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Home Publications Blogs Beat the Press Washington Post Complains That Bill Gates' Riches Come at the Expense of Everyone Else

Washington Post Complains That Bill Gates' Riches Come at the Expense of Everyone Else

Wednesday, 26 February 2014 06:05

The Washington Post complained that the people of San Jose California are suffering because the city has to pay higher prices for computers and software because  of the patent and copyright monopolies the government has given to Microsoft and other tech companies. Okay, the Post would never write such a piece, but it has no problem headlining a news article:

"In San Jose, generous pensions for city workers come at the expense of nearly all else."

The central item in the piece is the complaint of San Jose's mayor about the money he must pay to support the pensions of retired city workers. Of course the pensions for city workers are based on contracts that the city signed and are part of their pay. This piece makes no effort to assess the size of city workers' total compensation packages compared to private sector workers, so it really has no basis for its assertion that the pensions are generous. If public sector workers sacrificed substantial pay and/or made large contributions for these pensions, then it would be highly misleading to describe them as generous.

Furthermore, cities usually are not allowed to go back on contractual obligations short of bankruptcy. San Jose undoubtedly sold off many plots of property at prices that were far too low. If the city still possessed these properties and could sell them at the current market price then San Jose's mayor would have plenty of money to meet the needs that he complains he cannot address. But the Post apparently does not want readers to question the legitimacy of land sales, just workers' contracts.

Interestingly, the piece discusses the financial industry's efforts to derail a proposal for the state to offer a voluntary low-cost retirement plan to all its workers. The industry is complaining that it doesn't want the competition with the public sector. In effect the industry is demanding that people should be taxed -- paying more than necessary in fees -- in order to ensure that the financial industry can make profits on their retirement accounts. "The financial industry wants to tax Californians to ensure profits," would have been a more interesting and accurate headline for this piece.


Note: Original post modified slightly (7:45) and typo corrected -- thanks Robert Salzberg.



Comments (15)Add Comment
written by JSeydl, February 26, 2014 7:11
the piece discusses the financial industry's efforts to derail a proposal for the state to offer a voluntary low-cost retirement plan to all its workers. The industry is complaining that it doesn't want the competition with the public sector.

There is a larger social and political issue here. When workers are forced to hold individual retirement accounts, they are forced to spend time watching markets, timing the investments in those accounts. When everyone is forced to watch markets, everyone will have less time to participate in the democratic process. The financial sector benefits when less people participate in the democratic process. I don't know if the financial sector reasons this way conspiratorily, but this is inevitably what happens.
This needs a broader lens, Low-rated comment [Show]
If You Can't Stand the Heat of Competition, Then Get Out of the Kitchen
written by Last Mover, February 26, 2014 8:10
The [financial] industry is complaining that it doesn't want the competition with the public sector.

That's how for example, neo-fascist predators of the internet got away with marching into municipalities across America to prevent them from building their own broadband networks. The result was so devastating even the FCC is looking how to reverse it. When it gets the FCC's attention these days it has to be really, really bad.

Economic predators in the private sector repeatedly get away with pre-empting more efficient government services with grossly inefficient monopoly alternatives, by brainwashing the public into believing that they - the public - will pay more in excess taxes for something worse than that available from the private sector.

Yet at the same time, somehow the government version of provision in question is asserted to constitute an "unfair competitive threat" to the private sector alternative.

How stupid must one be to accept both of these propositions at the same time? If the government can do it better at lower cost, how is that "unfair" competition. If the government can only do it worse at higher cost, why doesn't that stand as the obvious "fair" comparative competitive standard for private sector provision?

As Dean Baker emphasizes, contracts usually considered sacred by the free market crowd, are essential to locking in what otherwise can turn into spurious cost estimates for which cost overruns can be dumped on the wrong parties and unearned gains kept by the wrong parties as well (read "privatized gains and socialized losses").

That's what contracts are all about, to prevent unwanted risks from being shifted to either party after the fact. They provide incentives on all sides to make the best possible predictions and live with them.

So what happens in practice? Contracts like those for public employees are picked apart and held up in the public square like witches found on a hunt for economic justice, while contracts for corporations are loaded with subsidies and monopoly rights, hidden away out of sight, disguised by walls of legal barriers and deceit other than lies carefully released about "job creation" and "free trade benefits".

To the financial industry that is complaining about competing with the state's low-cost retirement plan available to all workers, here's a little ... uh ... suggestion in line with free market competition ...

If you can't stand the heat of competition, then either get out of the kitchen or LOWER YOUR GODDAMN PRICES!
Cities change too quickly, Low-rated comment [Show]
Promises create incentives, Low-rated comment [Show]
Survival is generous now
written by Jennifer, February 26, 2014 9:41
Dave,you do know that the most pension funds are doing just fine, and that public pension assests had a median investment return of 12.4% last year http://blogs.reuters.com/munil...m=twitter

The fact is contracts that involve ordinary people are ok to break, corporate subsidies and the like, are untouchable. Most pensions that are in trouble, such as Chicago, were not paid into. But this is really rich:

“Anybody talking about retirement savings is a good thing,” said Alison Hawkins, vice president for communications at the Financial Services Roundtable, the lobbying group for asset managers, banks and other financial firms. “But there are a lot of red flags around this California idea. People already have access to the investment market. What is needed is more financial education.”

Why yes, people do have access to the investment market. And what has that got them? Every other day is a story on how, for a variety reasons, 401(k) plans, which were never meant to completely replace pensions, have failed. Not only that but the financial industry has backed federal legislation that would require investment advisors to be honest about what investments people are buying.
Dear Dave
written by ifthethunderdontgetya™³²®©, February 26, 2014 12:56
"Making iron-clad promises about future earnings that are dependent upon private sector investments only increases the demand for financial bailouts, excessive risk taking, etc..."

You deserve all the tomatoes you get for that rank dishonesty. Why don't you look at what is actually happening, for instance in the places where a Koch brothers candidate has won.

1) Pass a huge tax cut, most of which goes to the wealthy goopers in the area.

2) Declare a fiscal crisis, based on the new gap between revenues and spending.

3) Take it out of the hides of public employees.

It's theft, dave. Pure and simple.
written by skeptonomist, February 26, 2014 2:27
"All pensions, whether provided by the public or private sector, invest in private sector accounts"

No they don't. Social Security is a pension plan which does not rely on investing - it only has some investment in Treasuries because of the baby boom. There is no fundamental reason why there has to be any funding of pensions, or any involvement of investment of any kind. Retired people in 2040 will be supported from the production of 2040, not 2014. Actually if taxes should not be sufficient in 2040 to pay benefits because of a recession, the difference could be made up by printing money. This would be a constructive use of "monetary policy".

Don't let Wall Street dictate our thinking about pensions.
Why are the pensions broke?
written by James Geluso, February 26, 2014 2:33
This story failed to even ask, much less answer, the question of why the costs have gone up. Perhaps if the reporter had not accepted the city's focus on the last 10 years, he'd have seen that the city's pension costs are not a hill, but a V shape. The city relied on Wall Street returns to pay the debts it was incurring, and then in 2008 Wall Street tanked, but those debts remained. In 2003, the city wasn't paying its costs; in 2014, the city has to pay its costs, and has to make up for all the money it didn't pay in 2003.

You don't have to be as judgmental about Wall Street villainy and public-official overoptimism and irresponsibility as I am to tell this story.
written by PeonInChief, February 26, 2014 4:12

We rely on the stability of cities all the time. The municipal bond market, for instance, often has terms of 30 or more years. And no one suggests that a city won't be able to make good on the bonds. That's because those contracts are enforced, while ones that require cities to keep the promises they made to employees aren't.
Good Example 2 Use When Business Said "Gov't Not Needed"
written by James, February 26, 2014 4:34
"During one of Smith’s many visits to a store, he bought lights worth $530 for just $40. He got a bath drain costing $85 for $4.20 after switching bar codes. Other products included a chain saw, hand truck, shower drains and ceiling tiles.

In Atlanta, Home Depot spokesman Stephen Holmes said the company was grateful for the work of federal agents. He declined to say whether the case has influenced how the retailer puts prices on its products."


This article came from WAPO!
tax easements
written by Squeezed Turnip, February 26, 2014 5:26
No doubt some of those business property taxes that San Jose forgoes could make up that difference quickly too. They sold the land cheap, then they don't tax it, even when costs are higher than revenue. The mayor may be whining because the hot potato fell in his lap, but he should have the balls to write in the history books the names of the city elders who created the mess.
WTF?, Low-rated comment [Show]
Cost not value
written by James Geluso, February 27, 2014 4:02
James, don't get caught up in the value issue. Yes, a pension is worth a lot, but that's because it's paid for over a 30-year period, or more. The cost of that pension is what matters, and since pensions are an effective risk-spreading mechanism, they cost less than an equivalent single-person annuity.

Spiking -- adding to the benefit without a corresponding addition to the contribution -- is a real but overblown problem.
Many issues, but SAN JOSE
written by winstongator, February 27, 2014 6:08
If you wanted to look to a locale that has weathered the turmoil of the past 6 years better than Silicon Valley, anchored by San Jose, let me know. No mention of raising property tax rates? This is not Detroit of today. This is Detroit of the 50's when it was an economic powerhouse.

Public sector workers are overwhelmingly teachers, firefighters, and cops. If you think they are vastly overpaid, you are obviously not friends with any. When people decry a group, they should imagine doing it face-to-face.

A 12.4% return for 2013 is massive underperformance - not something pension funds should write home about.

If they want to change going forward, make comparable contributions to Defined Contribution plans. BUT don't make them massive give-aways to Wall St. Administer it yourself (you're big enough) and give some very simple index-fund options. Don't cry freedom, as it would already give them workers latitutde than they have today.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.