Monday, March 31, 2014

A Nation of Aging Civil Servants

I am an aging Civil Servant. I spent two decades fighting fires in the South Bronx...and it was fun. Business was good, especially during “the crack epidemic,” and the pay was decent and the benefits superior (unlimited non-line-of-duty medical leave, 3/4s of your pay for life for those who retire on “disability,” etc.). It wasn’t a bad life, all told.

Since those days, I’ve moved on to the Hazmat world where the compensation is even better and as I close in on “aging out,” I often wonder how long America can sustain the bad bets it’s made since FDR signed the 37 page Social Security in August of 1937.

Today, Medicaid IS insolvent and Medicare is slated for insolvency by 2026, and Social Security is generously scheduled for insolvency by 2033, although Rachel Greszler of Heritage makes the case for a much earlier demise for Social Security (

America’s public sector pensions are an iceberg looming over Titanic America. Many Municipalities large and small are now spending MORE tax revenues on retired public servants than they are on active police, teachers and firefighters. According to the Empire Center, New York’s total unfunded liability for public-sector retiree health insurance comes to nearly $250 billion...RIGHT NOW (!

Moreover, while private sector compensation packages for executives have long come under fire (and rightly so), excessive compensation for public officials tend to fly under the radar, probably due in large part to the incestuous connection between media and government.

Recently New York City’s brand new Public Advocate Letitia James asserted that the city’s top library officials are paid too much. That assessment probably came as a result of stories like this one about Queens Library head, Tom Gallante’s near $400,000/year take ( Brooklyn’s library head makes $333,000/year, while the New York Public Library head makes $711,000. (According to the New York Public Library’s tax filings for 2011, then-president Paul LeClerc’s base compensation was $334,914, and his total compensation reached $802,482.) In other cities like Los Angeles and Chicago, top library officials made $290,000 and $191,000 respectively, said James.

In the many small suburbs of Long Island and Upstate, School District Superintendents rake in up to half a MILLION dollars per year (

ALL of this is economically unsustainable absent a great surge in private sector growth that has so far eluded the USA along with its Western European counterparts.

The future, for America’s taxpayers looks bleak. According to economists Robert Novy-Marx and Josh Rauh, state and local taxes would have to increase by $1,385 per household immediately to make good the pension promises to state and local workers, including firefighters and cops. That's not going to happen given all the other demands on taxpayers. Default, in this case, is the proper word for cities and states using bankruptcy to repudiate their pension obligations.

A half decade ago, when the economy was humming, a common estimate held that federal taxes would have to rise 50% immediately to fully fund entitlement programs. Today, a 50% tax increase wouldn’t even meet the government's current, never mind future obligations.

In his first post-election (2012) press conference that he doesn't want any proposals that "sock it to the middle class." He must know better. A long-term socking, or SOAKING is exactly what's coming to the middle class, which must pay for the benefits it consumes.

With private sector defined benefits (traditional pensions) mostly gone, with Detroit and many smaller Municipalities simply defaulting on their pension obligations (and with Chicago considering the same) and even the Military’s vaunted pension benefits being scaled back retroactively, how can any public sector pensioners be optimistic?

We seem inevitably headed to an age of higher taxes, coupled with fewer services as a government that has over-promised for far too long ultimately has to make good on its fundamental obligations.

So, where is the “good news”? Given that, we all die in the end, there probably isn’t all that much good news. In fact, it seems that for Baby Boomers especially, it appears that the forecast is for more pain before the sun inevitably sets.

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