I can do it in 30 seconds...

On the 24th, we drove from Fredonia to our daughter's home in Albany for a few days. During the 5-hour drive, we listened to satellite radio for awhile.

One talkshow host had a caller who asked why it was fair that people in his income bracket--above $250,000/year--were being "targeted" for a tax increase. The host--who I am sure makes much more than $250,000 each year--absolutely mangled the reply. It was totally incoherent, and I blew a gasket.

We're on the Thruway going around 70 and I'm yelling at the radio. "I can explain it in 30 seconds," I yelled. I don't have a radio show, but I do have a blog so here goes. Please start the timer:

Let's have a look at how those with your income have done over the last 30 years. Here's a nice little graph:

Whoa! Looks like you folks have made out pretty well while the rest of us have gone pretty much nowhere. In fact, the median middle-class household income has gone DOWN by several thousand dollars during the last ten years.

Is this a fair picture? What about after taxes?

Wow, you still made out like gangbusters! And that's why it's fair that your taxes go up before anyone else's.

Sure, when the economy gets back on its feet we will all need to kick in a bit more in taxes. But right now, you are the group who can afford to pay a little bit more. That's why it's fair.

OK, please stop the clock...

First of all, let's note that even though the graphs were published by Mother Jones Magazine, the data is from the non-partisan Congressional Budget Office.

You may hear from me another time or two before we head back to Florida next week. We're at the house we're getting ready to sell for a few days picking up and filling nailholes. It's like camping since most of our stuff has already moved to Florida.

Even the satellite TV service has been cancelled so we're reduced to watching "off the air" TV. This time of the year is particularly bad since most of the shows we would normally watch are on cable or off the air during the holidays. Last night I was reduced to watching an Anne Murray special on a Toronto station hyping her "Friends and Legends" album which was first released in 2007!

Has democracy turned into a yacht race?

[NOTE: I'm headed north for the holidays, so this will be the last post until after the first of the year.]

Remember Wisconsin? They had an election a couple of years ago and the Republican promise of "jobs, jobs, jobs" carried the day giving that party total control of state government.

And once the election was over, do you remember what became the obsession of Wisconsin state government? Here's a hint: It wasn't "jobs, jobs, jobs." In fact it was something that nobody had bothered to mention during the election campaign: removing the collective bargaining rights of public employees--with the exception of police and firefighters, for a reason to be discussed later.

Remember Ohio? Pretty much the same story. But the citizens of Ohio made use of their ability to cancel legislation by means of a referendum. By a 2-to-1 margin, Ohioans told the Republicans in charge of state government that they were just fine with workers not needing to go by themselves to ask the CEO of a giant corporation for a raise. It seemed a much more balanced system when the union representing ALL of the workers could knock on the CEO's door.

Then there is Michigan. Last week--in a breathtaking show of raw political power--Michigan passed a "right to work" law.

What made it breathtaking was that Michigan governor Rick Snyder had said all along--including during the election--that he thought such a law was too divisive for his state. Then came the 2012 election in which Republicans lost several seats in the state house (the state senate was not up for election in 2012).

Apparently that made things less divisive because at 11 AM one day last week Snyder called a news conference and announced that he now supported a "right to work" law for Michigan. Amazingly, just such a law was introduced into the legislature early that same afternoon and was passed--without any hearings or time for public comment--by 8 PM that same evening. As you might expect, it was then signed by the governor.

Let's understand just what a "right to work" law means. New York is an example of a state that does not have such a law. So, if you take a job in a company whose employees have union representation does that mean you must join the union and pay union dues? No.

It does mean that you must pay an "agency fee" which is the portion of the union dues which actually goes toward negotiating and enforcing the contract under which everybody in that company works.

"Right to work" means that you get to say to the union, "Sure, go ahead and bargain with management on my behalf. I'll be happy to accept any benefits you negotiate, just don't ask me to pay anything to support those efforts on my behalf."

We fought a war over "taxation without representation." Right to work laws amount to representation without taxation.

It's easy to see how this benefits big corporations which make large campaign contributions, but how is this supposed to benefit the average Michigan worker?

In theory, eliminating those pesky unions makes Michigan a more attractive place for companies to build their plants, attracting more jobs to Michigan.

In theory, allowing corporations to dump anything they wanted anyplace they wanted for free should have the same effect. Let's all hold hands and race to the bottom. First one there "wins."

In practice, it doesn't seem to work this way. Research shows that the average wage in "right to work" states is $1500 less than in other states and that there is no "job flow" toward these states.

Even if there were a "job flow," how would that help the nation as a whole with one state stealing jobs from another?

Well, at least Michigan has a procedure allowing the public to overturn laws. Except, budget items. Would you believe that the Michigan legislature attached the "right to work" law to a budget bill? That's exactly what they did!

Which brings me to yacht races. I've been a sailor all my life. I spent summers teaching sailing at the Rochester YMCA camp on Keuka Lake.

There are 3 ways you can win a yacht race. The first is to have the fastest boat in the race. If your boat isn't the fastest, you can still win by having a skipper and crew with outstanding skills.

Failing the first two methods, many yacht races are won by using the rules against the other contestants. If you can force your opponent into a situation where they must violate a rule in order to avoid a collision you can win by having them disqualified.

It seems like government has become like a yacht race. The Constitution says not a word about the filibuster, yet the rules allow a minority to keep something from happening that a majority wants to happen.

And the people of Michigan must now live under a law they never asked for and never got to debate because the rules have been manipulated to keep them from having a say in the matter. How democratic.

Anybody with a brain can see that what happened in Michigan is all about politics not jobs. a lot of the money supporting Democratic candidates comes from union members and many of the people who man phone banks and pound the turf to get out the vote for Democratic candidates are union members.

Why were police and firefighters exempted from the anti-union bills in Wisconsin and Michigan? Simple. Members of these unions most often support Republican candidates.

Does this make sense?

There appears to be strong Republican pressure building in Washington to raise the Medicare eligibility age from 65 to 67. Some say that this will save the federal government $5.7 billion per year, and that's a good thing. Others see it as a needed "trophy" to keep the Republican base settled down when tax rates on income over $250,000 are raised.

But let's visit the Law of Unintended Consequences for a moment. An easy-to-understand explanation appears in a piece by Austin Frakt published in The Incidental Economist. Here are the numbers:

1) By excluding 66 and 67-year-olds from Medicare, the federal government will save $5.7 billion in 2014.

2) But, those people denied Medicare coverage don't just disappear. They will spend $3.7 billion of their own money to purchase coverage from other sources.

3) Employers will spend an additional $4.5 billion to cover workers who would have been on Medicare if the age remained at 65.

4) Premiums on the new healthcare exchanges will increase because folks at 66 or 67 tend to have higher medical costs than those who are younger.

5) If you are already on Medicare, get ready to kick in! Why? Because--by law--Medicare recipients pay 25% of the cost of the program through their premiums. Excluding the 66 and 67-year-olds from Medicare makes the average age of Medicare recipients increase, and a higher average age means a higher average expense per recipient. Plus, Medicare loses the premiums that these people would have paid. The best estimate of this is a 3% increase in premiums. The monthly Medicare premium is about $100 so a 3% increase would be almost $75/year for a typical retired couple.

6) The combination of 4 & 5 above add up to about $2.5 billion, with the states spending some additional money on 66 and 67-year-olds eligible for Medicaid.

Add everything up and it costs $11.4 billion to save the federal government $5.4 billion. If this sounds like a good deal to you, let's talk about a bridge I own in Brooklyn.

It would be much more effective to talk about allowing Medicare to use its huge weight to bargain with drug manufacturers on price--as the Veterans' Administration is already allowed to do.

Don't hold your breath on that one. Here are some additional interesting numbers:

1) We just went through the most expensive election ever. About $2 billion was spent on TV ads, etc.

2) When Obamacare was being proposed, the insurance and drug companies made it clear that they were willing to spend $10 billion to defeat the bill if it was not to their liking. Just imagine how many 30-second TV ads this would buy, and there would still be plenty of money left over to bribe--excuse me, make campaign contributions to--every politician in Washington.

If you agree with me that this is on the dumb side of stupid, make a call or send an email to your representatives in Washington.

Social Security: Little "tweaks" matter.

It's important for retirees to pay close attention to the current deficit negotiations in Washington because the "big 3" programs of most interest to retirees are chips on the table. These are Social Security, Medicare and Medicaid.

Don't think Medicaid applies to you? If you eventually need longterm care, how will you or your family handle the almost $100,000/year cost? Medicare pays for only 100 days of this type of care. Even if you have longterm care insurance, most policies cover only a set number of years at a set monthly maximum. Almost one of every two Medicaid dollars goes to pay for longterm care for the elderly or disabled, and it's quite possible it will be a program to which you or your family will turn.

Paul Krugman's column, The Big Budget Mumble, in this morning's NY Times provides some information on negotiating positions.

" As his opening bid in negotiations, Mr. Obama has proposed raising about $1.6 trillion in additional revenue over the next decade, with the majority coming from letting the high-end Bush tax cuts expire and the rest from measures to limit tax deductions. He would also cut spending by about $400 billion, through such measures as giving Medicare the ability to bargain for lower drug prices."

"So what are Republicans offering as an alternative? They say they want to rely mainly on spending cuts instead. Which spending cuts? Ah, that’s a mystery. In fact, until late last week, as far as I can tell, no leading Republican had been willing to say anything specific at all about how spending should be cut." [NOTE: I've promised to stay away from politics in these blog posts, except where politics collides with areas of fundamental interest to retirees. If this isn't such an area, I don't know what is!]

"The veil lifted a bit when Senator Mitch McConnell, in an interview with The Wall Street Journal, finally mentioned a few things — raising the Medicare eligibility age, increasing Medicare premiums for high-income beneficiaries and changing the inflation adjustment for Social Security. But it’s not clear whether these represent an official negotiating position — and in any case, the arithmetic just doesn’t work."

Krugman goes on to point out that raising the Medicare eligibility age has been looked at by the nonpartisan Congressional Budget Office which found that raising the age from 65 to 67 would save about $113 billion over the next decade. Primarily because people entering Medicare have far lower health costs than the average Medicare participant.

According to the CBO, increasing Medicare premiums for the affluent raises only $20 billion over the next 10 years, and note that they already pay higher premiums than you or I. 

And then there's the matter of Social Security. The great "fix" being floated is to reduce Social Security costs by switching from the Consumer Price Index (cpi) to the "Chained Consumer Price Index" (chained cpi) in figuring the annual cost-of-living adjustment for Social Security recipients. This would "save" about $185 billion over the next decade.

Remember, however, that no general tax revenue goes into Social Security. It is totally paid for by the FICA tax on workers and their employers. It is not responsible for a single penny of the deficit. In fact, it runs a surplus!

So why are we even talking about Social Security in terms of reducing the deficit? Welcome to the wonderful world of smoke and mirrors!

But wait, it gets better! The "chained cpi" is supposed to be a more accurate picture of the cost of living since it corrects for consumer responses to price fluctuations. When the price of beef increases, consumers buy more chicken and the chained cpi accounts for this producing a slightly lower cost-of-living figure. It's not a big difference, but here's the thing: over the course of years these small differences act like compound interest and build up. Use the chained cpi for 30 years and your monthly Social Security check will be less by almost 10% compared with using the traditional cpi.

Oh, and there's more! For several years the Bureau of Labor Statistics has been calculating a third cpi specifically designed to reflect the cost of living for those 62 and older. People of this age have greater-than-average healthcare costs which are reflected in the "CPI-E"--the "E" standing for "experimental."

Use of this measure would produce larger cost-of-living adjustments than the current CPI.

It appears, for now, that the White House understands that Social Security is not part of the problem. USA Today reports that " Treasury Secretary Timothy Geithner echoed another White House message to Republicans during a string of Sunday show interviews: no Social Security talks as part of the fiscal cliff negotiations."

"We're prepared to, in a separate process, look at how to strengthen Social Security," Geithner said on ABC'sThis Week. "But not as part of a process to reduce the other deficits the country faces."

This is an area worthy of your attention. Let your representatives in both houses of Congress know your feelings.

It's lightbulb time!

Quick note to blog readers: It has been a couple of months since my last post. Making a move of 1100 miles will do that! Well, the boxes are finally unpacked, the Thanksgiving guests have departed and I can finally get back to blogging!

Now that Congress is back in town, the next few weeks should be interesting as we approach the "fiscal cliff." We could certainly use an adult conversation about what levels of taxation and spending are appropriate. Sadly, we're more likely to get the same heaping portions of spin and baloney we suffered through during the--seemingly endless--campaign.

One of the biggest pieces of baloney is the idea that Social Security has anything remotely to do with the deficit. Let's get this straight right now: Social Security is 100% paid for by the FICA taxes paid by currently working employees and their employers. Not a penny of any other tax revenue goes to paying Social Security benefits!

In fact, the FICA tax structure was adjusted in the 1980's so that Social Security would run a surplus in the period leading up to the retirement of the babyboomers. Imagine! We actually got our national act together and planned ahead.

But, somehow, Social Security has become part of the deficit talks. Some "very serious people" in Washington say that we must reduce benefits, raise the retirement age or both to help address the deficit.

Here's an idea: No matter how many millions of dollars someone makes, they only pay FICA taxes on the first $110,000 of wages. Raise that limit to $250,000 and the entire Social Security "problem" is solved for a period of time longer than anyone alive today will see.

Unfortunately, the Medicare problem is not that easy to solve. Many of us retirees believe--wrongly--that Medicare is a program that we paid for through our Medicare taxes while we were working. Unfortunately, those Medicare taxes--by law--only pay 25% of the cost of Medicare. The rest comes from other taxes.

Medicare's going to be a tough problem to solve because almost no one is willing to address the real problems. First, Medicare is likely to spend more money on you during your last year of life than in all the years leading up to that time. It's hard for those of us who will go on living to recognize that there comes a point at which additional expensive treatment only prolongs suffering.

Second, we're trying to figure out how to pay for the world's most expensive--but not most effective--healthcare system. If every other wealthy nation has figured out how to provide healthcare with better outcomes than ours at half the cost, maybe it's time for the lightbulb to come on over our heads!

A word about the locked-out NFL officials.

It turns out that workers have something in common with the locked-out NFL officials. All across America, corporations are seeing record profits yet asking their workers to take cuts in pay and benefits. Usually, this includes substituting a defined-contribution (401k) retirement plan for the defined-benefit traditional pension.

The NFL is no exception. According to Timothy Egan's column, Zebra-nomics,  in today's NY Times: "... an incredibly prosperous cartel wants its longtime workers to take a cut in pension benefits — this at a time when the cartel is earning more money than at any time in its history, and has the greatest audience in American television."

Let's put the dispute into dollar terms. "The National Football League, which took in more than $9 billion in revenue last year and owned 23 of the 25 most watched telecasts last year, wants to cut the pension contribution by about 60 percent, moving the refs from a defined benefit into something closer to a 401(k)."

"What’s $3 million to the N.F.L.? It’s the price of a 30-second commercial during the Super Bowl. So, to be clear, the most popular entertainment commodity in the land is willing to seriously tarnish its name, its reputation and the validity of its games for the price of a single half-minute ad."

But hey, why not? Every business seems to be doing it. They're feeling the power of the tide of the national mood. There's almost nobody left to stand up for labor. Any mention of unions in a newspaper will result in dozens of comments claiming that unions are the cause of the decline of western civilization.

The depressing thing about those comments is that they very often come from middle class workers whose 8-hour days and weekends off are the result of unions. Think about what it will be like if unions are eliminated. Or, read a history book about the rise of organized labor in America and the conditions that brought it on.

Maybe employers--released from the bonds of dealing with their organized workers--will be reasonable and ethical. And maybe pigs will fly.

Teachers: Do not travel in herds!

That's according to the Washington Post's Harold Meyerson. The first paragraph of Lessons from the teachers' strike reads as follows:

"Here’s a bit of advice to America’s teachers: If you want the nation’s opinion leaders and CEOs to like you, don’t congregate in groups. Everyone, it seems, loves teachers individually. But when they get together, they become a menace to civilization."

Chicago teachers were pilloried in editorials across the nation for "... refusing to bow down to standardized tests. In the eyes of our elites, such tests have emerged as the linchpin of pedagogy and the best way to measure teacher, not just student, performance."

Meyerson points out that "The presumably numbers-driven educational reformers are highly selective when it comes to which numbers they take seriously. For years, many have touted charter schools (which usually are not unionized) as the preferred alternative to (unionized) public schools. But the most extensive survey of student performance at charter schools, from Stanford University’sCenter for Research on Education Outcomes, found that, of the 2,403 charter schools tracked from 2006 to 2008, only 17 percent had better math test results than the public schools in their area, while 37 percent had results that were “significantly below” those of the public schools and 46 percent had results that were “statistically indistinguishable” from their public-school counterparts."

"There’s also a good amount of data — including a study of high-performing public schools from the National Center for Educational Achievement — showing that ongoing teacher collaboration and mentoring and using tests for diagnostic, rather than evaluative, purposes produce better outcomes than the reformers’ brand of measuring teacher and student performance. The Cincinnati school district, which measures teacher performance chiefly through repeated peer evaluation, has the best student performance of any big Ohio city."

"There are other data that “educational reformers” would do well to study. Last week, the Illinois political newsletter Capitol Fax commissioned a poll of Chicago voters that showed that fully 66 percent of parents with children in the city’s public schools supported the strike, as did 56 percent of voters citywide. The only groups that disapproved of the strike (narrowly) were parents of children in private schools and whites. (Blacks and Latinos supported it.)....I suspect that a number of parents with kids in the city schools may have a more direct understanding of the challenges, both in school and out, that their children confront, as well as a clearer perception of the lack of resources that bedevil the schools."

Meyerson concludes: "As both policy and politics, the demonization of teachers unions is a dead end for improving American education. Working with, not against, teachers is the more sensible way to better our schools."