Detroit may mark the Beginning of the End of Generational Theft by Public Sector Unions

Posted by PITHOCRATES - August 4th, 2013

Week in Review

So who’s to blame for Detroit?  The greedy.  The greed of the public sector.  Who stole as much as they thought possible from future generations.  Laughing all the way to the bank.  But never did they think that their greed would eclipse the paying-ability of those they were stealing from.  Future taxpayers.  Which is what happened in Detroit.  And will probably happen elsewhere throughout the nation (see The Unsteady States of America posted 7/27/2013 on the Economist).

Nearly half of Detroit’s liabilities stem from promises of pensions and health care to its workers when they retire. American states and cities typically offer their employees defined-benefit pensions based on years of service and final salary. These are supposed to be covered by funds set aside for the purpose. By the states’ own estimates, their pension pots are only 73% funded. That is bad enough, but nearly all states apply an optimistic discount rate to their obligations, making the liabilities seem smaller than they are. If a more sober one is applied, the true ratio is a terrifying 48% (see article). And many states are much worse. The hole in Illinois’s pension pot is equivalent to 241% of its annual tax revenues: for Connecticut, the figure is 190%; for Kentucky, 141%; for New Jersey, 137%.

By one recent estimate, the total pension gap for the states is $2.7 trillion, or 17% of GDP. That understates the mess, because it omits both the unfunded pension figure for cities and the health-care promises made to retired government workers of all sorts. In Detroit’s case, the bill for their medical benefits ($5.7 billion) was even larger than its pension hole ($3.5 billion).

Some of this is the unfortunate side-effect of a happy trend: Americans are living longer, even in Detroit, so promises to pensioners are costlier to keep. But the problem is also political. Governors and mayors have long offered fat pensions to public servants, thus buying votes today and sending the bill to future taxpayers. They have also allowed some startling abuses. Some bureaucrats are promoted just before retirement or allowed to rack up lots of overtime, raising their final-salary pension for the rest of their lives. Or their unions win annual cost-of-living adjustments far above inflation. A watchdog in Rhode Island calculated that a retired local fire chief would be pulling in $800,000 a year if he lived to 100, for example. More than 20,000 retired public servants in California receive pensions of over $100,000.

This is an important point.  People say that we must honor these lavish pension and retiree health care benefits because they made a deal.  A contract with the city.  Or the state.  But did they?  No.  The public sector unions and the cities and states colluded together to steal money from future generations.  Who were not a party to those agreements.  This amounts to generational theft.  And the generous size of those benefits just makes that theft worse.  Transforming the public sector into an aristocracy.  That cares little for the future taxpayers that they will be bled dry to pay for their long and comfortable retirements.

Detroit is just the first domino to fall.  This generational theft is just unsustainable.  Something has to be done.  But what?

Public employees should retire later. States should accelerate the shift to defined-contribution pension schemes, where what you get out depends on what you put in. (These are the norm in the private sector.) Benefits already accrued should be honoured, but future accruals should be curtailed, where legally possible. The earlier you grapple with the problem, the easier it will be to fix. Nebraska, which stopped offering final-salary pensions to new hires in 1967, is sitting pretty.

In other words our public servants should not live a better life than their masters.  Those people paying the bill.  There should be no aristocracy in the United States.  People in the public sector shouldn’t be able to retire young and live a long life in retirement while someone else is paying the bill.  The taxpayer.  People who have to work until they drop dead to save for their own retirement.  That just isn’t right.  If our servants in the public sector want that long and comfortable retirement then they must do what people in the private sector do.  Save for it.  Make sacrifices.  And live more frugally.  Because there shouldn’t be two Americas.  Where one enslaves the other.  While setting up a string of municipal and state bankruptcies because of their greed that threatens the financial wellbeing of the nation.


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Religion allowed Sumer, Egypt and Europe to be Great

Posted by PITHOCRATES - November 15th, 2011

History 101

Religion Allowed Sumerians and Egyptians to Work Together and Live in Crowded Urban Cities

The world’s first civilization was Sumer.  Which included a series of city-states in Mesopotamia.  That land between the Tigris and Euphrates rivers.  Modern day Iraq.  And at the center of each city was a temple.  A ziggurat.  A multilevel structure that was broad at the base.  Narrow at the top.  Kind of like a pyramid.  But it wasn’t for entombing the dead.  Its height made it a ‘bridge’ to their gods.  It was at the top of these ziggurats where the priests performed their sacred rituals.  Ruled over the people.  Organized their large-scale farming.  Irrigation.  And their civilization.  Their food surpluses, the key to an advanced civilization, were stored at or near the ziggurat.  And the priest-king distributed the food to the people.

The world’s second civilization was Egypt.  Home of the pyramids.  That entombed their dead in elaborate rituals.  To help them enter the afterlife.  During the Old Kingdom one man ruled all of Egypt.  The pharaoh.  But he wasn’t just a king.  He was a god.  The people worshipped the pharaoh.  And worked at his direction.  The pharaoh directed the massive irrigation works.  The farming.  Managed the food surpluses.  And the people served their gods.  Possibly built the pyramids for them.  Out of love.  For some evidence suggests that slaves may not have built the pyramids as once thought.  But that they willingly joined together to build these tombs out of love and/or respect for their beloved pharaohs.

The first two great civilizations were theocracies.  Religion was the basis of their governments.  And the religious authority ruled.  Whether it be a priest-king.  Or a pharaoh.  A god to the people.  They organized and directed the people to do the things that made these civilizations great.  And the people did great things.  For their cities.  And their god(s).  For their religion was the great unifying factor that allowed a great number of people to live in crowded urban settings.  And work towards a common goal.

During the Dark Ages Charlemagne used Christianity to Unite Europe

Civilization advanced from these humble but great beginnings.  Religious thinking led to other thinking.  And everything great that followed.  Math.  Science.  History.  Physics.  And metaphysics.  We were thinking about our present.  And remembering our past.  The Greeks took thinking to great heights.  Figured out much of what we know today.  Alexander the Great took the glory that was Greece and spread it to the known world.  Then the Romans spread it to the parts of the world Alexander did not conquer.  The grandeur that was Rome was, in fact, Greek.

But the greatness peaked during the Roman Empire.  And then the Germanic tribes to the north sacked Rome.  And plunged Europe into the Dark Ages.  A world devoid of glory.  Where the hands of time were turned back a millennium or two.  Or three.  But all was not lost for Europe.  Because there was Christianity.  For the Roman Empire was a Christian empire.  And that’s something the people of Europe did not lose.  Their religion.  Which was the unifying force of the kingdoms that followed.  Including the great Charlemagne.  The unifier of Europe during the Dark Ages.  For Charlemagne was a devout Christian.  And even ascended to the throne as Holy Roman Emperor.

The rise of Islam in the holy Christian lands led to the Christian Crusades.  While in the ancient cities around the Mediterranean the Christians found a lot of lost Greek texts.  Brought them back to Europe.  To Christian monasteries.  And started that thinking all over again.  Leading to the Renaissance.  And the Enlightenment.  Picking up basically where the Greeks and Romans left off.  Making Europe the dominant region for centuries to come.

A lack of Religion and Spiritual Understanding Empowered Dictators to Kill their own People

Throughout history religion has made life better.  From its earliest days that simply allowed people to live and work together.  To developing a love for our fellow man.  Which restrained our most base instincts.  And calmed the savage breast.  Don’t believe this?  Just look at the worst genocides.

In sheer numbers it’s a tossup who killed more of their own people.  Joseph Stalin (the Soviet Union).  Or Mao Tse-Tung (the Peoples Republic of China).  In terms of a percentage of their population it’s no contest.  Pol Pot (Cambodia) wins that honor.  He killed some 20% of his own people.  And what do these three have in common?  They were all communists.  And their official religion?  None.  They were atheists.

Which is probably what let these dictators commit these cruel acts of barbarism against their own people.  Because they had no spiritual understanding of this life.  Or the afterlife.  So they had little to lose in their eyes.  Nothing to give them pause in unleashing all that repressed cruelty that advanced civilizations worked so hard to suppress.


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Posted by PITHOCRATES - November 14th, 2011

Economics 101

Living Together in Large Cities goes against a Million Years or so of Evolution

Agriculture advances gave us food surpluses.  Food surpluses gave us a division of labor.  The division of labor gave us trade.  Money made that trade more efficient.  By reducing high search costs inherent in the barter system.  And this efficient trade gave us advanced civilizations.  For these developments allowed great gatherings of people to live together in urban settings.  Well, these things, and something else.

For a million years or so man was a hunting and gathering species.  Which meant they traveled in small groups.  And followed food.  Why small groups?  Fewer mouths to feed.  Remember, hunters and gatherers need a lot of land to survive.  Because food wasn’t so plentiful in any one area.  And the last thing they wanted when they found food was to share it.  So when they weren’t killing their food they were killing those trying to take their food.  Which was the key to survival.  For he who eats today shall live to see tomorrow.  When the Europeans settled North America the Native Americans were still hunters and gatherers.  And they were a martial people.  Fierce warriors populated their tribes.  Why?  To protect tribal hunting grounds.  By killing any interlopers.  And they were doing this long before the Europeans set foot onto the continent.

So living together in large cities goes against a million years or so of evolution.  Which is why it didn’t happen overnight.  The transition from hunting and gathering to farming.  Before we could work together we had to learn to live together first.  And it all started with thinking.

Religion allowed People to Live Together like Family who were not Family

As we thought and developed better tools and better ways to farm we started thinking about something else, too.  Why are we here?  Who created ‘here’?  Why did the creator create ‘here’?  And what happens when we leave ‘here’?  After we die?  To answer these questions we developed religion.  And it brought us together as a people.

This is truly what separated us from the animals.  Because animals can use tools.  A bird can hold a stick in its beak to probe a hole for food.  But birds don’t worship.  They don’t have faith.  Only man does.  Because we started thinking about other things.  To see the bigger picture.  To understand this life.  And the next life.  Spiritually.  And this was the key to allowing great gatherings of people to live together in urban settings.  Religion allowed people to live together like family.  Who were not family.  Because we shared a common faith.  A religion.

Man was still cruel, though.  We spent a million years or so being cruel.  And that capacity to be cruel just didn’t go away.  But religion softened us.  It began a process to soothe the savage breast.  It allowed us to see something in people that wasn’t threatening.  And it allowed civilization to flourish.  Despite our cruelties.  Which were now reserved for those outside our own civilization.  Our enemies.  Heretics.  Especially those who attacked us.  And it was on these people, those who did not share our common faith, that we unleashed that repressed cruelty.

Religion Allowed us to Live in Crowded, Urban Cities Creating Commerce and Trade

A lot of atrocities have been committed in the name of religion.  This is true.  But sharing a common faith united us like nothing else could.  For our faith was bigger than us.  We learned to live by moral codes.  We worked together.  Voluntarily.  For the betterment of the cities we lived in.  And to serve our god(s).  In cities that priest-kings typically ruled over.  Guided by our religious beliefs.

Everything we did was for that spiritual journey.  Working hard in this life.  All the while preparing for the afterlife.  Bringing the people of a common faith together.  We became so close to each other that for the first time in history we could live in crowded, urban cities.  Creating commerce and trade.  In an advanced civilization.  None of which would have been possible if religion hadn’t softened up that cruelty within.  Instilled in us for the past million or so years.


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Advanced Civilization takes a Huge Step Forward with the Bronze Age

Posted by PITHOCRATES - November 2nd, 2011

Technology 101

Bronze gave the Artisans the Tools to Unleash their Human Capital and Increase the Quality of Life

Two things put man at the top of the food chain.  The ability to think.  And hands that could build the things we thought of.  In particular, tools.  First it was sharpened sticks and antlers.  Stone and flint.  These were steps forward.  But the quality of these tools was poor.  They weren’t ideal.  They were the best we could chip out from what we could find.  And they didn’t hold a sharp edge very long.  But that all changed with metallurgy.

Enter the Bronze Age.  Where man could cast pretty much any tool he thought of.  By pouring molten metal into a mold.  This was a huge step forward.  Because we could make tools to fit the job.  Any job.  They were strong, too.  And could hold a sharp edge for a longer time.  This exploded the growth of cities.  Farms.  And urban life.  Artisans now had the tools to unleash their human capital.  Cities became rich in finished goods.  Things that increased the quality of life.  And attracted the attention of envious neighbors.  And the uncivilized barbarians beyond the civilized frontier.

With bronze they could make better weapons to defend themselves.  And they did.  The Sumerians used bronze to create one of the most formidable defensive units of the time.  The phalanx.  A formation of soldiers armed with bronze-tipped spears.  This spear could reach further than a sword.  So swordsmen attacking a phalanx were at a disadvantage.  The phalanx could stab with the spear before the swordsman could stab with his sword.  The same principle of the defensive mechanism of the porcupine.  The phalanx was such a formidable defensive unit that it saw service for many centuries.  Letting civilizations grow because they could defend themselves from their envious neighbors.

It took Regional and Long Distant Trade to get the Copper and Tin to Smelt into Bronze

The Stone Age lasted a long time.  And the change to the Bronze Age didn’t happen overnight.  Because you don’t mine bronze.  You make it.  When you melt two or more metals together.  And the two most popular metals of the time were copper.  And tin.

The Sumerians used bronze tools and weapons.  But the Fertile Crescent didn’t have any ore deposits.  So the metals necessary to make bronze were not indigenous to the Fertile Crescent.  That land between the Euphrates and the Tigris.  So how did a people with no ore deposits smelt copper and tin into bronze?  Trade.

You have to dig copper out of the ground.  You have to dig tin out of the ground.  And you typically don’t dig copper and tin out of the same mine.  Worse, tin wasn’t as close to the Sumerians as copper was.  So it took regional trade.  And long distant trade.  To get the ore to smelt into bronze.

Trade gave us the Bronze Age and Advanced Civilizations

The Bronze Age created advanced civilizations.  But it took an advanced civilization to make bronze.  So what came first?  The Bronze Age?  Or advanced civilization?  That’s an easy answer.  Trade.

An advanced civilization could create great things.  As long as they had the ingredients to make those things.  Some of these things were indigenous to their civilization.  A lot of them were not.  So you traded.  To get the things you needed but didn’t have.  With the things you had.  And the things you built.  From both.


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Posted by PITHOCRATES - October 31st, 2011

Economics 101

People Traded the Things they Made to have Things they couldn’t Make

Agricultural advances gave us food surpluses.  Food surpluses gave us the division of labor.  And spare time.  For the first time everyone didn’t have to hunt or gather food.  They could do other things.  Think.  Experiment.  Innovate.  Create.  And they did.  Becoming specialists.  A middle class.  Artisans.  People who became very good at doing one thing.  So they kept doing that one thing.  Finding ways to improve that one thing.  And created surpluses of their own.  Potters made excess pottery.  Shoemakers made excess shoes.  Tanners made excess leather goods.  Metalworkers made excess metal goods.

Cities grew in the center of the sprawling farmland.  And it was in the cities where these artisans lived.  Where they honed their specialties.  And met.  With other specialists.  And with farmers.  To trade.  The potter would trade pottery for shoes.  The farmer would trade food for shoes and metal goods.  The tanner would trade leather goods for pottery, shoes and food.  And so on.  People traded the things they made.  To have things they couldn’t make.  Everyone was able to have more things.  Thanks to this trade.

This unleashed the vast human capital of the people.  Their cities.  And their civilization.  Cities on the coast fished.  Cities closer to the forest harvested wood.  Cities closer to the hills mined silver, gold and copper.  And coal.  And the cities traded their surpluses with other cities.  Metal workers and potters traded their goods for fuel for their forges and kilns.  Miners traded their ore and coal for grain and fish.  Either directly.  Or indirectly.  When other people traded their large surpluses with other people in other cities.  With the miners getting a portion of these large-scale trades for all their efforts to make those trades possible.

As Civilizations became more Complex they became more Dependent on Trade

All of this trading made cities grow.  And as a result the civilization they belonged to grew.  And became more advanced.  People ventured further.  Looking for other resources.  And met people from other civilizations.  Who had raw materials that were different and interesting.  As well as finished goods that were different and interesting.  And these civilizations traded with each other.

Civilizations established trade routes with each other.  Which connected civilizations with others in the unknown world.  Beyond the civilizations they knew.  Markets appeared on these trade routes.  Bringing the exotic from the furthest corners of the world to everyone.  As well as new ideas.  And innovation.  The civilized world grew more advanced.  More interdependent.  More peaceful.  And better.  There was more food.  More technology.  More goods and services.  And more leisure.  Giving rise to the arts.  And entertainment.

But it was not all good.  As cities grew they grew attractive to the uncivilized barbarians beyond the frontier.  Roving bands of hunters and gatherers.  Who were more partial to plunder than trade.  So a portion of their surpluses had to be set aside for city defenses.  The building of city walls.  Implements of wars.  And standing armies.  To defend their cities.  Their civilizations.  And their trade routes.  For as civilizations became more complex they became more dependent on trade.

Trade Improved the Quality of Life which is the Hallmark of an Advanced Civilization

Trade unleashed our human capital.  Because it drove innovation.  There was a big world out there.  Creating a lot of fascinating stuff.  And the only way to get it was to trade your fascinating stuff for it.  And when we did everyone won.  Life got better.  We learned new and interesting things.  That we used as building blocks for further innovation.  And further advancement.  Which led to a better quality of life.  The hallmark of an advanced civilization.


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