Mr Smith

Mr. Smith a teacher earns $60,000 in salary. He pays $8,394 federal tax, $2,310 state tax, $4,590 in payroll tax (social security and Medicare) and $1,200 in pension (2%) and he nets $43,500. This is filing as a single man to simplify things but filing jointly with a wife who earns the same would work out to the same result. He started to work at age 28 and is now 62 and decides to retire after 34 years. He gets 2% of $60,000 times 34 years or $40,800 per year pension. His social security is $13,600 per year so his gross income is $54,400. He pays $6,781 in federal tax, $2,090 in state tax so his net income is $45,529. Since this is $2,000 more than his current net pay he decides to retire. If he cannot live on his current salary he can work past 62 and then retire at more than his net. Also if he enjoys his work and is in good health he can keep on working and will retire at more than net a few years down the road.

Cities going broke

I have mentioned several times in the recent past that government groups are in financial trouble because of the way they negotiated with public unions. I pointed out that in too many cases the negotiators were elected by the unions and then sat across the table from each other to discuss benefits. Stockton, CA recently filed for bankruptcy and much of their problem can be traced to such union negotiations. Police officers are allowed to retire at age 50 with a 3% factor pension plan. This means they receive 3% of their final wages for each year they worked which means if you had 30 years service you could retire at 90% of salary. When you take into account that after retirement you no longer have to pay payroll tax or contribute to your pension these people earned more after retirement than they did before. Other employees were allowed to retire at age 55 and had a 2% pension factor. If you had 35 years of service you retired at 70% of your salary. Remove the cost of payroll tax and pension contributions and your at 80%. All employees were also guaranteed free health care for life after they retired and the city paid the full cost of the health care premiums. Finally the wages of city employees were much higher than equivalent jobs in the private sector. Here is a run down. Summary of Personnel Costs General Fund All Funds Base Pay $66,200,500 50.40% $112,605,522 52.52% Additional Pay $8,809,527 6.71% $11,020,547 5.14% Retirement $27,246,636 20.74% $40,118,476 18.71% Health/Dental Benefits $22,885,726 17.42% $40,717,520 18.99% Other $6,208,555 4.73% $9,926,203 4.63% Total Personnel Costs $131,350,944 100.00% $214,388,268 100.00% Stockton is only the beginning as cities, counties and state employee programs across the county are in similar straights. FDR said that public unions should not be allowed because they would end up negotiating with the same people they elected and he was right. Cities

Speak out

I often make jokes about political correctness but it can lead to serious problems. In the case of the Fort Hood killer, a Muslim doctor who showed signs of instability but things were glossed over because he was Muslim. This of course led to the murder of 13 military people and the injury of many more. When we refuse to talk about matters like this it just makes things worse. I know it is uncomfortable to point that the people are mostly black when a huge mob invades Walmart for a shoe sale or when another mob enters a store and starts shoplifting. We have to face up to the fact that 60 % of AIDS cases are in the gay community. If we ever want to get past these feelings we have to start talking about things as they are and not as we wish they were. As long as we accuse anyone talking about these things of being religious bigots or racist or homophobes we will keep our heads in the sand. I may not agree with how you feel about these issues but I still want to hear your thoughts. Freedom of speech is threatened whenever we ridicule someone for offering their opinion.

Rights

The Presidents recent remarks concerning his views on why some people achieve success, caused me to think back to my youth and how I felt about individuals. I was very liberal and would often defend unsavory people, by pointing out the deficiencies in their upbringing, as the cause of their crimes. If you told me of a man who robbed and beat someone, I would tell you about his fatherless home and his mother who was a prostituted and then say that if you had been raised that way, you would most likely be just like him. I got so good at this type of defense that I finally got to the point where no one was responsible for anything. As time passed and I became aware of more and more people who overcame tremendous obstacles to achieve high levels of success, I changed my views. The President’s comments about people not being responsible for their own success combined with my earlier view of people not being responsible for their failures can now be combined to minimize the effect of the individual and this leads me to my main point. When we say that it is society as a whole not the individual that determines success or failure, we are describing the view of many socialist. It is their view that the state is more important than the individual and that the state can decide what is best for the country. While this may be the view in other countries, our constitution was specially designed to limit the power of the state and it clearly defines the powers given to the individual. We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights that among these are Life, Liberty and the Pursuit of Happiness. In our country we believe that we get our rights from the Creator, not the government.

Medicare

Before 2007 all Medicare recipients paid the same premium but a law passed in 2003 that took effect in 2007 changed that. The new law said higher income people (couples with incomes of $170,000 or more) would pay higher Part B Medicare premiums ranging from $154 t0 $354 per month. The income level of $170,000 was indexed to inflation but Obama care stopped that so these higher income people will pay more for Medicare premiums but it did not affect the average person. For some individuals who are close to the $170,000 point their premiums will go up and could be as high as $354. By freezing the limit at $170,000 slowly more and more people will move into that bracket. Currently 2.4 million people fall into the higher income group and it is estimate that by 2019 that number will grow to 7.8 million. Again this will not affect most people. Obama care also does this same thing to Part D prescription drug and higher income people will see their premiums rise in this area.

Teachers and unions

This is some information on unions that might be of interest to you since teachers are under attack in several states. General Motors is in the news because it has taken government money to survive and is now owned by the government and the union but GM is in some ways typical of other large corporations in that they all have large legacy cost. Legacy costs are the commitments made to employees in the form of retirement benefits which include among other things pensions and health insurance. Today GM has unfunded legacy costs of about 200 billion and the 600 million shares of outstanding stock can be purchased for 1.5 billion dollars. This is the culmination of 50 years of mismanagement. Many years ago the company president had a long term plan usually 10 to 20 years and his strategy was developed on that basis but in the early 60's things begin to change. The president's horizon shortened and over the next ten years it dwindled to planning for the next quarterly dividend. The pressure on CEO's mounted and they had to show a good dividend to keep investors happy. If the value of the dividend fell then investors looked for other vehicles in which to place their capital and the CEO's job was in jeopardy. This was highlighted when it came time to negotiate a new contract with the union and the result was to pacify the union members with increased benefits instead of increased salaries. This allowed the CEO's to avoid a strike and pushed off payment into the future and thus preserving the current dividend. By the time payments came due this CEO was on his way to either a higher paying position or to retirement. So here we are today with a company that has committed payments to its retirees that are worth 130 times more than the entire company is worth. What idiot would ever purchase a company in that position? Only the federal government could be that stupid. In the Minneapolis School District there are 3,300 teachers and 6,700 support staff. 1,500 of the support staff are members of the teachers union. If the teachers select a candidate who will negotiate contracts that are favorable to teachers and then work to get them elected, they have a very good chance of winning. If each teacher and spouse vote for a particular candidate that is 9000 votes. Now if they get their parents to vote that is another 18,000. Next if they have coffee parties and invite the neighbors plus make a small campaign contribution they can just about guarantee a win for their candidate. The proof of this is that No DFL-endorsed candidate for the board has lost in at least 20 years. Here are the results from the last school board election and it is easy to see why someone with a 27,000 vote head start will be the likely winner and you can be assured that all the teachers do vote. 3 seats 131 of 131 precincts (100%) Lydia Lee * 61,623 Jill Davis 58,998 Carla Bates 54,691 Sharon Henry-Blythe * 39,476 Kari Reed 33,118 Doug Mann 28,416 This is why it is necessary for there to be a disinterested third party to negotiate contracts. Some thing similar to arbitration

Education

In the news today a study shows that 30% of students with loans are dropping out and end up with no degree and lots of debt. Here is an essay I wrote a few months back on this topic. When I hear people say that they cannot afford to go to college I just flat out do not believe them. What they may be saying is that they cannot afford to go to the college of their choice and that I can believe. In today’s America there is a college within driving distance of almost every town and kids can stay at home and go to a local school. Their parents can continue to supply room and board as they have and the child can work summers and part time and earn enough to provide for their books, tuition and fees along with enough to pay for their transportation cost. Tuition and fees run about $5,000 per year here in Minnesota. Upkeep, gas and insurance cost about $2,500 per year. Working at a fast food or equivalent place earning $8 per hour this $7,500 can be earned in about 1,000 hours. A kid can work 100 hours per week for ten weeks in the summer. I lived in Springfield, IL when I was growing up and I graduated from high school in June of 1955. At that time there was no college in the state capital of Illinois and so I had to go away to school. I worked full time and went to school part time at Miami University of Ohio and after nine years I graduated with a BS in Chemistry. There were no student loans and I was not smart enough to get a scholarship so I paid my own way, something that I am very proud of to this day. When I graduated I had a job with nine years work experience and money in the bank. Today with the student loan programs the kids graduate in four or five years but have no work experience, lots of debt and often no job. I believe these student loan programs are just one more example of the unintended consequences of good intentions. Those who believe in the government taking care of the citizens will defend this program but they often times are more interested in maintaining control over people than helping people help themselves. These loan programs were started along with many other government programs in the Great Society and as soon as they were available most colleges started to increase tuition to accommodate for the excess cash that would be forthcoming from the government. Most informed elected officials know all of this but they are not interested in changing it because it was power and control they were after and that is what this program gives them. Recent proposed changes to move these loans from the private to the public sector further increases their control.