Preparing for Institutional Collapse

Letting go of one’s illusions is a difficult process that takes a long, long time, but I am just about there. From a young age I have been a believer in public services and benefits as a way of providing some measure of assurance for other people, people I rely on every time I purchase a good or service, of a decent life regardless of one’s personal income or standing. After all, I initially chose public service as a career. And I have been a defender of the public institutions when compared with those who were only concerned with their own situation and preference put in less, or get out more, as if the community was a greedy adversary to be beaten in life rather than something one is a part of. Now, however, I see that it is probably hopeless.

Under the current generation of “leaders,” “the community,” in its governmental form, is controlled by insatiable interests and sits on top of those who happen to live in New York City, New York State, and the United States. While promising general, universal benefits in the future, or lower taxes in the present, they have already taken so much out of that future for themselves and self-interest groups that it is unlikely that there will be a functioning school system, usable parks, convenient mass transit, affordable health care, or a livable Social Security retirement stipend for my children’s generation. Even at high future taxes. They’ve blown it all, rationalized or just ignored the near certain effects on others, and they won’t give it back.   So perhaps all the time, energy and money directed toward trying to reform or improve our social institutions, particularly out government institutions, would be better spent preparing to do without them, or replace them.

Note: This was written in early 2008, right after the 25/55 deal for NYC teachers passed. It was merely the latest in a long series of irrevocable retroactive pension increases. I knew what the consequences would be, and decided that if they would do that – after 40 years of bad schools, and dashing the hopes of school improvement that had built up over a decade, then they would do just about anything without any limits. Since I knew that they knew what the consequences would be too. If you haven’t already, you can read about that deal here.

Continuing with the post as then written.

This is a difficult conclusion for me to arrive at, for three reasons. First, my chosen lifestyle, which might be described as happy living through materially modest living, assumes the substitution of cheaper shared amenities — public parks, transit, etc. — for more costly and wasteful personal amenities. If I end up paying for those shared amenities and not getting them, the way I paid local and (especially) state taxes for elementary school and didn’t get it for my children, that choice isn’t possible.

Second, my goal in life has been for the rest of the world to, net, be somewhat better off for my existence, rather than getting a “profit” by imposing a “loss” on others. So beating the system to suck more out and put less in isn’t going to make me happy. And being well off enough personally that I don’t rely on social institutions won’t do either, as I am concerned about my neighbors.

Worst of all, we in New York City are at the end of a long climb back from institutional decline. After prior generations “took all their was to take,” in the words of one union leader, before decamping to the suburbs, city residents were left paying high taxes for rich pensions, other public employee retiree benefits, debts run up in the pasts, and sinecures for those still around and milking the system. In return they endured a police force that did not stop crime, subways that barely worked, parks that were dangerous and in disrepair, schools so bad they violated the state constitution, bridges that were never painted and had to be closed, etc. Money for nothing. While most of those who chose to live here paid and got little, those who mattered avoided the subways by driving to their special free parking spaces, went to “politician beach” instead of Coney Island, sent their kids to the handful of decent schools by special variance, or lived in the suburbs while drawing money out of the city.

People I admire spent decades rebuilding the city’s public institutions, often substituting their own personal time money when tax dollars were directed elsewhere and public employees stopped working. But while the city tried to recover, political control at the state level remained in the hands of the sort of people who had sucked NYC dry in the 1950s and 1960s. And now, they have repeated the trick statewide. Indeed, in some ways their generation has done it nationwide.

Consider that three bond issues have been passed for the Second Avenue Subway, but as a result of benefits distributed in the past the MTA is so deep in debt that I can’t imagine how we (or should I say they) will be able to maintain the transit system we have.

Consider that property taxes remain far higher in NYC than they were ten years ago, and spending has soared in its public schools to the point where spending per child is now well above the national average even with a cost of living adjustment. But most of the increase in spending has been on retiree benefits, and with the recent deal to allow teachers to retire and receive pension and health care benefits seven years earlier, money spent in the schools themselves is certain to be slashed, again.

Consider that in 1983 my generation and those after were told we must pay vastly higher payroll taxes throughout our careers, and accept a later retirement age, to ensure Social Security would be there for us. Then all those extra contributions were spent. So now 25 years later we are told that further benefit cuts for, and/or much higher taxes on, are required once again. But only for those who were not “at or over 55” when Bush said the words, and only after all of those who came of age in the 1960s and earlier are in the system and “grandfathered” from any sacrifices.

Consider that every year public spending and subsidies soar for ever-richer health care for those who happen to benefit from public programs or publicly-subsidized private insurance, even as more and more people get nothing.

Consider all the donations people, including my family and many of my friends, have made to public amenities such as parks and libraries, when the services received are cut in the coming years.

Consider how tax breaks mean the rich can disguise their work earnings as capital gains and pay just 15% at the federal level, while in New York City and New York State those benefiting from public employee pensions are not required to pay any state and local income taxes on that income or on Social Security.

It isn’t just that those who have skillfully obtained “good deals” for themselves in the past are “grandfathered” and get to keep them. Worse, those who already have such deals take more and more every year. Like a bad parasite, the political class and its supporters feel so needy, so entitled, that they cannot help but kill their host. They will just keep grabbing and grabbing until government institutions collapse. (The executives who sit on each other’s boards and award each other an ever-greater share of business income are doing the same to the broader economy).

No one is willing to even impose a psychological price on the inside beneficiaries by forcing them to confront the difference between their unearned privileges and situation of those without. If forced, expect them not only to turn hostile but also to simply reply that “everyone should have more” and “everyone should pay less” in the future, when it might be “possible.” But when the future arrives, all the money has been taken off the top.

Don’t expect the institutional collapse to be announced. Services and benefits will dribble away by stealth. The subway line will not be closed, but trains will seldom arrive due to “circumstances beyond our control.” Medicare will not be repealed for our generation, but payment levels will be reduced to the point that almost no health care provider will accept Medicare — even as special funds mean more money for Local 1199. The inflation adjustment for Social Security will be recalculated. Future teachers will be paid less in order to direct money to the life of leisure of those retiring, so certification — and sick leave — rules will be loosened up so someone will more or less show up. High School requirements will be maintained, but required courses will fill up with insiders, forcing others to wait years to take them — until they drop out or are given a piece of paper anyway to help their “self esteem.”   We’ll have libraries — without books, open two days per week. And if you get robbed, you can make an appointment to file a police report in a month or two. Etc.

The future of public services and benefits is privatization and “placardization.” We already see privatization in the public sidewalks, public property individual people are “required” to maintain. So in affluent neighborhoods the sidewalks are good, in poor neighborhoods they are terrible. We see placardization in the free parking allocated to those with certain connections, many but not all of them in the public sector. Someday there will be education placards, health care placards, park placards, library placards — all off the books and all secret, of course.

Isn’t it amazing, when you think about it, how little the political class relies on public services? They have their tax-free pensions, not just Social Security, their private retiree health insurance that pays for what Medicare will not, their private cars and private parking, their suburban or private or special deal schools. They drive around in their SUVs with tinted windows. The really well off, meanwhile, can fend for themselves without public services and benefits. They don’t have to care, either. Just try to pay as little as they can.

In education, moreover, we can’t expect the parochial school system to be there for my grandchildren as it was for my children. It is already collapsing under the weight of actually trying to provide an affordable education, over and above the taxes parents pay, to those who are not affluent, something the NYC public schools generally have not bothered to do for most of the past 30 years. The UFT, among others, seems determined to kill it off, so it will be in an even stronger position to say “pay more or your children will not be educated.” Knowing all along that as we pay more our children will nonetheless not be educated. The well off will be able to afford the private $20,000 per year schools.

No, the Client 9 business was not the defining moment for the man who had declared “Day One Everything Changes.” That moment had arrived when he capitulated on last year’s budget, signed a huge teacher pension enhancement in the face of an upcoming fiscal disaster after having promised to improve the schools, and had his appointee release an MTA capital plan that proposes to borrow $20 billion to defer long promised improvements while deferring maintenance.

In fact for those without connections we may, as a nation, be heading back to the pre-progressive era in public services and benefits. But not in taxation. The money older generations have promised themselves, and promised to the wealthy and those in other countries in exchange for more benefits for less taxes for themselves, mean the federal, state and local governments will be coming after us for more and more money even as public services disappear and the poor are left to fend for themselves. Indeed, they will be coming after the poor for taxes. So it’s no use becoming a conservative or Republican, because they will be in favor of collecting those taxes too someday — after the fiscal collapse, when they can’t borrow anymore to hand out favors those who matter to them.

Here is the dilemma. Our social institutions, in government and business, are in the hands of a self-perpetuating group of self-interested people. The more ordinary people put in to government and business institutions — in taxes, hard work, savings and investment — the more those people take out for themselves and their supporters. I’ve argued for years that the institutions need to be revitalized, taken back, because we need them. I now suspect that we may have to do without them, whether we need them or not.

When I ran for public office, I tried talking to people about the cumulative effect of all the selling out of the future, all the special deals for the “special people,” on our common life. Down in Flatbush I ran into a woman who said the following. “My kids didn’t get to go to public schools, because they were terrible. The police don’t protect us. We won’t get Social Security. We’ll never get anything. I just don’t want to pay anymore; I just want to be left alone.” Yes lady, I remember every word.

After my Don Quixote attempt was mostly ignored, and considering how weak my position was in attempting to convince anyone else to try, I wrote the following about New York State’s public sector: “The situation is apparently similar to corporate governance. Top executives and directors may be enriching themselves, diluting ownership with stock issues and options, and bankrupting the company, but electoral rules make it impossible to vote them out. It is easier just to sell the stock.”

I wasn’t ready to give up then, but perhaps I am now. Perhaps our “leaders” have finally achieved the resignation of the downtrodden peasant, as evidenced in the Italian novel Bread and Wine, one of my favorite books, in which a revolutionary disguised as a priest tries to convince the peasants to unify to fight back against the unfair political system. They say there is nothing they can do about it other than try to beat the system and survive. Frankly, I begin to think that the U.S. is about ready for an Il Duce right now, since at the state level we already have a government like the one in Naples, were as a result of so many people beating the system for so long the city ended up filled with garbage that no one would pick up and no one could find a place for — even as illegal dumping poisons the buffalo mozzarella. (Google up Naples garbage and Naples mozzarella if you are interested in what is going on).

So what do you say to the kids, other than “Dad tried to do all he could?”

Looking for inspiration, I came upon this website referenced on a financial economics blog I participate in: What the website does, in exchange for a fee, is explain to people who are struggling to pay unaffordable mortgages, on houses whose value is dropping, who are doomed to foreclosure anyway, that they are better off walking away. The mortgage they signed for shouldn’t really be thought of as their moral obligation, according to the site, and one the dream of homeownership is gone, you realize that you’ll be better off just moving on.

How about the dream of a fair, viable community? A responsible, prosperous, fair-minded country? I wrote on the site that we in New York need a , to explain to us that since public services and benefits are doomed no matter what, we might as well refuse to pay taxes and have their state and their city and their federal government (not ours in the end) go bankrupt and default on debt and retiree “obligations” others have imposed on us without our consent. A day later I thought to look, and someone had reserved the domain name the day after I wrote that (it’s a popular site). Which means that at least one other person is thinking the same thing.

Thinking that perhaps the “walkaway” philosophy may not be shortsighted and selfish after all, if in reality any additional financial contributions to our political institutions will simply be stolen and could be in lieu of charitable contributions that might actually benefit someone who is actually less well off that I am. As opposed to someone who feels entitled to more. Call it the “audacity of hopelessness” that opens one mind to seeking another way out.

Update: I wrote this more than six years ago. Do I feel any better about things? Not much.

I think the upcoming MTA capital plan will be an important marker as to which way public services are going. Will it be fully funded (except perhaps system expansions) with cash? Will the MTA be forced to keep borrowing for ongoing normal replacement, postponing but increasing the coming disaster? Or will the plan be unfunded, an indication that there is nothing of the future left to take?

And would more money “for the MTA Capital Plan” really just go to even higher compensation for unionized MTA employees, who got much richer relative to non-Wall Street private sector workers in recent years? To even higher bids for contractors? Over the past few years labor arbitrators at both the federal and state level have made specific findings that the MTA could afford to pay its employees more and more in total compensation, even as most people were getting less and less, by diverting money from the capital plan and allowing the transit system to fall apart. Is there a better example of the idea that if you put more in, others will just take more out leaving our institutions no better off than before? I’m glad I mostly get around by bicycle now, as on my subway rides I seem to be hitting more delays.

In the private sector, Federal Reserve policy has created another debt-driven stock boom, with companies borrowing but not investing, and profits going not to dividends but to stock buybacks and to higher executive pay. Once the latest stock market bubble reached nosebleed territory got my savings, even retirement savings, out of stocks. I see no reason to lose money to help pump up executive pay even more. I’ll consider moving some retirement savings back into stocks when the dividend yield gets back up above 3.0% (the historic average is over 4.0%).

How about public parks? Like many, I have long been concerned with the “privatization” of this public service. With more and more money going to the retroactive pension increases for public employees, there has been less and less available for public services such as parks. So in places where people are affluent enough to donate to the local park, over and above the taxes they pay, there are decently maintained parks, but in places where there are fewer donations, the parks are less well maintained. My family nonetheless felt an obligation to donate to our nearby local park. Perhaps our donation would free up general revenues for park maintenance elsewhere.

The proposal to, in effect, tax park donations, and use the money elsewhere (in theory for parks elsewhere but likely in reality for other things, if not at first then certainly later when the stock market and city and state tax revenues turn down), caused me to think about everything differently.

Those who control the city would then push the people who donate to put more in, or else, with their local park held hostage. Instead of asking if I would be willing to contribute money to help out parks in poorer neighborhoods, perhaps those where people were willing to volunteer but didn’t have extra available cash to kick in, my donations would simply be taken.

Worse, since “money is fungible” in the words of our current Governor, even that money might not be used for other parks in the end. It could just substitute for tax dollars that would then go the pension increases that are awaiting Governor Cuomo’s signature right now. Or more special tax breaks for today’s seniors, which the AARP seems to be advocating for. Or some other deal for someone else working the system in Albany or City Hall. The more you put in, the more those on the inside could just take out, in secret deals that you don’t even know about.

This is what I was thinking about when we sat down last Thanksgiving weekend to write out the charity checks, using the money saved up for that purpose during the year. And I suggested dropping the Prospect Park Alliance. My wife suggested we contribute for one more year, before the charity tax went into effect, but it wasn’t the practicalities that bothered me – after all I was concerned about the “privatization” aspect of park services too. It was the idea of getting squeezed, putting more in only to have someone else grab more out, with every reason to suspect (net, after “fungible” money is moved around) resources are being redistributed to insiders rather than the less well off.

The city can still feel free to use our tax dollars, to the extent any are left after more powerful interests are satisfied, to maintain Prospect Park. And for the cracked walls in the Greenwood Playground, where my friend and I go to play paddleball after first picking up the trash other players drop on the ground rather than walking a few feet to the garbage can.

This post turned out to be the first in a series. The rest will follow.