Government Workers Get Paid Very Well. Often More Than In the Private Sector

See The Government Pay Boom: America's most privileged class are public union workers. From the WSJ, 3-26-10, p. A19. Exerpts:

"It turns out that public employees earn salaries that are about one-third higher on average than what is provided to private workers per hour worked."

"...nearly this entire benefits gap is accounted for by unionized public employees. Nonunion public employees are paid roughly what private workers receive."

"What if government workers earned the average of what private workers earn? States and localities would save $339 billion a year from their more than $2.1 trillion budgets. These savings are larger than the combined estimated deficits for 2010 and 2011 of every state in America."

"A 2009 study by economists Robert Novy-Marx and Joshua Rauh, published in the Journal of Economic Perspectives, estimated that these government pensions are underfunded by $3.2 trillion, or $27,000 for every American household."

"The Orange County Register reports that California has 3,000 retired teachers and school administrators, who stopped working as early as age 55, collecting at least $100,000 a year in pensions for the rest of their lives."

"Illinois's pension obligations are so costly the state had to issue $3.5 billion of bonds merely to meet its mandatory contribution to the worker retirement program, which faces $85 billion, or three years of state tax revenues, in unfunded liabilities."

"California, Nevada New Jersey and Ohio all allow double dipping, which lets government workers retire in their 50s and then work another full-time job while collecting retirement checks. In Ohio, police, firefighters and teachers can retire after 30 years on the job, collect a full benefit each year and go back to work full-time doing the same job."

"Across the state, Ohio's State Teachers Retirement System paid out more than $741 million in pension benefits last school year to 15,857 faculty and staff members who were still working for school systems and building up a second retirement plan."

"The unions also neglect one of the greatest perks of government employment: job security. Short of shooting up a Post Office, government workers rarely get fired or laid off."

" Cato Institute economist Chris Edwards has analyzed Department of Labor statistics and found that private workers are three times more likely to quit their jobs than are government workers."

How One Greedy Lawyer (Bill Lerach) Hurt Business

This comes from a book review in the WSJ From Bully to Felon: How Bill Lerach shook down corporations, until his scam was uncovered. From the 3-2-10 issue, p. A21. Exerpts:

"In 1972, a young lawyer co-authored an article for the University of Pittsburgh Law Review. He targeted class-action securities lawsuits, calling them "procedural monstrosities." They were legal extortion, he said, in which plaintiffs simply use "allegations as a bargaining weapon to be disposed of when an appropriate premium has been extracted from the defendant.""

"In the course of 30 years at the New York-based firm of Milberg Weiss, Mr. Lerach would become the most feared tort lawyer in the country, pioneering an assembly-line model of "strike" lawsuits against corporate America.

In a typical case, he would charge that a company had misled shareholders; he would then sue for damages, claiming to represent a class of people who had lost money on the company's stock; and, finally, he would bully the company into paying over a settlement. In 2008 he became a national symbol for the corruption and greed that lay behind such lawsuits, going to federal prison for helping to orchestrate one of the longest- running legal scams in history."

"Along the way they show how the plaintiffs' bar has transformed the process of class actions into big business."

"Mr. Lerach (eventually with the help of dozens of employees) would monitor company stock prices, waiting for one to plunge. Then he would find some prior sunny statement from the chief executive, dig up an inside trade or two, locate a shareholder plaintiff, and scream investor fraud. Subpoenas would often open up new targets for yet more accusations. Mr. Lerach would then threaten to bankrupt the firm in court or go away for a hefty sum. "I'll own your f---ing house in Maui and the diamonds on our wife's fingers," he once warned a CEO."

"By 1992, Milberg commanded 25% of the country's securities class actions; 90% were settled out of court. The firm's profits in 1993 exceeded $100 million."

"Nobody knew until later that a lot of this legal gamesmanship was rigged. Mr. Lerach had no trouble identifying corporate targets; the hard part was rustling up plaintiff-shareholders to represent. In 1976 an investor named Seymour Lazar proposed a solution: He'd buy stocks and serve as a plaintiff—for a kickback of any payout. It was illegal to pay individual plaintiffs to serve in lawsuits, lest their interests conflict with those of the rest of the plaintiffs' class; Milberg Weiss got around that restriction by sending the kickback money through middlemen lawyers."

"The federal government wouldn't catch on to the scam until the late 1990s, when yet another of the firm's professional plaintiffs was caught in an unrelated crime and came clean."

"Democratic Party thrives on campaign contributions from the securities bar and in return blocks the reforms that might put an end to such legal extortion"

Charter Schools Flourish in Harlem

That is the title of a WSJ article which you can read by clicking here. From the 3-8-10 issue, p. A21. Exerpts:

"Nationwide, the average black 12th grader reads at the level of a white eighth grader. Yet Harlem charter students at schools like KIPP and Democracy Prep are outperforming their white peers in wealthy suburbs. At the Promise Academy charter schools, 97% of third graders scored at or above grade level in math. At Harlem Village Academy, 100% of eighth graders aced the state science exam. Every third grader at Harlem Success Academy 1, operated by Ms. Moskowitz, passed the state math exam, and 71% of them achieved the top score."

"Ms. Moskowitz, a former city council member, says that turnout at the education fair—hundreds of parents and children arrived early and stood outside in the cold before the doors were opened—refute claims that low-income minorities are indifferent to their children's educational needs.'

"Just 2,000 of the nation's 20,000 high schools produce almost half of all high-school dropouts. But nearly half of all black high-school students wind up in one of these "dropout factories.""

"The sadder reality is that 60% of all black male high-school dropouts in their mid-30s have prison records."

The Health Care Bill Could End Up Costing Alot

See Back to the ObamaCare Future: The Massachusetts 'model' moves to price controls. From the WSJ, 3-1-10, p. A24. They compare it to the Massachusetts model. Exerpts:

"As with all new entitlements, the rolling cost crisis began almost immediately. For fiscal 2010 taxpayer costs are $47 million over budget, in part due to the recession, and while the $913 million Mr. Patrick requested for 2011 is a 5% increase over 2010, spending has grown on average 6.7% per year.

Meanwhile, average Massachusetts insurance premiums are now the highest in the nation. Since 2006, they've climbed at an annual rate of 30% in the individual market. Small business costs have increased by 5.8%. Per capita health spending in Massachusetts is now 27% higher than the national average, and 15% higher even after adjusting for local wages and academic research grants. The growth rate is faster too."

"...the political class and providers blame insurers, but a better culprit is the state's insurance regulation. Incredibly, the average "medical loss ratio" in Massachusetts for individual policies is 112%—that is, insurers pay $1.12 in benefits for every $1 in premiums.

This is the direct result of forcing insurers to charge everyone more or less the same rate regardless of age or health status, which makes it rational for people to wait to enroll until they need expensive coverage. It is also the result of the state's decision to merge the individual and small-group insurance markets, which transfers individual costs onto small businesses."

"The average insurance deductible is 28% lower than the U.S. average, and the benefits are more generous with less cost-sharing. Patients are thus insensitive to the cost of care."

"Thirty states imposed hospital rate setting in the 1970s and 1980s. Except for Maryland, every one of them eventually eliminated it—including Massachusetts, in 1991—partly because it didn't control costs."

"A 1988 study in the Journal of New England Medicine found that the states with the most stringent rate-setting had mortality rates 6% to 10% higher than those that didn't."

Can You Really Outlaw Short Selling?

Maybe not. See Regulatory 'Fixes' Miss the Mark(et) By Dennis K. Berman. From the WSJ3-2-10, p. C1:

"Governments have been trying to outlaw or regulate short selling since the Dutch did it in 1610. The English even specified a ban on short sales of bank shares in 1866. In both cases, the rules were repealed or ignored."

Was The Credit Crisis Just Like An Old Fashioned Bank Run?

That is what Steven Landsburg suggests at his blog with What Really Went Wrong. He discusses a book by Gary Gorton titled Slapped By the Invisible Hand: The Panic of 2007. The basic idea is that when mutual funds like Fidelity loaned money to investment houses like Bear Stearns, they started to wonder about the collateral they were given. It is not clear but it seems like the collateral was mortgage backed bonds. Once Fidelity and others questioned the value of those bonds (which is not surprising since we built too many houses), they demanded more collateral from Bear Stearns. But, of course, they could not give everyone more collateral and they went under. Everyone started withdrawing their money. Just like a bank run.

The part about mortgage backed bonds seems similar to what the AEI reported. I had a post on this calledAEI Paper On The Credit Crisis. They suggested that regulations steered banks into hold mortgage backed bonds that were given ratings that were unrealistically high. So they held assets that were more risky than they thought.

Lifestyle Changes Reduce Breast Cancer

See Up to a third of breast cancers could be avoided. It was by AP Medical Writer Maria Cheng, posted 3-25-10, at Yahoo. Here is the intro:

"Up to a third of breast cancer cases in Western countries could be avoided if women ate less and exercised more, researchers at a conference said Thursday, renewing a sensitive debate about how lifestyle factors affect the disease.

Better treatments, early diagnosis and mammogram screenings have dramatically slowed breast cancer, but experts said the focus should now shift to changing behaviors like diet and physical activity."

So once again, individuals can shape their own destiny.