who gets the feeling, in most cases rightfully so in modern American, that s/he is getting screwed by the “rich,” but tends to raise doubts about capitalism, but not in the way one mighty think. In a truly free market, capitalistic society, one gets rich by working hard and being smart. But if one is to judge today’s high income earner by the way he handles his wealth, we can only conclude that he is an idiot. Who needs any of this figurative excreta on which he not only squanders his income but also drives himself into debt? Why, for example, does a guy like Jim Press, former muckety-muck at Toyota (and the first American to serve on Toyota’s board) at which he made a seven figure income for years, and then a poohbah at Cerberus and Chrysler, at which he would have made an eight or nine figure income had his judgment regarding his own industry not been so poor, find himself in actual or figurative bankruptcy? Because he couldn’t get by on a seven figure income due to his senseless squandering of his income. Why do people feel consumed to buy the junk they buy? How smart can they be? And if they work so hard, how can they possibly have time to play with the toys they buy? The way the typical “rich” person, or at least the “rich” person who is most desperate to show everyone he is “rich,” handles himself leads a sane and sober person to wonder whether it is smarts and hard work, or merely luck, that makes one rich. It seems to all the world that the Millionaire Next Door years ago moved to a McMansion, bought a fleet of Ferraris, and is now broke. Too bad for those waling children. But truly bad for those sane and sober rich, those who have accumulated wealth the old fashioned way: hard work, intelligence, dedication, focus, and a willingness to adapt and, yes, to serve their customer base and community. These people, the true heroes of our economy, will be painted with the same brush, and be subjected to the same punitive levels of taxation, as those who made their money though lucky breaks, even luckier trades, the utter foolishness of the American people, or even more nefarious means.
So a tax rate of 50% on anyone is moronic; however, those who have behaved like utter fools in the wake of their newfound (or, in some cases, longstanding) riches have brought such vitriol disguised as policy upon themselves. In fact, one wonders why the percentage of positive responses was not far higher than 51%.
Much was made earlier this week of a poll that purported to show that 51% of Americans think that the “very rich” ought to be taxed at the rate of 50%.
First, a clarification of terminology. These polls are often inane, as is much discussion of “the rich,” a concept that seemingly confuses most people. Being “rich” refers to wealth; it is a balance sheet concept. One who has a high net worth is rich. If we are talking about taxing the “rich,” we ought to be talking about wealth taxes or personal property taxes, not income taxes. Income taxes hit people with high incomes (an income statement concept), who are not necessarily rich; i.e., they have not accumulated much wealth either because they have not been earning high incomes for a long time and/or they have, rather than accumulate wealth, elected to squander their incomes on the typical fluff and baubles that preoccupies so many high income, and faux high income, Americans. Note that, as my Dad used to say, people with money didn’t get that way by spending it. However, since most people are incapable of making the distinction between the “rich” and those with high incomes, and because of the wording of the polls, we have to assume that the pollsters and respondents are using the term “rich” to mean “high income earners.” Perhaps this level of financial illiteracy is fortunate; if people knew the difference between “rich” and “high income,” they would be pushing for wealth taxes, which would be the ultimate economic, financial, and political lunacy.
Taxing people at a 50% marginal rate is both misguided and unconscionable. It is misguided because it is horrible fiscal policy; at rates of 50% and higher, many high income people, and probably the most productive, would decide that it makes more sense to turn off the alarm clock and go back to sleep rather than get out of bed and face the world. A 50% rate is unconscionable because there is no justification for the government to seize 50% of anyone’s income; in the 19th century, the serfs in Russia rebelled at tax rates much lower than 50%. The government is not entitled to 50% of anyone’s income, especially when that rate was set, under our “democratic” system, by people other than those earning income taxed at 50%. One, of course, could argue by logical extension that no tax on income is justifiable, and that might be a worthy, but ultimately pointless, argument that we can save for another day. But half one’s income seized through the coercive force of government? Even the most ardent populist has to have misgivings, even if secret misgivings, about such an idea.
That having been said, can one blame the average person for feeling that such an onerous rate of taxation is justified in the wake of the behavior of our high income earners? Has there ever been time when high earners made such an extravagant effort at audaciously, and gauchely, displaying their “wealth” (or, in reality, access to liability creation, as I have said ad nauseam in the past)? The McMansions, the summer homes, the trips, the cars, the electronics, the clothes, the food, the restaurant meals in which the size of the portions and the price of the entrees seems to be inversely related, the hookers, the gambling, the expensive booze that differs only in labeling from the cheap hooch that did the job just as effectively on the residents of the skid rows that used to occupy the space now filled with the manses of the nouveau in debt, the cocaine, and all the tiresome detritus of the modern “rich” seem to be designed simply to tell other people: “I have money and you don’t. Chump.” Or, perhaps even more true, “I have more money than you! Don’t I? Don’t I? Please tell me I do or I will just fall apart. Wah! Wah! Wah!”
Yes, we are all familiar with the gilded age, but were even the exemplars of that era as audacious as these simpering wunderkinds? Certainly, the denizens of that age were eager to display their wealth, but there were fewer of them, they tended to display their wealth only to their approximate peers (out of a display of common sense completely foreign to today’s aspiring Gatsbys), and, unlike today’s “rich,” the Vanderbilts, the Rockefellers, the Carnegies, etc., actually contributed something to our economic development; they made their money laying the foundation of our prosperity rather than ripping out that foundation to squander the proceeds on their ephemeral pleasures.
Further, this display of wealth not only incites the typical person, who gets the feeling, in most cases rightfully so in modern American, that s/he is getting screwed by the “rich,” but tends to raise doubts about capitalism, but not in the way one mighty think. In a truly free market, capitalistic society, one gets rich by working hard and being smart. But if one is to judge today’s high income earner by the way he handles his wealth, we can only conclude that he is an idiot. Who needs any of this figurative excreta on which he not only squanders his income but also drives himself into debt? Why, for example, does a guy like Jim Press, former muckety-muck at Toyota (and the first American to serve on Toyota’s board) at which he made a seven figure income for years, and then a poohbah at Cerberus and Chrysler, at which he would have made an eight or nine figure income had his judgment regarding his own industry not been so poor, find himself in actual or figurative bankruptcy? Because he couldn’t get by on a seven figure income due to his senseless squandering of his income. Why do people feel consumed to buy the junk they buy? How smart can they be? And if they work so hard, how can they possibly have time to play with the toys they buy? The way the typical “rich” person, or at least the “rich” person who is most desperate to show everyone he is “rich,” handles himself leads a sane and sober person to wonder whether it is smarts and hard work, or merely luck, that makes one rich. It seems to all the world that the Millionaire Next Door years ago moved to a McMansion, bought a fleet of Ferraris, and is now broke. Too bad for those waling children. But truly bad for those sane and sober rich, those who have accumulated wealth the old fashioned way: hard work, intelligence, dedication, focus, and a willingness to adapt and, yes, to serve their customer base and community. These people, the true heroes of our economy, will be painted with the same brush, and be subjected to the same punitive levels of taxation, as those who made their money though lucky breaks, even luckier trades, the utter foolishness of the American people, or even more nefarious means.
So a tax rate of 50% on anyone is moronic; however, those who have behaved like utter fools in the wake of their newfound (or, in some cases, longstanding) riches have brought such vitriol disguised as policy upon themselves. In fact, one wonders why the percentage of positive responses was not far higher than 51%.
Wednesday, September 23, 2009
“(INSURANCE)? WE DON’T NEED NO STINKIN’ (INSURANCE)”
9/23/09
Republicans have attacked the health care proposal of Senator Max Baucus (D, Montana) (See my already seminal 9/17/09 post GIMME A STEAK...AND GIVE THAT MAN THE BILL.) because the bill plan requires nearly all Americans to buy health insurance. Senator Charles Grassley (R., Iowa) says “Individuals should maintain their freedom to choose health care coverage, or not.” Senator Jon Kyl intoned “This bill is a stunning assault on liberty.” There are plenty of reasons not to like the Baucus proposal, but its insurance mandate, at least currently, is not one of them.
Regular readers know that there are few more ardent champions of personal freedom and liberty than yours truly. However, I also believe that along with individual rights come individual responsibilities. As it stands now, the choice not to buy health insurance is a choice to have others pay for your health care. As I said in that 9/17 piece, few, if any, people are denied health care, or at least emergency treatment, in this country. One simply goes to an emergency room and gets his or her life saved, leg set, appendix removed, etc. The care the uninsured receive may or may not be the best care possible, but it will be expensive care in any case. If the person receiving the treatment does not have insurance and cannot pay for such treatment, the hospital or other health care provider will simply spread the cost of that care among its other patients who have health insurance or who can otherwise pay for their treatment and, under the current scheme of things, the treatment of those who elected to have others pay for their care. The argument for mandating health insurance goes that if we make people buy car insurance so that other motorists with whom they come in contact (literally) don’t get stuck with bills arising from the negligence of the uninsured, it makes sense to make people buy health insurance so responsible people don’t have to pick up the tab for irresponsible people. It’s not a perfect argument; driving is a privilege, not a right. But it does have a certain logical appeal.
Still, those of us who still respect individual freedom are offended by the notion of forcing people to do anything, other than avoid inflicting bodily, financial, or other harm on others (a prohibition, by the way, that just might cover requiring carriage of health coverage). So maybe there is a way around requiring purchase of health insurance. We could make absolutely sure that the uninsured pay for whatever health care they receive by allowing providers to place liens on, or simply seize, the bank accounts, homes, and other assets of those who elect not to carry insurance. We could make such liens senior to any other debt incurred by these deadbeats, thus making lenders reluctant to lend to the uninsured. We could garnish wages, forever, if necessary, for those who have no assets or assets insufficient to cover their hospital bills. In other words, we would make failure to carry health insurance a choice, but a choice that could lead to utter destitution of those who make that choice. The result, of course, would be that electing not to purchase health insurance would not be a choice any remotely reasonable person would make, and no mandates would be necessary to get everyone to buy insurance.
There are lots of people who simply cannot afford insurance. They will get subsidies to buy insurance and, as I predicted, the size of those subsidies has been increased from those proposed in the original Baucus plan. There are more people who can afford insurance but choose to spend money on other “essentials,” like luxury cars, flat screen televisions, and homes and vacations they have no business owning or taking. Unfortunately, they, too, will get subsidies; that’s the way the world works. But no one will have an excuse not to buy insurance if doing so would result in utter financial ruin and if the “I just can’t afford it” argument is nullified by taxpayer subsidies.
Of course, one could argue, with a not inconsiderable degree of logic, that if we force people into buying insurance either by a mandate or by making it financially ruinous not to do so, we are merely forcing people to do business with those nice folks in the health insurance industry. Without a public option, the argument might continue, we are effectively forcing people to become so much cannon fodder for the health insurers. The notion is frightening to many of us and would probably lead to even greater regulation of insurers than the Baucus plan envisions, a public option, or both. But once we’ve forced people into buying insurance, given them subsidies to do so, forced health insurers to take on all comers, and provided a public option, how far are we from a completely socialized, one payer system? As I said in the aforementioned 9/17/09 post, GIMME A STEAK...AND GIVE THAT MAN THE BILL, “Health care reform is something that is very difficult to do incrementally.”
Just one more thing that has always bothered me…We often hear the ridiculous argument that for young, healthy people, the decision not to buy insurance is a rational one. Does being young and healthy somehow make one immune for accidents, car wrecks, skiing accidents, motorcycle accidents, etc.?
Republicans have attacked the health care proposal of Senator Max Baucus (D, Montana) (See my already seminal 9/17/09 post GIMME A STEAK...AND GIVE THAT MAN THE BILL.) because the bill plan requires nearly all Americans to buy health insurance. Senator Charles Grassley (R., Iowa) says “Individuals should maintain their freedom to choose health care coverage, or not.” Senator Jon Kyl intoned “This bill is a stunning assault on liberty.” There are plenty of reasons not to like the Baucus proposal, but its insurance mandate, at least currently, is not one of them.
Regular readers know that there are few more ardent champions of personal freedom and liberty than yours truly. However, I also believe that along with individual rights come individual responsibilities. As it stands now, the choice not to buy health insurance is a choice to have others pay for your health care. As I said in that 9/17 piece, few, if any, people are denied health care, or at least emergency treatment, in this country. One simply goes to an emergency room and gets his or her life saved, leg set, appendix removed, etc. The care the uninsured receive may or may not be the best care possible, but it will be expensive care in any case. If the person receiving the treatment does not have insurance and cannot pay for such treatment, the hospital or other health care provider will simply spread the cost of that care among its other patients who have health insurance or who can otherwise pay for their treatment and, under the current scheme of things, the treatment of those who elected to have others pay for their care. The argument for mandating health insurance goes that if we make people buy car insurance so that other motorists with whom they come in contact (literally) don’t get stuck with bills arising from the negligence of the uninsured, it makes sense to make people buy health insurance so responsible people don’t have to pick up the tab for irresponsible people. It’s not a perfect argument; driving is a privilege, not a right. But it does have a certain logical appeal.
Still, those of us who still respect individual freedom are offended by the notion of forcing people to do anything, other than avoid inflicting bodily, financial, or other harm on others (a prohibition, by the way, that just might cover requiring carriage of health coverage). So maybe there is a way around requiring purchase of health insurance. We could make absolutely sure that the uninsured pay for whatever health care they receive by allowing providers to place liens on, or simply seize, the bank accounts, homes, and other assets of those who elect not to carry insurance. We could make such liens senior to any other debt incurred by these deadbeats, thus making lenders reluctant to lend to the uninsured. We could garnish wages, forever, if necessary, for those who have no assets or assets insufficient to cover their hospital bills. In other words, we would make failure to carry health insurance a choice, but a choice that could lead to utter destitution of those who make that choice. The result, of course, would be that electing not to purchase health insurance would not be a choice any remotely reasonable person would make, and no mandates would be necessary to get everyone to buy insurance.
There are lots of people who simply cannot afford insurance. They will get subsidies to buy insurance and, as I predicted, the size of those subsidies has been increased from those proposed in the original Baucus plan. There are more people who can afford insurance but choose to spend money on other “essentials,” like luxury cars, flat screen televisions, and homes and vacations they have no business owning or taking. Unfortunately, they, too, will get subsidies; that’s the way the world works. But no one will have an excuse not to buy insurance if doing so would result in utter financial ruin and if the “I just can’t afford it” argument is nullified by taxpayer subsidies.
Of course, one could argue, with a not inconsiderable degree of logic, that if we force people into buying insurance either by a mandate or by making it financially ruinous not to do so, we are merely forcing people to do business with those nice folks in the health insurance industry. Without a public option, the argument might continue, we are effectively forcing people to become so much cannon fodder for the health insurers. The notion is frightening to many of us and would probably lead to even greater regulation of insurers than the Baucus plan envisions, a public option, or both. But once we’ve forced people into buying insurance, given them subsidies to do so, forced health insurers to take on all comers, and provided a public option, how far are we from a completely socialized, one payer system? As I said in the aforementioned 9/17/09 post, GIMME A STEAK...AND GIVE THAT MAN THE BILL, “Health care reform is something that is very difficult to do incrementally.”
Just one more thing that has always bothered me…We often hear the ridiculous argument that for young, healthy people, the decision not to buy insurance is a rational one. Does being young and healthy somehow make one immune for accidents, car wrecks, skiing accidents, motorcycle accidents, etc.?
Tuesday, September 22, 2009
“I GO TO RIO…”
9/22/09
Way back in February of this year, Pat Ryan, chairman of both insurance giant AON and the Chicago 2016 Committee, stated that “there is no insurance product for cost overruns of construction.” Since then, after the heat was turned up on the city and Mayor Daley for so cavalierly putting the citizens on the line for the financial consequences of the Mayor’s 21st century edition of bread (for favored contractors; this is Chicago, after all) and circuses (for those with the spondulicks, and the desire, to buy overpriced tickets for events in which we normally show not even the slightest interest), Mr. Ryan has miraculously found such insurance, or, more properly, according to the Chicago Tribune, Mr. Ryan believes he can arrange such insurance. However, there is a catch; the insurance, in which I guess we just gotta believe, will only cover cost overruns attributable to circumstances beyond the Chicago Olympic team’s control, like inflation. Such insurance will not cover cost overruns due to changes in construction plans, a common, perhaps the most common, source of cost overruns. Such insurance, if indeed it is any more than a figment of Mr. Ryan’s, and the Mayor’s, team’s febrile imagination, would not cover shortfalls due to, according to the Civic Federation of Chicago, unsold tickets or donation shortfalls. The Tribune also points out that such insurance won’t cover such quaint Chicago customs as bribes, bid-rigging, and political cronyism. So it looks very much like this “insurance,” which Mr. Daley assures us will protect the taxpayers from his impetuousness, would cover everything but those things that are most likely to occur. Selling such insurance sounds like a great deal.
Another eventuality (certainty, really) that insurance will not cover (and that may fall under the Tribune’s “political cronyism” category) is what I will call “back scratching” insurance or “we’ll make it up to you” insurance. Contractors and/or contributors will be coaxed into “contributing” to the Olympic effort, either through direct contributions or through eating cost overruns, by, when outright bullying doesn’t work, assurance that whatever is lost on the Olympics will be made up through the awarding of contracts for other city business. That way, the Olympics don’t show a loss because costs are kept low and/or hefty contributions miraculously appear. The taxpayers, the Mayor will be happy to report, will not have to come up with any dough to cover losses for the Olympics. However, taxpayers will be on the hook for the sub-rosa “make whole” deals reached with favored city contractors. And there will be no insurance for that. And, given the way things are done in this city, few people will notice.
Oh, well. Perhaps the Mayor can sell off the traffic lights. Or the naming rights to Chicago streets. Or the parks. Or the lake front (Oh, wait, the lakefront will be cluttered with Olympics detritus…okay the river front.) Or the schools. Or the police stations. Or….
Way back in February of this year, Pat Ryan, chairman of both insurance giant AON and the Chicago 2016 Committee, stated that “there is no insurance product for cost overruns of construction.” Since then, after the heat was turned up on the city and Mayor Daley for so cavalierly putting the citizens on the line for the financial consequences of the Mayor’s 21st century edition of bread (for favored contractors; this is Chicago, after all) and circuses (for those with the spondulicks, and the desire, to buy overpriced tickets for events in which we normally show not even the slightest interest), Mr. Ryan has miraculously found such insurance, or, more properly, according to the Chicago Tribune, Mr. Ryan believes he can arrange such insurance. However, there is a catch; the insurance, in which I guess we just gotta believe, will only cover cost overruns attributable to circumstances beyond the Chicago Olympic team’s control, like inflation. Such insurance will not cover cost overruns due to changes in construction plans, a common, perhaps the most common, source of cost overruns. Such insurance, if indeed it is any more than a figment of Mr. Ryan’s, and the Mayor’s, team’s febrile imagination, would not cover shortfalls due to, according to the Civic Federation of Chicago, unsold tickets or donation shortfalls. The Tribune also points out that such insurance won’t cover such quaint Chicago customs as bribes, bid-rigging, and political cronyism. So it looks very much like this “insurance,” which Mr. Daley assures us will protect the taxpayers from his impetuousness, would cover everything but those things that are most likely to occur. Selling such insurance sounds like a great deal.
Another eventuality (certainty, really) that insurance will not cover (and that may fall under the Tribune’s “political cronyism” category) is what I will call “back scratching” insurance or “we’ll make it up to you” insurance. Contractors and/or contributors will be coaxed into “contributing” to the Olympic effort, either through direct contributions or through eating cost overruns, by, when outright bullying doesn’t work, assurance that whatever is lost on the Olympics will be made up through the awarding of contracts for other city business. That way, the Olympics don’t show a loss because costs are kept low and/or hefty contributions miraculously appear. The taxpayers, the Mayor will be happy to report, will not have to come up with any dough to cover losses for the Olympics. However, taxpayers will be on the hook for the sub-rosa “make whole” deals reached with favored city contractors. And there will be no insurance for that. And, given the way things are done in this city, few people will notice.
Oh, well. Perhaps the Mayor can sell off the traffic lights. Or the naming rights to Chicago streets. Or the parks. Or the lake front (Oh, wait, the lakefront will be cluttered with Olympics detritus…okay the river front.) Or the schools. Or the police stations. Or….
Saturday, September 19, 2009
OF THE GOVERNMENT, BY THE GOVERNMENT, AND FOR THE GOVERNMENT
9/19/09
Today’s (i.e., Saturday, 9/19’s) Chicago Sun-Times reports that Cook County Board President Todd Stroger has expressed irritation at the leak of news that the Cook County State’s Attorney’s Office has issued a subpoena for financial records from Mr. Stroger’s office. Mr. Stroger does not blame Commissioner John Daley, who is chairman of both the County Board finance committee and audit committee, who revealed the existence of the subpoena to fellow commissioners in a memo he sent last week. Mr. Stroger says that Mr. Daley was merely doing his job as audit committee chairman. Instead, Mr. Stroger blames unknown commissioners for putting politics ahead of “what’s good for the government.” (Emphasis mine) Mr. Stroger said, in his usual articulate fashion, that “Committee members probably should have some confidentiality and not immediately call the press. But they are what they are.”
Several points are worthy of note:
--Why doesn’t Mr. Stroger blame Mr. Daley, who was the guy who actually revealed the subpoena to commissioners? We have to assume that Mr. Daley, one of Chicago’s more astute politicians, knows that few on the county Board can keep a secret. Is this hesitance to blame the Mayor’s brother really a consequence of Mr. Stroger’s assessment that Mr. Daley is only doing his job? When did someone’s doing one’s job ever stop Mr. Stroger from criticizing anyone in the past? Could Mr. Stroger’s hesitance to blame Mr. Daley be a reflection of who is really in charge of the County Board? Could Mr. Stroger’s obeisance add credence to those who argue that the Stroger family has been an arm of the Daley family, politically, for two generations?
--Why is John Daley head of both the audit and finance committee? I don’t profess to know a great deal about accounting, but I, many years ago, passed the CPA exam and know enough to teach, with some degree of effectiveness, survey accounting courses to MBA (and similar degree) students. It would seem that having the finance committee and the audit committee report to the same person would be an egregious violation of the most elementary auditing principles.
--Note Mr. Stroger’s words: “I just think some of ‘em (the unnamed leaking commissioners) can’t see the forest because of the trees and they don’t always look out for what’s good for the government.” I doubt if Mr. Stroger has the intellectual horsepower to realize the enormity of that statement. “What’s good for the government”? Since when is what’s good for the government the measure of performance for our public officials? How about what’s good for the citizenry? Apparently, that’s not as important to Mr. Stroger, and to a whole list of far more despicable people throughout history, as what’s good for the government. Was that a mere slip of the tongue on Mr. Stroger’s part, or was it a Freudian slip, revelatory of what this second generation career payroller really thinks is the essence of the function of a public official?
Today’s (i.e., Saturday, 9/19’s) Chicago Sun-Times reports that Cook County Board President Todd Stroger has expressed irritation at the leak of news that the Cook County State’s Attorney’s Office has issued a subpoena for financial records from Mr. Stroger’s office. Mr. Stroger does not blame Commissioner John Daley, who is chairman of both the County Board finance committee and audit committee, who revealed the existence of the subpoena to fellow commissioners in a memo he sent last week. Mr. Stroger says that Mr. Daley was merely doing his job as audit committee chairman. Instead, Mr. Stroger blames unknown commissioners for putting politics ahead of “what’s good for the government.” (Emphasis mine) Mr. Stroger said, in his usual articulate fashion, that “Committee members probably should have some confidentiality and not immediately call the press. But they are what they are.”
Several points are worthy of note:
--Why doesn’t Mr. Stroger blame Mr. Daley, who was the guy who actually revealed the subpoena to commissioners? We have to assume that Mr. Daley, one of Chicago’s more astute politicians, knows that few on the county Board can keep a secret. Is this hesitance to blame the Mayor’s brother really a consequence of Mr. Stroger’s assessment that Mr. Daley is only doing his job? When did someone’s doing one’s job ever stop Mr. Stroger from criticizing anyone in the past? Could Mr. Stroger’s hesitance to blame Mr. Daley be a reflection of who is really in charge of the County Board? Could Mr. Stroger’s obeisance add credence to those who argue that the Stroger family has been an arm of the Daley family, politically, for two generations?
--Why is John Daley head of both the audit and finance committee? I don’t profess to know a great deal about accounting, but I, many years ago, passed the CPA exam and know enough to teach, with some degree of effectiveness, survey accounting courses to MBA (and similar degree) students. It would seem that having the finance committee and the audit committee report to the same person would be an egregious violation of the most elementary auditing principles.
--Note Mr. Stroger’s words: “I just think some of ‘em (the unnamed leaking commissioners) can’t see the forest because of the trees and they don’t always look out for what’s good for the government.” I doubt if Mr. Stroger has the intellectual horsepower to realize the enormity of that statement. “What’s good for the government”? Since when is what’s good for the government the measure of performance for our public officials? How about what’s good for the citizenry? Apparently, that’s not as important to Mr. Stroger, and to a whole list of far more despicable people throughout history, as what’s good for the government. Was that a mere slip of the tongue on Mr. Stroger’s part, or was it a Freudian slip, revelatory of what this second generation career payroller really thinks is the essence of the function of a public official?
“SHE ASKS ME WHAT I MAKE…”
9/19/09
The Fed has come up with a plan to review, and maybe veto, the compensation plans of U.S. banks. The plan extends far beyond the pay packages of CEOs and COOs and extends far down the organizational (but not necessarily the compensation) ranks of bank personnel to include traders, lending officers, and other bank personnel. Further, the Fed’s oversight power would extend well beyond the mega-banks, the downfall of which would supposedly create so much havoc for our economy, to reach every Fed regulated bank in the country.
This proposal is being advanced partially in response to international pressure to impose even tougher scrutiny over bank pay, a subject bound to arise in the upcoming G-20 meeting in Pittsburgh, partially out of genuine concern about another financial “meltdown,” partially as part of an ongoing turf war with other government agencies over regulation of banks, and partially out of desire of the Fed, which, under Obsequious Ben Bernanke has become little more than an arm of the Bush/Obama administration, to extend government control even further into our nation’s financial sector.
As regular and longtime readers know, my stance on government regulation of pay in the private sector is that the whole notion is appalling, but once the banks and other financial institutions took the government’s money, they opened the door to such oversight. Until this proposal, such financial equivalent of a colonoscopy by the gentle hands of the federal government could have been avoided simply by refusing to take bailout money. Given the pusillanimous leadership of the financial sector, however, such testicularity was out of the question. So the whiners and the criers who run our nation’s financial sector took the money and, implicitly, accepted the scrutiny that came with it, and so were in no position to complain.
However, this latest Fed proposal is not tied to federal bailout money, and the proposed control over compensation would not be justified by the old, and understandable, “he who pays the piper calls the tune” adage. Instead, the Bernanke Fed is justifying this massive expansion of government power by invoking its powers as the “safety and soundess” regulator for banks. The Fed argues that it merely wants to avoid situations in which bank personnel are compensated for engaging in excessively risky activities that might result in imperiling banks that would then have to be bailed out in a redux of the “capitalism on the way up and socialism on the way down” approach to the financial system of which the Bush administration was so fond. Thus, the Fed argues, this micromanagement of bank compensation levels is essential to keep our banking system safe and sound.
This explanation of its rationale for expanding the government’s already far too intrusive role in the financial system is clearly a rationalization rather than a genuine explanation. If the Bush/Obama administration, and its lackeys at the Fed, were so concerned about the safety and soundness of the banking system, it could advance that salubriousness by announcing that the next time those tough guy champions of free market capitalism on Wall Street come begging for a bailout, the approach the federal government will take will be executed through an expanded version of the RTC of the late ‘80s and early ‘90s. The new RTC would seize those banks that get into trouble, fire their boards and their executives, and break the banks up into good banks and bad banks, auctioning off the assets of the bad banks to real capitalists rather than the faux free marketeers who speak so admiringly of the virtues of the marketplace while remaining comfortably ensconced in their government coddled multi-layered leviathans. Further, the mechanisms necessary to quickly implement such a new RTC approach should be put in place now in order to show the banks that the government is serious and to obviate the explanation given for not employing such an approach when things got messy a few years ago; i.e., that we simply did not have time to deploy a new RTC and thus our only alternative was to ladle out seas of spondulicks to the very scoundrels and mountebanks who did so much to aid and abet our self-immersion into the soup of financial dystopia from which we are, according to the experts, currently emerging.
Faced with the prospect of losing their lifetime sinecures, the people who run these financial goliaths will suddenly become very assiduous about keeping their institutions safe…and the taxpayers protected. Of course, I am assuming here that the people who ostensibly run these institutions actually understand what their traders, investment bankers, sales people, and loan officers are doing. This is perhaps a far too brave assumption.
This solution, like most of those I propose, will never be implemented because the Bush/Obama administration, and most of Congress, essentially sees its role as coddling Wall Street rather than protecting the taxpayers. The idea of actually throwing their paymasters out of the very positions from which those paymasters can dispense such abundant largesse to their puppets in Washington would be the political and financial equivalent of matricide to a career Washington politician.
The Fed has come up with a plan to review, and maybe veto, the compensation plans of U.S. banks. The plan extends far beyond the pay packages of CEOs and COOs and extends far down the organizational (but not necessarily the compensation) ranks of bank personnel to include traders, lending officers, and other bank personnel. Further, the Fed’s oversight power would extend well beyond the mega-banks, the downfall of which would supposedly create so much havoc for our economy, to reach every Fed regulated bank in the country.
This proposal is being advanced partially in response to international pressure to impose even tougher scrutiny over bank pay, a subject bound to arise in the upcoming G-20 meeting in Pittsburgh, partially out of genuine concern about another financial “meltdown,” partially as part of an ongoing turf war with other government agencies over regulation of banks, and partially out of desire of the Fed, which, under Obsequious Ben Bernanke has become little more than an arm of the Bush/Obama administration, to extend government control even further into our nation’s financial sector.
As regular and longtime readers know, my stance on government regulation of pay in the private sector is that the whole notion is appalling, but once the banks and other financial institutions took the government’s money, they opened the door to such oversight. Until this proposal, such financial equivalent of a colonoscopy by the gentle hands of the federal government could have been avoided simply by refusing to take bailout money. Given the pusillanimous leadership of the financial sector, however, such testicularity was out of the question. So the whiners and the criers who run our nation’s financial sector took the money and, implicitly, accepted the scrutiny that came with it, and so were in no position to complain.
However, this latest Fed proposal is not tied to federal bailout money, and the proposed control over compensation would not be justified by the old, and understandable, “he who pays the piper calls the tune” adage. Instead, the Bernanke Fed is justifying this massive expansion of government power by invoking its powers as the “safety and soundess” regulator for banks. The Fed argues that it merely wants to avoid situations in which bank personnel are compensated for engaging in excessively risky activities that might result in imperiling banks that would then have to be bailed out in a redux of the “capitalism on the way up and socialism on the way down” approach to the financial system of which the Bush administration was so fond. Thus, the Fed argues, this micromanagement of bank compensation levels is essential to keep our banking system safe and sound.
This explanation of its rationale for expanding the government’s already far too intrusive role in the financial system is clearly a rationalization rather than a genuine explanation. If the Bush/Obama administration, and its lackeys at the Fed, were so concerned about the safety and soundness of the banking system, it could advance that salubriousness by announcing that the next time those tough guy champions of free market capitalism on Wall Street come begging for a bailout, the approach the federal government will take will be executed through an expanded version of the RTC of the late ‘80s and early ‘90s. The new RTC would seize those banks that get into trouble, fire their boards and their executives, and break the banks up into good banks and bad banks, auctioning off the assets of the bad banks to real capitalists rather than the faux free marketeers who speak so admiringly of the virtues of the marketplace while remaining comfortably ensconced in their government coddled multi-layered leviathans. Further, the mechanisms necessary to quickly implement such a new RTC approach should be put in place now in order to show the banks that the government is serious and to obviate the explanation given for not employing such an approach when things got messy a few years ago; i.e., that we simply did not have time to deploy a new RTC and thus our only alternative was to ladle out seas of spondulicks to the very scoundrels and mountebanks who did so much to aid and abet our self-immersion into the soup of financial dystopia from which we are, according to the experts, currently emerging.
Faced with the prospect of losing their lifetime sinecures, the people who run these financial goliaths will suddenly become very assiduous about keeping their institutions safe…and the taxpayers protected. Of course, I am assuming here that the people who ostensibly run these institutions actually understand what their traders, investment bankers, sales people, and loan officers are doing. This is perhaps a far too brave assumption.
This solution, like most of those I propose, will never be implemented because the Bush/Obama administration, and most of Congress, essentially sees its role as coddling Wall Street rather than protecting the taxpayers. The idea of actually throwing their paymasters out of the very positions from which those paymasters can dispense such abundant largesse to their puppets in Washington would be the political and financial equivalent of matricide to a career Washington politician.
Thursday, September 17, 2009
EVERYBODY IN THE POOL
9/17/09
For a guy who doesn’t have an overall opinion on health care (health insurance, really) reform, I sure seem to be writing a lot about it lately!
One of the schemes being advanced as part of health insurance reform is a nationwide, government sponsored buying co-op, which would bring buyers and sellers together in order to facilitate the purchase of health insurance at an affordable price. Federal subsidies would be provided to those who meet certain income tests, thus rendering any unsubsidized insurance unaffordable for them. As a big fan of free markets and competition, this idea makes a lot of sense to me, though one wonders how well it would work under circumstances (e.g., preexisting conditions) and in an area (health insurance) in which the normal magic of the marketplace often falls flat.
One of the provisions of creation of such a co-op is that illegal immigrants would not be granted access to it, even if they wanted to participate with their own money, i.e., buy insurance without a federal subsidy. President Obama, as pusillanimous as any other politician in Washington, has been adamant about not letting undocumented immigrants access to such a pool. How much sense does this make? None. Such denial has been floated as part of a health care overhaul by the Obama administration because the President, and just about every other politician, does not want to be accused of “coddling illegals.” The “no health care for illegals under any circumstances” argument eliminates a substantial part of the motivation for overall health care reform.
I understand the argument that “illegal” has a very specific meaning, that those here illegally shouldn’t be here and thus, the argument goes, ought to be deported rather than given access to benefits designed for those here legally. But I also understand reality; we have millions upon millions of illegal immigrants in this country, and they aren’t going anywhere any time soon both because apprehending and deporting all of them would be impossible (and in some cases inhumane) and because it would be well nigh impossible, at least in the short to intermediate run, for our economy to function without undocumented workers. All these immigrants, like anyone else, have health care needs. If we don’t allow them to buy health insurance, unsubsidized health insurance, we will continue to provide emergency (and not always in the strictest sense of the word) care for free.
Let me reemphasize the word “unsubsidized.” I am not in favor of providing free or subsidized health care for illegal immigrants, especially when so many of our citizens have no health insurance. But that is precisely why I am in favor of letting illegal immigrants have access to a system that enables them to buy coverage with their own money. Do we want to allow them such access, or do we want to continue doing what we do now, i.e., provide illegal immigrants with free health care?
For a guy who doesn’t have an overall opinion on health care (health insurance, really) reform, I sure seem to be writing a lot about it lately!
One of the schemes being advanced as part of health insurance reform is a nationwide, government sponsored buying co-op, which would bring buyers and sellers together in order to facilitate the purchase of health insurance at an affordable price. Federal subsidies would be provided to those who meet certain income tests, thus rendering any unsubsidized insurance unaffordable for them. As a big fan of free markets and competition, this idea makes a lot of sense to me, though one wonders how well it would work under circumstances (e.g., preexisting conditions) and in an area (health insurance) in which the normal magic of the marketplace often falls flat.
One of the provisions of creation of such a co-op is that illegal immigrants would not be granted access to it, even if they wanted to participate with their own money, i.e., buy insurance without a federal subsidy. President Obama, as pusillanimous as any other politician in Washington, has been adamant about not letting undocumented immigrants access to such a pool. How much sense does this make? None. Such denial has been floated as part of a health care overhaul by the Obama administration because the President, and just about every other politician, does not want to be accused of “coddling illegals.” The “no health care for illegals under any circumstances” argument eliminates a substantial part of the motivation for overall health care reform.
I understand the argument that “illegal” has a very specific meaning, that those here illegally shouldn’t be here and thus, the argument goes, ought to be deported rather than given access to benefits designed for those here legally. But I also understand reality; we have millions upon millions of illegal immigrants in this country, and they aren’t going anywhere any time soon both because apprehending and deporting all of them would be impossible (and in some cases inhumane) and because it would be well nigh impossible, at least in the short to intermediate run, for our economy to function without undocumented workers. All these immigrants, like anyone else, have health care needs. If we don’t allow them to buy health insurance, unsubsidized health insurance, we will continue to provide emergency (and not always in the strictest sense of the word) care for free.
Let me reemphasize the word “unsubsidized.” I am not in favor of providing free or subsidized health care for illegal immigrants, especially when so many of our citizens have no health insurance. But that is precisely why I am in favor of letting illegal immigrants have access to a system that enables them to buy coverage with their own money. Do we want to allow them such access, or do we want to continue doing what we do now, i.e., provide illegal immigrants with free health care?
GIMME A STEAK...AND GIVE THAT MAN THE BILL
9/17/09
Yesterday, Senator Max Baucus (D., Montana) revealed his compromise health care proposal to hoots of derision from both sides of the health care “debate,” which, under normal circumstances, would indicate that the bill might have something going for it. While I have been reluctant to comment on the specifics of any health care bill, both because I’m not sure how I feel about the entire “health care reform” proposition (See, inter alia, my 8/13/09 post, TAKE A DEEP BREATH, my 8/26/09 post, “…WOIKIN’ FOR THE MAN EVERY NIGHT AND DAY…”, and my 9/11/09 post “WE PROTECT YOUR HEALTH”) and because I think that, in the end, nothing substantive will pass (See my 8/29/09 post “PENNY LANE IS IN MY EARS AND IN MY EYES…”), one of the specifics of the Baucus plan, and indeed the specific that has raised the most hackles, deserves comment.
The Baucus plan requires people to buy health insurance or face a sliding scale fine that reaches $3,800 per family for those whose earnings exceed 300% of the federal poverty level, or about $66,000 per year. Subsidies would be provided for those families with earnings up to 400% of the federal poverty level, or $88,000 per year, designed to keep, but, in practice, not always successful in keeping, the amount paid for premia to a maximum of 13% of their income. This provision has some people, especially Republicans who love to profess their concern for the “middle class,” apoplectic. It’s a costly mandate, they argue, that will wind up forcing people to pay more for health care than they are paying now. And they are correct; those who currently pay nothing for health insurance, because they don’t have any, will pay more for health insurance because they will be forced to buy such coverage. However, isn’t that one of the major thrusts of health care reform? Pressure on health care costs will be brought down, at least for those who have insurance, by mandating coverage and thus no longer forcing those with insurance to pick up the bills of those who don’t have insurance, by choice or necessity. Under our current, or any, “system,” most uninsured people will not be denied care in the event of a catastrophic illness or injury; they will go to emergency rooms and get the care they need. It might not be the best care, and it will, in most, but not all, cases be limited to catastrophic care, but it will be expensive care, and someone else, under the current “system,” will pay for it. Just as we make people buy car insurance so that the cost of their wrecks doesn’t have to be borne by those responsible enough to buy insurance, any health reform bill should force people to buy insurance so that the cost of their health care, and the cost of their implicit insurance (the assurance that they will get the care necessity to save their lives) doesn’t have to be borne by those responsible enough to buy health insurance. This is an issue both of fairness and of economic efficiency.
Cost is a problem in many cases. Even though, in a recurring theme of the Insightful Pontificator, I refuse to believe that most people don’t fritter away enough money on useless manifestations of their own silliness to cover at least part of the cost of something as vital as health insurance, 13% of one’s income is a lot to suddenly have to spend. Two points are merited, however. First, having to spend that much will make people realize how much health insurance, and health care, costs. The overwhelming majority of people who get their health insurance through an employer provided plan have no idea how much health insurance, or health care, costs. Interestingly, most people involved in this debate get employer provided health insurance, and, in many cases, that employer is the government. If they had to buy their own individual policies, they would have a firmer handle on costs. That is why I am given to saying that the opinions on this issue of those who do have employee coverage is, while not worthless, not nearly as valid as the opinions of those of us who use after tax dollars to buy our own health insurance.
Second, if anything like the Baucus bill becomes law, it is a reasonably sure bet that the aforementioned subsidies will be increased simply because some people cannot afford insurance without greater subsidies and other people are not going to give up their big screen televisions, frequent meals out, big ticket sporting events available for free on television, and luxury cars for something so trivial as health insurance without a deep excavation into your pocket to pay for it. But the more we subsidize health insurance (and take such steps as requiring coverage of those with preexisting conditions, one of the aspects of health insurance reform that stands a decent chance of actually becoming law), the closer we get to government financed universal health care and something very close to a public option and, eventually, a one-payer system. Health care reform is something that is very difficult to do incrementally.
Yesterday, Senator Max Baucus (D., Montana) revealed his compromise health care proposal to hoots of derision from both sides of the health care “debate,” which, under normal circumstances, would indicate that the bill might have something going for it. While I have been reluctant to comment on the specifics of any health care bill, both because I’m not sure how I feel about the entire “health care reform” proposition (See, inter alia, my 8/13/09 post, TAKE A DEEP BREATH, my 8/26/09 post, “…WOIKIN’ FOR THE MAN EVERY NIGHT AND DAY…”, and my 9/11/09 post “WE PROTECT YOUR HEALTH”) and because I think that, in the end, nothing substantive will pass (See my 8/29/09 post “PENNY LANE IS IN MY EARS AND IN MY EYES…”), one of the specifics of the Baucus plan, and indeed the specific that has raised the most hackles, deserves comment.
The Baucus plan requires people to buy health insurance or face a sliding scale fine that reaches $3,800 per family for those whose earnings exceed 300% of the federal poverty level, or about $66,000 per year. Subsidies would be provided for those families with earnings up to 400% of the federal poverty level, or $88,000 per year, designed to keep, but, in practice, not always successful in keeping, the amount paid for premia to a maximum of 13% of their income. This provision has some people, especially Republicans who love to profess their concern for the “middle class,” apoplectic. It’s a costly mandate, they argue, that will wind up forcing people to pay more for health care than they are paying now. And they are correct; those who currently pay nothing for health insurance, because they don’t have any, will pay more for health insurance because they will be forced to buy such coverage. However, isn’t that one of the major thrusts of health care reform? Pressure on health care costs will be brought down, at least for those who have insurance, by mandating coverage and thus no longer forcing those with insurance to pick up the bills of those who don’t have insurance, by choice or necessity. Under our current, or any, “system,” most uninsured people will not be denied care in the event of a catastrophic illness or injury; they will go to emergency rooms and get the care they need. It might not be the best care, and it will, in most, but not all, cases be limited to catastrophic care, but it will be expensive care, and someone else, under the current “system,” will pay for it. Just as we make people buy car insurance so that the cost of their wrecks doesn’t have to be borne by those responsible enough to buy insurance, any health reform bill should force people to buy insurance so that the cost of their health care, and the cost of their implicit insurance (the assurance that they will get the care necessity to save their lives) doesn’t have to be borne by those responsible enough to buy health insurance. This is an issue both of fairness and of economic efficiency.
Cost is a problem in many cases. Even though, in a recurring theme of the Insightful Pontificator, I refuse to believe that most people don’t fritter away enough money on useless manifestations of their own silliness to cover at least part of the cost of something as vital as health insurance, 13% of one’s income is a lot to suddenly have to spend. Two points are merited, however. First, having to spend that much will make people realize how much health insurance, and health care, costs. The overwhelming majority of people who get their health insurance through an employer provided plan have no idea how much health insurance, or health care, costs. Interestingly, most people involved in this debate get employer provided health insurance, and, in many cases, that employer is the government. If they had to buy their own individual policies, they would have a firmer handle on costs. That is why I am given to saying that the opinions on this issue of those who do have employee coverage is, while not worthless, not nearly as valid as the opinions of those of us who use after tax dollars to buy our own health insurance.
Second, if anything like the Baucus bill becomes law, it is a reasonably sure bet that the aforementioned subsidies will be increased simply because some people cannot afford insurance without greater subsidies and other people are not going to give up their big screen televisions, frequent meals out, big ticket sporting events available for free on television, and luxury cars for something so trivial as health insurance without a deep excavation into your pocket to pay for it. But the more we subsidize health insurance (and take such steps as requiring coverage of those with preexisting conditions, one of the aspects of health insurance reform that stands a decent chance of actually becoming law), the closer we get to government financed universal health care and something very close to a public option and, eventually, a one-payer system. Health care reform is something that is very difficult to do incrementally.
Monday, September 14, 2009
“I’M A RETIRED (SCHOOL TEACHER), LIVING ON A PENSION…”
9/14/09
I sent the following letter to the Chicago Sun-Times in response to another installment in its series “Pension Bonanza”:
9/14/09
In today’s installment of its “Pension Bonanza” series, the Sun-Times reports that several union officials are collecting gargantuan pensions under an obscure 1957 law that allows retired local government workers to draw pensions based not only on their service in government, but also on time they spent, and on salaries they earned, working for labor unions, lobbying groups, and other non-governmental organizations. The Sun-Times cited, inter alia, Chicago Federation of Labor President Dennis Gannon, who draws a city pension of $153,649 per year while still holding his union post. Especially interesting was the case of Reginald L. Weaver, who once worked as an elementary teacher in Harvey but who, for at least the last twelve years, has held various union posts, including president of the National Education Association, the job he currently holds. Mr. Weaver currently draws a pension from the state of Illinois of $226,485 per year, while, like Mr. Gannon, still holding his union post. Need I say that teachers in Harvey, or just about anywhere, for that matter, the people whom Mr. Weaver purportedly represents, do not make anything like $226,000 per year?
Mr. Weaver responded to the article by opining:
“It’s unfortunate that people focus on a pension rather than why kids in urban areas aren’t receiving the education they should. Those are the kinds of things I wish people would focus on.”
Three thoughts:
First, given that second sentence, I hope Mr. Weaver did not teach English. If he did, we may have found out why at least some kids are not getting the education they need.
Second, I’ll bet that Mr. Weaver thinks it’s unfortunate that people focus on his pension.
Third, many of are concerned about, if not focused on, why kids in urban areas aren’t receiving the education they should, or much of any education at all, for that matter. We realize that education is one of the surest paths to a rewarding life for these young people and to a better society for all of us. The reason that we don’t express such concern by going along with Mr. Weaver’s preferred solution to the educational problems of what he calls the “urban areas,” i.e., more money for “schools,” is that money for “schools” tends to find its way not into the instruction and guidance of young people or into fairly compensating outstanding teachers, but into the pockets of educational bureaucrats and union chieftains like Mr. Weaver.
Mark Quinn
I sent the following letter to the Chicago Sun-Times in response to another installment in its series “Pension Bonanza”:
9/14/09
In today’s installment of its “Pension Bonanza” series, the Sun-Times reports that several union officials are collecting gargantuan pensions under an obscure 1957 law that allows retired local government workers to draw pensions based not only on their service in government, but also on time they spent, and on salaries they earned, working for labor unions, lobbying groups, and other non-governmental organizations. The Sun-Times cited, inter alia, Chicago Federation of Labor President Dennis Gannon, who draws a city pension of $153,649 per year while still holding his union post. Especially interesting was the case of Reginald L. Weaver, who once worked as an elementary teacher in Harvey but who, for at least the last twelve years, has held various union posts, including president of the National Education Association, the job he currently holds. Mr. Weaver currently draws a pension from the state of Illinois of $226,485 per year, while, like Mr. Gannon, still holding his union post. Need I say that teachers in Harvey, or just about anywhere, for that matter, the people whom Mr. Weaver purportedly represents, do not make anything like $226,000 per year?
Mr. Weaver responded to the article by opining:
“It’s unfortunate that people focus on a pension rather than why kids in urban areas aren’t receiving the education they should. Those are the kinds of things I wish people would focus on.”
Three thoughts:
First, given that second sentence, I hope Mr. Weaver did not teach English. If he did, we may have found out why at least some kids are not getting the education they need.
Second, I’ll bet that Mr. Weaver thinks it’s unfortunate that people focus on his pension.
Third, many of are concerned about, if not focused on, why kids in urban areas aren’t receiving the education they should, or much of any education at all, for that matter. We realize that education is one of the surest paths to a rewarding life for these young people and to a better society for all of us. The reason that we don’t express such concern by going along with Mr. Weaver’s preferred solution to the educational problems of what he calls the “urban areas,” i.e., more money for “schools,” is that money for “schools” tends to find its way not into the instruction and guidance of young people or into fairly compensating outstanding teachers, but into the pockets of educational bureaucrats and union chieftains like Mr. Weaver.
Mark Quinn
Sunday, September 13, 2009
“I’M A RETIRED (CITY OF CHICAGO WORKER), LIVING ON A PENSION…”
9/13/09
News stories in today’s (i.e., Sunday, 9/13’s) and Friday, 9/11/09’s Chicago Sun-Times, authored by ace political reporters Tim Novak and Art Golab, detailed the generous pensions public employees receive in the state of Illinois. I’ve been harping on this issue for years, even before I wrote my now seminal 11/16/07 piece, “ELIHU, WOULD YOU LOOFAH MY STRETCH MARKS?”, in which I related the pension time bomb, about to blow up our local government budgets, and to lead to near outright rebellion among property taxpayers, to the Drew Peterson case. The most salient paragraph in that piece was as follows:
The big problem in the muni market is just beginning to be felt and, admittedly, is not part of the market’s immediate difficulties but will be far greater as it comes to fruition. This problem is public sector pensions. Our local government employees get perhaps the most generous pensions, on a percentage basis, of anyone in the country. Just about anyone, for instance, knows a cop, teacher, fireman, or just a local bureaucrat who has retired in his or her early 50s on an astronomical percentage (70%-80%) of his or her salary. One of the less shocking aspects of the Drew Peterson story is that the scrofulous Mr. Peterson is now receiving a pension of $72,000 per year after “retiring” at the age of 53 from the Bolingbrook Police Department. And, for those readers not familiar with the Chicago area, Bolingbrook, while not Mayberry, is not exactly tough duty for a cop. These huge and growing pension obligations are consuming an ever greater share of municipal budgets and thus of residents’ property tax bills. Back in the days when local government workers were somewhat underpaid relative to their private sector colleagues and a large percentage of the taxpayers had defined benefit pension plans, the taxpayers, while never happy about paying taxes, were less hesitant to pay real estate taxes to support rich defined benefit plans for municipal workers. But now that local government workers salaries’ are getting higher, pensions are getting ever richer, and the defined benefit pension plan is going the way of the pterodactyl in the private sector, property taxpayers are getting more and more resistant to paying their growing real estate bills when an ever growing portion of those bills is going to fund pension benefits of which they can only dream. This resistance has the potential to turn into outright rebellion as property tax bills continue to skyrocket, local services deteriorate, or both. While not being the immediate source of problems in the muni bond market, this is going to result in a crisis in municipal budgets in the very near future.
The punch line, of course, is that state and local government pensions are currently a big financial problem and they will become an enormous political problem as they get more lucrative and fewer taxpayers, the people who are picking up the tab for these lavish retirement benefits, receive pensions from their employers.
Today’s Sun-Times reports on the time honored Chicago custom of “double-dipping,” i.e., working at a government job until one is about fifty, retiring with a generous pension, and then getting another government job covered by a separate pension plan, thereby collecting both salary and pension courtesy of the taxpayers. The story related the story of Mr. Craig Bazzani, who draws an annual income of $529,273 courtesy of the taxpayers, along with those of Glenn “Max” McGee ($409,976), Patrick Murphy ($292,644), Jim Edgar ($287,111), Dana Starks ($263,897), and so on down to Cherryl Thomas, barely scraping by on $104,463. I’m sure, as Mayor Daley has said in similar cases, that these people “could have done much better in the private sector.” Yeah. Uh-huh. Goldman would have hired all these people, I’m sure.
Interestingly, Jacquelyn Heard, the mayor’s press secretary, deigned to enlighten the benighted taxpayers with the wisdom that can only be derived from years of slopping at the public trough. This pension boondoggle is actually, according to Ms. Heard, a good deal for taxpayers, if only we had the intelligence to realize it. Ms. Heard condescended to tell us:
“I am, by no means, faulting taxpayers for looking askance at this. The thing is, they are out of (sic) no more money than if the jobs had been given to two other people. In some cases, it’s a benefit to the taxpayers because we’re getting someone with a higher skill level. In the case of Dana Starks, he was due his pension, and he was going to draw that from the Chicago Police Department. At the same time, we needed someone at the Department of Human Relations. Here, we have a person who has the (Here’s one of those cutesy-pie terms I referred to in the now seminal 9/31/09 piece “OOH E OOH AH AH, TING TANG, WALLA WALLA BING BANG…”) skill sets. He can hit the ground running. He can start improving relations throughout the city. He had other job offers and we didn’t want to lose him.”
Think about this statement for awhile. (I am only using Mr. Starks in this argument because Ms. Heard specifically referred to Mr. Starks in her observations. I don’t know any more about Mr. Starks than I read in the paper.) Mr. Starks retired from his administrative position with the Chicago Police Department, after 30 years with the Department, at the age of 57 and began drawing his pension of $131,000 per year. He then took a job as Chicago’s “human relations commissioner” (“Human relations commissioner?” C’mon! Only in the public sector and in those big corporations that have been effectively made arms of the public sector by so many government contracts and so much cross-pollination in their executive ranks.), which paid him $133,000 per year. The taxpayers are paying him $264,000. Ms. Heard’s logic is, however, on the surface, correct. Assuming the city needs something called a human relations commissioner, the taxpayers are paying three salaries/pensions:
Mr. Starks’ CPD pension
Mr. Starks’ new salary
The salary of Mr. Starks’ replacement (Assuming that whatever role he had with the CPD had to be filled. Note that Mr. Starks, though having started, one presumes, as a street cop, was, by the time he retired, a bureaucrat. What the CPD needs is more people on the street, not more bureaucrats, but I digress.)
Assuming, again, that either of Mr. Stark’s jobs is anything more than sinecures for political hangers-on and check writers, IF MR. STARKS RETIRED from his police job, we would indeed be paying these three salaries/pensions in any case. But what if the human relations commissioner job were not made available to Mr. Starks? He might have kept his desk job with the CPD, in which case the taxpayers would only be paying two salaries:
Mr. Starks’ CPD salary
The new human relations commissioner’s salary.
So, no, Ms. Heard, the current situation is not necessarily such a good deal for the taxpayers. Conceivably, the taxpayers are getting a two for the price of three deal. One could argue that, under the existing pension regimen, Mr. Starks, like any state or local employee who has accumulated a good sized pension and who has even a modicum of financial sense, would certainly retire and we would be paying for the three salaries/pensions outlined above. When one qualifies for a pension of 70% or 80% of one’s salary, if one continues to work at his or her current position, one is effectively working for a small fraction of one’s former pay. This, of course, goes back to the original question behind all these articles: Why are these public pensions so lucrative? That is grist for an even longer post.
There is, however, a potentially greater danger here than even the pension bonanza we have so generously made available to our public servants. Let’s assume that Ms. Heard’s contention is true, that Mr. Starks, or any high level bureaucrat “had other job offers.” Whence might those job offers emanate? Forget about Mr. Starks for a minute and broaden the discussion to include any of these public sector eminences. Are private employers lining up to hire these guys because of the skills and work habits they acquired in a lifetime on the public payroll? Or are they looking to hire these former public servants because of the connections they bring and the business, public business, effective access to the taxpayers’ wallets, they can generate? Think no-bid contracts, business as usual in Chicago, etc., and the answer becomes glaringly obvious. So maybe it is cheaper to keep these big time trough sloppers on the public payroll; they do less damage there than they can do helping hand out even more of your money to their friends, employers, and friends of those at the top of the power structure.
One final, and only tangentially related, note:
What makes Ms. Heard think that Mr. Stark’s years with the CPD make him so supremely qualified to be Human Relations Commissioner that he can “hit the ground running”? Assuming that there is no one capable of writing a campaign check or working a precinct who is NOT qualified to be Human Relations Commissioner, how does Mr. Stark’s CPD experience qualify him for that job? One could argue, very justifiably, that cops are masters at human relations; it goes with the job and helps keep officers alive in situations so fraught with danger that we who are not cops cannot possibly imagine them. So why couldn’t any police officer with more than a few years of street experience be just as qualified as Mr. Starks to be “Human Relations Commissioner,” whatever in the world that is.
News stories in today’s (i.e., Sunday, 9/13’s) and Friday, 9/11/09’s Chicago Sun-Times, authored by ace political reporters Tim Novak and Art Golab, detailed the generous pensions public employees receive in the state of Illinois. I’ve been harping on this issue for years, even before I wrote my now seminal 11/16/07 piece, “ELIHU, WOULD YOU LOOFAH MY STRETCH MARKS?”, in which I related the pension time bomb, about to blow up our local government budgets, and to lead to near outright rebellion among property taxpayers, to the Drew Peterson case. The most salient paragraph in that piece was as follows:
The big problem in the muni market is just beginning to be felt and, admittedly, is not part of the market’s immediate difficulties but will be far greater as it comes to fruition. This problem is public sector pensions. Our local government employees get perhaps the most generous pensions, on a percentage basis, of anyone in the country. Just about anyone, for instance, knows a cop, teacher, fireman, or just a local bureaucrat who has retired in his or her early 50s on an astronomical percentage (70%-80%) of his or her salary. One of the less shocking aspects of the Drew Peterson story is that the scrofulous Mr. Peterson is now receiving a pension of $72,000 per year after “retiring” at the age of 53 from the Bolingbrook Police Department. And, for those readers not familiar with the Chicago area, Bolingbrook, while not Mayberry, is not exactly tough duty for a cop. These huge and growing pension obligations are consuming an ever greater share of municipal budgets and thus of residents’ property tax bills. Back in the days when local government workers were somewhat underpaid relative to their private sector colleagues and a large percentage of the taxpayers had defined benefit pension plans, the taxpayers, while never happy about paying taxes, were less hesitant to pay real estate taxes to support rich defined benefit plans for municipal workers. But now that local government workers salaries’ are getting higher, pensions are getting ever richer, and the defined benefit pension plan is going the way of the pterodactyl in the private sector, property taxpayers are getting more and more resistant to paying their growing real estate bills when an ever growing portion of those bills is going to fund pension benefits of which they can only dream. This resistance has the potential to turn into outright rebellion as property tax bills continue to skyrocket, local services deteriorate, or both. While not being the immediate source of problems in the muni bond market, this is going to result in a crisis in municipal budgets in the very near future.
The punch line, of course, is that state and local government pensions are currently a big financial problem and they will become an enormous political problem as they get more lucrative and fewer taxpayers, the people who are picking up the tab for these lavish retirement benefits, receive pensions from their employers.
Today’s Sun-Times reports on the time honored Chicago custom of “double-dipping,” i.e., working at a government job until one is about fifty, retiring with a generous pension, and then getting another government job covered by a separate pension plan, thereby collecting both salary and pension courtesy of the taxpayers. The story related the story of Mr. Craig Bazzani, who draws an annual income of $529,273 courtesy of the taxpayers, along with those of Glenn “Max” McGee ($409,976), Patrick Murphy ($292,644), Jim Edgar ($287,111), Dana Starks ($263,897), and so on down to Cherryl Thomas, barely scraping by on $104,463. I’m sure, as Mayor Daley has said in similar cases, that these people “could have done much better in the private sector.” Yeah. Uh-huh. Goldman would have hired all these people, I’m sure.
Interestingly, Jacquelyn Heard, the mayor’s press secretary, deigned to enlighten the benighted taxpayers with the wisdom that can only be derived from years of slopping at the public trough. This pension boondoggle is actually, according to Ms. Heard, a good deal for taxpayers, if only we had the intelligence to realize it. Ms. Heard condescended to tell us:
“I am, by no means, faulting taxpayers for looking askance at this. The thing is, they are out of (sic) no more money than if the jobs had been given to two other people. In some cases, it’s a benefit to the taxpayers because we’re getting someone with a higher skill level. In the case of Dana Starks, he was due his pension, and he was going to draw that from the Chicago Police Department. At the same time, we needed someone at the Department of Human Relations. Here, we have a person who has the (Here’s one of those cutesy-pie terms I referred to in the now seminal 9/31/09 piece “OOH E OOH AH AH, TING TANG, WALLA WALLA BING BANG…”) skill sets. He can hit the ground running. He can start improving relations throughout the city. He had other job offers and we didn’t want to lose him.”
Think about this statement for awhile. (I am only using Mr. Starks in this argument because Ms. Heard specifically referred to Mr. Starks in her observations. I don’t know any more about Mr. Starks than I read in the paper.) Mr. Starks retired from his administrative position with the Chicago Police Department, after 30 years with the Department, at the age of 57 and began drawing his pension of $131,000 per year. He then took a job as Chicago’s “human relations commissioner” (“Human relations commissioner?” C’mon! Only in the public sector and in those big corporations that have been effectively made arms of the public sector by so many government contracts and so much cross-pollination in their executive ranks.), which paid him $133,000 per year. The taxpayers are paying him $264,000. Ms. Heard’s logic is, however, on the surface, correct. Assuming the city needs something called a human relations commissioner, the taxpayers are paying three salaries/pensions:
Mr. Starks’ CPD pension
Mr. Starks’ new salary
The salary of Mr. Starks’ replacement (Assuming that whatever role he had with the CPD had to be filled. Note that Mr. Starks, though having started, one presumes, as a street cop, was, by the time he retired, a bureaucrat. What the CPD needs is more people on the street, not more bureaucrats, but I digress.)
Assuming, again, that either of Mr. Stark’s jobs is anything more than sinecures for political hangers-on and check writers, IF MR. STARKS RETIRED from his police job, we would indeed be paying these three salaries/pensions in any case. But what if the human relations commissioner job were not made available to Mr. Starks? He might have kept his desk job with the CPD, in which case the taxpayers would only be paying two salaries:
Mr. Starks’ CPD salary
The new human relations commissioner’s salary.
So, no, Ms. Heard, the current situation is not necessarily such a good deal for the taxpayers. Conceivably, the taxpayers are getting a two for the price of three deal. One could argue that, under the existing pension regimen, Mr. Starks, like any state or local employee who has accumulated a good sized pension and who has even a modicum of financial sense, would certainly retire and we would be paying for the three salaries/pensions outlined above. When one qualifies for a pension of 70% or 80% of one’s salary, if one continues to work at his or her current position, one is effectively working for a small fraction of one’s former pay. This, of course, goes back to the original question behind all these articles: Why are these public pensions so lucrative? That is grist for an even longer post.
There is, however, a potentially greater danger here than even the pension bonanza we have so generously made available to our public servants. Let’s assume that Ms. Heard’s contention is true, that Mr. Starks, or any high level bureaucrat “had other job offers.” Whence might those job offers emanate? Forget about Mr. Starks for a minute and broaden the discussion to include any of these public sector eminences. Are private employers lining up to hire these guys because of the skills and work habits they acquired in a lifetime on the public payroll? Or are they looking to hire these former public servants because of the connections they bring and the business, public business, effective access to the taxpayers’ wallets, they can generate? Think no-bid contracts, business as usual in Chicago, etc., and the answer becomes glaringly obvious. So maybe it is cheaper to keep these big time trough sloppers on the public payroll; they do less damage there than they can do helping hand out even more of your money to their friends, employers, and friends of those at the top of the power structure.
One final, and only tangentially related, note:
What makes Ms. Heard think that Mr. Stark’s years with the CPD make him so supremely qualified to be Human Relations Commissioner that he can “hit the ground running”? Assuming that there is no one capable of writing a campaign check or working a precinct who is NOT qualified to be Human Relations Commissioner, how does Mr. Stark’s CPD experience qualify him for that job? One could argue, very justifiably, that cops are masters at human relations; it goes with the job and helps keep officers alive in situations so fraught with danger that we who are not cops cannot possibly imagine them. So why couldn’t any police officer with more than a few years of street experience be just as qualified as Mr. Starks to be “Human Relations Commissioner,” whatever in the world that is.
Friday, September 11, 2009
“YOU CHEATED, YOU LIED, YOU SAID THAT YOU LOVED ME…”
9/11/09
The media have been abuzz since Wednesday night, but not in response not to President Obama’s heath care speech, which essentially boiled down to the equivalent of intellectual mashed potatoes we have come to expect from our public officials. Instead, everyone is agog at Representative Joe Wilson’s (R. S.C.) shouting “You lie!” when the President stated that his health care plan (The President has a plan?) would not cover illegal immigrants.
Representative Wilson’s outburst should not have been made, and, by shouting “You lie!,” he displayed immaturity and an inability to control his emotions. (Or maybe not; continue reading to the last paragraph.) For those reasons, Mr. Wilson’s outburst, regardless of its veracity or lack thereof, was completely inappropriate. The other reasons being advanced for its inadvisability, however, are groundless, to wit:
--The outburst will somehow hurt Mr. Wilson.
CBS radio news on the hour yesterday, during the 10:00 AM, Chicago time, broadcast, reported that Mr. Wilson “will pay in ways he didn’t expect” for his outburst. The story went on to report that contributions were flowing in to his opponent in the wake of Mr. Wilson’s fit of boorishness. This is indeed true; in response to appeals from the MoveOn.org and the Democratic National Committee, Mr. Wilson’s opponent, Rob Miller, has received pledges totaling more than $500,000 from across the country since Wednesday night.
But think for a minute. Who outside South Carolina knew who Representative Joe Wilson was until Wednesday night? Now everyone does. And, as the sayings go, there is no such thing as bad publicity, and just make sure you spell my name correctly when you write horrible things about me. Mr. Wilson is the darling du jour of the conservative punditocracy. Who thinks that the contributions to Mr. Miller from the left will not be more than matched from contributions to Mr. Wilson from the more rabid fringes of the right? More immediately important, Mr. Wilson’s support among voters in his very conservative district, where he garnered 54% of the vote against Mr. Miller in 2008 in what passes for a “close” race in that district, has skyrocketed in the wake of his childish outburst. Politically and financially, Mr. Wilson has only helped himself by calling Mr. Obama out, regardless of the veracity, or lack thereof, of his contention or the general mookishness he displayed.
--Regardless of what one thinks of the occupant of that office, one should show respect for the office of President of the United States; Representative Wilson showed no such respect.
Once upon a time, that may have been true. But once upon a time, we had an informed electorate that carefully considered politicians and their ideas and voted based on careful assessment of the issues or a thorough analysis of their (the voters’) self interest. (The latter is completely legitimate, by the way; it’s how Chicago, and other big cities, selected its political leadership for years; see my upcoming book The Chairman, A Novel of Big City Politics.) People, though perhaps not having spent as many years in school (learning God knows what) as today’s electorate, actually read newspapers and were aware of what was going on around them. Campaigns were relatively short; thus, candidates were forced to run on their records of public or private service, not the latest entrail readings of political “consultants.” Over the last, oh, twenty or thirty years, the president of the United States has been the guy whose spinmeisters have been able to bamboozle a larger chunk of an apathetic, ill-informed, fatuous electorate than have the other guy’s spinmeisters.
Am I being too harsh in my assessment of our current electorate? Consider the Lincoln-Douglas debates. Can you imagine such fora taking place today? One can hear the cries from the besotted listeners: “Boring! Boring! Tell me about the candidates’ preferences in underwear!”
As H.L. Mencken said long ago, back before the level of sophistication of the typical American voter really fell off a cliff, “The American people get the government they deserve…and they get it good.” The presidency is a reflection of the electorate. In today’s America, where the situation comedy and the reality show have driven the conventional newspaper to the point of extinction, how is that presidency worthy of any respect whatsoever?
--Representative Wilson’s loutishness was beneath the dignity of the Congress of the United States.
Beneath the dignity of the Congress of the United States? Is there an extant institution that has less dignity than the Congress of the United States? When the words “Congress of the United States” are uttered, “dignity” is perhaps the furthest thing from any sentient listener’s mind, for the reason outlined in my discussion of the presidency above.
Perhaps the greatest man to grace the United States Senate was S.I. Hayakawa (R., CA), who, smart enough not to make a career of the sandbox game that is Washington, D.C., served from 1977 to 1983. He summed up his clear-eyed understanding of the Congress of the United States when he thanked a hapless witness before some ill-conceived, showboating committee of the Senate by stating “I thank you for appearing before this pack of hyenas.”
One more thought. Perhaps, on reflection, Mr. Wilson’s outburst, while unusual in latter day America, is, even if a touch boorish, not such a bad thing. Anyone who watches sessions of the British House of Commons understands that similar outbursts are part of the normal operations of that august body. Perhaps such spirited argument, and sometimes, ad hominem attacks, might not only liven things up a bit but allow us to get to the meat of the issues more expeditiously and effectively.
The media have been abuzz since Wednesday night, but not in response not to President Obama’s heath care speech, which essentially boiled down to the equivalent of intellectual mashed potatoes we have come to expect from our public officials. Instead, everyone is agog at Representative Joe Wilson’s (R. S.C.) shouting “You lie!” when the President stated that his health care plan (The President has a plan?) would not cover illegal immigrants.
Representative Wilson’s outburst should not have been made, and, by shouting “You lie!,” he displayed immaturity and an inability to control his emotions. (Or maybe not; continue reading to the last paragraph.) For those reasons, Mr. Wilson’s outburst, regardless of its veracity or lack thereof, was completely inappropriate. The other reasons being advanced for its inadvisability, however, are groundless, to wit:
--The outburst will somehow hurt Mr. Wilson.
CBS radio news on the hour yesterday, during the 10:00 AM, Chicago time, broadcast, reported that Mr. Wilson “will pay in ways he didn’t expect” for his outburst. The story went on to report that contributions were flowing in to his opponent in the wake of Mr. Wilson’s fit of boorishness. This is indeed true; in response to appeals from the MoveOn.org and the Democratic National Committee, Mr. Wilson’s opponent, Rob Miller, has received pledges totaling more than $500,000 from across the country since Wednesday night.
But think for a minute. Who outside South Carolina knew who Representative Joe Wilson was until Wednesday night? Now everyone does. And, as the sayings go, there is no such thing as bad publicity, and just make sure you spell my name correctly when you write horrible things about me. Mr. Wilson is the darling du jour of the conservative punditocracy. Who thinks that the contributions to Mr. Miller from the left will not be more than matched from contributions to Mr. Wilson from the more rabid fringes of the right? More immediately important, Mr. Wilson’s support among voters in his very conservative district, where he garnered 54% of the vote against Mr. Miller in 2008 in what passes for a “close” race in that district, has skyrocketed in the wake of his childish outburst. Politically and financially, Mr. Wilson has only helped himself by calling Mr. Obama out, regardless of the veracity, or lack thereof, of his contention or the general mookishness he displayed.
--Regardless of what one thinks of the occupant of that office, one should show respect for the office of President of the United States; Representative Wilson showed no such respect.
Once upon a time, that may have been true. But once upon a time, we had an informed electorate that carefully considered politicians and their ideas and voted based on careful assessment of the issues or a thorough analysis of their (the voters’) self interest. (The latter is completely legitimate, by the way; it’s how Chicago, and other big cities, selected its political leadership for years; see my upcoming book The Chairman, A Novel of Big City Politics.) People, though perhaps not having spent as many years in school (learning God knows what) as today’s electorate, actually read newspapers and were aware of what was going on around them. Campaigns were relatively short; thus, candidates were forced to run on their records of public or private service, not the latest entrail readings of political “consultants.” Over the last, oh, twenty or thirty years, the president of the United States has been the guy whose spinmeisters have been able to bamboozle a larger chunk of an apathetic, ill-informed, fatuous electorate than have the other guy’s spinmeisters.
Am I being too harsh in my assessment of our current electorate? Consider the Lincoln-Douglas debates. Can you imagine such fora taking place today? One can hear the cries from the besotted listeners: “Boring! Boring! Tell me about the candidates’ preferences in underwear!”
As H.L. Mencken said long ago, back before the level of sophistication of the typical American voter really fell off a cliff, “The American people get the government they deserve…and they get it good.” The presidency is a reflection of the electorate. In today’s America, where the situation comedy and the reality show have driven the conventional newspaper to the point of extinction, how is that presidency worthy of any respect whatsoever?
--Representative Wilson’s loutishness was beneath the dignity of the Congress of the United States.
Beneath the dignity of the Congress of the United States? Is there an extant institution that has less dignity than the Congress of the United States? When the words “Congress of the United States” are uttered, “dignity” is perhaps the furthest thing from any sentient listener’s mind, for the reason outlined in my discussion of the presidency above.
Perhaps the greatest man to grace the United States Senate was S.I. Hayakawa (R., CA), who, smart enough not to make a career of the sandbox game that is Washington, D.C., served from 1977 to 1983. He summed up his clear-eyed understanding of the Congress of the United States when he thanked a hapless witness before some ill-conceived, showboating committee of the Senate by stating “I thank you for appearing before this pack of hyenas.”
One more thought. Perhaps, on reflection, Mr. Wilson’s outburst, while unusual in latter day America, is, even if a touch boorish, not such a bad thing. Anyone who watches sessions of the British House of Commons understands that similar outbursts are part of the normal operations of that august body. Perhaps such spirited argument, and sometimes, ad hominem attacks, might not only liven things up a bit but allow us to get to the meat of the issues more expeditiously and effectively.
“WE PROTECT YOUR HEALTH”
9/11/09
This morning, “progressive” talk show host Ed Schultz, like just about every talk show host, right or left, was discussing “health care,” a subject that is surely trying the already limited patience and attention spans of most Americans. I don’t know what Mr. Schultz’s major point was; I jumped in in the middle of his conversation he was having with a caller, who was presumably an MD, as I was looking for an alternative to the commercials on CNBC, Bloomberg, Dave Ramsey, and WBBM-AM on my car radio. I presume that “Big Eddie,” a likeable, and occasionally quite sensible, self-described leftie, was promoting the public option or something like it, but I could be wrong and, for purposes of this post, it doesn’t matter. What struck me was a statement Mr. Schultz made regarding “high deductible” plans. I was in the car and, since, unlike most drivers, I pay attention when I drive, I did not take notes and hence cannot quote Mr. Schultz, so I’ll paraphrase while remaining true to his point:
A $2,000 deductible is pretty heavy for a working family with a couple of kids.
I am sure that I will get plenty of flak for the following observations, and not only from the self-styled champions of “the poor” or “the working poor” (Describing people as “the poor” or “the working poor” have been rendered largely meaningless in our profligate, just gotta have it so I can show it society. People would be surprised how many people who are considered “rich” by those who are unable to see past appearances are, in reality, poor in the sense that they, even if not technically bankrupt, have no net worth because they owe more than they “own.” These people may technically “own” large, “upscale” homes, wide screen TVs, the very latest electronic stress inducers, and several “luxury CUVs,” but they are, for all intents and purposes, like Uncle Roman in the classic “The Great Outdoors,” “broke, busted, bankrupt.” A far better description of those we generally regard as “poor” would be “low income.” But I digress.), but also from those who, while “possessing” plenty of largely useless and frivolous gimcracks, have yet to acquire all the trappings of faux wealth they “deserve,” but have driven themselves to financial ruin in their ongoing, yet ultimately doomed, attempts to fill that mysterious hole in their lives with the latest geegaw that their similarly gormless neighbors have recently “acquired.”
Despite the flak I will get for being cold, cruel, heartless, or “out of touch,” I have to ask how a $2,000 deductible can be “heavy”? For whom? Even if one doesn’t make much money at all, one should have AT LEAST $2,000 put aside for emergencies. Anyone, no matter how little he makes, should be able to set aside AT LEAST 10% (but 20%, 30%, or more is far preferable and, believe it or not, doable) of his income. At that rate, accumulating $2,000 should take very little time. Put another way, if one isn’t saving 10% of one’s income, one is spending money on things that are far less important than accumulating savings. Even if one is classified correctly as “low income,” one would be amazed at how much one can save by, say, carrying one’s lunch to work, not buying snacks or pop at the convenience store by the individual serving, dropping some cable channels, eschewing sporting events, movies, or other forms of outside the home entertainment, etc. Put very simply, anyone with an income can put aside at least 10% of that income and thus rather quickly have $2,000 available for emergencies, like a deductible for one’s, or one’s children’s, medical deductibles. One only has to learn to prioritize and save.
Some might argue that they have $2,000 (or, in the cases of the faux rich the Wall Street types once assured us were “immune” to recession because of their “high incomes and net worths,” $2,000 in line availability on their credit cards), but they don’t want to spend it on medical deductibles. That should be someone else’s (the government’s, their employer’s, etc.) responsibility. But what could possibly be important than the health of one’s children? If you child really needs to see a doctor, or worse, a relatively small deductible should be completely inconsequential. If one has more important things on which to spend his money than the treatment the legitimate medical needs of one’s family (Do see, however, my 5/27/09 post “Gimme a bromo;” we would all do well to be a little more discriminating in our usage of “health care.”), why should the taxpayers, or your employer, place a higher priority on the health of your children, or you, than you do?
Besides the larger point I am trying to make about saving and spending priorities, a more specific point arises from this issue: any health care plan that doesn’t involve deductibles, and more than token deductibles, is doomed because such a plan would exacerbate the core problem with our system of health insurance; i.e., the one who uses the service is not the one who pays for the service. One does not have to be an economic genius, or even mildly interested in the subject, to understand why such a separation of user from payer has dug us into the hole in which we find ourselves. Without deductibles, without the user of the service having to ask himself if he really needs the procedure or doctor visit he is contemplating, there will be no effective cost controls. And, no, not every sniffle, twinge of discomfort, or inane commercial for the latest wonder drug to treat maladies viewers didn’t even realize they had, requires us to “ask (our) doctor,” unless, of course, someone else pays. Then that inquiry, doctor visit, or procedure, no matter how expensive, becomes essential to the continuance of our stay in this mortal coil. See, again, my seminal 5/57/09 post “Gimme a bromo.”
This morning, “progressive” talk show host Ed Schultz, like just about every talk show host, right or left, was discussing “health care,” a subject that is surely trying the already limited patience and attention spans of most Americans. I don’t know what Mr. Schultz’s major point was; I jumped in in the middle of his conversation he was having with a caller, who was presumably an MD, as I was looking for an alternative to the commercials on CNBC, Bloomberg, Dave Ramsey, and WBBM-AM on my car radio. I presume that “Big Eddie,” a likeable, and occasionally quite sensible, self-described leftie, was promoting the public option or something like it, but I could be wrong and, for purposes of this post, it doesn’t matter. What struck me was a statement Mr. Schultz made regarding “high deductible” plans. I was in the car and, since, unlike most drivers, I pay attention when I drive, I did not take notes and hence cannot quote Mr. Schultz, so I’ll paraphrase while remaining true to his point:
A $2,000 deductible is pretty heavy for a working family with a couple of kids.
I am sure that I will get plenty of flak for the following observations, and not only from the self-styled champions of “the poor” or “the working poor” (Describing people as “the poor” or “the working poor” have been rendered largely meaningless in our profligate, just gotta have it so I can show it society. People would be surprised how many people who are considered “rich” by those who are unable to see past appearances are, in reality, poor in the sense that they, even if not technically bankrupt, have no net worth because they owe more than they “own.” These people may technically “own” large, “upscale” homes, wide screen TVs, the very latest electronic stress inducers, and several “luxury CUVs,” but they are, for all intents and purposes, like Uncle Roman in the classic “The Great Outdoors,” “broke, busted, bankrupt.” A far better description of those we generally regard as “poor” would be “low income.” But I digress.), but also from those who, while “possessing” plenty of largely useless and frivolous gimcracks, have yet to acquire all the trappings of faux wealth they “deserve,” but have driven themselves to financial ruin in their ongoing, yet ultimately doomed, attempts to fill that mysterious hole in their lives with the latest geegaw that their similarly gormless neighbors have recently “acquired.”
Despite the flak I will get for being cold, cruel, heartless, or “out of touch,” I have to ask how a $2,000 deductible can be “heavy”? For whom? Even if one doesn’t make much money at all, one should have AT LEAST $2,000 put aside for emergencies. Anyone, no matter how little he makes, should be able to set aside AT LEAST 10% (but 20%, 30%, or more is far preferable and, believe it or not, doable) of his income. At that rate, accumulating $2,000 should take very little time. Put another way, if one isn’t saving 10% of one’s income, one is spending money on things that are far less important than accumulating savings. Even if one is classified correctly as “low income,” one would be amazed at how much one can save by, say, carrying one’s lunch to work, not buying snacks or pop at the convenience store by the individual serving, dropping some cable channels, eschewing sporting events, movies, or other forms of outside the home entertainment, etc. Put very simply, anyone with an income can put aside at least 10% of that income and thus rather quickly have $2,000 available for emergencies, like a deductible for one’s, or one’s children’s, medical deductibles. One only has to learn to prioritize and save.
Some might argue that they have $2,000 (or, in the cases of the faux rich the Wall Street types once assured us were “immune” to recession because of their “high incomes and net worths,” $2,000 in line availability on their credit cards), but they don’t want to spend it on medical deductibles. That should be someone else’s (the government’s, their employer’s, etc.) responsibility. But what could possibly be important than the health of one’s children? If you child really needs to see a doctor, or worse, a relatively small deductible should be completely inconsequential. If one has more important things on which to spend his money than the treatment the legitimate medical needs of one’s family (Do see, however, my 5/27/09 post “Gimme a bromo;” we would all do well to be a little more discriminating in our usage of “health care.”), why should the taxpayers, or your employer, place a higher priority on the health of your children, or you, than you do?
Besides the larger point I am trying to make about saving and spending priorities, a more specific point arises from this issue: any health care plan that doesn’t involve deductibles, and more than token deductibles, is doomed because such a plan would exacerbate the core problem with our system of health insurance; i.e., the one who uses the service is not the one who pays for the service. One does not have to be an economic genius, or even mildly interested in the subject, to understand why such a separation of user from payer has dug us into the hole in which we find ourselves. Without deductibles, without the user of the service having to ask himself if he really needs the procedure or doctor visit he is contemplating, there will be no effective cost controls. And, no, not every sniffle, twinge of discomfort, or inane commercial for the latest wonder drug to treat maladies viewers didn’t even realize they had, requires us to “ask (our) doctor,” unless, of course, someone else pays. Then that inquiry, doctor visit, or procedure, no matter how expensive, becomes essential to the continuance of our stay in this mortal coil. See, again, my seminal 5/57/09 post “Gimme a bromo.”
Tuesday, September 8, 2009
FENCING—SOUTH SIDE OF CHICAGO STYLE
9/8/09
I sent the following note to Chris Fusco, ace Chicago Sun-Times political reporter, in response to his “The Watchdogs” article in today’s (i.e., Tuesday, 9/8/09’s) Sun-Times entitled “The Fence that Burke Built.” In that alternately entertaining and depressing, but not at all surprising, article, Fusco describes the fence that 14th Ward Alderman, and City Council Finance Committee Chairman, Ed Burke had built with taxpayer money, ostensibly to keep Curie High School kids off the adjoining railroad tracks. The fence, just coincidentally, serves to keep the same kids, or anyone else, safely away from the Alderman’s relatively newly built $900,000 home, situated in a neighborhood in which $900,000 normally mighty buy as many as ten homes.
I post this letter for two reasons. First, the letter, and the article to which it responds, gives the reader an idea how Alderman Burke, the dean of the City Council, and some of his colleagues regard the City’s treasury, and their constituents. Second, the letter promotes my upcoming book.
Thanks.
9/8/09
Hi Chris,
Nice article on the fence around Ed Burke’s house, which, as you know, is just barely within the boundaries of his 14th Ward.
Whatever happened to Burke’s “old” house on the northwest corner of 50th and Campbell? That was quite the place, too. Did he tire of that particular mansion? Was it possibly redistricted out of the 14th Ward? Perhaps more interestingly, who bought the place, the “stately Burke manor” in a well-kept and nice, though decidedly working class, neighborhood in which such a palace is clearly out of place? Was the buyer politically connected? There could be a story here, but maybe not. I am curious not only because I am an avid fan of Chicago politics (My novel, The Chairman: A Novel of Big City Politics, which takes place in a very thinly veiled Chicago, should be out next month.), but also because my grandmother lived two doors away from the 50th and Campbell compound. She, and my uncles, aunts, and cousins, who all lived on a two block span on 49th and 50th and Campbell, were piqued, convinced that Burke, by building his gargantuan monument to himself, was rubbing their noses in their far more materially mundane existences. Their attitudes toward the Alderman were far from unique among their neighbors.
Thanks, Chris; keep up the good work.
Mark Quinn
I sent the following note to Chris Fusco, ace Chicago Sun-Times political reporter, in response to his “The Watchdogs” article in today’s (i.e., Tuesday, 9/8/09’s) Sun-Times entitled “The Fence that Burke Built.” In that alternately entertaining and depressing, but not at all surprising, article, Fusco describes the fence that 14th Ward Alderman, and City Council Finance Committee Chairman, Ed Burke had built with taxpayer money, ostensibly to keep Curie High School kids off the adjoining railroad tracks. The fence, just coincidentally, serves to keep the same kids, or anyone else, safely away from the Alderman’s relatively newly built $900,000 home, situated in a neighborhood in which $900,000 normally mighty buy as many as ten homes.
I post this letter for two reasons. First, the letter, and the article to which it responds, gives the reader an idea how Alderman Burke, the dean of the City Council, and some of his colleagues regard the City’s treasury, and their constituents. Second, the letter promotes my upcoming book.
Thanks.
9/8/09
Hi Chris,
Nice article on the fence around Ed Burke’s house, which, as you know, is just barely within the boundaries of his 14th Ward.
Whatever happened to Burke’s “old” house on the northwest corner of 50th and Campbell? That was quite the place, too. Did he tire of that particular mansion? Was it possibly redistricted out of the 14th Ward? Perhaps more interestingly, who bought the place, the “stately Burke manor” in a well-kept and nice, though decidedly working class, neighborhood in which such a palace is clearly out of place? Was the buyer politically connected? There could be a story here, but maybe not. I am curious not only because I am an avid fan of Chicago politics (My novel, The Chairman: A Novel of Big City Politics, which takes place in a very thinly veiled Chicago, should be out next month.), but also because my grandmother lived two doors away from the 50th and Campbell compound. She, and my uncles, aunts, and cousins, who all lived on a two block span on 49th and 50th and Campbell, were piqued, convinced that Burke, by building his gargantuan monument to himself, was rubbing their noses in their far more materially mundane existences. Their attitudes toward the Alderman were far from unique among their neighbors.
Thanks, Chris; keep up the good work.
Mark Quinn
Sunday, September 6, 2009
“…FOR WE KNOW YOU HAVE SAND, ILLINOIS, RAH! RAH!...” (I can’t explain it either, but that’s what the song says.)
6/9/09
The following is a response I sent to John Kass, ace political columnist for the Chicago Tribune, to a column he wrote today (i.e., Sunday, 9/6/09) that touched on the “clouting” “scandal” at the University of Illinois. Loyal readers will see that my response to John contains elements from my two past posts on the U of I: “WE ARE LOYAL TO YOU, ILLINOIS…” (6/8/09) and “…WE'RE ORANGE AND BLUE, ILLINOIS, WE'LL BACK YOU SO STAND 'GAINST THE BEST IN THE LAND…”:
6/9/09
Hi John,
In your 9/6/09 column recounting your breakfast with our distinguished governor (no relation), you stated, concerning the U of I “clouting” “controversy”:
“And once those heads (of the U of I’s president and chancellor) thunk and began rolling, Quinn will get the credit and the voters may forget his earlier indecision.”
I don’t know whether this was a statement of normative philosophical preference, i.e., these heads SHOULD roll, or a positive political prediction, i.e., these heads WILL role. Either way, it deserves comments.
If this is a statement of normative philosophical preference, why should the trustees be replaced (except, of course, for those whom the governor did not have the courage to replace) and the president and chancellor lose their jobs for responding to political pressure while those who exerted the pressure walk? This doesn’t sound like something the John Kass I know and like would favor! Mikva says his commission gave the politicians a pass because they will have to answer to the voters. But does anyone believe that the typical citizen, whose mind has been turned into silly putty by near constant exposure to the cotton candy for the mind that emanates from the television set, will remember any of this when election time comes? Most people can’t name their congressman, let alone their state legislators. It seems that if the pressurees have to pay for the U of I clouting “scandal,” surely the pressurers should pay. Try to imagine, for a moment, the hearings that would have been conducted had our legislators had the stones to address the U of I problem itself instead of passing the buck to a phony commission, and you will get the utter inanity of firing the administrators and trustees while letting the politicians skate:
Trustee (or administrator): “Sir, I was only responding to a request, and it was more like a demand or a threat, from the people who control a huge chunk of our budget. I had little choice when you and your colleagues put the arm on me to admit the imbecile progeny of some big time contributor to your campaigns.”
Legislator: “How dare you, sir, cave in to the pressure I and my colleagues put on you! You should be fired!”
If your statement was a positive political prediction, rather than a normative philosophical statement, do you really think the voters of Illinois are shocked or surprised that clout was exercised (in Illinois of all places!) to admit a relative handful of marginally qualified students to the University of Illinois? Do you think the Governor’s handling of this situation, one way or the other, will really matter in the upcoming gubernatorial race? After all, these are the voters who keep electing the bi-partisan kleptocracy that runs this state.
Thanks, John.
Mark Quinn
mightydad@att.net
The following is a response I sent to John Kass, ace political columnist for the Chicago Tribune, to a column he wrote today (i.e., Sunday, 9/6/09) that touched on the “clouting” “scandal” at the University of Illinois. Loyal readers will see that my response to John contains elements from my two past posts on the U of I: “WE ARE LOYAL TO YOU, ILLINOIS…” (6/8/09) and “…WE'RE ORANGE AND BLUE, ILLINOIS, WE'LL BACK YOU SO STAND 'GAINST THE BEST IN THE LAND…”:
6/9/09
Hi John,
In your 9/6/09 column recounting your breakfast with our distinguished governor (no relation), you stated, concerning the U of I “clouting” “controversy”:
“And once those heads (of the U of I’s president and chancellor) thunk and began rolling, Quinn will get the credit and the voters may forget his earlier indecision.”
I don’t know whether this was a statement of normative philosophical preference, i.e., these heads SHOULD roll, or a positive political prediction, i.e., these heads WILL role. Either way, it deserves comments.
If this is a statement of normative philosophical preference, why should the trustees be replaced (except, of course, for those whom the governor did not have the courage to replace) and the president and chancellor lose their jobs for responding to political pressure while those who exerted the pressure walk? This doesn’t sound like something the John Kass I know and like would favor! Mikva says his commission gave the politicians a pass because they will have to answer to the voters. But does anyone believe that the typical citizen, whose mind has been turned into silly putty by near constant exposure to the cotton candy for the mind that emanates from the television set, will remember any of this when election time comes? Most people can’t name their congressman, let alone their state legislators. It seems that if the pressurees have to pay for the U of I clouting “scandal,” surely the pressurers should pay. Try to imagine, for a moment, the hearings that would have been conducted had our legislators had the stones to address the U of I problem itself instead of passing the buck to a phony commission, and you will get the utter inanity of firing the administrators and trustees while letting the politicians skate:
Trustee (or administrator): “Sir, I was only responding to a request, and it was more like a demand or a threat, from the people who control a huge chunk of our budget. I had little choice when you and your colleagues put the arm on me to admit the imbecile progeny of some big time contributor to your campaigns.”
Legislator: “How dare you, sir, cave in to the pressure I and my colleagues put on you! You should be fired!”
If your statement was a positive political prediction, rather than a normative philosophical statement, do you really think the voters of Illinois are shocked or surprised that clout was exercised (in Illinois of all places!) to admit a relative handful of marginally qualified students to the University of Illinois? Do you think the Governor’s handling of this situation, one way or the other, will really matter in the upcoming gubernatorial race? After all, these are the voters who keep electing the bi-partisan kleptocracy that runs this state.
Thanks, John.
Mark Quinn
mightydad@att.net
FIX IT AGAIN, SERGIO
9/6/09
I don’t write about cars and the car business nearly as much as I used to in the Insightful Pontificator or as I did in its predecessors, the Insightful Weekly Commentary and the Insightful Irregular Commentary. Some of my readers would find one such column too many, some consider the few I write far too few. But cars are a subject of general interest, and certainly remain close to my heart, so I write about things automotive when I have something interesting to say that might have applications, or ramifications, beyond the car business.
I wrote the following letter to Motor Trend magazine in the wake of a completely asinine comment by Fiat CEO Sergio Marchionne, who has graced the Insightful Pontificator several times this year in the wake of his becoming the current car industry rage and, supposedly, a large component of Chrysler’s salvation:
9/6/09
Your October “Trend” section quotes Fiat, and now Chrysler, head honcho Sergio Marchionne as saying:
“The level of competition between these two brands is tremendous because they are both going after the same customer. Dodge is the American musclecar (sic), while Alfa Romeo is the European musclecar (sic). How we dovetail the two brands is very important.”
Dodge is the American muscle car? Someone ought to tell the boys in Turin that this is 2009, not 1971. Even the Challenger redux, coolly competitive in the pony car segment despite its extra large proportions, and the very serious, but perhaps soon to be gone, Viper cannot make a sales channel that features the Caravan, Nitro, Caliber, and “no stick available” Charger a muscle car division.
Alfa and Dodge are going after the same customer? A more apt assessment of the two divisions is that Alfa is Fiat’s upscale division and Dodge is Chrysler’s bargain division, and the two should be kept as far apart as possible if Alfa is to compete successfully as a premium channel in the United States.
My confidence in Fiat’s, and Mr. Marchionne’s, ability to serve as Chrysler’s savior, never that great in the first place, has been taken down a notch or twelve.
Mark Quinn
Naperville, IL
I don’t write about cars and the car business nearly as much as I used to in the Insightful Pontificator or as I did in its predecessors, the Insightful Weekly Commentary and the Insightful Irregular Commentary. Some of my readers would find one such column too many, some consider the few I write far too few. But cars are a subject of general interest, and certainly remain close to my heart, so I write about things automotive when I have something interesting to say that might have applications, or ramifications, beyond the car business.
I wrote the following letter to Motor Trend magazine in the wake of a completely asinine comment by Fiat CEO Sergio Marchionne, who has graced the Insightful Pontificator several times this year in the wake of his becoming the current car industry rage and, supposedly, a large component of Chrysler’s salvation:
9/6/09
Your October “Trend” section quotes Fiat, and now Chrysler, head honcho Sergio Marchionne as saying:
“The level of competition between these two brands is tremendous because they are both going after the same customer. Dodge is the American musclecar (sic), while Alfa Romeo is the European musclecar (sic). How we dovetail the two brands is very important.”
Dodge is the American muscle car? Someone ought to tell the boys in Turin that this is 2009, not 1971. Even the Challenger redux, coolly competitive in the pony car segment despite its extra large proportions, and the very serious, but perhaps soon to be gone, Viper cannot make a sales channel that features the Caravan, Nitro, Caliber, and “no stick available” Charger a muscle car division.
Alfa and Dodge are going after the same customer? A more apt assessment of the two divisions is that Alfa is Fiat’s upscale division and Dodge is Chrysler’s bargain division, and the two should be kept as far apart as possible if Alfa is to compete successfully as a premium channel in the United States.
My confidence in Fiat’s, and Mr. Marchionne’s, ability to serve as Chrysler’s savior, never that great in the first place, has been taken down a notch or twelve.
Mark Quinn
Naperville, IL
Friday, September 4, 2009
“OH, C’MON, SIR. DON’T YOU THINK YOU DESERVE THIS?”
9/4/09
This morning’s (i.e., Friday, 9/4/09’s) Wall Street Journal reports that, as the headline on page C1 put it, “Troubles for ‘Prime Borrowers’ Intensify.” The gist of the article is that the delinquency rate on so-called prime loans, while still far lower (by a factor of almost 4) than the delinquency rate on sub-prime loans, is accelerating at a far faster pace than the delinquency rate on sub-prime loans. Further, HSBC, a not at all atypical credit card lender, reports that its prime credit card loan portfolio is performing worse than its sub-prime credit card portfolio.
This news on the accelerating deterioration of “prime” loans might surprise many people, but not regular readers of the Insightful Pontificator. The artificial nature of the prosperity that our economy seemingly experienced through much of the last decade of the last millennium and the first decade of this one has been a recurring theme of these posts. See, inter alia, probably my best musings on this issue, my 3/11/09 piece, “BUT I SERVE AN UPSCALE, RECESSION PROOF CLIENTELE…”
The explanation for the increasingly woeful state of our nation’s “money good” borrowers is, according the article, that prime borrowers have more “financial levers” to pull to keep them out of trouble. They have been able to use these tools, such as dipping into savings (Ha! Savings? Remember when financial “experts” were telling us only chumps had savings in actual cash money? And our consumption obsessed society used that codswallop as a rationalization for p---ing away every last dollar and then some? Grist for yet another post…in addition to the, oh, hundreds or so I have written on this topic.), borrowing against the house, reducing contributions to retirement plans, etc., to keep their heads above water. Sub-prime borrowers, who had no access to such life preservers, just sunk. They defaulted and were written off by the credit card companies and mortgage lenders long ago, so their problems are, largely but by no means completely, behind the lenders. Meanwhile, the prime borrowers are of late running out of rabbits to pull out of their hats and now are increasingly in default on their mortgage and credit card loans.
That explanation seems logical, but I prefer another one that I elucidated in that already referenced and pullulatingly seminal 3/11/09 piece, “BUT I SERVE AN UPSCALE, RECESSION PROOF CLIENTELE…” To wit, these supposedly money good borrowers never had any money in the first place, or at least not enough money, or even income, to support their lifestyles, lifestyles that, only a generation ago, would have seemed lavish by any measure. What they had, instead, was access to liability creation born of an out of control credit market and other-worldly underwriting standards. The financial whiz kids with their eight figure bonuses assured us that the old lending and borrowing maxims were hopelessly out of date due to their studied application of the Frankensteinesque “tools” they designed, but clearly did not understand. Since the risk had been eliminated, or at least carefully calibrated and controlled, according to Wall Street, and the making of a loan was completely divorced from the holding of a loan, underwriting standards became lax to the point of nonexistence. Legions of American consumers, fortified with the certainty that they were entitled, on the day they got out of school, to live as well as their parents ever had, jumped on the “opportunities” such financial chicanery afforded them. Then a collective utterance of “Whoops!” emanated from the financial world, and the consequences were predictable…and still probably have not played out entirely.
Indeed, today’s aforementioned Journal article states:
“For prime borrowers, this recession has been especially tough because declining home prices have taken away one of the typical crutches for them since it is harder to tap the equity in their homes to pay their bills if they lose their jobs, according to a report issued this week by Standard & Poor’s.”
But even this tidbit from the Standard & Poor’s report misses the point. People weren’t using the equity in their homes to pay their bills because they lost their jobs. They used the equity in their homes to pay their bills, usually through the circle jerk of refinancing their credit cards at “low, low home equity rates,” as a matter of routine even when they still had jobs. This “tapping the equity in your home to get the things you want…and deserve” ruse has been the backbone of the financial finagling that sustained the faux prosperity of the last twenty years or so.
And now the chickens have come home to roost. Surprised? Not if you’re a regular Insightful Pontificator reader.
This morning’s (i.e., Friday, 9/4/09’s) Wall Street Journal reports that, as the headline on page C1 put it, “Troubles for ‘Prime Borrowers’ Intensify.” The gist of the article is that the delinquency rate on so-called prime loans, while still far lower (by a factor of almost 4) than the delinquency rate on sub-prime loans, is accelerating at a far faster pace than the delinquency rate on sub-prime loans. Further, HSBC, a not at all atypical credit card lender, reports that its prime credit card loan portfolio is performing worse than its sub-prime credit card portfolio.
This news on the accelerating deterioration of “prime” loans might surprise many people, but not regular readers of the Insightful Pontificator. The artificial nature of the prosperity that our economy seemingly experienced through much of the last decade of the last millennium and the first decade of this one has been a recurring theme of these posts. See, inter alia, probably my best musings on this issue, my 3/11/09 piece, “BUT I SERVE AN UPSCALE, RECESSION PROOF CLIENTELE…”
The explanation for the increasingly woeful state of our nation’s “money good” borrowers is, according the article, that prime borrowers have more “financial levers” to pull to keep them out of trouble. They have been able to use these tools, such as dipping into savings (Ha! Savings? Remember when financial “experts” were telling us only chumps had savings in actual cash money? And our consumption obsessed society used that codswallop as a rationalization for p---ing away every last dollar and then some? Grist for yet another post…in addition to the, oh, hundreds or so I have written on this topic.), borrowing against the house, reducing contributions to retirement plans, etc., to keep their heads above water. Sub-prime borrowers, who had no access to such life preservers, just sunk. They defaulted and were written off by the credit card companies and mortgage lenders long ago, so their problems are, largely but by no means completely, behind the lenders. Meanwhile, the prime borrowers are of late running out of rabbits to pull out of their hats and now are increasingly in default on their mortgage and credit card loans.
That explanation seems logical, but I prefer another one that I elucidated in that already referenced and pullulatingly seminal 3/11/09 piece, “BUT I SERVE AN UPSCALE, RECESSION PROOF CLIENTELE…” To wit, these supposedly money good borrowers never had any money in the first place, or at least not enough money, or even income, to support their lifestyles, lifestyles that, only a generation ago, would have seemed lavish by any measure. What they had, instead, was access to liability creation born of an out of control credit market and other-worldly underwriting standards. The financial whiz kids with their eight figure bonuses assured us that the old lending and borrowing maxims were hopelessly out of date due to their studied application of the Frankensteinesque “tools” they designed, but clearly did not understand. Since the risk had been eliminated, or at least carefully calibrated and controlled, according to Wall Street, and the making of a loan was completely divorced from the holding of a loan, underwriting standards became lax to the point of nonexistence. Legions of American consumers, fortified with the certainty that they were entitled, on the day they got out of school, to live as well as their parents ever had, jumped on the “opportunities” such financial chicanery afforded them. Then a collective utterance of “Whoops!” emanated from the financial world, and the consequences were predictable…and still probably have not played out entirely.
Indeed, today’s aforementioned Journal article states:
“For prime borrowers, this recession has been especially tough because declining home prices have taken away one of the typical crutches for them since it is harder to tap the equity in their homes to pay their bills if they lose their jobs, according to a report issued this week by Standard & Poor’s.”
But even this tidbit from the Standard & Poor’s report misses the point. People weren’t using the equity in their homes to pay their bills because they lost their jobs. They used the equity in their homes to pay their bills, usually through the circle jerk of refinancing their credit cards at “low, low home equity rates,” as a matter of routine even when they still had jobs. This “tapping the equity in your home to get the things you want…and deserve” ruse has been the backbone of the financial finagling that sustained the faux prosperity of the last twenty years or so.
And now the chickens have come home to roost. Surprised? Not if you’re a regular Insightful Pontificator reader.
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