A revision to the U.S. Constitution requires a two-thirds vote of each house of the Congress, the signature of the President, and the approval of three-quarters of the states. It is something that is virtually impossible to achieve. And yet if we had a functioning government, it is something that would probably be attempted immediately. Right now there are millions of contracts outstanding that require people, businesses, and property owners that suddenly have no revenues to pay someone else money. Leases and mortgages, for example. Money those who owe do not have, thanks to coronavirus-related shutdowns.
As it stands the result will be a wave of bankruptcies and foreclosures that leave everyone — those who owe, those who are owed, and third parties — worse off. Or renegotiations, in bankruptcy or out, that take time, lawyers and money to complete, and may not succeed. Or mass bailouts that benefit existing interests — and benefit them more the better off they already are — at the expense of less well off later-born generations and the future of the United States.
I propose a fourth option. Allowing the government to, in effect, suspend contracts en masse for people and organizations that have lost their income due to government-mandated shutdowns during a pandemic. The contracts would remain in place, but would be frozen. No money would be owed during the shutdown or for a month thereafter, and the contracts would be extended for that length of time. It would be as if the time of the shutdown and the month after had not occurred. Financial asset holders would, in effect, be forced to provide zero interest loans during the shutdown. Frankly, right now that’s a pretty good rate of return compared with the alternatives. The problem with this proposal is that it is unconstitutional.
The Bureau of Labor Statistics released rebenchmarked Current Employment Survey data, with 2019 annual average data (the average of all 12 months), last week. While it seems as if it were ancient history, it is worth looking at this data now, because it shows how New York State benefitted from a massive employment boom from the peak of the prior economic upturn in 2008 to what seems certain to be the peak of the expansion that just ended in 2019. An employment boom that dwarfed the increase from 2000 to 2008, and exceeded the U.S. average in percent gains, even though New York is a slow population growth state. A boom that was concentrated in New York City.
And yet by the end of 2019 the City of New York, the State of New York, and the MTA were already facing budget crises. Service cuts, tax increases, fee increases and deferred maintenance to the point of a future drastic infrastructure decline were already on the table. And now, no doubt our elected officials and the special interests they represent will use the coronavirus and an excuse for all of the above. They should not be allowed to get away with it. Just as the business crisis was caused not by the virus, but rather by all the debts businesses piled up to pump up stock prices and executive pay, as everyone across the ideological spectrum seems to be saying (the subject of my prior post). So the fiscal crisis was coming one way or the other, due to similar heists over the past 25 years.
In recent posts, I’ve explored the way the concentration of investment in just a few huge companies, and their high-end economic activity in a few superstar cities and metro areas, have warped regional economies and commercial real estate. In addition, the example of those few hugely-valued firms has apparently warped the practice of business management in general. One characteristic of information technology software is that it costs very little to replicate. Once an app, a program, a website is built, it doesn’t cost much more to serve 50 million people than it does to serve 50 people. As a result, the valuation of the largest internet-based and software-based firms have rocketed to insane heights, and provided their founders and early backers with unprecedented wealth.
One consequence is that just creating and operating a middle-sized firm with solid profits, and being normally rich, isn’t good enough anymore. Not for founders, and not for venture capital investors, all of whom want the next Amazon or bust. As a result, firms that could have been solidly profitable on a modest or mid-sized scale have expanded to the point where there are only two possible outcomes: predatory monopoly, and bankruptcy. Including two in the so-called “prop-tech” sector.
In the wake of the U.S. getting sucked into yet another crisis in the Middle East SUV cheap gasoline supply area, it occurs to me that Iranians and Americans have the same problems.
Each are being ruled over by a generation that thinks of itself as the generation, the Americans who came of age in the 1960s and the first half of the 1970s, and the Iranians of the Iranian revolution of 1979 and 1980.
Each of those generations is obsessed by its particular culture war, in part sex-driven, tribalist issues, and those of at the top in politics seek legitimacy based almost exclusively based on those “people like us vs. people them” issues. They don’t want to talk about anything else.
At the same time, however, these aging generations, in their own self-interest, have left the generations to follow worse off than they have been, by cashing in the future. And despite having done so, they still think they have the right to dictate the terms of that future to those following, and stifle their aspirations, rather than allowing disadvantaged later-born generations to find their own way through the mess they have inherited.
The dictating the future aspect is more obvious in Iran, where I would probably be in jail (at best). But you see it in the United States too, every time those over the age of 60 show up to protest against a bike lane being added or a multifamily housing development being approved (and, of course, Obamacare). “We don’t need it,” they say, “it will change things and benefit outsiders!”
U.S. Millennials get paid 25 percent less, on average, than Baby Boomers had at the same point in their lives, despite higher educational attainment on average and, frankly, less socially destructive behavior. And yet those Boomers want to force the Millennials to live the same way. To buy their houses at inflated prices, in places where it takes one car per adult just to live.
The Boomers, while running up public debts and grandfathering themselves into richer benefits and lower taxes, claim that later born generations can deal with higher taxes and diminished old age benefits, because they have “time to adjust.” But that doesn’t mean the Boomers feel compelled to allow those adjustments. They seek to foreclose alternatives and shut down discussion, just like the Ayatollahs in Iran.
In olden days, the passing of the wise elders was a loss those following had to overcome. But as I look around the world, and see the tribalist geriatrics in charge, sometimes I think the Grim Reaper is the best hope for everyone on the planet.
This post is about government functions I refer to as public amenities: parks, recreation, culture, and libraries. Just because they are amenities doesn’t mean they are unimportant, although they are often treated that way in a budget crisis. For the young and old, in fact, the availability of these shared, social spaces is one of the most important reasons to live in central cities. In modern suburbs people shuffle between detached homes and workplaces, and generally only interact with people they don’t already know in places that have significant admission fees. In New York City you can be with people, get entertained, and get exercise without spending much of anything.
Taxpaying workers who don’t have children in public schools, don’t commit crimes, and aren’t on Medicaid, are cash cows for the City and State of New York. These public amenities, along with streets, mass transit and garbage pick up, are really all they get for the taxes they pay, since the cost of water and sewer service is funded by charges. These are things that benefit everyone, but given the special interest-driven politics of state and local government here, the goal is always to take from everyone and give it to the “special people.” So benefitting everyone is the same as benefitting no one in particular who actually matters. Fortunately, Census of Governments employment and payroll data shows that as of March 2017 New York City’s agencies in these functions were not understaffed (unlike in the past for parks), and their workers were not underpaid. We’ll see what happens when the tax dollars aren’t gushing in from yet another Wall Street and real estate bubble, as they have been.
I’ve been spending my time compiling employment and payroll data from the Census of Governments, and haven’t had the time to write much more than a rant otherwise. Here comes the rant.
The Equifax settlement administrator tells me I have a choice of $125 in theory, or far less in reality, or free credit monitoring, in recompense for Equifax having failed me as their customer by providing my personal information to whoever chose to take it. I have until November 19th to take action to stay outside the settlement and do something I have never done and never thought I would: sue someone, according to an e-mail I (and probably just about everyone else – 147 million people) have received. So they have my e-mail address too?
I took a quick look at the latest labor force estimates from the Bureau of Labor Statistics. With unemployment low, but businesses still not willing to raise wages significantly, jobs are going where the workers are, not the other way around. And for much of the post recession period, that has been New York City. From June 2011 to May 2017, the New York City resident labor force was higher than it had been a year earlier by an average of 31,192. With lots of suburban homeowners becoming empty nesters and then retiring, and relatively few new housing units built in the suburbs, the labor force of the rest of the New York-New Jersey metropolitan area was lower by an average of 5,345 per year. Even this understates the suburban labor force decline, as the rest of the metro area includes a number of smaller, older cities such as Yonkers, Hoboken and Jersey City, and that is where young adult workers have been moving and new housing has been built.
Lately, however, there has been a modest reversal. From June 2017 to May 2018 the New York City labor force was lower than it had been a year earlier by an average of 2,624, while the labor force of the rest of the NY metro was down by an average of 3,401. And from June 2018 to May 2019, the New York City labor force was down by an average of 13,238 while the rest of the metro area was higher by an average of 15,979. If New York City’s resident labor force did decrease by 16,000 over two years, that isn’t much compared with the massive increases of the past two decades. But one wonders if this is the start of a trend.
Red State, Blue State, Democrats, Republicans, anti-tax advocates, public unions, public sector, private sector, federal, state and local and even in Europe. Retirement and old age benefits are promises about the far off future, allowing any and all to use them as a tool to rip people off and make a getaway before the heist is discovered. At the state and local government level, all over the U.S., one finds the generations now retired or about to retire promised themselves far more than they had been willing to pay for, leading to crises of various kinds. But always there is the assumption that the older generations that created the problem and benefitted from it can’t participate in sacrifices needed to prevent disaster.
The first response is always the union-friendly choice to drastically cut the pay and benefits of new hires, in order to offset the soaring cost of benefits for those cashing in and moving out. Screwing the millennials as part of the “screw the newbie, flee to Florida” cycle that goes on and on. “If you don’t like it, don’t take the job; take some other job that also pays 25 percent less than the Baby Boomers were paid for the same work,” as Federal Reserve Bank of New York research has shown.
But when that isn’t enough, the next proposal is a “pension freeze.” Middle-aged workers, now mostly the last of the Boomers in those in Generation X, get to keep the pension benefits they have earned so far, but are not allowed to accrue any new benefits at the rate they were promised. They are allowed to contribute to a 401K instead. “If you don’t like it, quit and take another job for 15 or 20 percent less than most Boomers and members of the Silent Generation were paid, if someone will hire you.”
That’s fair, isn’t it? No it is not!
I looked through the Message of the Mayor publication for the City’s of New York’s April budget proposal and financial plan, and came upon a couple disappointing and unfair parts of the proposal.
First, on page 87, I found that the financial plan now includes line items for federal and state funding specifically for New York City teacher pensions. Not for education. Not for the pensions of other public employees. Not for retirement of the vast majority of city residents who don’t have pensions and have little or nothing in retirement benefits at all, and would end up paying for this in higher federal and state taxes and cuts in services and benefits. Teacher pensions. Currently the amount of money in those lines is zero, but the budget lines were added for a reason. Whatever Bill DeBlasio may say about what he will do for the rest of us if elected President or (if he drops that idea) Governor, just understand how he plans to get the Democratic nomination. By promising to take even more from everyone else and give it to the teacher’s union, over and above what they have already taken, in exchange for money and support.
Second, on page 59, I find that city capital funding for mass transit, at $485 million in FY 2019, is proposed to be cut to $136 million in 2020, $54 million in 2021, and $40 million per year thereafter. Presumably the $485 million was the money for the MTA Cuomo badgered DeBlasio to put up and match with state funds, after 25 years of little if any city or state contribution the MTA capital plan — and soaring MTA debts. And now? Looks like frenemies DeBlasio and Cuomo have a new plan. Cut $1 billion in actual budgeted money for the MTA Capital plan between them, add $1 billion in congestion pricing revenue, but then bond against all those future congestion pricing revenues and spend them in just five years, before leaving the MTA with no money to maintain the system thereafter.