Posts Tagged ‘magnificent seven’

High inflation will make Illinois’ pension crisis less severe

Posted: March 14, 2021 by John Ruberry in economy, News/opinion, politics
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By John Ruberry

Will high inflation offer benefits? In Illinois and other states burdened by woefully underfunded pension plans, it just might.

Boss Michael Madigan, the man behind Illinois’ financial debacle, is finally gone. Hard work by the Illinois Policy Institute, some Republicans, local radio hosts, and yes, bloggers, made the Madigan name toxic. The tipping point against the longtime chairman of the Illinois Democratic Party and the speaker of the state House for all but two years since 1983, was a disappointing 2020 general election. He’s now enjoying a comfortable retirement.

How comfortable? Madigan, 78, contributed just $350,000 to his retirement, an amount he’ll collect as a state pensioner in just three years, according to the Illinois Policy Institute. Over the next 17 years, of course if he lives that long, the Chicagoan will collect $2.9 million from his pension. Not that Madigan is poor. Presumably he’s made a lot of money from his law firm, Madigan & Getzendanner, which specializes in property tax appeals. How much money? We’ll never know because Madigan has never released his income tax returns. 

In 1989, Governor James Thompson, a Republican, signed into law a bill that gave Illinois retirees a three-percent annual cost-of-living increase raise in their pensions. Which means after twenty years their pensions double. Madigan was the House speaker when the pension COLA bill passed through the General Assembly. 

Over thirty years later Illinois’ pension plans are among the worst-funded among the 50 states.

Short of default–pension benefits are protected by the state constitution–or a federal bailout, there is no way out for Illinois in regards to these obligations. It’s that bad.

But then there is inflation. Joe Biden’s stimulus package, most of which is not related to COVID-19, has many economists, including Lawrence Summers, Treasury secretary under Bill Clinton, worrying about higher inflation. A basic explanation of how high inflation occurs is too much cash chasing too few goods. And Biden’s stimulus is more than double that of Barack Obama’s stimulus of 2009.

Here’s what Forbes’ Elizabeth Bauer said two years ago about inflation and pensions:

If the United States were to hit a period of high inflation rates, sustained over a long period of time, these liabilities would shrink considerably — and I’m not even speaking, snarky photo aside [the article contains a photograph of a Zimbabwean $100 trillion bill], of hyperinflation. Based on my calculations (and yes, these are real calculations, using real data for this plan collected for another project, not merely back-of-the-envelope estimates, however unlikely the very even numbers make it appear), an inflation rate of 10%, and assumptions for interest rate/asset return rate and salary increases over time which reflect the same net-of-inflation rates as at present, would halve the pension liabilities of the Illinois Teachers’ Retirement System.

Crisis solved? Kinda sorta. Public pension debt in Illinois will be less of a financial burden if 1970s-type inflation returns. And of course it’s easy to chuckle about the over 100,000 retirees who last year were collecting over $100,000 annually in their pensions, unless you are a member of this fortunate caste.

But what about the retirees collecting half of that–after years of seeing large chunks of every paycheck deducted for retirement? They’ll lose too.

When I was in college an economics professor explained to me and my classmates that inflation is a zero-sum game; he used the example of a five-person poker game. When the first cards are dealt there is, let’s say, $500 placed in chips, $100 per-player. When the final hands are played there is still $500. Some leave the table richer, others poorer. 

High inflation–and hyper inflation–will reward some, which is why, for my largely self-funded 401(k) plan, I recently moved some of my funds into real estate. Let’s hope I made the right decision.

Among hypothetical inflationary losers will be Illinois pensioners, and presumably other public-penioners, unless their plans are tied to the annual rate of inflation. 

Of course don’t expect the public-sector union bosses to quietly accept their fate if inflation deals them, excuse me for not letting go of the poker example, a bad hand. Among the lessons learned from the COVID-19 lockown is that teachers unions are very powerful and they have the ears of Democratic politicians, despite what the science says about the virus and how it spreads among younger people.

John Ruberry regularly blogs at Marathon Pundit.

Conservatives need to defend others in free speech battle

Posted: January 3, 2021 by John Ruberry in culture, News/opinion, politics
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By John Ruberry

Free speech is under harsh attack in America courtesy of wokeism. Such warnings about free speech are nothing new–but in the past much of the danger has been imagined. For instance I was in college when The Clash released Combat Rock. On the opening track, “Know Your Rights,” Joe Strummer sings of those rights, “all three of them.” The third right is “free speech,” with a caveat. That right could be used if “you’re not dumb enough to actually try it.” Assuming that Strummer was addressing his core audience, American and British youths of the early 1980s, what he said was at best a gross exaggeration.

Not so in 2021.

I received the inspiration for this post by listenening to Ben Shapiro’s December 24 podcast, Goodbye, 2020.

Shapiro is among the many commentators who predict a purge–my word, not his–of dissident voices, meaning conservative ones, on social media such as Twitter, beginning with Donald Trump as soon as he’s not president.

Absurdly, people like Jack Dorsey, the CEO of Twitter, still claim that social media is a neutral conduit of information. Twitter for a while prevented the posting and distribution of the New York Post’s Hunter Biden laptop story on the microblogging platform claiming that the laptop details were hacked and illegally obtained. Wrong on both counts. Twitter had no problem with Tweets linking to the New York Times story about Trump’s income tax returns–those returns may have been obtained by hacking. Regardless how those returns were accessed the person who did so broke the law.

What to do?

Forge alliances.

“Well first of all we’re going to have to rely on people, believe or not, who are moderate liberals,” Shapiro said in that podcast, “who are sick of watching the Overton window shut.”

And that means conservative have to defend those liberals who cross the cancel culture.

An incident on Twitter comes to mind. Three years ago in this space I reviewed the documentary XTC-This Is Pop, which was about the spectacular rock back that emerged in England in the late 1970s. That post got a lot of retweets, including one from the XTC Fans Twitter page, run by the now-dissolved group’s former leader, Andy Partridge. A committed liberal, Partridge’s Tweets, although often sarcastic, were entertaining and usually well-thought out, whether it was about music, religion, or politics.

In 2019 some people with too much time on their hands accused Partridge of anti-Semitism after a series of Tweets–not well-thought out this time–about American Middle East policy that devolved into an online shouting match about Israel and religion. Partridge, a strident atheist, went a little too far, I admit, but taken into context with his overall sardonic attitude, those Tweets weren’t a big deal to me. I planned to write a blog post on Marathon Pundit defending him, but then Partridge cancelled himself on Twitter by deleting the XTC Fans account and I moved on to other things.

One of those Twitter accounts Partridge engaged with was “Jon Devin Nunes’ Prostate.”

You know, some people take Twitter too seriously.

Back to Partridge. No one knows why he deleted his account–perhaps he decided that he was spending too much time on social media. He certainly broke a Twitter rule of mine: Never feed online trolls.

I believe if Partridge wasn’t an older white male a Twitter mob would not have bothered to object to those controversial Tweets. For instance the media, with a few exceptions, have not called to task Georgia US Senate candidate Raphael Warnock for his anti-Israel comments.

There will be other efforts to silence dissidents on social media. Mostly against conservatives. But against liberals too.

Conservatism must embrace free speech. And that means relying on for allies, not just the moderate liberals that Shapiro spoke of, but also center-line liberals too in order to fight this crucial battle. And keep in mind no political ideology is always correct.

As for the fundamentalist far-left, the tiny tail wagging the cultural dog these days, I believe they’ve already isolated themselves, as Isaac Asimov said of the 1960s radicals, into a “no-man’s land of the spirit.” Think of the bleating sheep in George Orwell’s Animal Farm.

But right now in the culture wars the far-left is winning.

Fight back.

John Ruberry regularly blogs at Marathon Pundit.

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