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Yesterday’s New York Times carries “Padded Pensions Add to New York Fiscal Woes”, the usual story about retired public employees in their 40s collecting pensions of more than $100,000 per year. These pension are automatically adjusted for inflation, exempt from state and local income tax, and these folks should live quite a long time since they retired young and no longer suffer from the stress and sedentary lifestyle of a worker. If these folks live 50 years post-retirement and investment returns in the crippled-by-pension-debt U.S. economy continue to be roughly equal with inflation, that’s up to $5 million of today’s dollars for every person who ever worked for the government.

Given the voting power of public employee unions, there does not seem to be any practical way for states and local governments to shed these obligations. As thousands of the highest earners in the state (i.e., the public employee pension collectors) are exempt from income tax, it is plain that these pensions will be paid for with dramatically higher property taxes. How to warn folks considering buying a house in one of these towns, then, that the value of their house will be sucked dry by taxes necessary to pay retired 45-year-olds? How about a law that towns and/or states with a significant pension overhang be required to change their name to something Greek?

New Jersey would be renamed “Epirus”; California “Peloponnese”. Yonkers would become “Kalamata”, etc.

Related: “Pensions: How states and local governments indulge in deficit-spending.”

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I chatted with a 75-year-old man here in Massachusetts and listened as he sang the praises of Big Government and deficit spending. In his opinion, the government’s massive borrowing saved our economy because surely we would have fallen into another Great Depression otherwise. He thought that the crisis was over and the economy was in good shape now. How then did he feel about the government’s plans to borrow another nearly $10 trillion over the next ten years (graph)? He loved that too.

Did he have grandchildren? No.

So basically he had benefited from the Reagan tax cuts and extra helpings of government services for the last 30 years but wouldn’t live long enough to get hit with the new taxes necessary to repay the debt. He was protected on the Massachusetts Turnpike by state troopers earning an average of $150,000 per year (plus another $150,000 or so in pension and other benefits). He is getting back far more than he paid into Social Security. He is getting unlimited government-paid health care in the world’s most expensive hospitals (Medicare). All to be paid for one day by people who are currently children and denied the right to vote.

Now that the federal government’s biggest expenses are “entitlements” for old people and most of the money is coming from future generations, does it make sense to allow old people to vote in federal elections? As government workers and contractors are also allowed to vote, what opposition to federal government expansion could possibly prevail at the ballot box?

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In my economic recovery plan (November 2008), I proposed that the U.S. adopt an immigration system that favors people who are likely to earn a lot of money. My basic theory was that Americans will never be able to pay back all of the money that our government is currently borrowing, so we need to find some foreigners who will agree to come in here and work to pay our debts.

A few recent news events seem to indicate that we’re going in the opposite direction. Barack Obama’s Aunt Zeituni was granted asylum and will be eligible for citizenship, not on the grounds that she might one day earn enough money to stop living off the taxpayers of Massachusetts but rather because she is too ill to work or travel (nytimes).

Meanwhile, Faisal Shahzad, granted citizenship in April 2009, went down to Times Square and tried to kill a few hundred of the Americans who had welcomed him just a year earlier. In looking at http://en.wikipedia.org/wiki/Faisal_Shahzad, it is hard to understand what economic or cultural benefit we could have expected from adding Mr. Shahzad to the ranks of U.S. citizens. Here are some of his credentials:

• D student in high school
• “mediocre student” in a Pakistani business school
• C, D, and F student at a college in Washington, D.C. that was stripped of its accreditation

By the time Mr. Shahzad was granted citizenship, there were 15 million unemployed Americans, many of whom had superb educations and skills. How was Mr. Shahzad supposed to thrive in a U.S. economy flooded with jobless native-born Americans? In this case, of course, we know that Mr. Shahzad did not thrive and that whatever taxes he may have paid are now dwarfed by the billions in antiterrorism costs his actions have imposed on the rest of us.

I would be interested to get comments from readers who live in countries such as Australia and New Zealand that use point systems to evaluate potential immigrants. Could Faisal Shahzad have earned citizenship under these systems? (And we might as well ask about Aunt Zeituni as well.)

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Greece has been having some financial troubles lately and economists have been blaming Greece’s use of the Euro. A small country should have its own currency, they say, so that it naturally falls in value when the government prints money or spends all of the income that today’s infants might reasonably be expected to earn over their lifetime. If only Greece had kept the Drachma its future would be as bright as China’s or Australia’s.

Conventional economic wisdom in the Americas, however, seems to have been that small countries do better when they don’t have their own currency. Ecuador, for example, prospered after “dollarization” (reference). Now that the local government could not print money, investors were more likely to trust the place (though of course lately these countries are having their currency devalued by the U.S. government’s spendthrift ways (chart)).

How come what was supposedly good for Ecuador is bad for Greece?

Separately, how do the Europeans go about printing money? In the U.S., we issue Treasury Bonds and then have the Federal Reserve Bank buy them (older posting). How can this work in Europe, though? They seem to have a central bank, but how would it decide which country’s bonds to buy? Must it buy equal weights of bonds from all of the members of the monetary union? Or do Europeans simply not print money?

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I’ve done a bit of planting this season, mostly by hollering at helicopter students to dig. So far we have about 1500 new plants in the ground and therefore it is time to think about irrigation. Given the high cost of water, either paid directly to a municipal water company or to the electric company when pumped up from a well, I figured it would be easy to find a smart spigot-end controller/timer. My timer would measure temperature, light, humidity, and rainfall then irrigate accordingly. I.e., it would shut itself off on cold damp days and run longer on hot bright dry days. As the controller/timer is already out in the elements, all of the sensors can be mounted directly on/in the box. Amazon sells desktop digital temperature/humidity sensors, complete with LCD screen and battery holders (parts already required for the controller/timer) for less than $10. So you’d think that a $40 or $50 hose-end controller/timer could have at least some of the obvious sensors. But they don’t. A friend pointed out that Make published an article on a home-made system that does some of this (link). But I’m surprised it isn’t offered at Home Depot.

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It has become common to listen to radio stations on computer systems, e.g., a desktop or laptop PC or the Sonos system. The processors inside these computers are capable of processing (low quality) video in real time. So one would think that the processor is powerful enough to compute whether the station is playing music or if an announcer is talking. A consumer listening to a public radio station might want to hear the music but not the advertisements (generally all talk, e.g., “support for WCRB comes from BP, the world’s leading blah blah blah”). Why isn’t there an option in a Windows radio player or in the Sonos system to mute or kick the volume down 20 dB during the talk segments?

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I asked a father today about his son’s post-graduation plans. The kid had every advantage that a loving family could bestow, including 12 years of private school at approximately $30,000 per year and four years of a prestigious liberal arts college at more than $50,000 per year. The kid has the following advantages:

• more than half a million dollars and 16 years of education
• the boundless energy and perfect health of youth
• a lively interest in commerce and making money
• native speaker of the world’s most practical language (English)
• willing to work for minimum wage (and would be willing to work for less if it were not illegal)

One would think that employers would be tripping over each other to hire this kid. What are his summer plans? Like most of his classmates, he couldn’t find a job and will be moving back home to live with mom and dad.

It seems odd to me that folks who run schools and colleges feel confident that they are doing a great job and that their graduates are superbly educated while simultaneously employers don’t think that they can make a profit by hiring the Class of 2010 at the prevailing low wages.

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Six months after trying to schedule a checkup (what they used to call an “annual physical”) with my primary care doctor, it finally happened at the end of March. Today’s mail brought a bill from the doctor’s office. I don’t think that this includes the lab tests that were done; these were handled at a separate facility where I filled out about 5 pages of forms, including insurance information.

The original bill was $510 and that’s what I would have had to pay without insurance. The $510 bill was submitted to the insurer/HMO on 4/1/2010. On 4/27/2010, there was a “disallowed adjustment” from the insurer/HMO of $416.97 and a “risk WH adjustment” of $9.75. The insurer/HMO actually paid $68.28 of the $510. My copayment somehow worked out to $15 and I was sent a paper bill for this amount, about a month after the visit.

So… in terms of the real economy, this was an $83 transaction, equivalent to what you might spend on dinner for two. But instead of being paid with a credit card swipe, there were apparently multiple clerks involved at the doctor’s office and the insurer. Negotiations happened behind the scenes. A paper invoice was printed and put into an envelope by hand. A check was mailed through the U.S. mail (perhaps it is our health care system that is keeping the Post Office alive).

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Our friends who have kids tend to be in their forties, i.e., too old to muster the energy and optimism necessary for divorce (divorce requires optimism because one would have to believe that one could be happier alone or with someone else). I was asked recently “Do you think Schlomo and Rebecca [not their real names] are going to have any more kids? They seem to fight a lot.” I replied that Schlomo would be better off with a third kid because then he would get along with three quarters of the other household members rather than two thirds.

Can this rule be generalized? For a young couple, each of whom might yet be able to build a new marriage with a more compatible partner, discord should lead to having fewer children. For an older couple, if they aren’t enjoying each others’ company, they should have as many children as possible.

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If the Politburo and Gosplan down in Washington, D.C., don’t object to the merger of United and Continental, let me suggest a name for the new monster airline: Aeroflot.

How can consumers profit from this change in the industry? Perhaps we should be shorting the stock of Orbitz, Expedia, and other ticket booking sites. When the U.S. has only one airline there won’t be much value in comparison shopping.

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