My Blog

Category: Politics

  • Pensioners Take Note, Municipal Bond Storm Coming

    [B]ut California too is now starting to hand it to bondholders. Cities in California are now testing the limits of bankruptcy law, and not paying the debt nor the payments for retirees to the state system. Thus this article describes how the state retirement system (CALPERS) is suing to demand payment, and saying that retiree obligations come AHEAD of creditors (municipal bond holders) in the queue.

    “The issue is, do Calpers obligations supersede unsecured bondholders?” Fabian said in a telephone interview. “There’s an awful lot of unsecured bondholders in California. If you put pension obligations to Calpers as secured and senior to unsecured debt, in effect those bonds have been downgraded.”

    In the Stockton and San Bernardino cases, Calpers is arguing that pension contributions must be made ahead of payments to other creditors because they are so-called statutory liens, or debts that state law requires to be paid. Bondholders and other creditors that oppose Calpers argue that pension debt is a contractual obligation like any other.

    You’d have to be nuts to buy California municipal debt if Calpers has precedence and employee retirement benefits can’t be cut, since this is the MAIN THING that is driving these cities into insolvency. In the future likely these municipalities would just contract out everything to third parties that wouldn’t pay their employees those giant benefits, but the cities have to jettison these liabilities to put their fiscal house in order today.

    via Chicago Boyz.

    In case this is a little tough to follow, in bankruptcy debts are paid according to a priority.  There’s a decent primer here.

    The “Illinois” based pensions are probably ok. e.g. ITRS.  There is no statute permitting a state to file for bankruptcy protection.

    However cities are corporations; they can (and do) file for bankruptcy protection.  CPS, CPD, CFD employees and retirees should watch these cases in California closely.  They may be getting a real haircut if they have to defer to the bond holders to get their money.

    It’s all very very sad.

     

  • Chicago’s New Billboard Deal All But Signed

    Kudos to Alderman Bob Fioretti:

    A Chicago City Council committee signed off Monday on Mayor Rahm Emanuel’s latest privatization deal—even though, after nearly five hours of testimony, aldermen still didn’t quite know how it added up for taxpayers, what its shortfalls might be, or exactly which companies were included in putting it together.

    In more than a few places, they weren’t even sure what the contract said.

    “As I tried to go through these documents over the weekend, I have to admit, I don’t really have the expertise to understand them,” said Ed Burke, who’s read a few contracts in more than four decades as an alderman and attorney.  …

    As they explained, the deal involves renting out public space to a private billboard company in return for some of the proceeds. The firm, Interstate JCDecaux, will pay to put up digital billboards on 34 sites along expressways in Chicago. In return, the city will collect a guaranteed $155 million over the next twenty years, with an option to extend it for nine more.The city will also get a share of the advertising revenues—though there are pages of complex formulas and footnotes that determine the exact amount. For example, taxpayers will essentially pay back some of the millions they’re receiving up front, since over time Interstate JCDecaux will recoup the costs of building and maintaining the billboards before sharing proceeds with the city.  …

    “Was there any independent financial analysis for this particular proposal?” asked 46th Ward alderman James Cappleman.”Not directly,” said Scott.  …

    But the guaranteed payouts are far below that—the most per year is $15 million, in 2013.

    And this is where the fun starts…

    But Alderman Robert Fioretti (2nd) messed everything up by asking for a head count to see if they had a quorum.

    This was a shocking development, as committee meetings regularly proceed without anything close to half their members present, which is technically what they’re supposed to have. But under the council rules it doesn’t matter unless a member of the committee raises a stink about it.

    Such stink raising is not common.

    In fact, Carrie Austin, chair of the budget committee, wasn’t deeply irked that such a disgraceful thing was happening on her watch. She tried to turn Fioretti to stone with an infuriated stare. “I find it awful strange that you would call a quorum now, after you know so many people have left.”

    “I think it’s entirely appropriate,” Fioretti replied, plopping down in his seat as if to say, what are they going to do—map me out of my ward?

    Austin recessed the committee and, along with mayoral aides, got on the phone to round up some more warm bodies.

    A half hour later the roll was called again, and 23 aldermen were counted as present and more-or-less awake—one more than needed for a quorum, and plenty more than needed to sign off on the billboard deal. It passed 20-3, with only Fioretti, Waguespack, and Pawar opposing.

    via Chicago Reader.

    This is going to be the parking meter deal redux.  Just you wait.  We’re going to have digital advertising everywhere and the city is going to get a mere $15 million a year.  JCDecaux is going to make 4 or 5 times that.

    This is a farce.  In a few years Rahm is going to ask JCDecaux for a “favor” and they’re going to do it.  It’s all connected, and corrupt.

  • $55 Million Paid to Kids to Do Nothing

    Records provided to CNN show that $54.5 million was spent on the NRI program, mostly through the governor’s discretionary fund, which doesn’t require legislative approval.

    The only data on the program’s accomplishments come directly from the Illinois Violence Prevention Authority. The NRI states that it created more than 3,484 jobs, provided counseling for more than 3,100 children, and helped 1,175 ex-cons.  …

    NRI participants were paid $8.75 an hour, first to receive mentoring from adults, and then go out to pitch positive messages and hand out fliers in their neighborhoods.  …

    [S]tudents earned $8.75 an hour to visit the DuSable Museum of African American History and to the National Museum of Mexican Art.

    What the ??

    Why would taxpayers pay for kids to attend mentoring?  It would be like paying them to play basketball or video games or go to school.

    $54.5 million / 3,484 jobs / $8.75 / hour = 1,787 hours & $15,642.94 per person.  This is nothing more than paying kids for doing the right thing.

     

  • Who Would Rather Not Work?

    This first came up (recently at least) with the Hostess workers:

    Interviews with more than a dozen workers showed there was little sign of regret from employees who voted for the strike. They said they would rather lose their jobs than put up with lower wages and poorer benefits.

    “They’re just taking from us,” said Kenneth Johnson, 46, of Missouri. He said he earned roughly $35,000 with overtime last year, down from about $45,000 five years ago.

    “I really can’t afford to not be working, but this is not worth it. I’d rather go work somewhere else or draw unemployment,” said Johnson, a worker at Hostess for 23 years.

    via Reuters.

    Yes, old news.  But I came across this today:

    welfare cliffs

    In the recent past we noted the somewhat startling reality that “the single mom is better off earning gross income of $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income and benefits of $57,045.”  …  the painful reality in America is that: for increasingly more Americans it is now more lucrative – in the form of actual disposable income – to sit, do nothing, and collect various welfare entitlements, than to work. … there is an earnings vacuum of around $40k in which US workers are perfectly ambivalent toward inputting more effort since it does not result in any additional incremental disposable income.

    via ZeroHedge.

    An interesting note is that the graphic comes from the PA Dept. of Public Health.  It’s a slide from a whole presentation about welfare’s failure.

    I recall a story from a friend of mine who used to run a mechanical company.  He had a nice lady working at the office whom he gave a raise.  She took her new pay stub and dutifully notified social services.  As a result of the modest raise she was going to lose her housing voucher.  So she had to go back to work and say, “Thank you very much but can you please take your raise back.  I need to keep my housing voucher.”

    The system is broken.  Very very broken.

  • Pregnant Hurricane Sandy Victim and 2-year-old Daughter Homeless

    A pregnant Hurricane Sandy victim was booted from her hotel room yesterday and forced to hunt for a place to stay because FEMA dropped the ball on her reservation.

    Keri Christian, 27, was living at Brooklyn’s Nu Hotel with her daughter, Serafina, 2, after the storm destroyed their Staten Island home.

    Now the eight-months-pregnant mom is couch surfing at an acquaintance’s home in Bay Ridge until she finds a new place.

    Her husband, Anthony Marotto, 41, has been in Staten Island, trying to raise their charred and flooded home from the ashes.

    “I feel like a homeless person . . . like a street rat,” said Christian, who’s expecting a boy in January. “It’s aggravating and physically demanding. I’m really pissed.”

    via NYPOST.com.

    Insanity.  If this was the Bush administration this would be national news every day.  Every day.

     

  • $45k/yr is the “New Rich”

    Implemented in 1969 to make sure upper-income Americans pay their share of taxes, the AMT has increasingly snared more middle-income Americans over the years because it was never indexed for inflation.

    During the 2011 tax year for example, the higher tax hit single taxpayers with incomes as low as $48,450 and joint filers making only $74,450.

    But millions more Americans could be subject to the AMT in their 2012 returns if Congress fails to reach a deal on the fiscal cliff before year-end. That’s because the AMT is currently scheduled to hit individuals making as little as $33,750 a year and joint filers making $45,000.

    via CNBC.

    Being married and making over $45,000 a year is the “new rich.”

    Incredible.

  • 2/3 of Millionaires Avoid 50% Tax Rate

    Two-thirds of millionaires left Britain to avoid 50p tax rate

    Almost two-thirds of the country’s million-pound earners disappeared from Britain after the introduction of the 50p top rate of tax, figures have disclosed.

    via Telegraph.

    Shhhhh…  This is a secret.  No one tell the U.S. media.  They think the “rich” will just stay and give Obama all their money.

  • Racists Blacks Fret About Sole White Lady

    Black leaders are growing increasingly worried that a white candidate might seize the seat of former Democratic Rep. Jesse Jackson in the upcoming Illinois special election.

    With a host of black candidates announcing their intention to seek the seat, the concern is that they could split the African-American vote and provide a plurality to a white contender. The worries escalated this week after former Rep. Debbie Halvorson, a white Democrat and veteran of suburban Chicago politics, threw her hat into the ring.  …

    “There’s a great deal of concern that Debbie Halvorson would win because the black vote would be split 18 ways,” said Delmarrie Cobb, a longtime Democratic political consultant in Chicago who formerly worked for Jackson Jr.“The battle we have is that we can’t afford to lose a black voice in Congress,” she added. “It would be a terrible loss in many ways.”

    via POLITICO.com.

    Where’s MLK or even Malcolm X when we need them?

    It’s just so sad.  I fear we’re heading backwards.  This attitude is not going to help blacks and whites get along.  It’s politics of division.  It’s only making the problem worse.

  • Everyone Wants a Drone – Zero Concern For Your Privacy

    Are unmanned aircraft, known to have difficulty avoiding collisions, safe to use in America’s crowded airspace? And would their widespread use for surveillance result in unconstitutional invasions of privacy?

    via SFGate.

    Yes, and no seem like pretty straightforward answers to these questions.

    But the elected idiots who man the Congressional Unmanned Systems Caucus have taken over $8 million in campaign contributions from drone developers.

    So do you feel safe yet?

     

     

  • Illinois’ Pension Time-Bomb Too Big Too Fix

    So says the Commercial Club of Chicago.

    In a memo to its members, the Civic Committee of the Commercial Club of Chicago said last week’s elections didn’t bring in an influx of lawmakers willing to deal with the pension crisis but instead leaves taxpayers with “more legislators who aren’t prepared, or willing, to make the tough decisions necessary to save our state.”

    “We are writing today to let you know that the pension crisis has grown so severe that it is now, unfixable,” said the letter co-signed by Miles White, chairman of the Commercial Club; Jim Farrell, chairman of the Civic Committee, and Ty Fahner, president of the Civic Committee and Commercial Club.

    via Sun-Times.

    Miles White is the Chairman and CEO of Abbott Labs.  Jim Farrell is the retired Chairman and CEO of Illinois Tool Works.  Ty Fahner is a partner at Mayer Brown where he handles tax, bankruptcy, and securities matters.  These are not dumb guys.  They understand finance and are used to dealing with large numbers.

    The headline is of course misleading; the problem is fixable.  It’s really just that every week that’s wasted means the solution will be more painful.  The Commercial Club outlines what it thinks needs to be done:

    • All cost-of-living increases need to be eliminated for retirees, who now get annual 3 percent pension boosts.
    • A cap on salaries must be imposed upon which pensions can be based.
    • The retirement age for full pension benefits needs to be raised to 67.
    • Downstate and suburban school systems must be forced to take on pension payments from the state for educators over a 12-year phase-in.

    This is pretty painful for the pension members.  Naturally there will be some pain on the taxpayers as well.  It’s a bad situation that’s only getting worse by the day.