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America’s public servants are now its masters

By Mort Zuckerman

Published: September 9 2010 22:49 | Last updated: September 9 2010 22:49

There really are two Americas, but they are not captured by the standard class warfare speeches that dramatise the gulf between the rich and the poor. Of the new divisions, one is the gap between employed and unemployed that President Barack Obama seeks to close with yet another $50bn stimulus programme. Another is between workers in the private and public sectors. No guesses which are the more protected. A recent study by the Mayo Research Institute found that “private-sector workers were nearly three times more likely to be jobless than public-sector workers”.

Political tension is bound to grow when jobs disappear faster in the private than the public sector, just as compensation in the former is squeezed more. There was a time when government work offered lower salaries than comparable jobs in the private sector, a difference for which the public sector compensated by providing more security and better benefits. No longer. These days, government employees are better off in almost every area: pay, benefits, time off and security, on top of working fewer hours. Public workers have become a privileged class – an elite who live better than their private-sector counterparts. Public servants have become the public’s masters.

Take federal employees. For nine years in a row, they have been awarded bigger average pay and benefit increases than private-sector workers. In 2008, the average wage for 1.9m federal civilian workers was more than $79,000, against an average of about $50,000 for the nation’s 108m private-sector workers, measured in full-time equivalents. Ninety per cent of government employees receive lifetime pension benefits versus 18 per cent of private employees. Public service employees continue to gain annual salary increases; they retire earlier with instant, guaranteed benefits paid for with the taxes of those very same private-sector workers.

More troubling still is the inherent political corruption. Elected officials tend to be accommodating when confronted by powerful constituencies such as the public service unions that agitate for plush benefits and often provide (or deny) a steady flow of cash to election campaign funds. Their successors will have to cope with the inherited debt burden – and ultimately the nation’s taxpayers are stuck with the bill.

As Governor Arnold Schwarzenegger has pointed out, spending on retirement benefits for California’s state employees is growing at three times the rate of state revenues, now exceeding $6bn annually and growing at the rate of 15 per cent a year. In other states, however, the politics of public pensions appear to be changing. In Michigan, Governor Jennifer Granholm, a Democrat, recently enacted a teacher pension reform that should save about $3bn over 10 years by increasing the amount workers must contribute. Illinois raised its retirement age for newly hired public workers from as low as 55 to 67. Chris Christie, the Republican governor of New Jersey, decided that even if it took bruising clashes with public worker unions, public service compensation reform was essential for the fiscal health of the state. His stance surprised many, but it made him a national figure.

There is no quick fix to deal with the billions in unfunded liabilities. Public service employees are almost impossible to fire, except after a long process and only for the most grievous offences. What is more, the courts have ruled in many states that pension increases granted by elected bodies are vested benefits that must be paid no matter what, precluding politicians from going back and changing past agreements.

The only fair solution is to take the politicians out of the equation and have fully independent commissions in charge, fixing the scale of salaries and benefits for public-service workers and establishing an affordable second retirement tier for new employees. More reasonable retirement ages should be in order, such as 65 for general employees and 55 for public safety employees. This would take nothing away from the existing benefits of current employees.

A fundamental rethinking of the public workforce is necessary. Americans cannot maintain their essential faith in government if there are two Americas, in which the private sector subsidises the disproportionate benefits of this new public sector elite.

The writer is editor in chief of US News & World Report and chairman and co-founder of Boston Properties

FT.com / Comment / Opinion – America’s public servants are now its masters

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A Crash. A Call for Help. Then, a Bill.

By CHRISTOPHER JENSEN
NYTimes.com
Published: September 3, 2010

 
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ABOUT a year ago Cary Feldman was surprised to find himself sprawled on the pavement in an intersection in Chicago Heights, Ill., having been knocked off his motor scooter by the car behind him. Five months later he got another surprise: a bill from the fire department for responding to the scene of the accident.
Steve Kagan for The New York Times
VICTIM Cary Feldman paid for the dispatch of a fire truck he didn’t request.
“I had no idea what the fire truck was there for,” said Mr. Feldman, of nearby Matteson. “It came, it looked and it left. I was not hurt badly. I had scratches and bruises. I did not go to the hospital.”
Mr. Feldman had become enmeshed in what appears to be a nascent budget-balancing trend in municipal government: police and fire departments have begun to charge accident victims as a way to offset budget cuts.
Ambulance charges have long been common and are usually paid by health insurance, but fees for other responders are relatively new. The charge is variously called a “crash tax” or “resource recovery,” depending on one’s point of view. In either case, motorists are billed for services they may have thought were covered by taxpayers.
Sometimes the victim’s insurer pays. But if it declines, motorists may face threats from a collection agency if they don’t pay.
The AAA opposes such fees, said Jill Ingrassia, managing director for government relations and traffic safety advocacy. “Generally, we see that public safety services are a core government function that should be properly budgeted for with general taxes and not addressed by fees after the fact,” she said.
Ms. Ingrassia says such charges can place an “undue burden on motorists who can’t choose the size or duration of an emergency response,” which means they cannot control the size of the bill they may get. “We also really don’t want to discourage any motorist involved in a crash from calling for police or rescue services if they fear they are going to be billed for it,” she said.
Mr. Feldman received a bill for $200. The Chicago Heights Fire Department told him the fire truck had responded in case there was a fire at the scene.
But Mr. Feldman, 71, had another question: “Why are you charging me? I didn’t do anything wrong. Charge the other guy.”
Neither Mr. Feldman’s insurance company, nor that of the man who struck him, would pay. Mr. Feldman finally paid the bill with some of the money he received from the insurance company of the person who hit him.
“This is my personal opinion: it is a rip-off and a scam,” he said.
The Chicago Heights fire chief, Thomas Martello, referred inquiries to the mayor’s office, which did not respond to three phone messages in early August or to another on Thursday. (Mayor Alex Lopez died of a heart attack on Aug. 27. )
There appears to be no group that tracks the jurisdictions charging such fees or the number of bills sent. But police or fire departments are charging in at least 26 states, said Robert Passmore, senior director for personal lines at the Property Casualty Insurers Association of America. The group has lobbied against the fees, saying they amount to double taxation. It also says on its Web site, “The role of police and fire departments should be to serve and protect, not serve and collect.”


But Regina Moore, the president of Cost Recovery, a billing company in Dayton, Ohio, that tries to collect the fees for municipal departments, said property taxes paid for fire crews to be “on ready standby” and for police to “protect property and citizens from crime.” She argued that “traffic crash response is outside the scope of the primary function of both law enforcement and fire services.”
The people who cause the problems should pay for such services, she said, not other taxpayers or accident victims who are not at fault.
Jeffrey Johnson, president of the International Association of Fire Chiefs, said that some fire departments had charged for service calls for years, but that it was happening more often as departments tried to avoid reducing services.
“It is more prominent recently as economic times drive responders to look for ways to pay for their services,” said Mr. Johnson, who just retired as chief of Tualatin Valley Fire and Rescue in Aloha, Ore. People are accustomed to bills for ambulances, which are routinely paid by health insurance, he said. “So what we are really talking about is the leap from paying an ambulance fee, which people expect, to paying a first-responder fee.”
Mr. Johnson said the fire chiefs’ association had taken no position on such charges. “We believe that is a local decision,” he said.
But the association does have what it calls a partnership with Fire Recovery USA of Roseville, Calif., another billing company.
In an e-mail, Ann Davison, a spokeswoman for the fire chiefs’ association, said that relationship was focused on helping to explain the pros and cons of the practice to fire departments. Fire Recovery does donate “a portion” of its revenue to the association, she said.
Often departments charging fees are in communities with busy Interstate highways, where crews often respond to crashes involving travelers who do not pay local taxes, Mr. Johnson said.
That is the case with Salina, Kan., which responds to accidents on Interstates 70 and 135. In 2008, the city’s fire department received permission to start billing people involved in accidents to help cover costs, said Mayor Aaron Peck.
In about two years the department has sent out bills for 63 accidents, averaging about $390 each. He said the city sent about $10,000 a year in bills and received payments amounting to about half that much. The rest of the money is lost to the city because some people refuse to pay and some of the money goes to a billing agency.
The billing services make money by taking a portion of the funds they collect. “The average is 10 percent, and if they don’t get paid, we don’t get paid,” said Ms. Moore of Cost Recovery.
Rick Benner, chief financial officer for Fire Recovery, said that for his company about 20 percent would be “a fair representation.”
Billing agencies like these have made it easier for fire departments to charge for services, and that has the effect of encouraging more departments to send bills to motorists involved in crashes, said Mr. Johnson of the fire chiefs’ association.
The insurance industry argues that billing companies trying to drum up new business are a main reason the practice has been spreading.
But Mr. Benner says Fire Recovery is simply trying to help departments avoid service cuts.
Typically, departments send billing firms copies of accident reports and information on how many people and how much equipment responded. On average, the bill is about $200 for police and $600 to $800 for fire departments, Ms. Moore said.
Whether taxpayers are billed for crashes in their own jurisdictions varies by location.
There are also variations in whether the bill goes only to the motorist at fault or to all the parties involved, in which case the billing companies say the insurers determine fault.
If the insurance company refuses to pay, whether the motorist is billed depends on the jurisdiction, Ms. Moore and Mr. Benner said. If the motorist declines to pay, some departments drop the claim. Others take legal action.
Whether an insurance company will pay depends on the language in the policy, Mr. Passmore said, adding, “There are a lot of shades of gray.”
After adopting such programs, some jurisdictions — including Radnor Township, Pa. — later backed off in response to complaints from residents and visitors, news reports and lobbying by the insurance industry. In recent years 10 states have prohibited such collections, according to the property casualty association: Alabama, Arkansas, Florida, Georgia, Indiana, Louisiana, Missouri, Oklahoma, Pennsylvania and Tennessee. But some of those prevent only the police, as opposed to fire departments, from charging fees.
Ms. Moore of Cost Recovery says these are examples of “big insurance” working against “innocent taxpayers” and public safety.
The insurance industry says it is protecting consumers and trying to hold down premiums.
The finger-pointing has left cities like Denver trying to figure out what to do. This year, the city considered fees for nonresident, at-fault drivers, said Eric Brown, a spokesman for Mayor John W. Hickenlooper. Mr. Brown said the city stood to recover about $500,000 a year for fire services.
But the proposal was criticized by taxpayers and the media. In an editorial, The Denver Post described the idea as unfair and unwise, saying it would put taxpayers “financially on the hook for supporting emergency services twice.”
The city decided not to decide.
“We shelved it for this year,” Mr. Brown said.

A Crash. A Call for Help. Then, a Bill.

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“Living until 150 years old is impossible in the natural world,” said Akira Nemoto, director of the elderly services section of the Adachi ward office. “But it is not impossible in the world of Japanese public administration.”

Seems like the Japanese like a little pension fraud as well….

Japan, Checking on Its Oldest, Finds Many Gone

TOKYO — Japan has long boasted of having many of the world’s oldest people — testament, many here say, to a society with a superior diet and a commitment to its elderly that is unrivaled in the West.
That was before the police found the body of a man thought to be one of Japan’s oldest, at 111 years, mummified in his bed, dead for more than three decades. His daughter, now 81, hid his death to continue collecting his monthly pension payments, the police said.
Alarmed, local governments began sending teams to check on other elderly residents. What they found so far has been anything but encouraging.
A woman thought to be Tokyo’s oldest, who would be 113, was last seen in the 1980s. Another woman, who would be the oldest in the world at 125, is also missing, and probably has been for a long time. When city officials tried to visit her at her registered address, they discovered that the site had been turned into a city park, in 1981.
To date, the authorities have been unable to find more than 281 Japanese who had been listed in records as 100 years old or older. Facing a growing public outcry, the country’s health minister, Akira Nagatsuma, said officials would meet with every person listed as 110 or older to verify that they are alive; Tokyo officials made the same promise for the 3,000 or so residents listed as 100 and up.
The national hand-wringing over the revelations has reached such proportions that the rising toll of people missing has merited daily, and mournful, media coverage. “Is this the reality of a longevity nation?” lamented an editorial last week in The Mainichi newspaper, one of Japan’s biggest dailies.
Among those who officials have confirmed is alive: a 113-year-old woman in the southern prefecture of Saga believed to be the country’s oldest person, at least for now.
The soul-searching over the missing old people has hit this rapidly graying country — and tested its sense of self — when it is already grappling with overburdened care facilities for the elderly, criminal schemes that prey on them and the nearly daily discovery of old people who have died alone in their homes.
For the moment, there are no clear answers about what happened to most of the missing centenarians. Is the country witnessing the results of pension fraud on a large scale, or, as most officials maintain, was most of the problem a result of sloppy record keeping? Or was the whole sordid affair, as the gloomiest commentators here are saying, a reflection of disintegrating family ties, as an indifferent younger generation lets its elders drift away into obscurity?
“This is a type of abandonment, through disinterest,” said Hiroshi Takahashi, a professor at the International University of Health and Welfare in Tokyo. “Now we see the reality of aging in a more urbanized society where communal bonds are deteriorating.”
Officials here tend to play down the psychosocial explanations. While some older people may have simply moved into care facilities, they say, there is a growing suspicion that, as in the case of the mummified corpse, many may already have died.
Officials in the Adachi ward of Tokyo, where the body was found, said they grew suspicious after trying to pay a visit to the man, Sogen Kato. (They were visiting him because the man previously thought to be Tokyo’s oldest had died and they wished to congratulate Mr. Kato on his new status.)
They said his daughter gave conflicting excuses, saying at first that he did not want to meet them, and then that he was elsewhere in Japan giving Buddhist sermons. The police moved in after a granddaughter, who also shared the house, admitted that Mr. Kato had not emerged from his bedroom since about 1978.
In a more typical case that took place just blocks from the Mr. Kato’s house, relatives of a man listed as 103 years old said he had left home 38 years ago and never returned. The man’s son, now 73, told officials that he continued to collect his father’s pension “in case he returned one day.”
“No one really suspects foul play in these cases,” said Manabu Hajikano, director of Adachi’s resident registration section. “But it is still a crime if you fail to report a disappearance or death in order to collect pension money.”
Some health experts say these cases reflect strains in a society that expects children to care for their parents, instead of placing them in care facilities. They point out that longer life spans mean that children are called upon to take care of their elderly parents at a time when the children are reaching their 70s and are possibly in need of care themselves.
In at least some of the cases, local officials have said, an aged parent disappeared after leaving home under murky circumstances. Experts say that the parents appeared to have suffered from dementia or some other condition that made their care too demanding, and the overburdened family members simply gave up, failing to chase after the elderly people or report their disappearance to the police.
While the authorities have turned up a large number of missing centenarians, demographic experts say they doubt that discoveries of the living or the dead would have much impact on Japan’s vaunted life expectancy figures; the country has the world’s highest life expectancy — nearly 83 years — according to the World Bank. But officials admit that Japan may have far fewer centenarians than it thought.
“Living until 150 years old is impossible in the natural world,” said Akira Nemoto, director of the elderly services section of the Adachi ward office. “But it is not impossible in the world of Japanese public administration.”

Japan, Checking on Its Oldest, Finds Many Gone – NYTimes.com

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CNBC.com Article: US Probes Corruption in Big Pharmaceuticals
The US Department of Justice is scrutinizing payments by leading pharmaceuticals companies in markets around the world. The FT reports.
Full Story:
http://www.cnbc.com/id/38688879
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How Gangsters Are Saving Euro Zone

By STEPHEN FIDLER 

JULY 30, 2010

BRUSSELS BEAT

[brussels_sub]
(Please see Corrections & Amplifications item below.)
Gangsters, drug dealers and money launderers appear to be playing their part in helping shore up the financial stability of the euro zone.
That’s thanks to their demand, according to European authorities, for high-denomination euro bank notes, in particular the €200 and €500 bills. The European Central Bank issues these notes for a hefty profit that is welcome at a time when its response to the financial crisis has called its financial strength into question.
The high-value bills are increasingly “making the euro the currency of choice for underground and black economies, and for all those who value anonymity in their financial transactions and investments,” wrote Willem Buiter, chief economist at Citigroup, in a recent research report. The business of issuing euro notes, produced at almost zero cost, is “wildly profitable” for the ECB, Mr. Buiter wrote.
When euro notes and coins went into circulation in January 2002, the value of €500 notes outstanding was €30.8 billion ($40 billion), according to the ECB.
Today some €285 billion worth of such euro notes are in existence, an annual growth rate of 32%. By value, 35% of euro notes in circulation are in the highest denomination, the €500 bill that few people ever see.
In 1998, then-U.S. Treasury official Gary Gensler worried publicly about the competition to the $100 bill, the biggest U.S. bank note, posed by the big euro notes and their likely use by criminals. He pointed out that $1 million in $100 bills weighs 22 pounds; in hypothetical $500 bills, it would weigh just 4.4 pounds.
Police forces have found the big euro notes in cereal boxes, tires and in hidden compartments in trucks, says Soren Pedersen, spokesman for Europol, the European police agency based in The Hague. “Needless to say, this cash is often linked to the illegal drugs trade, which explains the similarity in methods of concealment that are used.”
A spokeswoman for the ECB declined to comment on who uses the bills.
The ECB and its member governments are beneficiaries of the demand.
The profit a central bank gains from issuing currency—as well as from other privileges of a central bank, such as being able to demand no-cost or low-cost deposits from banks—is known as seigniorage. It normally accrues to national treasuries once the central banks account for their own costs.
The ECB’s gains from seigniorage are becoming increasingly important this year.
The ECB has taken hundreds of billions of euros of assets of unknown quality on to its balance sheet as it has reacted to the global financial crisis.
It holds more than €600 billion in collateral from banks to which it has made loans, and more than €400 billion in securities it holds outright, including government bonds.
Overall, the ECB’s balance sheet has grown to almost €2 trillion. It has a capital base of €78 billion. That creates leverage that makes it look like a “hedge fund on steroids,” Mr. Buiter wrote. It wouldn’t need to lose much on these assets to wipe out its thin cushion of capital.
That’s where seigniorage comes in.
In recent years, the profits on its issue of new paper currency have been running at €50 billion. In 2008, the year of the Lehman Brothers crisis, it was €80 billion.
Even with conservative assumptions about future growth of currency in circulation—at, say, 4% a year, which is in line with the ECB’s 2% inflation target plus a margin for economic growth—Mr. Buiter estimates future seigniorage profits for the central bank between €2 trillion and €6.9 trillion.
Thanks to seigniorage, he says, the ECB is “super solvent.”
An ECB spokeswoman says there’s no plan to withdraw high-value notes, national equivalents of which were used in six member states before the euro was launched. They will be retained when a redesigned series is issued in coming years.
Replacing them with small denominations would increase production and processing costs, she says.

Corrections & Amplifications
The volume of €500 notes in circulation is €285 billion, accounting for 35% by value of all euro notes outstanding. An earlier version of this article incorrectly said the €285 billion figure represented all euro notes.
There are 570 million €500 bills in circulation. The scale on a chart accompanying an earlier version of this article misrepresented the number as 570,000.
Write to Stephen Fidler at stephen.fidler@wsj.com

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High Frequency Trading – HFT – OR THE SCAM IN THE MARKET….

“It’s Not A Market, It’s An HFT ‘Crop Circle’ Crime Scene” 

Further Evidence Of Quote Stuffing Manipulation By HFT

“It’s Not A Market, It’s An HFT ‘Crop Circle’ Crime Scene” – Further Evidence Of Quote Stuffing Manipulation By HFT | zero hedge

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