Monday, October 03, 2011

The Spanish Canary


You don't have to be a futurist to see the future. Unless we get the right leadership - we are just 5 years from Spain ... and not the good parts.
He depends on government handouts of €530 ($702) a month – less than half the amount he needs just to pay his mortgage – and is convinced that the bank is about to repossess the flat where he lives with his wife and three children.

“I am legalised here, but for more than five years I’ve not been working,” says Mr Ekenobaye. “We are trying to do whatever we can.”
...
“In the past four years we have lost 25 per cent of our income,” says José María Fraile, the town’s mayor. “At the moment there’s no liquidity ... The [credit] window has closed.”

Mr Fraile is negotiating with trade unions to fire 190 people, a quarter of the city’s workforce, as a way to save money. One private company responsible for sports facilities has obtained a court order to sequester municipal assets to cover millions of euros of unpaid debts. Valoriza, another company, is owed €80m for years of garbage collection and cleaning.
It's only starting, and it's coming here.

We know about Detroit - but what about States? The first shoe to drop in the USA is already going; California.
“This year the state will directly spend $32 billion on employee pay and benefits, up 65 percent over the past 10 years,” says Crane later. “Compare that to state spending on higher education [down 5 percent], health and human services [up just 5 percent], and parks and recreation [flat], all crowded out in large part by fast-rising employment costs.” Crane is a lifelong Democrat with no particular hostility to government. But the more he looked into the details, the more shocking he found them to be. In 2010, for instance, the state spent $6 billion on fewer than 30,000 guards and other prison-system employees. A prison guard who started his career at the age of 45 could retire after five years with a pension that very nearly equaled his former salary. The head parole psychiatrist for the California prison system was the state’s highest-paid public employee; in 2010 he’d made $838,706. The same fiscal year that the state spent $6 billion on prisons, it had invested just $4.7 billion in its higher education—that is, 33 campuses with 670,000 students. Over the past 30 years the state’s share of the budget for the University of California has fallen from 30 percent to 11 percent, and it is about to fall a lot more. In 1980 a Cal student paid $776 a year in tuition; in 2011 he pays $13,218. Everywhere you turn, the long-term future of the state is being sacrificed.
... I see it in my own town, the taxpayers have become slaves to the public employee retirees - fat boomers tooling around in their Harleys.
"It’s like the housing bubble and the Internet bubble. There were people around who were writing about it. It’s not that there aren’t people telling us that this is crazy. It’s that you refuse to believe that you are crazy.”

He hands me a chart. It shows that the city’s pension costs when he first became interested in the subject were projected to run $73 million a year. This year they would be $245 million: pension and health-care costs of retired workers now are more than half the budget. In three years’ time pension costs alone would come to $400 million, though “if you were to adjust for real life expectancy it is more like $650 million.” Legally obliged to meet these costs, the city can respond only by cutting elsewhere. As a result, San Jose, once run by 7,450 city workers, was now being run by 5,400 city workers. The city was back to staffing levels of 1988, when it had a quarter of a million fewer residents. The remaining workers had taken a 10 percent pay cut; yet even that was not enough to offset the increase in the city’s pension liability. The city had closed its libraries three days a week. It had cut back servicing its parks. It had refrained from opening a brand-new community center, built before the housing bust, because it couldn’t pay to staff the place. For the first time in history it had laid off police officers and firefighters.

By 2014, Reed had calculated, a city of a million people, the 10th-largest city in the United States, would be serviced by 1,600 public workers. “There is no way to run a city with that level of staffing,” he said. “You start to ask: What is a city? Why do we bother to live together? But that’s just the start.” The problem was going to grow worse until, as he put it, “you get to one.” A single employee to service the entire city, presumably with a focus on paying pensions.
...
I n August 2011, the same week that Standard & Poor’s downgraded the debt of the United States government, a judge approved the bankruptcy plan for Vallejo, California. Vallejo’s creditors ended up with 5 cents on the dollar, public employees with something like 20 and 30 cents on the dollar. The city no longer received any rating at all from Moody’s and Standard & Poor’s.
California did not get there by accident. Their bad idea voters, after they soiled their next - have moved.
“Those who have money and can move do so,” Whitney wrote in her report to her Wall Street clients, “those without money and who cannot move do not, and ultimately rely more on state and local assistance. It becomes effectively a ‘tragedy of the commons.’ ”
Behold the nation the Boomers have left their children. California dreaming to a nightmare in a generation - all because of their greed. Is that fair? All I know is that the nation that inherited literally and figuratively the most from their parents are, literally, leaving their children the least. I guess they figured that instead of parenting their children, they medicated them enough that they won't care.

16 comments:

James said...

Dont worry phib. As long as you contribute your fair share.

SouthernAP said...

Okay, first off I am going to take exception to the generalization of the Baby Boomer civil employee-retirees who are now riding Harleys. My dad did his 22 in the Navy and then did another 20 as a civil service employee in a town in Washington State. He finally retired for good just a couple of years ago and is sweating his own pension both Federal and state. He does own a motorcycle, but it isn't a Harley.

Why because some of the larger cities in the state with the larger unions have been voting larger and larger increases in the pay charts, back when the world was full of wine&roses. So now some of the smaller cities and smaller public employee unions are being driven into the ground by the corruption in the larger cities. I would bet you dollars to donuts that some of the small town unions through the nation are being drugged down by thier larger brethern in places like LA, Detriot, NYC, Miami, etc. So the small towns in places like Mayberry,Ottumwa, Frostbite Falls are getting screwed over as well. Since state governments looking to cut back on expenses are looking at cutting, or heavily modifiying, or out right eliminating the pension plan they signed up for or were promised when being recurited.

I would also ask just like we debate about the level of GOFO's out there and Senior Civilian Contractors out there sucking up oxygen in places. If we take a look at the staffing at all levels of government from the Federal on down to the ctiy level; how many people do we need to fill some of those levels of BS such as Diversity Training or to generate some metric for a higher purpose (such as how many X people are doing Y so that the government can get a part of some Federal Grant), or just duplicating another leg of the government or micro-managing government bosses watching someone else.. Even worst though is how some of thse folks look around seeing that someone out in the world earning 6 figures for the same job they are doing, so they petition for that same sort of salary. In turn they petition for a change in the pay scale, the government goes for it and that is why we have some E-3 equivalent in the civilian side of the government bringing home 6 figures after taxes. If we are serious about reforming government then we need to kill some of these micro-managers and excessive pay scale for the jobs being done.

ewok40k said...

Look forward to future where nobody has job, because everything can be either done by robots, computers, or starving children somewhere CNN isn't allowed in. And high tech jobs moving to the country with smallest possible education/average pay rate. As for the governments, federal and state raking up debts, trend really started with Reaganomics. No tax rises  but borrow like hell to fund 600 ship Navy. Worked for about 3 decades, with focus of spending shifting between military and social spending depending on world events (Cold War End, 9/11).  Time to turn off the voltage under the 3rd rail, namely to connect retirement age to median life expectation or prepare to have centennials+ spending half of life in retirement. Time to bring back the industry building politics and start making things that can be exported. And try to do this and get elected again...
You know, regarding the "throwing money from helicopter" idea, it would in reality work better than "saving the banks too big too fail". People finding $ on the street would generate demand at shops, while banks simply bought more gold and silver instead of lending and investing in main street economy...

Mike M. said...

What infuriates me is that the Federal Government realized the fixed-pension model was unsustainable thrity years ago - and ditched it in 1983.  And avoided a lot of problems.  There was absolutely no reason for every state and local government not to follow suit.

The Emigrant said...

This is why I actually think folks needs to get behind the message that Elizabth Warren was trying to put out, but perhaps in a way she did not intend--that the people who actually pay the taxes are owed a little something, and in fact may have the moral upper hand.

I'm personally not so sure that is something the Democratic party wants to embrace fully, once they think about where it naturally leads.

Anonymous said...

Clearly the downside of the "Me generation."  I saw it in 2008, I moved out, would not you do the same?

Spade said...

Weren't you people supposed to die before you got old?

UltimaRatioRegis said...

That is what OBAMACARE is for. 

JAV said...

Retired military personnel contribute 0% to the pension fund they collect from, and the federal gov't that pays you is deeper in debt than the locals.  My pension fund is over 100% funded because we didn't let the pols steal from it to build their fountains and high-speed rail. Yet you complain about the pensions of civil servants, who paid 5-10% of their wages into their pension fund for 20-35 years. And, in the case of most police/firefighters, they cannot collect social security or their benefit is reduced because they have a pension. But retired military personnel collect social security without an offset, right?

So we cut the cops and firemen's pensions to bail out the cities that the (name your party here) ran into the ground. Fine, what's good for the goose, is good for the Salamander...How about we cut your pension since Congress isn't doing their job?

cdrsalamander said...

Jackwagon - you don't read this blog much do you?  Who in the milblogosphere started talking about the unavoidable change in the military system first?

Ummm ... that would be me, including addressing the question in person to a panel at the milblog conference in early '10.

I'll take my hit along with the GS civil service personnel if that is what it takes as part of a balanced package; no problem here.

LT B said...

Be nice if Congress took a hit too.  

Anonymous said...

That is probably the only way the current system would financially work out - everyone who pays into the system dies two days before they start collecting.

Casey Tompkins said...

But, but, I thought all the trouble was caused by greedy Wall Street fact-cat corporations!?

I'm soooo confused.

Casey Tompkins said...

A big hit. When's the last time you saw a poor congresscritter?

MCPO Airdale said...

Gee, glad you found an entire generation to blame! Nothing like over-generalization to show the weakness of your argument.

cdrsalamander said...

Statistics are, by their nature, over-generalizations Master Chief.  That doesn't mean they are false.