Wednesday, July 31, 2013

Fine Line Between "Administrative" and Congressional Law.

Congress passes our laws and most people think that whatever the government directs them to do is the because of   laws directly passed by Congress.  That’s not quite right. Congress creates an executive Agency and that department writes rules or codes which when issued become what are called CFR’s (code of federal regulations) or administrative laws.

For example, Congress created the Department of Agriculture.   The Department of Agriculture is part of the administrative branch of government; it is under control of the President.  So when Congress passed the Healthy Hunger-Free Kids Act of 2010. It directed the USDA to establish nutrition standards for all foods and beverages sold to students in school during the school day.  They did that, no big deal.  I’m sure several food nutritionists got together and put together a school lunch menu and considered it a done thing. At that point, whatever they wrote became an administrative law. Then Obama’s wife came out with the ideal school lunch menu that included whole wheat and other items that you couldn’t even get a kid to eat at home.  One phone call, and guess what your kids get for lunch now? --and it’s the law.
Then there is the Treasury Department, more specifically, the IRS, another department controlled by the executive.  “Kill all Tea Party applications” isn’t written anywhere in the laws, but hey, the applications are not going anywhere soon. Did they violate any law, probably not, they get to write the laws they need, to function as directed by Congress.  Our representatives gave them the power to create administrative laws that many people believe border on being extremely arbitrary and harsh.

We are surrendering more of our freedom with each government agency created. A government agency can create a directive that will have the full force of law until it is challenged by a court of law. Recently the Mayor of NY City, had the Board of Health approve a regulation limiting soda sizes. That was an “Administrative Law.”  The court overturned it stating that the mayor’s ban on sugary sodas of more than 16 ounces was a violation of executive powers.
I’m not so upset about the delegation of authority to a Federal agency, but some of these departments have run amok.  Just getting your kids to eat the food served at home is a real challenge. Why screw it up with whole wheat? School lunch sales are down quite a bit for kids not on the subsidized lunch program. It’s McDucks if you have cash or the school cafeteria for the free lunch. When I was a kid, the school would send a proposed food menu home for the parent’s approval.  The current message I get; the American public is too stupid for their own good and some government created Agency like the Food and Drug Administration will save us from ourselves.

I use to love McDonalds French fries made with real animal fat, they were delicious.  Some pencil pusher in the FDA wrote a directive that ruined French fries forever. Even our fast food is now “Politically Correct.”

Here is a real test, make a peanut butter and jelly sandwich using whole wheat bread.   Woof it down. Do you think you’ll ever want another one of those? If you say yes, that’s probably a good indication that you need to cut down on the amount of weed you’re smoking. Gimmie my white bread and greasy (animal fat) French fries, freedom tastes better without government regulations. Our fast food is now terrorist friendly—no pork fat—Go figure!  I guess we want them to live longer also.

Saturday, July 20, 2013

The Coming Pension Disaster

Detroit bites the dust and the one question that no one will bring up, is; “Where is the money coming from to pay the city’s promised retirement benefits?” 10 cents on the dollar won't cut it. This bankruptcy is the biggest so far; $20 billion give or take 4 billion. About 12 billion is for retirement benefits. The city looks like a bombed out war zone. The real estate tax base is gone. Many other cities nationwide are in similar financial peril and on the verge of insolvency.

Here is what happened in Prichard Alabama in 2009 with their bankruptcy. The retirement checks stopped when the money ran out. Click on this LINK for the full story. Note that the court demanded that they start contributing 16 million to the retirement fund and they had no money to do so. Where the judge thought they would pull the money from, is beyond me.

Several issues are at play here. How do you sue a city that is broke and collect real money rather than a judgment? The state is not obligated to pay city debts. And you can’t sue the state anyway. What happens to the people who were collecting retirement and health care benefits? The Stockton bankruptcy from a year ago is still in limbo this year. California law, states that the city’s retirement funds are exempt from the Federal bankruptcy court proceedings. Notice that CalPERS has a vested interest in this ruling, they’re holding a sizable portion of city's retirement funds. The Federal bankruptcy court wants all of the city's assets on the table. Can State laws rewrite the Federal Bankruptcy Code? Federal law should override State law. It could be a moot point by the time it gets out of the courts; we’ll all be dead by then.

The Pension Benefits Guaranty Corporation (PBGC) was created by Congress as a backup retiree plan for failed private pension plans. Unfortunately for the city of Detroit, the key word is "private," "public" won't qualify. This little unknown government entity is already on the hook for 26 billion dollars more than they have in collected premiums. The listing below displays the present top 10 of failed pension plans now on government life support.

After the American Airlines bankruptcy goes final, there could be another 10 billion added to the PBGC's unfunded obligations. And of course General Motors pension liabilities could add another 25 billion to that total. Employee retirement benefits were really what GM’s initial bankruptcy was all about—and that 25 billion hasn’t gone anywhere, it’s still there (sshh--that’s a secret).

Basically what we are coming down to is hundreds of retirement funds are underfunded by large amounts. Many of these plans were doomed to failure. Cities choose to grant increased retirement benefits instead of wage increases. It looked great on the books and didn’t show up in the city budget like a wage increase would. And this is coming back to haunt them. The laws are in place to protect the retiree. “By God, they have to give me my pension, I earned it!” The only trouble is, passing a law guaranteeing benefits, in no way creates the funds for the check to be written. No money in the city coffers makes any court award meaningless.

Surfing Google for answers, I ran across a plethora of government abstracts dealing with the PBGC. I don’t pretend to have understood half the government double talk, but it is obvious from all of the interaction, the Congress and the Department of Labor are well aware of what is going on. This is a high traffic issue with little mention in the press.

In the future, it could be very upsetting to be a retired GM employee and find out that they were now covered by PBGC. They’d think; “Well I still have my Social Security to add to my GM retirement” ---- In all likelihood, the PBGC might deduct their Social Security benefits from their proposed GM pension benefits. Government programs promise you more, by giving you less.

The interesting thing to note about the future failure of government retirement plans, there is no news coverage. They haven’t happened, so there is nothing to report. Where will the money come from, to pay these debts off? Will the Pension Benefit Guarantee Fund be expanded to include government retirees? The Fanny and Freddie bailout fiasco comes to mind. I guess what’s good for GM, is good for America. I seem to have heard that before -- somewhere.

Let the bankruptcy festival begin. Government employees were promised “Surf and Turf,” and it looks like they’ll be lucky to settle for chipped beef and gravy on toast-- better known as “SOS” in military circles. I was dumbfounded to learn that a fireman I indirectly know,  is retiring at age 50 on 100K a year. Reality is right around the corner here –somewhere—  The joke when I went to high school was, If you can't find a real job you can always work for  the government. That has changed quite a bit in the last 40 years. We'll have to wait and see how this plays out in the courts, the winner could end up being the biggest loser.

Saturday, July 13, 2013

Poorly Thought Through Concepts

Many people in the United States think it would be great to give the rest of the world Democracy. Right now, millions of Egyptian Muslims are rioting, who by just voting and winning one election, think that the army has ripped Democracy away from them. If you are uneducated poor and starving, you cannot afford Democracy, it has no meaning. It’s a little like a terminally ill person winning the lottery, the money means little. Democracy has nothing to do with winning an election and then telling everyone around you how to reproduce, live and worship. Hmm— on second thought I could be wrong on that---

Obamacare for everyone including those with extreme health issues and no insurance sounds very noble. There is one problem, Health insurers have figured out that really sick people don’t work, so if they drop individual policies, they eliminate those people who could be their greatest liability. And of course, if the health care insurers raises rates too high, they will be banned from selling insurance—kind of reminds me of the quote “Please Brier Bear, don’t throw me in the Brier patch.” Employers have figured out that keeping the number of employees under 50 does have advantages. And of course keeping the work week short, under 30 hours, keeps benefits low. How all this will help a hamburger flipper get health care coverage escapes me.

Feeding the worlds starving masses seems very noble also. The trouble is if the world population increases another two billion---then, people have to starve and die, in order for your family to have the food they need to survive. Our world is a little like a fruit fly experiment, where you enclose one banana and two fruit flies in a beaker and watch what happens. You end up with a beaker of fruit flies and no banana (assuming the flies are not gay).

Many think the burning of fossil fuels is having no environmental impact on our world. But the catastrophic weather of the last year or two has been very unsettling. Let’s hope it’s part of a cycle that is over for now. We can ban the burning of coal, but we can’t stop the mine owner from selling his coal to China. Also, the idea that the government subsidization of the production of ethanol is going to solve the oil shortage, doesn’t really work. A gallon of gas with 15% ethanol doesn’t produce the gas mileage of the real thing. It does however raise the price of beef (corn fed cattle may be a thing of the past). Converting food to ethanol, to burn in an auto and paying people extra to produce it, is only something that the "Sad Sack" group in Congress could think up.

The thing not realized with all of the above mentioned, is that we have created ways of life that revolve around models that have worked well for us in the past, like the phrase; “Real estate will always go up in value. “ What most people haven’t realized, is that the game is changing, but our thinking hasn’t. It’s often repeated; ”The USA is the greatest country in the world.” It was at one time. Repeating the phrase doesn’t validate it; but repetition is a form of personal validation, and it works quite well. We don’t consider ourselves as fruit flies, but what the rest of the world does, could finish off the banana. Everything is inter-related. The new phrase to repeat is; “Technology will save us.” Start repeating it! If you don't like that phrase, try this one; "I am not a fruit fly." Repetition will be our salvation ;>). Enjoy the banana.