• Tips gratefully accepted here. Thanks!:

  • Recent Comments

    Ivory Bill Woodpecke… on Words du Jour
    William on Happy Birthday to Me!
    Ivory Bill Woodpecke… on Happy Birthday to Me!
    MAG on Happy Birthday to Me!
    bellecat on Happy Birthday to Me!
    riverdaughter on Happy Birthday to Me!
    bellecat on Happy Birthday to Me!
    jmac on Happy Birthday to Me!
    jmac on Happy Birthday to Me!
    Ivory Bill Woodpecke… on Happy Birthday to Me!
    Ivory Bill Woodpecke… on Happy Birthday to Me!
    riverdaughter on Happy Birthday to Me!
    Roger on Happy Birthday to Me!
    Ivory Bill Woodpecke… on Chaos and Confusion is the…
    Catscatscats on Chaos and Confusion is the…
  • Categories


  • Tags

    abortion Add new tag Afghanistan Al Franken Anglachel Atrios bankers Barack Obama Bernie Sanders big pharma Bill Clinton cocktails Conflucians Say Dailykos Democratic Party Democrats Digby DNC Donald Trump Donna Brazile Economy Elizabeth Warren feminism Florida Fox News General Glenn Beck Glenn Greenwald Goldman Sachs health care Health Care Reform Hillary Clinton Howard Dean John Edwards John McCain Jon Corzine Karl Rove Matt Taibbi Media medicare Michelle Obama Michigan misogyny Mitt Romney Morning Edition Morning News Links Nancy Pelosi New Jersey news NO WE WON'T Obama Obamacare OccupyWallStreet occupy wall street Open thread Paul Krugman Politics Presidential Election 2008 PUMA racism Republicans research Sarah Palin sexism Single Payer snark Social Security Supreme Court Terry Gross Texas Tim Geithner unemployment Wall Street WikiLeaks women
  • Archives

  • History

    November 2020
    S M T W T F S
    1234567
    891011121314
    15161718192021
    22232425262728
    2930  
  • RSS Paul Krugman: Conscience of a Liberal

  • The Confluence

    The Confluence

  • RSS Suburban Guerrilla

  • RSS Ian Welsh

    • Know Your Enemies
      An enemy is someone who means you harm and has the means to inflict it. A friend is someone who has wants to do good for you, and has the means to bestow it. I once wrote primarily to predict and to change the world. I now write to help a few people, those who […]
  • Top Posts

Who could have predicted??

I haven’t written much about the Cromnibus bill because it snuck up on us, didn’t it? It probably didn’t spring fully formed from the head of Zeus overnight. The various political movers and players had to have been working on it for some time, probably before the election. Nothing should be shocking anymore but I do admit to being surprised at how thoroughly the pension system has been undermined and how much ground the bankers have gained back. You would think that Democrats would have put up more of a fight because it’s not going to end well for a generation of people my age who played by the rules, lived within their means, paid in advance, and still got laid off and ripped off.

In any case, it was all pretty predictable back in 2008. Here’s one of my posts from May 2008 as we watched the party invite the vampires in and the level of peer pressure, vicious attacks on the Clintonista holdouts and accusations of racism directed at us reached a crescendo. I was not entirely correct about the result of these attacks on us. Back then, I thought there would be a backlash from the party faithful that got chucked overboard. There was but it was a very bad idea called the Tea Party. That was a waste. It’s only made things worse.

Note that we were pretty spot on about who had taken over the party.

Here’s the gist of it from Bird Brains, May 2008:

It looks like people higher up in the food chain are considering a protest vote as well. Taylor Marsh writes that even Geraldine Ferraro is disgusted. And, predictably, the accusations of political immaturity are not far behind.

Let me set the record straight for those of you who don’t understand where this is coming from (referring to a video link now lost). This DNC and the Obama campaign have conducted the campaign season as if they took lessons from the Enron boys from the movie, The Smartest Guys in the Room. There’s something distinctly unDemocratic about the whole thing. It doesn’t pass the smell test.  Cokie Roberts (of all people) mentioned it a couple of days ago. The process for picking a candidate is deeply flawed and *could* be easily manipulated to thwart rather than confirm the will of the people. It’s like the California deregulation plans that were just sitting there waiting for some clever traders to game the system for fun and profit at “granny’s” expense.

The system is flush with cash and one can almost imagine the operatives sitting at their monitors hearts pumping with adrenaline while they pull out all of the stops, reaching deep down into the modern American psyche in order to power play off all the weaknesses there that will result in a maximum payoff. Assertive women, men with hardhats, hillbilles, grannies ripe for rapping, gays and lesbians all provide targets for the aggressive young, male and pretentious to exercise their new social hierarchy. The level of viciousness is reaching a fever pitch.

Who is giving them permission to set aside their ethics and shuffle off the standards of acceptable behavior? Who is running the party that allows for the brutal suppression of one half by the unleashed id of the other half? I put the blame at the top of the party and Obama himself.

There is a price to be paid for such aggressive and insensitive behavior. People do have free will. The party belongs to the people who believe in its principles. Those principles of social justice, equality and shared responsibility can not be discarded for Change! without the party suffering some severe blows to its foundation. Going forward, the party becomes a fragile shell, easily blown to bits by outside forces because its foundations of support have been carelessly undermined.

This is where we are. The foundations of support, the people and principles that made the Democratic party viable and strong, are being callously destroyed by those who have been given permission to rig the system for one candidate over the other. Those of us who stayed with the party and our country through decades of movement conservatism, who volunteered our time and our voices, who suffered withering criticism and family divisions for not adopting Republican values, who protested the war, the attacks on science, the regression of women’s and GBLT progress in the public sphere, the subjugation of the working class have all been told that we’re not wanted anymore. Our party has evolved and we, like neanderthals, didn’t make the cut.

And Voila! The Cromnibus bill.

It’s not looking good. I don’t watch cable news. Katiebird does. She says the level of propaganda on MSNBC is just as bad as it is on Fox News. I’m glad I’m missing it.

No, I don’t think Elizabeth Warren can save us.  We’re going to have to save ourselves, from ourselves.

What the bankers are doing to Detroit is criminal

Go read No Banker Left Behind at the NYTimes.  Let us recap, shall we?

The bankers, who had all of their bonuses protected and bailed out with our federal tax dollars when they blew up the world because people like Larry Summers argued that it was unfair to violate their compensation contracts, are bearing down on Detroit to pay outrageous sums of money on ill-advised derivatives transactions that will result in innocent Detroit municipal employees forfeiting up to 90% of their pensions.

I blame Obama.  Yes, I do.  If he had come into office committed to holding responsible the people who lied, conned and irresponsibly gambled away our money, we might well be on the road to real recovery right now.  Instead, he had people like Larry Summers and Tim Geithner advising him to go easy on the bankers because shoring up the banks was THE most important thing.

Screw everyone else.

What I really regret is that so many former Democrats went off in a rabid frenzy over some stupid birth certificate issue instead of focussing on the real offenses of this White House.  So much time and energy wasted over citizenship red herrings and vacations.  I’m not sure which is worse.  Stupid conservative leaning Democrats or banker lackeys in the Oval Office.

Whichever it is, Detroit’s employees shouldn’t have their lives ruined over it and I have yet to see Obama step up and prevent this unfolding tragedy from taking place.  Which only means one thing to the rest of us: if our own pension plans go belly up because of some stupid merger or incompetent pension fund manager or predatory bankers, we’re all equally screwed.  No one is going to step up and protect your deferred compensation for all your years of work.

The White House is just going to let the bankers drink your milk shake.

Jeez, it’s only your pensions. Give a banker a break

Reversing the kettling procedure in Madrid, Sept. 25, 2012

Yesterday, Madrid had massive protests over austerity measures.  Today, it’s Greece.  Will Ireland follow suit or are they just into suffering?

Time will tell but it looks like people will need to get a lot more insistent before the bankers and governmental officials get the point.  Austerity and scarcity are artificially constructed situations.  What governments haven’t had the guts to do is tell their banker gamblers to take a haircut.

And then there’s all those 401Ks that need to be appeased.  We brought that on ourselves when we listened to the gamblers and decided to join them at the global casino instead of saving most of our retirement money in nice, boring pensions.  You know, the nice boring pensions that our parents retired on and live a nice, comfy lifestyle with a paid for house and a yearly cruise to the Panama Canal?  Is that so awful??  No, it is not.  But it is certainly not what you’re going to get if the stock market takes another steep, steady dive and fails to recover before you’re old enough to retire.

Anyway, the peasants are revolting.  Go peasants!

Reviving the Wooly Mamouth or Surviving the 401(k) Scam

It’s just a drop in the bucket of mostly misleading information but this post deserves attention:

The 401k Scam by By Nathaniel Downes

The Demos report is an eye opener as to the hidden costs which cause 401k programs to not only fail to keep up with inflation, but to fall behind even the base amount invested into these funds.

What they found was that, for the projected samples that the 401k would lose over $155k for its entire lifetime. Since the entire sample fund at the time of retirement would be $320k, that means a full third of the money which was put into the system was taken by the 401k itself in the guise of fees.

How does this work you may ask? The report goes into detail, but we shall give a simplified example here.

First, your 401k funds are typically put into mutual funds, so let us first address those.

If you put $10,000 into a mutual fund which lists a 3% return, it sounds good, yes? But that is after the fees are deducted. These fees are listed as a percentage of your total investment, but they are deducted from the revenue generated. You get $300 added to the $10,000, but that was after the $150 in “expense ratio,” mutual fund fees such as marketing fees, management fees, and administration feeds, as well as $150 in direct transaction fees have been removed. Your $10,000 had earned $600, but half of that was eaten up in fees. And it does this each and every year. $300 every year for 40 years gives you $12,000 in total fees deducted, more than your original investment.

After some easy to follow charts and more explanation he goes on to describe how pensions are different:

By comparison, a pension plan is a form of insurance, similar to what you would find for your automobile or your healthcare. Money taken in is used to pay out for those who have met the qualifications for payment. Many of these systems use surplus funds to invest in stable, fixed investments, such as treasury bonds. Social Security works in this manner, surplus funds paid in go into a special trust fund filled with US Treasury Notes, pre-paid cash in effect. The trade-off for this is that the amounts paid out are not directly owned by the individual, they are a large pool that all tap into.

(post title stolen from a comment following the post)

Saturday: Power Wash

It’s a nice day, the kid is available, why not power wash the house? That’s what’s on the menu today. I’m headed off to the rental place to pick the washer up. Fun, fun.

In the meantime, remember a couple weeks ago when I wrote that Pfizer was a poster child for The Strategy of No Strategy and that the pension fund would start looking like a target soon?

Gettin’ closer. Pfizer announced on Thursday that they were ending their pension plan. Yep, everyone will now be transitioned to a 401K. Isn’t that special? It looks like people with pensions in companies that were acquired may be safe (please, please, please) but, you know, who knows at this point. The change in the pension plan will affect people who will be turning 55 in about the year 2018. Unfortunately, I know a number of Pfizer employees who may be affected by that and can only imagine how thrilled they are at this news after the cruel amount of stress they’ve been through in the past 4 years.

So, to recap, for scientists living in America but not some parts of Europe:

  • Pharmageddon continues at a steady pace, throwing many, many scientists out of work, perhaps permanently.
  • The only jobs we can get pay a LOT less. You don’t even want to know.
  • Benefits are few to non-existent.
  • Job-hopping and instability is now “expected”. You may have to leave your family behind. Better yet, don’t have a family.
  • You might end up working for a CRO where your input in projects is restricted to task oriented, boring procedures all day, like widget making. No more creativity or learning will be necessary after all those hard science courses.
  • You probably won’t be getting that pension you were counting on after 2 decades of work.
  • If you want health insurance for yourself and your family, you’ll have to pay through the nose for it from your vastly reduced salary at a CRO.
  • Your 401K is tanking- again. But THIS time, because you are out of work, there won’t be any build-back.
  • You are slowly being turned into an “entrepreneur” without any of the benefits. No group insurance rates, no labor protections, no reasonable business loans, and the costs of starting your own pharma, with all of it’s associated risks, are astronomical and suicidal. If you haven’t asked yourself whether all of the entrepreneur talk politicians keep touting will eventually lead to abuse and exploitation of workers without protections, now’s the time to think it over.
  • And finally, the morons in Congress whose skinny necks you would like to wring right now are blithely and capriciously talking about significantly reducing the only retirement option left to you- Social Security. (BTW, see Charles Pierce’s destruction of David Brooks this week. Very satisfying. I strongly suggest David Brooks stay out of central New Jersey because there are a lot of unemployed cancer researchers who he finds indistinguishable from Maury Povitch trailer trash who would like to rip the face off of people like him- metaphorically, of course.)

You know those elected people in Washington? Yeah, I hate those people. I knew the bastards would be putting the screws to us before the election to make people panic and agree to anything. But I never thought they could be this clueless, savage or viciously cruel. I’m not afraid but I am extremely angry at both parties. And, Yes, I know one party is much worse than the other but it hardly makes a difference which party is the worst when both have now crossed the threshold to the dark side. That leaves the vast majority of us without representation but still paying taxes, unemployed or not. And taxation without representation fueled the last revolution.

We are living in a kleptocracy and Democrats did not try hard enough to keep it from happening. Everything you’ve ever worked for your entire life can be stolen from you piece by piece. Your career, your patents, your house, your pensions, your retirement nest egg and all of those extra taxes you paid into a Social Security plan. Promises can be broken, you could get screwed and end up dying poor and no one is held accountable.

Yep, what Washington, DC needs is a good power wash, on the inside.

P.S.- Working people who vote Republican because of social issues should have their heads examined.

‘gits
****************************************
One more thing: according to a new book by James Mann, Hillary Clinton and Timothy Geithner didn’t get along at the beginning of the Obama administration. Geithner was muscling Clinton aside when it came to dealing with China. It seems that Geithner wanted the Treasury department to be in charge of foreign policy with China and to concentrate solely on economics. Clinton wanted to address more than economic matters and wasn’t going to yield on China. There was a standoff and Clinton won. But she was overruled on the issue of ambassador appointments. Why is that significant? It’s because the ambassador that Obama appointed to China is none other than former Republican presidential candidate and wealthy chemical company scion Jon Huntsman. Yep, read it and weep, labrats. The guy that Obama appointed to China at a time when our jobs were hemorrhaging there was none other than a Republican chemical company guy who speaks Mandarin.

No wonder this administration doesn’t give a royal F#%* about the destruction of our American research industry. It was the plan all along. Right, Mr. Geithner? You guys did nothing to slow things down. In fact, you went out of your way to make it easier for our companies to relocate to Shanghai.

So, let’s review: the people who really didn’t get along with Tim Geithner were all women. They were Sheila Bair, Elizabeth Warren, Christina Romer and Hillary Clinton. I’m sure there are others but any woman who stands up to Geithner and disagrees with him is ok by me. All of these women proposed policies that were ignored by Geithner and the White House but would later turn out to be right. In every case, Geithner had the upper hand except in his interactions with Hillary, where she had a victory on overall policy with China but didn’t get to pick the ambassadors.

And we’re still not at war with Iran.

It’s amazing how so many Democratic party activists got it so wrong. I wonder how that happened, given that they supposedly do not fall for political mind tricks and propaganda…

The Poster Child of “The Strategy of No Strategy”: Pfizer

Pfizer is trying to reinvent itself by shrinking, according to the New York Times. I can’t say that I’m surprised.  The CEOs and financial guys are still living in their own worlds.

The Strategy of No Strategy is strong in this one.  Oh such tasty morsels in this article.  Where to start.  How about this paragraph full of chewy goodness:

Pfizer — once the Big in Big Pharma — is making a radical shift, one being watched closely by the rest of the industry. It is getting smaller.

Last week the company announced it was selling its infant nutrition business to Nestlé for $11.85 billion, and it is expected to divest its profitable animal health business by next year. At the same time, the company is slashing as much as 30 percent of its research budget as part of a plan to focus on only the most promising areas, like cancer andAlzheimer’s disease.

1.) It’s getting smaller only 2 years after it made itself bigger.  Pfizer bought up Wyeth and laid off every single one of my friends and former colleagues in research.  It hired back a handful and sent them to Groton, CT.  I’ll get to Groton in a minute.

2.) It’s getting rid of valuable assets to concentrate on cancer and Alzheimers.  And why those two therapeutic areas, you ask?  Allow me to get cynical.  Well, more cynical than I already am.  These two diseases progress rapidly and the sufferers are almost desperate for a cure, cancer drugs get fast tracked for approval, toxicity profiles are relaxed, you can pretty much charge what the market will bear, and even if the drugs fail the patients rarely complain.  So, quick approval and no class action lawsuits.  What’s not to love?  Looks like you Lupus sufferers and schizophrenics are SOL though.

“It’s not necessarily smaller per se, it’s focused,” Ian C. Read, Pfizer’s chief executive, said in an interview Tuesday. “We are at our heart a biopharmaceutical company focused on applying science to improving people’s quality of life. That is what our core is. That is what will determine our success.”

{{rolling eyes}}

This part is good:

Drug executives are asking themselves: “What is it that we now face, given that in the past decade — when everything was going right — we didn’t build with this future in mind?” said Jeremy Levin, who oversaw a similar reorganization of Bristol-Myers Squibb and is about to take over as chief executive at Teva Pharmaceuticals.

At Pfizer, skeptics have questioned the decision to shed some of its most profitable units in favor of doubling down on the risky pharmaceutical business. Pfizer’s nutrition unit grew by 15 percent and animal health by 17 percent in 2011, while its pharmaceutical sales dipped by 1 percent. And Pfizer has suffered some notable flops over the last several years, including the failure of an experimental cholesterol treatment that was seen as a potential successor to Lipitor and poor sales of an inhaled insulin drug that the company eventually abandoned.

So, in the past decade, when everything was going right, why did Pfizer decide to eat smaller companies and lay off all the research staff and put companies and projects in a state of limbo while they merged, and how could that *possibly* result in not building with the future in mind?

Now it’s selling off it’s most profitable divisions.  It doesn’t take a rocket scientist to realize that it’s doing it to pay off the shareholders, who must be obeyed after all:

The acquisitions, some said, turned Pfizer into a Frankenstein’s monster — a giant stitched together from the scraps of smaller companies that lurched forward with little purpose.

“I think the company sort of lost their way in the years before the Wyeth acquisition,” said Catherine J. Arnold, an analyst for Credit Suisse.

Ya think?  Hey, how about the next time a merger is in the works, we actually ask the people discovering drugs whether it is a good idea.

Oh and about that plan to cut research costs by 30%:

Even so, the company’s decision to cut research budgets as it is planning to recommit to its pharmaceutical core struck some as risky. Mr. Gordon, the Michigan business professor, called it a “magic trick.”

It’s a magic trick, however, that most major pharmaceutical companies are also trying. “The question is how do you remain successful and sustain your operations if you’re investing less and less in R&D?” said Kenneth I. Kaitin, a professor and director of Tufts University’s Center for the Study of Drug Development. “The answer to that is to try to find a new way and a more efficient mechanism for discovering and developing drugs.”

If you want to discover more drugs, cut research!  Everyone is doing it.  Let me just suggest to the “smartness” crowd and masters of the shareholder universe that the reason you don’t have any blockbusters is because you treated research like a red-headed stepchild while you were busily merging your little hearts out and collecting bonus checks.  “A more efficient mechanism for discovering drugs” now means outsourcing to China all the grunt work while trying to buy licenses for drugs from struggling and desperate former research staff who will sell them for a tiny fraction of what they may be worth.

Pfizer plans to reduce its research budget from $9.4 billion in 2010 to $6.5 billion to $7 billion this year. It closed a research center in Britain and has been trimming its facility in Groton, Conn., and moving resources to areas closer to universities in Boston and Cambridge, England.

In 2011, the company ended 91 projects, canceling programs aimed at treating bladder infection, for example, as well as one to treat nasal symptoms from allergies. Company executives have also said they will be on the lookout for smaller acquisitions to fill gaps in their portfolio, and will expand partnerships with academic institutions.

Mr. Read said the cuts would not affect the areas that the company has prioritized. “Most of what I cut had a low probability of success,” he said.

Those projects had an even lower probability of success after tens of thousands of research jobs were cut, the budget was slashed more times than a libidinous teenager in a horror movie and the rest of the staff was made to play a game of musical chairs moving from Princeton and Pearl River to Groton to not Groton but we don’t know where yet to Cambridge.  I’ve heard reports that the few former Wyeth staff have been laid off more than once since the merger.

Pfizer has to be the poster child of The Strategy of No Strategy.  They’ve abandoned some of their hardest, smartest workers, and I know some of these people so I know how good they are, to chase get-rich-quick-schemes from the oh so cleverer people at Harvard and MIT and then get Chinese PhDs at a fraction of the cost to churn out compounds in Shanghai.  Pfizer has completely abandoned the idea that it takes 10-15 years to discover and develop a drug, and that continuity of research is crucial.  Pfizer first acquired and then ripped apart all of the smaller pharmas under it to become a bloated behemoth of a leviathan that could be consumed by shareholders in wild abandon.  It’s left a big gaping hole in the pharmaceutical landscape and so far as I can tell, not one politician has bothered to find out why our drug discovery expertise is disappearing right before our very eyes.

Right about now, it is dawning on Wall Street, the CEOs and the investors that they have unleashed Pharmageddon and that they’ve made some big mistakes, not least of which is that the profits that can be shared are slowing down to a mere trickle.  Nevermind all the scientists who no longer have careers, what about their bonuses?? I don’t know about bonuses. My former colleagues and I should be worried about our pensions.  That big pile of cash is going to look mighty tasty and we are all headed for a seniority of deprivation if we don’t figure out a way to stop them from consuming it all.

Friday: Defeat for NJ Public Unions

How did this fly under the radar?  I blame joblessness on my own part and Anthony Weiner’s penis.

TRENTON — New Jersey lawmakers tonight voted to enact a sweeping plan to cut public worker benefits after a long day of high-pitched political drama in the streets of Trenton and behind closed doors.

Union members chanted outside the Statehouse and in the Assembly balcony, and dissident Democrats tried to stall with amendments and technicalities. Although they successfully convinced top lawmakers to remove a controversial provision restricting public workers’ access to out-of-state medical care, they failed to halt a historic defeat for New Jersey’s powerful unions and a political victory for Republican Gov. Chris Christie.

[…]

The bill passed the Assembly 46-32 and will be sent to Christie’s desk for his signature. Fourteen Democrats voted for the bill, while 32 opposed it. After the vote, protesters in the balcony shouted “Shame on you!”

Unions have blasted the bill for ending their ability to collectively bargain their medical benefits. Health care plans for 500,000 public workers would be set by a new state panel comprised of union workers and state managers, rather than at the negotiating table. A sunset provision would allow unions to resume collective bargaining after increased health care contributions are phased in over four years.

In addition, police officers, firefighters, teachers and rank-and-file public workers would all pay more for their pensions and health benefits.

Supporters of the bill say the state needs to cut costs because the pension and health systems are underfunded by more than $120 billion total. The Christie administration estimated the bill would save $3 billion in health benefits over the next 10 years and $120 billion in pension costs over 30 years. Much of the pension savings are from the controversial elimination of the cost-of-living adjustments for retirees, which unions have threatened to challenge in court.

The bill that passed will affect not only future retirees but *current* ones by eliminating cost of living increases. (People who think the Republicans won’t screw around with Medicare for current retirees should think again.  In fact, anyone who is not wealthy and is still a Republican should have their head examined.)  Some people might ask what’s the big deal but it’s already ridiculously expensive to live in New Jersey.  In my suburb, the median salary is $109,000/year and that and a quarter will get you a modest townhouse, barely. Those of us without jobs are really screwed but it’s not much better for people living on pensions when the property taxes soar.  We can thank Christie Todd Whitman for the pension problems.  I believe it was Whitman who shoved the burden of financing the pensions onto local municipalities in the 90’s.

There are many problems with the way NJ runs its local governments.  Frankly, there are too many of them.  This is the densest state of the union in terms of population and the state is carved up into thousands of tiny fiefdoms that are run inefficiently. Not only is there a lot of duplication of effort, some residents get away with paying relatively little. One middle class suburb might have sky high property taxes while a swankier suburb with higher real estate values pays substantially less in property taxes.  The difference is that the middle class suburb is a receiving school district while the Bonus Class suburb is a sending district that doesn’t need to fund facilities or staff for the high school.  Isn’t that conveeeeeenient?

In this state, it feels like the burden of funding everything is squarely on the shoulders of the middle class.  You educate the children of the poor AND the wealthy.  It’s a sweet deal if you’re rich and can benefit from the property tax version of the Matthew Effect.  The property tax issue and home rule problem here has been extremely resistant to modification.  But it doesn’t help that neither the state legislature, nor any governor of NJ I’ve ever suffered under, has made any attempt to make it fairer for the people most under stress by the tax situation.  The rich get richer, the poor get a lot of grandstanding but no real solutions and the middle gets the shaft.

Local government is expensive.  You definitely get what you pay for.  I would prefer a more equitable way to fund the state rather than the crushing property taxes that are forcing some of us out of NJ.  A higher tax on the rich is way overdue.  Municipal government overhaul is overdue.  Shifting the burden from property taxes to an occupation tax and a more progressive income tax is way overdue.  Loosening up the state’s bizarre liquor license laws to reel in more revenue is overdue (very few groceries sell wine, beer or liquor and very few restaurants have liquor licenses).

But year after year, the only solution that is ever proposed is to underfund the pensions and demonize the unions.  The politicians in this state are completely inept at ever addressing any of the problems that have plagued NJ since I moved here 20 years ago.  This is no way to treat your children’s teachers, or your neighborhood police officers or your emergency services people or any of the other people you forget you need until you need them.  Joblessness and a reduced income trickles down on the handyman, the cashier whose grocery store is closing and the piano teachers.  We all suffer when the rich rig the system in their favor and screw the rest of us.

A word to the stingy, MBA class suburbanites: When you go to the next Board of Ed meeting to complain about the budget or the fact that your bratty, overindulged kid has to walk on pavement to get to the bus stop, leave your $58,000 Lexus SUVs at home.  Driving them when your kid’s favorite social studies teacher is about to get the ax is in very bad taste.  I know, I know, no one will tell you this but I feel I owe it to you to let you know how crass, rude and insensitive it is.  You look like novo riche, status conscious social climbers and a school board meeting is not a place to do networking.

Did I mention  I am willing to relocate?

Anywhere but here.

The following is a statement from NJEA president Barbara Keshishian:

“Today marks a new low point in the attack on New Jersey’s school employees and other public workers.  With their action today, the 46 Assembly members who voted ‘yes’ sent a clear message that their promises aren’t worth the paper they are written on.

“By stripping even currently retired public employees of their promised and earned cost-of-living adjustments, these legislators signaled that no promise they make should ever be believed by any New Jersey voter.

“Retirees who count on their pensions for a modest level of security after a lifetime of public service will suffer because of today’s vote.  NJEA will challenge these illegal actions in court.  We cannot and will not allow this outrageous raid on retirees’ pension checks to stand.  This pension raid would reduce many retired workers’ pensions by 40% or more by the end of their lives.

“A legislature and governor who will raid the pension checks of retirees and the paychecks of middle-class workers but lack the courage or integrity to ask the very wealthy to share the sacrifice of even a modest tax increase are not the representatives of the people who elected them.

“Politicians who think it is acceptable to ask middle-class families to pay $5,000 more out of pocket for drastically reduced benefits but refuse to ask a $5,000 sacrifice from taxpayers earning $750,000 a year have failed in their obligation to represent the interests of all their constituents.

“Elected leaders who say they support collective bargaining but vote to undermine it as severely as this legislation does cannot be trusted or believed any longer when they claim to stand for the values and principles that working-class voters hold dear.

“Today’s vote was a victory for those who believe that America’s widening wealth gap and its growing preference for the wealthy over the working class are good for America.  For those of us who believe that democracy belongs to all voters, regardless of their wealth, today serves as a call to take back our government by joining forces with elected leaders and those who aspire to office who truly believe in fairness, honesty and genuine collaboration.

“We salute the 32 brave Assemblywomen and Assemblymen who opposed this attack on the middle class, as well as the 16 honorable Senators who did the same earlier this week.  The 200,000 members of the New Jersey Education Association will not forget the courage and integrity they demonstrated throughout this process.”

Monday: Sign of the Times

I found this little ditty from Reuters a couple of days ago.  Forget the debt ceiling, it’s the equities market you need to worry about:

NEW YORK, May 15 (Reuters) – The big money is calling a halt to the surge in stock prices. Declines in oil and metals prices are being seen by an increasing number of fund managers and strategists as a signal to get out of riskier areas of the equity market. And that means avoiding things like Chinese IPOs and sticking to the boring stuff, like utilities. The growing concern is that stocks had priced in an overly optimistic economic path, and the recent breakdown in commodities and shift in equities to safer industries such as health care, suggest a reckoning in coming months. Ken Fisher, founder of Fisher Investments that manages about $38 billion in equities. is among those concerned many investors have become overconfident. “I think expectations for the stock market are a bit on the high side,” he said.

Hmmm, you mean that I should lower my expectations of spectacular returns and should maybe settle for the same kind of return I might have gotten with a much more secure pension?  You mean we were right to think that we couldn’t get “Money for nothing and our chicks for free?”  And I wasn’t given a choice because…?

Now, I will be the first to admit that I know very little to nothing about how finance works.  It’s not my fault that I was forced into a 401K.  What I usually do is mix up my investments, set the autobalance option to “on” and leave the sucker alone.  In fact, my BFF probably knows more about my investments than I do.  I’ve done pretty well in the past 8 years but still don’t have anything near the level of savings I need to retire on.

Even so, it’s all at risk right now.  My 401K options didn’t include a mattress to stuff my money under.  All of my options carry an element of risk, some less than others, but most of it tied to the machinations of the money addled financiers.  And WHY are we invested in this market?  Well, as the nice 401K man explained to us when he came to visit the facility last year, pensions are going the way of the dinosaur, “yours aren’t going to cover your expenses”, and “social security is gone for most of the people in this room”.  Gee, who died and made him the US government?  In other words, where else you gonna go, you stupid born in the latter half of the 20th century schlepps?

But note what these guys are saying now that they’ve got everyone invested:

Ken Fisher, founder of Fisher Investments that manages about $38 billion in equities. is among those concerned many investors have become overconfident. “I think expectations for the stock market are a bit on the high side,” he said.

Wait!  Weren’t we supposed to put all of our retirement funds into the market and watch them grow over time so that when we retired, there would be this ginormous fund of cash on which we would pay low as dirt taxes?  Wasn’t that how it was supposed to work?  That’s how it was advertised.  So, now we are being told NOT to expect a hefty return on our investment?  And what exactly is an expectation that is a bit on the high side?  I thought the sky’s the limit.  Surely, I would fare better than my widowed mother on social security, with two pensions, a paid off house, socialized health care and who has never had to choose a mutual fund in her entire life.  I could take TWO cruises per year, right?

No?

I’m not surprised that a whole generation of workers is about to get the biggest shock of its life.  The numbers never did add up for us.  It doesn’t surprise me that it’s coming as soon as it is.  My estimate was 2013, more or less.  We who straddle the baby boom/Gen X era were always going to get the shaft.  The older babyboomers were going to take their big cut of 401K profits, as is their right as firstborns, and send us the hand-me-downs.  Those of us straddlers who are no where near retirement age will have to stand by helplessly as our 401Ks and pensions are sucked dry by the huge generation that precedes us. The finance guys are furiously doing their jobs, trying to track down places where the money can grow to replace the money that is siphoned away.  But they are running out of options and they are now realizing that they must lower our expectations.  Well, they kept *telling* us there was no guarantee of a big payoff, didn’t they?  Weren’t we paying attention when they told us that??  They said our money *could* grow to stratospheric amounts, not that it *would* grow like that.  If we didn’t choose wisely, like choosing to delay our births to around 1960, that’s hardly *their* fault, is it?

Even the Chinese IPOs are not looking so shiny anymore.  Could the rumor that Chinese chemists are demanding 40% more in salary over last year be related to that?  Hey, just because American chemists were like lambs to the slaughter doesn’t mean Chinese chemists have to have a death wish.  So, China is getting smart.  (Worldwide, it turns out that there just aren’t that many of us research types after all)

Yes, the finance guys are getting desperate.  They are finding fewer places to turn a profit, the profit margins are getting skimpier, the babyboomers are removing their cash and they need to get more younger workers into the market.  The base of the pyramid is starting to thin.  Maybe that accounts for all the attacks against the unions and the business plans of Republican run municipal governments to create two tier retirement plans, which now look like thinly disguised theft of younger workers.  All of their money will be put in 401Ks, they will have no access to pensions and by the time they need to access the 401K’s, there will be nothing left or what is left will be growing slowly, if at all, as it is siphoned away by the retiring babyboomers.  The icing on the cake is that some of these municipal workers will be taken out of the social security system as well.  That means there really is nowhere else for them to go but the 401K, the losing proposition.

What does surprise me is that no one seems to be particularly concerned.  We straddler numbers are huge.  We had the biggest graduating classes.  Our wages are being shredded right now, our futures ripped up.  If we’re lucky, we’ll have a bit of money from social security, a bit left over from our ravaged 401Ks and *maybe* a teensy bit of a pension, provided the company that is funding it doesn’t file for bankruptcy and dismantles it (a very real possibility considering who ended up owning my biggest pension fund right now).

Obama is part of this generation.  He seems blithely unconcerned.  Well, what do we want HIM to do about it?

Exactly.  That’s why I voted for the girl.

How the Social Security Commission will kill the American Economy

According to the New York Times, small investors are pulling their money out of the stock market.  Yep, seems like it’s a bit too risky for the boomer generation.  What with all of their retirement savings opportunities drying up:

To be sure, a lot of money is still flowing into the stock market from small investors, pension funds and other big institutional investors. But ordinary investors are reallocating their 401(k) retirement plans, according to Hewitt Associates, a consulting firm that tracks pension plans.

Until two years ago, 70 percent of the money in 401(k) accounts it tracks was invested in stock funds; that proportion fell to 49 percent by the start of 2009 as people rebalanced their portfolios toward bond investments following the financial crisis in the fall of 2008. It is now back at 57 percent, but almost all of that can be attributed to the rising price of stocks in recent years. People are still staying with bonds.

Another force at work is the aging of the baby-boomer generation. As they approach retirement, Americans are shifting some of their investments away from stocks to provide regular guaranteed income for the years when they are no longer working.

And the flight from stocks may also be driven by households that are no longer able to tap into home equity for cash and may simply need the money to pay for ordinary expenses.

On Friday, Fidelity Investments reported that a record number of people took so-called hardship withdrawals from their retirement accounts in the second quarter. These are early withdrawals intended to pay for needs like medical expenses.

According to the Investment Company Institute, which surveys 4,000 households annually, the appetite for stock market risk among American investors of all ages has been declining steadily since it peaked around 2001, and the change is most pronounced in the under-35 age group.

Under 35’s?  Honey, you ain’t seen nothing yet if the current proposals to raise the retirement age and cut Social Security benefits gets passed.  Contrary to the expectations of the corporate retirement fund managers out there, if social security gets more difficult to collect, my whole investment strategy is going to undergo a radical readjustment and not in Wall Street’s favor.

Suddenly, I will have to start a new savings plan to cover the costs of getting older when I can no longer bop around in the lab and up and down the stairs to the autoclave.  That is, if I even get the privilege of retiring from a job, which at this point looks less and less likely.  No, if social security becomes a distant dream, that segment of my retiremement scheme will have to be made up somehow.  And I WON’T be sticking my money in some risky stock market fund where there is no guarantee that my dollar of savings won’t be a dollar of withdrawal down the road.

Cutting Social Security means no more vacations, no more furniture, no more gadgets.  It means downsizing, selling the modest townhouse ASAP and finding some cheap little condo without high maintenance fees.  It means putting the money in the safest, least sexy place possible and just sitting on it.  For decades.  Seriously, life will become a LOT simpler.  After all, I have a kid I need to put through college and something’s got to give. I’ve never been a gambler and only participate in the 401K program under duress.  Give me a nice guaranteed pension and I’d be happy.  I’d rather be secure than rich.  Maybe that’s just me but I could be happy in Denmark where people can focus on living their lives and less on acquiring stuff.

Sometimes, I think that the people who are so hell bent on dismantling social security haven’t thought through this problem sufficiently.  They think we are so driven to outdo the Joneses that we’ll keep shoveling our hard earned paychecks into high yield investments.  Maybe some irrationally exuberant people will but the NYTimes article suggests that many of us have been too burnt to be careless with fire.  The outcome they are expecting seems to deny that the American worker has structured his whole life around social security and when it becomes unattainable, that security has to be compensated in other ways.  I don’t think current recipients should get too comfortable either.  Once the social pact is gone, the overstrapped still employed are going to start resenting the amount of money that goes into a program they can never benefit from.  Consider too that some companies are cutting out pensions entirely in the near future even though they provide them for current employees.  Future wages are already going down.  There is just not enough money to pay for everyday living and kids and saving for retirement and saving for some older person’s retirement.  Right now, it’s not so much of an issue but take away that piece of the retirement pie and there *will* be consequences.  The US economy is dependent in part on social security, which is why it was developed in the first place.  Seniors without incomes spend no money.  So, to save up for those senior years, money will have to be sequestered and some of us don’t have a lot of time to do it.

What’s really shocking about the “Catfood Commission” is that it’s being done by Democrats.  Even if the recommendations were acceptable, which they aren’t, this is not the time to be proposing them.  It smacks of the worst kind of politics when a respected program that everyone loves is held hostage for electoral gain.  Democrats are doing this.  It’s like taking the baby out of the basinet and holding it over a pit of Republican crocodiles, daring us to vote against Democrats.  It makes me LESS inclined to vote for the Democrats because if it happens this year, they’re going to keep doing it and one of these years, that baby’s going to fall or be so emaciated that it will be worthless, sort of like what happened to reproductive rights.  If Democrats want my help this year, they will dismantle the commission before November, recognizing that the economy can’t handle any talk of cutting benefits or extending the retirement age.

So, go ahead, bipartisan commission, make it harder for me to retire.  Hell, let’s be honest, make it *impossible* for me to retire.  And I will suck all of my funds out of the free market system.  I’ll stick to the bare necessities, continue to buy used cars, will forgo my next laptop, stop buying nice clothes and, like this year, turn down the family cruise this winter.  My bank account will become fat but the economy will stagnate as people all over the country remember what happened to people in the Roaring Twenties who sunk all of their retirement money in the stock market and risky investments.  My bank account and CD’s may make squat in interest but as long as they’re guaranteed by the government, I’ll live with it.

Until some new Idiot in Charge proposes a bipartisan committee to study the FDIC.

And now for something radical and extreme: Get rid of the 401K

Last weekend, I got polled.  Er, by Harris, the polling company.  I’ve been getting a lot of that lately.  Maybe being a middle class suburbanite independent Democrat-in-exile in NJ means I have finally arrived but it’s unlikely I fit their notions of the typical polling subject.  Well, not after this poll anyway.

The first question was about my attitudes towards the military.  Would I suggest the military to a young person?  As it happens, I’m a military brat, my family has a long tradition of joining up and I have current family members who are career military.  So, while a military career is not for everyone and it’s certainly more dangerous than it was 10 years ago, I wouldn’t rule it out for someone who doesn’t know what they want to do as a career.

That first answer seemed to have put me, a lifelong liberal, on the Tea Party branch of the decision tree.  Many of the other questions after that point were kind of insulting to the intelligence.  For instance, is someone arrested for a crime entitled to speak to an attorney?  Jeez, all those years of Dragnet should have sunk in by now.  Of course they are.  What about if the crime is serious or particularly heinous?  Um, yeah, that’s when you are most in need of one to defend you.  What about if it’s a TERRORIST???  Do they get to speak to an attorney on the government’s dime if they are accused of TERRORISM?  Well, Timothy McVeigh went through the process, was represented, had a fair trial and got what was coming to him.  I think the system can work.  Let’s not start making exceptions for alleged terrorists.

Anyway, that wasn’t the section that tripped my trigger.  No, the one that got to me was about 401Ks.  I don’t know what our brilliant braintrusts in the Democratic party are up to but if they are the ones who are suggesting that it would be a nifty keen idea to expand the 401K system, we might as well all just get used to an America whose salad days are over.  The poll question was something like, “Would you approve or disapprove of expanding the 401k system to workers whose employers would not be required to make a matching contribution?”

That’s a weird question for so many reasons.  The first one is, if you allow *some* employers to opt out of making contributions, wouldn’t you just give the rest of them justification for also opting out?  And what about the Enron-esque employers who match with stock?  But I digress.  Because the real employment trend is to make everyone contractors, freeing the corporation from actually employing and being responsible for the lives of the people who work for them.  So, maybe that’s where this question is coming from.  Say you are now a contractor, forced to go through some rent collecting middle man who acts as an intermediary between the corporate entity and your paycheck.  Now YOU are responsible for your retirement accounts, not the corporate entity.  So, does the old corporation have to match your 401k contributions?  Something to think about as the traditional bonds between employer and employee are redefined.

But that’s not why the 401K needs to go.  Now, I am not a financial wizard.  Far from it.  If you want that kind of expertise, check out Dakinikat’s posts, or Baseline Scenario or Naked Capitalism.  No, I am just Jane Bagodonuts from the burbs.  Nevertheless, blogging allows me to expound on any subject I like or don’t like.  And I have particular dislike for my 401k, may it grow and prosper.  Here are my reasons from a liberal perspective:

1.) It’s a Ponzi scheme.  Yep.  Unlike Social Security, which we are all required to participate in and which has actuarial expertise built into it and is a fall back retirement insurance policy, the 401k is for suckers.  It relies on lots of people dumping their investment dollars into pumping up the price of stocks.  When the baby boom generation starts to retire in earnest, it’s going to want to cash in, leaving us with funds with diminishing value.  UNLESS we get some other poor schmos who don’t have employer contributions to send their money to our 401Ks in return.

2.) Wall Street thinks the money in your 401K is there for them to use as gambling chips in some global game of roulette.   We saw this happen in 2008 when the subprime mortgage market collapsed but it’s not limited to the bond market.  Oh, sure, the stock market is more highly regulated but when the bottom fell out of the mezzanine subprime tranche CDO’s it took everything else with it.  Besides, who has time to monitor their 401K’s at every minute of the day?  Most of us follow the Ron Popeill method of financial investment: set it and forget it. Turning a bunch of naive amateurs into financial planners of their old age lifestyles has turned into a windfall for the predators on Wall Street.  What we don’t know can hurt us and we don’t know what they’re up to.

3.) Wall Street and the financial sector in general is like the Wild West right now.  Until there is more oversight and regulation, you just can’t trust them.  The constant infusion of cash to these testosterone poisoned, self centered, highly overrated gamblers who manage our money only encourages more risk taking and future financial collapses.

4.) 401Ks lead to employees betting against themselves.  The shareholder is the emperor.  The money we put into these funds increase when employers see staff as unattractive drags on the bottom line.  I’ve always preferred the word Personnel to Human Resources because it acknowledges that there are persons actually doing the work and that we are not just variable costs to be minimized for the benefit of the bonus class.  Nevertheless, when corporations cut staff, the stock goes up and everyone starts dreaming of their new retirement condo in Mexico.  That is, iff they have the privilege of actually retiring.

5.) 401ks lead to less innovation.  Well, if you have to cut staff to assuage the quarterly panic attacks of the shareholders, you don’t have people innovating for you.  It’s true.  People who no longer work for you are not required to do your thinking for you.  The people who are left are too busy preparing for their own “displacement” to do any real work.

6.) 401ks invite the bonus class to invest in emerging markets, not the American market.  They’re always chasing profits.  For themselves.  For you?  Ehhhhh, not so much.  Shareholders, that is the BIG shareholders, not you and me, have to be satisfied so the money must go somewhere.  Why not India?  Oh, sure, it means that the capital will be invested in a place that means more Americans will lose their jobs and potential American entrepreneurs will go begging for startup money. But that’s the nature of capitalism.  Suck it up.

5.) In order to get a break on taxes, which in my case are pretty ugly, you can’t take the money out until you retire.  You can borrow from your 401K but then, you have to make sure you stay employed so you can pay yourself back.  It’s not very liquid and most of us can’t afford to fund multiple retirement/savings/college funds.  In emergencies, it’s useless.

Now, I am glad that I have a 401K, for the short term forseeable future, and that my employer is rather generous in funding it.  But it’s all on paper as far as I’m concerned.  By the time I am ready to retire, it might be worthless.  Getting rid of them wouldn’t exclude investing in the stock market.  It would just not institutionalize it and make it an all-but-mandatory retirement strategy.  Maybe the financial sector would be a little bit more attentive to our needs if they didn’t have a steady stream of easy money flowing into their gargantuan gullets.  Maybe customer service would improve.  There might be incentives offered to attract your business.  Maybe the risky gambling addiction behavior would cease.

I dunno.  I can only speculate with my money averse mind. But the more I hear about the financial meltdown, the more I keep coming back to the 401K “instrument” as the root of all evil.

Get

Rid

Of

It