The looming (and necessary) tax increase

March 15, 2010

From today’s NYTimes comes another in their series of articles on water.  Today’s piece discusses the crumbling infrastructure in Washington, D.C.  The destruction of this system and others like it all over the country is the legacy of our misspent prosperity and our legislators’ inability to tackle even the (seemingly) simplest of problems that face us.

Today, a significant water line bursts on average every two minutes somewhere in the country, according to a New York Times analysis of Environmental Protection Agency data. In Washington alone there is a pipe break every day, on average, and this weekend’s intense rains overwhelmed the city’s system, causing untreated sewage to flow into the Potomac and Anacostia Rivers.

State and federal studies indicate that thousands of water and sewer systems may be too old to function properly.

For decades, these systems — some built around the time of the Civil War — have been ignored by politicians and residents accustomed to paying almost nothing for water delivery and sewage removal. And so each year, hundreds of thousands of ruptures damage streets and homes and cause dangerous pollutants to seep into drinking water supplies.

This is what we will leave our children: a broken-down system incapable of delivering the water we need to survive because no one wants to pay for it.  The unrealistic expectations of the masses with respect to their desire for low tax bills are sure to turn into outrage (or worse) when the taps run dry.   It’s our own fault.

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Posted by Mark Wegener

The looming tax increase

March 1, 2010

The closer you look, the smaller it gets

This has nothing to do with Democrats or Republicans or who is president.

Today’s Wall Street Journal shows that the effect of the financial crisis on states and municipalities (and taxpayers) is only starting to be felt. As state pension funds cut investment return forecasts (to reduce the need to take excess portfolio risks), the difference must be made up by taxpayers.

At Calpers, about 75% of payouts come from the pension fund’s investments, with the remaining 25% tied to contributions from California governments and employees. According to Pew, a hypothetical $100 billion pension fund that achieved a 7.75% return rate for 10 years would have about $211 billion. With a 6% rate, the same fund would grow to $179 billion—a difference of $32 billion.

That $32 billion will come on the backs of California taxpayers.

Note to IL residents: If Calpers is cutting from 7.75% to as low as 6%, consider that IL is still at 8.6% on an $8.7 billion asset pool.  If IL cut to 6%, that’s about a $4bn addition to an existing $45bn unfunded pension liability gap.

We’ve made promises to workers that we can’t afford to keep.  The Pew Center on the States reports that the total gap is about $1 trillion ($1,000,000,000,000).  Those promises were made to people that are critical to our survival,both literally and figuratively (e.g., firemen, policemen, teachers), who are relatively low on the pay scale and who aren’t eligible for social security.  It’s not as simple as cutting the payouts to the recipients.  The whole social contract needs to be rethought.

As being known as something of a cynic, I was disappointed in myself that I was continue to be surprised and disappointed by the lack of vision and the unwillingness of our elected officials to tackle the tough problems we face, preferring instead to focus on those less difficult issues that will offend no one and help keep them in office.  In the meantime, the problems created from when we were seemingly awash in money and nothing bad would ever happen to us, continue to get worse and the hole gets deeper.

The first rule of being in a hole is “stop digging”.  As a nation, our elected officials always seem to have shovels in their hands. (And that’s not a crack at the very necessary stimulus plan.)

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Posted by Mark Wegener

Progress Paradox Redux

November 4, 2009

Kellogg’s Corn Flakes has been running full page ads in the New York Times in which they reprint the front page of the Times from the current date, one hundred years before.  It’s  fascinating to read what people thought worthy of front page coverage and how they wrote it.  The language used has clearly evolved since then.

Included on the front page for November 4, 1909 was this item:

FARMAN UP FOR OVER FOUR HOURS

Breaks Endurance and Distance Records in 144-mile Aeroplane Flight

Paris, Nov. 3—Henry Farman broke all aeroplane records for distance and duration to-day in a flight for the Michelin Cup at Chalone Camp.  He remained in the air four hours seven-teen minutes and fifty-three seconds and covered 144 miles.

The weather today was ideal, it being gray and windless, although the cold was severe.  The aviator received an ovation when he landed.

Think about it; the world record flight was Chicago to Fort Wayne, and it took four hours to do it, and got an ovation when he was done.  Fly to Fort Wayne today and nobody even grunts at the pilot.

We’ve come so far and there’s so much further to go.  If we could get our smartest people to stop trying to figure out ways to game the financial markets with complex securities, maybe we’d have a chance to achieve it (seriously, I once worked with a brilliant physicist and real live rocket scientist who thought the highest and best use of his skill was working in the foreign exchange group at Continental Bank).

By now you’ve seen this clip from Conan’s show about how people take progress for granted.   This is of a piece with that, and Gregg Easterbrook’s 2003 work Progress Paradox:  How Life Gets Better While People Feel Worse.  We’ve become so blasé about the incredible progress that we’ve achieved.  You get the sense from reading these old news pages that the people of that time knew they were in remarkable times and appreciated it.

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Posted by Mark Wegener

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