The Hoboken Tax Reform Coalition
Paralysis of the State [and the City of Hoboken]
This op-ed piece by David Brooks discusses the imbalance between the funding of infrastructure vs. public employee salaries and benefits. While focused on the state and federal levels, it also holds true for Hoboken. For decades, city government has done little to maintain, repair, and improve our infrastructure, preferring instead to fritter away local tax dollars on no-show, no-work, little-work, and overpaid jobs. This imbalance, along with increased attention to our streets, utilities, parks, and waterfront, will need to be addressed sooner rather than later.
The Paralysis of the State
By DAVID BROOKS
Published: October 12, 2010
Sometimes a local issue perfectly illuminates a larger national problem. Such is the case with the opposition of the New Jersey governor, Chris Christie, to construction of a new tunnel between his state and New York...
Why are important projects now unaffordable? Decades ago, when the federal and state governments were much smaller, they had the means to undertake gigantic new projects, like the Interstate Highway System and the space program. But now, when governments are bigger, they don’t.
The answer is what Jonathan Rauch of the National Journal once called demosclerosis. Over the past few decades, governments have become entwined in a series of arrangements that drain money from productive uses and direct it toward unproductive ones.
New Jersey can’t afford to build its tunnel, but benefits packages for the state’s employees are 41 percent more expensive than those offered by the average Fortune 500 company. These benefits costs are rising by 16 percent a year.
New York City has to strain to finance its schools but must support 10,000 former cops who have retired before age 50. California can’t afford new water projects, but state cops often receive 90 percent of their salaries when they retire at 50. The average corrections officer there makes $70,000 a year in base salary and $100,000 with overtime (California spends more on its prison system than on its schools).
States across the nation will be paralyzed for the rest of our lives because they face unfunded pension obligations that, if counted accurately, amount to $2 trillion — or $87,000 per plan participant. All in all, governments can’t promote future prosperity because they are strangling on their own self-indulgence...
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Replies to This Discussion
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Permalink Reply by robert randall on -
John3.16 - the article is an op-ed piece by David Brooks, a respected moderate republican commentator in the New York Times and it reflects what is essentially conventional wisdom. There's nothing very controversial in it, and recent polls indicate that a large majority of New Jersey residents agree with the general sentiments expressed. While I have no doubt that Eric is well endowed, posting a new york times op-ed piece that simply states what to most people is the obvious is surely not evidence of it.
If you have "an arsenal of FACTS, NUMBERS, ACTUARIALS" please present it so we can give your point of view the consideration it deserves. Note that when you include irrelevant personal attacks like the one against Bill Dressel (a man most readers have never heard of) your views will tend to get dismissed as bitter, incomprehensible rants so it would be more effective to focus more clearly on whatever your actual point is.
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Permalink Reply by Eric Kurta on -
I think that what 3.16 is saying is that largesse in the public sector pales in comparison to that of the private sector, more specifically Wall Street. True, perhaps, but it doesn't excuse bad behavior on the part of local gov't officials. I'm not buying it.
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Permalink Reply by robert randall on
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Eric - I get his point but much like his attack on Bill Dressel, its a non sequitor. I'm jealous that baseball players make lots of money - even the ones who don't always get the job done well. But that doesn't inspire my boss to pay me more money or keep him from laying me off when business is bad. States like New York and New Jersey are not just deciding they won't be able to pay the promised benefits - it will ultimately be impossible for them to do so. This is not a political decision - its ultimately driven by cold economic reality. Ponzi schemes are great while they last, but the only question is how long it will take to fail.
Today, much of the problem can still be solved with relatively small compromises and little or no real suffering if the public employee unions take a realistic approach. In a few years that will not be the case. Unfortunately, this is unlikely to happen with much of the current union leadership. Bullies are used to get their way by bullying, and I'm afraid many unions will not change their tactics until its too late and their membership is irrevocably screwed.
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Permalink Reply by Gene on
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Wall Street people are at the mercy of the market which happens to be a private enterprise. They have no guaranteed pensions as generous as the public employee pensions. In bad years Wall St people make no bonus. For our genius who defends the public sector largesse; that is ZERO. When was the last time the public sector employess got zero for their work?
If the public employee defender is so jealous of Wall St workers; I have a simple answer to him.
Get a job on Wall St and take your chances.
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Permalink Reply by scott m siegel on
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Private companies are just that private. Taxpayers do not subsidize their pay, benefits or retirements (with a few exceptions). Shareholders or partners have the risk through their investments. Public employees don't share that financial risk. If anyone has a problem with private pay then buy shares in the company and vote down the pay. We the public don't have that right with public jobs even though through our taxes we are equivalent to investors.
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I could come up a list with 1,000+ companies that took no money and many others that were screwed by the highest corporate tax rate in the developed world. Let alone over regulation and private company unions that led to the decimation of the manufacturing sector. That is why public union members outnumber private union members for the first time.
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Also Schering Plough took $0 TARP. They did a merger with Merck who received a bridge loan from JP Morgan who didn't want TARP in the first place but like half the banks was forced to take it. Obama in his zeal to nationalize the banks refused to take the money back. After congressional and corporate pressure he finally did. JP Morgan and other banks are permitted to make loans under TARP. That was the whole purpose of the program. Merck came out on top and Fred Hassan was paid to exit as the junior partner. Think of like the (hopefully) retiring police officers getting their version of the "golden parachute" to make room the younger ranks.
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Permalink Reply by Gene on
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John;
You may have worked for Refco but you still cannot spell or punctuate. Your class envy is typical of liberals. If someone does well; you are jealous. Do not try to equal their success; just envy them and try to castigate and denigrate their achievement!
I truly doubt your success in Wall Street. There are as many failures of people trying to make it on the Street. Like anything else there are bad people on Wall Street the same as there are bad cops, firemen, teachers, mayors etc.
Take a look at all the people from Bear Stearns, Lehman, and other firms who lost their entire pension. A lot of these people were clerks, back office people, messengers etc. They were simply workers; not highly paid risk takers. They had no recourse to a guaranteed pension with automatic raises even during a recession. As far as people losing money in the market; they are your investments. I never saw someone from Wall Street hold a gun to anyone's head to get them to make an investment.
As far as getting a job as a policeman; I started out working in the FBI. Looks like I took your advice long before you even existed. I worked in Wall Street and was a partner in 2 major firms. I worked there for 30 years and enjoyed my time there. In that time frame we had several really bad years when there were no bonuses. We just sucked it up and went back to work again. There was no crying that we deserved something.
America has a FREE ENTERPRISE SYSTEM and it is fabulous. You might try it!
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Permalink Reply by robert randall on
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John - you are misunderstanding the problem. The issue is not whether public employees are overpaid or underpaid relative to other jobs. I agree that public employeesI are not overpaid relative to many others who I think are less deserving. In my perfect world, actors, baseball players, bankers and lawyers would make less and teachers, firefighters and police would make more. But we don't live in that world. Actors, baseball players, bankers and lawyers are paid by industries that are profitable enough to pay their salaries. When industries have been "bailed out" it wasn't to protect those high salaries but to protect the rest of us from the costs of an economic debacle that would have cost many others their much lower salaries. Its not fair that unworthy people got the benefit of the bailout but life isn't always fair and it would have been stupid to cut off our national nose to spite the corporate face.
Teachers and firefighters on the other hand, are not paid out of profits - they are paid out of taxes. Or worse, they are paid out of borrowing against future taxes. The benefit packages that have been promised to public employees are not "fair" or "unfair" they are unaffordable for states and municipalities. This means that unfair as it may be, those benefits will not be paid as promised. Denying that reality instead of dealing with it will only make the problem worse, and the ultimate solution more painful for those public employees who could lose their jobs instead of their raises.
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Permalink Reply by robert randall on
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Also John - your claim that the benefits "should have been and still can be affordable" is simply wrong. New Jersey didn't underfund the pension system because it wanted to - it underfunded it because the state didn't have the money. And even if the funds had been "fully funded" they would be unaffordable in the real world because the funding formulas are based on rates of return have not been and won't be attained. Both the politicians and the union leaders are responsible for creating an accounting fiction that has defrauded both taxpayers and workers. Truly fully funding the system as currently constituted cannot happen without both unacceptably high taxes that will cripple economic activity and unacceptably large layoffs that will jeopardize public safety and cost young families needed jobs. There is plenty of unfairness to go around, and benefit levels will be cut whether it is fair to long time workers and retirees or not, because the alternative is even less fair to alot more people. By refusing to agree to reasonable changes like a shift to defined contribution plans even for new hires, many public employee unions are abdicating their responsibility to their membership to be part of crafting a solution, and are ultimately severely damaging the interests of the vast majority of their members.
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Permalink Reply by robert randall on
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John - I'll be happy to take you up on that beer sometime - though as we both likely want to protect our anonymity it will have to happen by chance. Perhaps it already has.
While I don't agree with you that the pension system could have been sustainable had the state acted responsibly over the last 14 years, its kind of beside the point. They didn't, and no responsible economist believes it is sustainable now. It's even beside the point to argue about whose fault it is. The fact is both New Jersey's workers and taxpayers are now screwed, and the pain will have to be shared. Taxpayers are already burdened by the highest property taxes in the country, so its time for workers and those retirees who can afford it to kick in by accepting less than was promised to them
I don't agree with those who blame workers for the benefits they have. But I think the anger some have stems not from the fact that people have good benefits, but from the perception that they don't care how high taxes will have to rise to support the system as long as they get theirs. I work for a small company that provides us with health insurance. We used to have a great plan with no copay and thought that we would always have that. When costs went up and business declined the owner told us that he couldn't pay for the annual increases and he froze the amount he was willing to pay. Each year, the 8 of us who are covered by the plan get together and agree on a combination of benefit reductions and copays that allow us to keep the insurance we want, and we appreciate the contribution the company makes even though its far less on a percentage basis than it used to be.
It's the refusal of public sector employees to recognize that these kinds of compromises need to be made that gets so many people angry.
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John: Please refer to below, that is a better answer to your question about TARP.
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