Author: philg

It would not have occurred to me that Americans would actually want to pay higher taxes so that the Department of Motor Vehicles clerk could earn more than they do, or to work until age 75 to support a policeman who retired at 42 and moved to the Philippines, telling New York City to send his checks there (one of my helicopter students! He was up from NYC for a year or two while the taxpayers paid him to attend the Kennedy School of Government at Harvard). Yet this is the conclusion of a New York Times poll (story).

I wonder if the methodology of the poll had something to do with the outcome. About 25 percent of those surveyed said that the salaries and benefits of public employees were “too low.” As this is a practical impossibility without indentured servitude (a worker whose salaries and benefits were “too low” would quit and find a better job, something that public employees very seldom do), I think there are two explanations for this answer. One is that citizens are dissatisfied with the quality and energy of public employees and believe that, by raising salaries, better workers would be found and 20-30 years from now, after the current batch of mediocre workers has retired, public services would be improved. The second explanation is that 25 percent of the people surveyed either are public employees or are financially dependent upon public employees (the wife, children, and grandchildren of Robert W. Healy, Jr. probably would not say that his $5 million pension is excessive or that his $336,317 annual salary (84% of President Obama’s!) to manage a small town was excessive).

Now that over 40 percent of the U.S. economy is government spending (chart), I wonder what would happen if one were to conduct a poll of only those who work in private industry and don’t have a spouse, child, or parent who works for the government.

Finally there is the art of question wording (good video example). The New York Times told poll respondents “Collective bargaining refers to negotiations between an employer and a labor union’s members to determine the conditions of employment.” (all questions) The word “conditions” in my mind generates an image in my mind of working hours, task assignments, etc. The word “employer” makes me think of a private tax-paying company. What if the question had started out “Collective bargaining refers to the ability of a labor union to negotiate with politicians the delivery of pension and health care benefits to be paid for by future taxpayers”? I think the answer might have been very different.

Finally, we could apply Occam’s Razor to explain the poll result. We live in a democracy (“rule of the people”). The current system of government, including the fact that public employees are permitted to unionize and then bargain with the politicians whose election they financed and supported, is the result of citizens voting. So if the voting system works, we should expect our government to be exactly what most people want. It may seem alarming that people voted for a system in which the U.S. would owe 500 percent of GDP (see this nytimes article), but on the other hand the voters are also the same folks who refinanced their mortgages every two years and spent all of the (fake) equity in their homes.

What do readers think? Do Americans with private jobs really, as the NY Times poll seems to indicate, want to work until they are elderly and infirm so that public employees can spend their 50s on the golf course?

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The Cirrus SR20 that I often fly was created by a couple of brothers in the Midwest. When they needed expansion capital about 10 years ago, the company was sold to Arab investors. With the capital in place, Cirrus grew to dominate the market for piston-powered airplanes purchased for personal transportation (leaving Cessna and Piper to sell into the flight school market). When they wanted to improve the avionics, they switched from Avidyne (Massachusetts-based)/Garmin (Kansas-based; Taiwan-owned) to all-Garmin. Last year the company that makes the engine, Continental, was sold to a Chinese firm. Today, Cirrus announced that the entire company has been sold to a Chinese airplane manufacturer (press release). So Cirrus going forward will essentially be an all-Chinese show (counting Taiwan as culturally if not politically “Chinese”).

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Having decided to defer his scheduled strangulation, I bought some Wellness dog food today at Whole Foods for Ollie the Collie. The bag is labeled for the literate canine: “Please enjoy by October 21, 2011”.

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Some professional fundraisers who apparently don’t subscribe to the government’s “do not call” registry, called me at home this morning, asking me to help out the American Lung Association. This led to over to guidestar.org to find out how much these particular do-gooders are paid for doing good.

The most recent Form 990 was for the year ended June 30, 2009 and it was a tough year for the enterprise, with revenues down about 10 percent. Fortunately, it wasn’t such a bad year for employees. Bernadette Toomey paid herself $466,000 (a raise of about $75,000 over the previous year; I thought maybe her high salary was because the job required a medical degree (a practicing pulmonologist in NYC would earn about $196,000), but a Google search reveals that Ms. Toomey has a “a Bachelor of Arts in Communications from Marymount Manhattan College and a Masters in Adult Education from American University”). Joseph Bergen clocked in at $357,000 (he left early in the year apparently, and the majority of his cash was $201,000 in severance pay). Charles D. Connor collected $303,000. Kim A. Schwartz raked off $250,000.

I think it would be nice if we could augment the do not call registries with our personal incomes. Then we could check a box “Do not call me if your employees earn more than I do.”

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A friend of mine has been looking to hire smart people from across a range of disciplines. Here are his tales from the trenches:

In theory the economy is horrible and people want jobs. In practice it seems that no one I interview has any real knowledge. I just interviewed a woman getting a PhD in electrical engineering and bioinformatics from [top school, but not quite at the Stanford level] and she couldn’t tell me the probability of flipping heads three times in a row with a fair coin. I just interviewed a 4.0 physics major from [top state school] and he didn’t know how to convert miles to kilometers, and had no idea how to convert cubic kilometers in cubic meters.

For the record this is depressingly common. I’ve probably done ~700 interviews in the last five years of grads from top-notch technical programs. Perhaps ten percent were able to do basic mental math, reason about probability, etc.

Tyler Cowen says that we’ve run out of low-hanging fruit (free land, big technology improvements, uneducated young people). In “Universities and Economic Growth”, I speculated that the lack of improvement in our universities, essentially unchanged since the year 1088, was a drag on economic growth. My friend’s experience with interviewing folks fresh out of 16-22 years of our best schooling, proves, I think, Tyler Cowen wrong on the subject of at least one of his three kinds of fruit tree. It is true that we’ve taken young people and given them high school diplomas and college degrees of various kinds. But that does not mean that we’ve educated them. So there may be room yet for significant economic growth driven by improved education.

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I asked a friend who’d worked in private industry for more than 10 years how her new federal government job was going. “It’s great,” she said. “I’m non-essential, so I’m looking forward to being furloughed in a couple of weeks and having some time off.” Was the job so demanding? “For the six months, I thought that I had to work. Every time a senior person suggested something, I would scurry back to my office and write up a proposal. Then I’d show it to him and he’d say ‘I think we’re going to do something else.’ So now I just smile. I really hardly have to do anything.” How time-consuming is doing hardly anything? “I go in about 9:30 and leave at 4.”

Her salary for doing a couple of hours of real work daily? Nearly $100,000 per year plus fantastic pension and health care benefits.

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In response to repeated questions from friends and family, I’ve drafted “Watson and the Turing Test”. I would appreciate comments and corrections.

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I spoke with a certified financial planner at Vanguard last week. For security in the event of a U.S. stock market meltdown, he recommended holding some bonds via a fund. Which fund? One that invests exclusively in U.S. municipal bonds. That’s right, the folks that have signed up for pension and retiree health care obligations that they can’t even understand, much less pay (the shortfall is supposedly around $3 trillion, but since nobody knows how long people will live or how much health care will cost in the future, it could be much more). Also, in many cases, these are the bonds of sovereign entities that can default without leaving investors any recourse in federal courts (see this Brookings Institution article). Finally, given enough inflation in the U.S., these bonds would be paid back in “mini-dollars”.

The idea of California bonds as a hedge against the risk of a collapse in the price of Intel strikes me as a poor one. Would an investor be better off with a mixture of bonds from different economies worldwide and in different currencies? I’d feel a lot more comfortable holding bonds from Germany than from the city of Chicago. If the U.S. government’s money printing operation generates out of control inflation, it would be much nicer to be paid in Australian dollars (now worth more than the U.S. dollar, for the first time since 1983, when the currency began to trade freely) than in U.S. mini-dollars. And if the world muddles through more or less unchanged… the currency variations should average out to null and the interest rates on those foreign bonds should also be about the same as on dollar bonds.

One potential disadvantage to this plan is that foreign bonds don’t get the tax exemption on interest that U.S. municipal bonds get. Perhaps the sophisticated investor would buy the municipal bonds and insure them against default (and hope that, in the next crisis, whoever succeeds AIG as the biggest bond insurer also gets bailed out with money from the suckers (i.e., taxpayers)).

Another disadvantage seems to be high fees, in the neighborhood of 0.5% per year. The yield on a 10-year German bond is 3.14% (Pi, as far as a computer scientist is concerned), so fully 1/6th of the return goes to a manager. The expense ratio on a typical Vanguard bond fund is around 0.12%.

Does anyone have specific funds to recommend? Or perhaps a strategy of simply buying individual long-term bonds and holding them? (I have to believe that the trading fees for an individual buying a foreign bond are going to be much higher than what a fund would pay.)

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Folks: I have two PCs at home that are both fairly new and running Windows 7. They connect (sometimes) to several shared directories on an HP Mediasmart server. At times the shared directories can be browsed as though they were local; at other, unpredictable, times, an application will hang for 5-10 seconds waiting to get a directory listing. The HP Mediasmart, which is running Windows Home Server, seems to be one of the crummiest IT products ever designed. It can take a minute or two to log in to the admin console (when the computer and server are four feet apart and connected via gigabit Ethernet). Instead of using a standard operating system RAID1 arrangement, the Mediasmart duplicates information from disk to disk on a per-folder basis. When you copy a few GB of new data onto the server, the performance becomes even flakier for a day or so. The only thing that I can say in favor of the Mediasmart is that it has a good backup and restore service.

I didn’t like my previous NAS box, a ReadyNAS (now Linksys), because the admin console (viewed from a Web browser) was very slow to load, but the underlying SMB service was much better (I am pretty sure that it was running Linux and SAMBA), and the mechanical/fan noise from the box was too loud for domestic use.

What are my options? I have a hard time believing that this is the best that Windows can do with a shared drive, since I know that corporate slaves all over the U.S. are working off networked drives all day every day.

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My favorite thing about the protests surrounding state capitols (story) is that, in each state, thousands of unionized government workers are able to spend Monday-Friday, 9-5, demanding that politicians act on their behalf. How come the private-sector workers (e.g., the 67-year-olds working at Walmart who support the $100,000+/year pensions of retired 50-year-old former public workers) aren’t counter-protesting in similar numbers? Probably because they have to work! What better proof could their be of the superior situation of government workers relative to their private counterparts?

[I like the New York Times article because they cite just one example of a retired government worker. He is 50 and, the Times reports, has a pension of just $19,500 per year. The reporter did not seek out the Ohio equivalent of Bruce Malkenhorst, collecting $510,000 annually from the taxpayers of California (see this list of the 9111 California pensioners; see this Forbes magazine article for how Malkenhorst vaulted to the top).]

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