American Elephants


Wisconsin Protesters are Getting Off Easy! by The Elephant's Child

Public sector workers in Wisconsin are, though they don’t seem aware of it at all, getting off easy.  Governor Scott Walker is asking government workers to pay a little more of their health care costs, and to pay a little more of their pension costs.  He is addressing the enormous problem of the circular power game engendered by collective bargaining over benefits.

Union members’ dues are collected by the state and given to the unions.  The unions use the dues to fund the campaigns of the officials with whom they will bargain over the benefits of union members. The incentives are for the officials to give the unions whatever benefits they want, so that they will get union money for their campaigns in subsequent years. The taxpayers who foot the bill for the whole thing have no seat at the table, and can only influence events by throwing the bums out — which the very Democratic state of Wisconsin did in November, 2010.

Hence the protests, violence, screaming and general misbehavior in Madison, and the occupation of the statehouse, which apparently has left the building dirty and reeking.

What is not on the program in Wisconsin, and should be, is the idea of Defined Benefit Pensions. In principle, these plans are designed to be pre-funded.  Employees are supposed to set aside money during their career to pay for the benefits they will receive in retirement.  In some cases, employees have to pay part of it themselves.  The employer, the state, invests those assets in equity investments with a smaller portion in fixed-income vehicles like bonds.

The problem is that the employee’s benefits are unaffected by the performance of the assets that are supposed to support the benefit.  Defined benefit plans are designed to shift investment risk from the employee to the employer.  Over the long term, defined benefit plans, especially those where the benefit keeps growing because of crooked collective bargaining, make very difficult situations for employers (think Chrysler and GM).  In 2009, 84% of state and local workers in America were offered a defined-benefit plan.  When state pension plans lose money, taxpayers must step in to make up the difference, because the defined benefit is promised — regardless of real world conditions.

When you hear terms like “unfunded pension liabilities,” you probably want to pay attention. Most people in the private sector now have Defined Contribution Plans, or 401(k)s.

Actuaries are folks that are really good with math, but nobody can predict the future.  Any time someone presents you with a program that is telling you what to expect ten years from now — is full of it.  Insurance plans cannot promise to fulfill your future needs, they can only make assumptions based on current conditions.

Life is risky, and grownups assume the risk and try to prepare for it.  Adolescents expect someone else to take care of them.



The Story Behind Your Flowers by The Elephant's Child

March comes in, they say, like a lion and goes out like a lamb.  Could be.  Today started off with sunshine, and has devolved into brief cloudbursts, short windstorm–the kind that would shut down the turbines— another cloudburst and more sunshine.  It’s 45° and I can still see a patch of blue sky out the window, but clouds dominate.  Fortunately, the grocery stores are full of blooms to assuage the gloom.

There are various bursts — Valentine’s Day flowers were a reminder to every man who entered the store that he’d better not forget to take some home.  We’ll have some green-dyed carnations for St. Patrick’s Day, and then explosions of flowers for Easter and Mother’s Day.  But where do they all come from when the weather is so miserable here?

This fascinating article from the Smithsonian tells the story about how Col0mbia became our major supplier of flowers.  It is a remarkable story of   specialization and innovation.



The Do-Gooders Line Their Own Pockets! by The Elephant's Child

Nearly a year ago, I wrote about Assistant Secretary of Energy Cathy Zoi, who as revealed by disclosure documents, has a huge financial stake in companies likely to profit from the Obama administration’s “green policies.”

She was previously CEO of Al Gore’s Alliance for Climate Protection, and left that job to serve as assistant secretary in charge of energy efficiency and renewable energy. It was a remarkable example of graft and crony capitalism. But we’re learning about how well the renewable energy and green jobs sector is doing.  Now, Zoi has announced that she will be leaving her post to go to work for George Soros’ new venture capital firm focused on green energy.

The DOE website says that Zoi “manages over $30 billion of American Recovery and Reinvestment Act Funds” (the Stimulus).  Her new job will have her working to secure “green energy” taxpayer handouts and subsidies.  This is another of Soros’ bright ideas.  By investing hundreds of millions of dollars into advocacy groups that lobby for increased energy subsidies, he now gets to be on the receiving end of all those billions of dollars of subsidies.  Tim Carney, excellent investigative columnist writes:

Zoi’s tenure at EERE was rife with conflicts of interest. Her husband, Robin Roy, is an executive at Serious Materials, a small window manufacturer that boomed when Obama came to office. First, Serious Materials benefited from free advertising by the White House: President Obama praised a new Serious factory in March – before he officially nominated Zoi – and then Vice President Biden made a public visit to a different Serious plant in April, just after her nomination but before her confirmation. Finally, Serious was also the first window company to pocket a stimulus tax credit – worth $584,000 – for investing in new equipment.

Zoi testified before the Senate Energy and Natural Resources Committee in favor of a HOMESTAR program, also known as cash for caulkers, which became another subsidy for Serious.

At the time of her nomination, the couple owned between them 120,000 stock options in Serious Materials, according to her April 2009 personal financial disclosure. She also owned at least $265,000 of stock in a Swiss company called Landis+Gyr that makes “smart meters,” high-tech thermostats that the administration has promoted for saving energy. Pro-free-market writer and lawyer Chris Horner described the conflicts of interest: “Clearly, DoE funding to encourage the adoption of ‘smart meters’ would very likely lead to much increased sales by Landis+Gyr — and a potential windfall for Zoi.”

It is an ugly story of corruption and conflict of interest, cloaked in garments of green that apparently absolve them from any blame. Taxpayers can blame them, but it won’t do any good.  You might remember when the next election comes around.



Wisconsin Sen. Glenn Grothman Trapped by a Screaming Mob by The Elephant's Child

Wisconsin Republican Senator Glenn Grothman was chased and trapped by an out-of-control mob as he tried to enter the Wisconsin capitol building. It was a remarkably ugly scene. He had to be rescued by one of his Democrat colleagues who was with the demonstrators.

The nation is facing a fiscal crisis of historic proportions, and the big spending Democrats who were removed from office in November are still refusing to acknowledge that there is a debt crisis. In state after state, even normally Democratic states like Wisconsin, voters sent Republicans into office to put things in order.  Wisconsin Governor Scott Walker faces a $3.6 billion budget shortfall over the next two years. He is required by law to balance the budget. The interesting thing is that the unions would prefer to lay people off than lose power.  We have Democrats desperately defending the status quo.  Republicans trying to rescue the state from a fiscal meltdown.

Walker faces tough choices. He proposed that state workers contribute a little more to their pension and health-care benefits, and started a revolution.  Teachers called in sick, schools closed, demonstrators massed at  the capitol and moved into the capitol building.  Democrat legislators, who didn’t have the votes, left the state to prevent the legislature from having a quorum.

The public quickly came to understand that although they were expected to pay the bill for public workers’ benefits, they were unrepresented at the bargaining table. The deal is that public employees pay their dues to the union, the union spends the dues on campaign funds to elect their preferred Democrat candidate to office, where he will bargain with the union on their benefit package which he hopes will be generous so the union will again support his campaign. A cozy and corrupt game, and one that cash-strapped states can no longer afford.

Democrats have chosen not to recognize the results of the election in Wisconsin.  They may insist loudly that they are “doing it for the kids,” but as usual, it merely proves that what they care about is control and power.  Democrats have tried to whip up the mob with claims that the Libertarian Koch brothers — well, it’s entirely unclear exactly what they are trying to blame on the Koch brothers — but it’s clear that the Kochs are guilty because they are very rich. And “the rich,” by definition, deprive the poor of their money unjustly.  How that works is also unclear.

Since the teachers had to go back to school, we don’t know just who comprises the screaming mob. President Obama has sent in volunteers from Organizing for America, private sector unions are there in solidarity with the public unions, and there seems to be a number of students.  Madison is a university town.

The usual rabble-rousers have turned up to rouse the rabble. The President is improperly siding with the unions, but that is nothing new.  His Labor Secretary, Hilda Solis, believes that her job is to support the unions rather than American workers  That they understand neither tradition or propriety is not surprising. That they deny there is a fiscal crisis is not really surprising either, but it is a very big problem.




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