Public Sector Pensions: True/False Quiz

Questions for anyone who supports public sector pensions.

1. True or false? It is ideal to make all California taxpayers personally liable for financial obligations of potentially trillions of dollars to 12% of state workers.

2. True or false? If a financial manager fails to produce 8% returns over the course of 15, 20, or 30 years, he is either incompetent or has mismanaged funds.

3. True or false? Despite the fact that CalPERs bought actual land and commodities like timber in addition to stocks, it still failed to diversify its holdings over the past ten years.

4. True or false? As fund assets increase, it is easier to produce 8% gains.

5. True or false? As fund assets reach the hundreds of billions, it becomes harder to produce consistent gains because it becomes harder to effectively invest in all types of investments.

6. True or false? Warren Buffett, Stanford University, and Chuck Reed are lying to us or are uninformed when they warn us that government pensions in their current form are unsustainable and we should switch to a two-tier pension system.

7. In your opinion, what percentage of mutual funds run by professional managers have weathered the 2008-2009 recession? What makes you believe CalPERs will be in the top group of professional money managers in the future, given their performance in 2008-2009? If Bernanke and Greenspan couldn't see the housing crisis coming, why do you think a CalPERs money manager will?

8. True or false? It is ideal to rely on professional managers--most of whom have proven themselves incompetent over the past ten years--to prevent California taxpayers from being personally liable for potentially trillions of dollars of benefits to just 12% of state workers.

9. Almost all of California's public pensions assume an 8% average annual growth rate. Somewhere, there is a mutual fund manager who can manage the state's pension money and promise 8% annual gains. Do you have your money with him or her? If so, can I have the person's contact information?

10. Have you invested at least 25K in non-401k assets over the past seven years? (The reason I ask is because you would have a better idea of how difficult it is to get 8% a year, even over the long run.)

Even the big funds chase performance and have to mix up asset allocations. That involves the potential for human error no matter what. At some point, public pension supporters are just arguing that 12% of state workers should be immune from investment mistakes while the other 88% cover their arse.

Also, note that I did not mention private unions in this thread. It is a separate discussion, b/c private corporations, unlike states, can more easily declare bankruptcy to shed themselves of any long term obligations. The issue in the corporate union realm is how to ensure proper funding of the PGGC while minimizing the cost to taxpayers and consumers.

Furthermore, the best argument against private sector unions is that they harm younger and newer workers by enacting artificial barriers to getting a job; therefore, one can argue that unions limit worker mobility and freedom, especially for younger workers and immigrants.

In addition, being pro-union (or socialist) usually means you favor restricting work for immigrants in favor of native-born citizens. This is because most union jobs go to citizens, not new immigrants. It's not inherently wrong to believe that citizens should get preference over immigrants for jobs, but it depends on what kind of society you want, i.e., a faster-growing, dynamic society--or a society that votes themselves benefits to a specific class of people at the expense of future growth. But again, that's a separate discussion, and this "quiz" was designed to apply only to public sector unions and benefits.

Movie Recommendation: Finishing the Game

If you haven't seen Finishing the Game (2007), you are missing a hilarious film. 4/5 stars. It's about a group of filmmakers who discover an unfinished Bruce Lee movie. They try to do a remake with a new actor. The search for the new actor includes a white guy who thinks he's half-Chinese; a guy named Breeze Lee; and a Korean and Colombian couple from Alabama.

Bonus: if you want to watch an excellent thriller, check out Shutter Island (2010).

Gordon Brown: Book Recommendation

I recently read Gordon Brown's book, Beyond the Crash. I am very surprised it did not generate more publicity and discussion. An excellent book, but one with very idealistic solutions.

Random Bonus: from Thomas Paine: "My own line of reasoning is to myself as straight and clear as a ray of light. Not all the treasures of the world, so far as I believe, could have induced me to support an offensive war, for I think it murder."

As of 2011, we are still in Afghanistan and Iraq. American taxpayer dollars still support some theory of war and peace in the Middle East that is apparent to the Pentagon but not to the average citizen.

Thomas Paine on America

Thomas Paine, from The Rights of Man:

If there is a country in the world where concord, according to common calculation, would be least expected, it is America. Made up as it is of people from different nations, accustomed to different forms and habits of government, speaking different languages, and more different in their modes of worship, it would appear that the union of such a people was impracticable; but by the simple operation of constructing government on the principles of society and the rights of man, every difficulty retires, and all the parts are brought into cordial unison. There the poor are not oppressed, the rich are not privileged. Industry is not mortified by the splendid extravagance of a court rioting at its expense. Their taxes are few, because their government is just: and as there is nothing to render them wretched, there is nothing to engender riots and tumults.

More here.

John Wooden, Teacher

John Wooden was not only a great coach, but a wonderful human being. I thoroughly enjoyed this Charlie Rose interview:

http://www.charlierose.com/view/interview/11055

"No written word, no oral plea can teach our youth what they should be. Nor all the books on all the shelves, it’s what the teachers are themselves."

I like to say John Wooden was old school before old school, but he was also on the cutting edge:

BILL RUSSELL: He was one of the few coaches that would...let his team fast break in the ‘50s. Most of the coaches would not let their team fast break.

RIP, Coach.

Pensions, New Jersey Corruption Style

I can't believe I didn't see this article when it first came out:

http://redtape.msnbc.com/2010/11/the-secret-sauce-behind-bloated-state-pensions.html#posts

Anyone who wants to defend pensions for public employees needs to click on the link above. Remember: government unions tend to have major pull with legislatures, because in some cities, the union machine puts a candidate ahead by 20% to 30% immediately. That's what happens when only about 50 to 60% of eligible voters show up on election days.

I feel sorry for New Jersey taxpayers and wish Governor Christopher Christie well.

India: the Good Stuff

Here are some general thoughts on India after my trip:

1. The Grand New Delhi, located on Nelson Mandela Rd, New Delhi, 110070, is an amazing hotel. I've never stayed in a 5 star hotel before, but this had to be a 5 star hotel. The building is beautiful, reasonably near the airport, and customer service is consistently fantastic. Although customer service in India generally leaves much to be desired, The Grand New Delhi delivered perfect service. I highly recommend it for everyone, including disabled travelers--the hotel went out of its way to accommodate my hearing impairment (personal wake up calls, etc.). Thank you to everyone at The Grand New Delhi.

2. At the last minute, I wanted to see a dentist to get a basic checkup. I ended up at Ganga Ram Hospital, where I saw a line of people waiting to see dentists. The dentist spoke perfect English, took a look at me, and was able to answer all of my questions. When I tried to pay him for the short consultation, he refused payment.

Doctors and dentists who work in charitable hospitals are the real heroes, if you ask me. The dentist I saw probably assisted 20 to 35 people that day, either at no charge or low bono. Most dentists in India are also available if you want to hire them for something more than a checkup. Prices are much lower than in the United States, and many dentists are trained in the United States' best schools.

3. If you go to India, remember that elders are respected. I liked how everyone called older people either Auntie, Uncle, Sir, or Madam. Maybe Sidney Poiter visited India before he starred in the excellent film, To Sir, With Love.

4. India's film industry has true diversity. Almost all the Indian movies I've seen include Muslims, Hindus, Sikhs, etc. India is very diverse, and one reason the country works is because no one seems marginalized in the media.

Also, although India doesn't get along with Pakistan, its government and media do an excellent job separating Indian Muslims from Pakistani Muslims. America could learn a thing or two about fighting terrorism from India. Despite its own 9/11--the 26/11 Mumbai attacks--India's government and media have steadfastly refused to castigate its own citizens. Perhaps the 2002 Gujarat massacre of Muslims in India may have played a part in India's softer tone--I don't know.

5. India has freedom of speech and freedom of press. Newspapers in India are fantastic. Almost every issue slams government corruption. WikiLeaks was front-page news, and all the articles had substantive analysis. America's founding fathers would be proud of India's media. I am sad to say this, but India's media is clearly better than the pablum America's media passes off as "news."

6. You can feel India's energy everywhere. As Robert Kunzig wrote in National Geographic (Jan 2011), "People, people, people, people--yes. But also an overwhelming sense of energy, of striving, of aspiration."

7. Fareed Zakaria has a brother, Arshad Zakaria. I recently read Gasparino's Sellout, which mentioned Arshad. (Sellout is an excellent book, by the way.) I searched and searched for speeches by Arshad, and finally found an interesting roundtable discussion where Arshad summarizes India very well:

Let me start by giving you some of the three or four interesting things that you will see, which are different from some of the other Asian economies. The first thing you see is that the Indian culture is essentially like an occidental culture. It is a Western culture. So in simple ways, when we have investors over, they feel completely comfortable with the Indian business community and to a smaller extent with the political community, mainly because India has a large agricultural population. But you do have a culture where it's very comfortable for Westerners to fit in on a social basis.

That ties in with what I think is the second point, which is that the language of business in India is English. I think one of the big changes that’s taken place in the world is the language of the global multinational is now English. That interestingly gives India an advantage not just over other emerging markets, but over some of the European countries as well because a lot of people learned it in school to the extent where they’ve not only mastered the language but also the nuances of system and culture — it’s sort of like being in London or the United States. When you travel on roads where you may see a bull or a cow on the side of the road, you’re reminded quickly that you’re not in London, but once you get into a new building, which is being priced at New York or London prices because of this infrastructure issue, you will see from a societal basis that India has quite an advantage.

I think the other thing you focus on is the fact that India, again, is truly a democracy, where you’ve had smooth transitions of power, which allow you to see all the ups and downs of democracy. You have a free press, which is both a good thing and a bad thing. You’ve got TV channels sensationalizing everything, very much like Westerners are used to. There is very much a strong Western influence.

I'd say the biggest issue other than infrastructure that you'd find when you go there, especially if you go to northern India, is the poverty and the scale of poverty. It is, I think, incredibly telling when you look at it and it’s something that people aren’t used to. I would say that’s why there are a decent number of people who will leave feeling uncomfortable without being able to pinpoint why. It’s unlike a lot of places because the poverty sits right next to the wealth. So you’ll see the best roads in Bombay with slums right next door. The proximity of poverty with incredible wealth is something you see clearly in India, and the scale of it is tremendous. And that’s just something that, no matter what you’re expecting, tends to shock some people.

I couldn't have said it better myself.

Bonus: I wrote a five part series about my experiences in India. The first part can be found here.