It Can't Happen Here

McMahon Says Mayor

Is Liberal on Pensions,

He Likes 401(K) Plans

Mayor Bloomberg's proposals to reduce the cost of pensions for city employees came under fire today not only from public employee unions, city government's perennial adversary in matters of wages and pensions, but from a conservative analyst as well.

E.J. McMahon, who writes op-eds for the New York Post and articles for other publications, complains that the mayor's goals are too modest. He wants New York City to switch from defined benefit plans to defined contribution plans. That would be a complete reversal of current pension policies, and would require amending the New York State Constitution.

Under "defined benefits", if you work for the city, enroll in the pension plan, and subsequently retire, you will receive a defined percentage of your wages as a pension. The percentage increases for each year of the employee's service. In Tier One, the most generous plan for regular employees, the percentage was 2.2% per year for the first 25 years on the payroll, and 1.7% per year for years 26 and upward. The plan is weighted to encourage, but not require, retirement after 25 years, because the rate of increase declines by 28% after the first quarter century. The deadline for enrolling in Tier One was June 30, 1973, over thirty-seven years ago. It was followed by Tier Two and a series of less generous formulas because of recurring financial crises faced by city government.

At the same that percentages were held flat or decreasing, some pensions were increasing because of numerous "sweeteners" - bills adopted by the New York State legislature providing additional benefits to various categories of employees - giving others the opportunity to buy into the plan, and adding coverage to specified groups at the behest of lobbyists for union locals. What was taken away with one hand could be restored by the other, and the outcome was a high percentage of endorsements of incumbents by labor unions. Rule 21-O explains the obvious: "One hand washes the other." I learned that ancient maxim from the late Mary Perot Nichols, city editor of the Village Voice in its early years, the 1960's.

The pension system came to grief with the sharp decline in the stock market in late 2008, which also led to the collapse of the Madoff pyramid scheme. People withdrew their money from Madoff to cover losses on their portfolios of stocks which were considered legitimate but whose values were in part based on misjudgments, not the same as, but comparable to the fictions that Madoff concocted to conceal his peculation.

Their failing stocks did, however, actually exist. In another distinction, no government agency deemed Madoff too big to fail. Settlements of hundreds of millions of dollars have been paid by banks which knew or should have known that the junk they were selling was not too different from Madoff's fictional inventory.

The relationship this has with the pension funds is that government is responsible for the pension funds earning enough to fulfill their obligations to retirees, present and future. If the pension funds, of whom State Comptroller Tom DiNapoli is the sole trustee, do not earn sufficient money on their investments, government must make up the balance. The worse economic conditions are, the larger the deficit will be and the greater the sum that will be required to make the fund whole.

Mayor Bloomberg said Wednesday in the State of the City address that New York City paid $1.5 billion for pensions in 2001, and now over $7 billion is projected for pension expenses in 2011. The rate of increase is described as unsustainable, and indeed it is. Even if the rate of increase declines, as it must, the sum of money needed to subsidize the pension fund is likely to continue to climb.

McMahon, a conservative analyst and frequent author on city and state financial problems, wants the city to switch to a defined benefits system, in which the employee gets back only what he has put in, plus interest, dividends and whatever increase may have come through rising prices. Although this would control the city's costs, the pensioners are left to dine, eat, skimp or starve, depending on the vagaries of stock prices and whatever benefits are received through social security and Medicare (if they are over 65). Defined contributions are particularly vulnerable to inflation; money that is paid in during early years is more valuable than it is when it is taken out many years later.

McMahon believes Bloomberg erred by not demanding defined contributions. In theory, the argument can be justified in terms of the city's inability to pay more. In today's world, we believe a decent retirement income is justified after a lifetime of work, and to rely on the stock and bond market to provide the necessities of life has a Dickensian attitude we find difficult to accept in the 21st Century. On the other hand, defined contributions work well in other jurisdictions, and the expense can be alleviated by requiring employee contributions.

The fact that there does not appear to be the remotest chance of such a plan being enacted is not sufficient to disqualify the proposal as an option. The Legislature will have to be pressed hard to enact any pension reform over the anticipated objections of their major funders: public employee unions and their political action committees. Hopefully, Mayor Koch, who was recruited for the task by Mayor Bloomberg, may be of assistance in helping win public support for modifications of the existing system, which imposes burdens on the many for, in some cases, the unjust enrichment of the few.

Pensions are a dry and dusty subject, unless you receive or desire one. People reasonably fear the loss or diminution of benefits they have always considered their due. The area will require considerable scrutiny and, preferably, a bi-partisan approach if one can be attained. There are undoubtedly abuses of the system which should be corrected, and it will be interesting to see if legislative leaders can persuade union leaders to accept any modifications of existing law, even to correct the most serious iniquities and abuses in existing procedures, such as excessive overtime and fraudulent disability claims, which have been approved wholesale.

First in Albany, we shall see what happens to the budget that Governor Cuomo will propose February 1. Then there is ethics reform, which is a no-cost item, at least to the State. It may cost certain legislators plenty. Don't forget redistricting, which if done honestly will imperil some sitting ducks who may, if justice is done, be rendered lame.

Some legislators may be in particular need of the pensions we are discussing, but with the Constitutional bar to impairing previously granted rights, their own benefits will not be impacted, even if their day-to-day living expenses are provided in state facilities.

The Last Muckraker

Ace Investigative Journalists,

Wayne Barrett, Tom Robbins,

Are Leaving the Village Voice

On rare occasions, someone writes an article which I believe is so significant that I want to share it with you, our readers, without delay and with no need for linkage.

This morning we received the following column from Wayne Barrett, announcing that after 33 years as a columnist for the Village Voice, he was leaving the weekly paper, which is now a throwaway (distributed free). This unexpected news is a great loss for the City of New York.

The New York Times blog reported later this morning that Barrett had been let go by the Voice to save money and that Tom Robbins, the only other name reporter in New York City coverage, had resigned in protest at the management decision to fire Barrett. The Voice has been bought and resold by many owners in the last thirty years. Barrett was its lead investigative journalist, but previous managers, including Rupert Murdoch, Clay Felker and Carter Burden, did not interfere with his column. Barrett had won many honors in his years at the Voice, and was responsible for uncovering numerous municipal scandals.

The Voice is now owned by a Phoenix, Arizona-based conglomerate of 17 weeklies around the country. The executive editor is Michael Lacey and the CEO of Village Voice Media is James Larkin. Neither man is widely known in New York. The founders of the Voice in 1955 included Daniel Wolf, the paper's editor, Edwin Fancher, a Greenwich Village psychologist, and Norman Mailer.

Over the years, Barrett has produced a remarkable body of work which should be made readily available to the general public. In my judgment, as far as New York politics and ethics are concerned, he is and has been the conscience of his generation. Although we do not always agree, and I think some of his judgments are too harsh, his fact-collecting abilities and those of his interns at the Columbia School of Journalism, where he teaches, are unsurpassed.

If this dogged and painstaking reporter did not possess that unique combination of integrity, industry and intensity, he would not have been able to do the work that he has done so consistently and so capably for a third of a century. If the three levels of government had acted on more of the information he collected and presented, this city, state and nation would be better served. If other journalists had followed up on more of his stories, instead of ignoring them because they appeared first in the Voice, the results would have been beneficial to honest public officials and harmful to those who betrayed their trust. Nonetheless, his impact over the years has been substantial, and who can tell what wrongful conduct his columns deterred?

Barrett and Tom Robbins are two of the most knowledgeable writers about what really goes on inside New York's multi-layered cosmos of government, politics, real estate and big business.

The articles they wrote are part of a great legacy of reform journalism, initiated at the Village Voice by Daniel Wolf (1915-1996), and carried on by Mary Perot Nichols (1926-1996) and Jack Newfield (1938-2004). We hope that Wayne and Tom continue to write, that New Yorkers continue to read, and authorities begin to take action on the events and issues that they have so courageously and unhesitatingly called to their attention over the years.

This is the column we received today. We are proud to send it to you.

TIME FOR SOMETHING NEW
by Wayne Barrett

January 4, 2011

Ed Koch and I were inaugurated on the same day in 1978. He became mayor and I became his weekly tormentor.

I had written a few pieces for the Voice before I took over the Runnin' Scared column that January, going back as far as 1973.

But I was now inheriting a column that Mary Nichols, the Voice's editor-in-chief, had made famous, and that had been written by greats like Jack Newfield, Ken Auletta, and Joe Conason. A country kid out of Lynchburg, Virginia, where I'd founded the Teenage Republicans, I was suddenly occupying the first two pages of New York's counter-cultural crier.

Since then, I have written, by my own inexact calculation, more column inches than anyone in the history of the Voice. These will be my last.

I am 65 and a half now, and it is time for something new.

If I didn't see that, others did.

The paper has always been more than an employer to me. I turned down other jobs that paid better three times to stay here. Though my mentor Newfield used to say we got our owners "from office temporaries," and though I worked for 14 different editors, the Voice was always a place where I could express my voice. And that meant more to me than larger circulations or greater influence or bigger paychecks.

It is called a writer's paper because we decide what we will write. That is not a license to spout and I never took it as such. Across all these years, I almost never wrote in the first person and, even when I did, the piece was still packed with reportage. In my extended family, I have become the go-to guy for eulogies and I report every one of them, learning more about my mother, for example, by interviewing her sisters than she ever told me when she was alive.

When I was asked in recent years to blog frequently, I wouldn't do it unless I had something new to tell a reader, not just a clever regurgitation of someone else's reporting.

My credo has always been that the only reason readers come back to you again and again over decades is because of what you unearth for them, and that the joy of our profession is discovery, not dissertation.

There is also no other job where you get paid to tell the truth. Other professionals do sometimes tell the truth, but it's ancillary to what they do, not the purpose of their job. I was asked years ago to address the elementary school that my son attended and tell them what a reporter did and I went to the auditorium in a trenchcoat with the collar up and a notebook in a my pocket, baring it to announce that "we are detectives for the people."

When the Voice celebrated its 50th anniversary in 2005, I said "we thought a deadline meant we had to kill somebody by closing time," and that, as a liberal Democratic paper, we were "better at goring one of our own." It never mattered to me what the party or ideology was of the subject of an investigative piece; the reporting was as nonpartisan as the wrongdoing itself. I never looked past the wrist of any hand in the public till. It was the grabbing that bothered me, and there was no Democratic or Republican way to pick up the loot.

The greatest prize I've ever won for the work I've done in these pages was when Al D'Amato called me a "viper" in his memoir. Chuck Schumer, who ended D'Amato's reign after 18 years, ascribed his victory in a 2007 memoir to a story I'd written a decade earlier that devastated the incumbent Republican. What Schumer didn't say was that as soon as Hank Morris, Schumer's media guru, went up with an ad based on my revelations about D'Amato, Arthur Finkelstein, who was running D'Amato's 1998 campaign, aired a commercial about Schumer's near-indictment and flashed my nearly two-decade-old clips breaking that scandal on the screen as well. I was the maestro of a commercial duel.

Even as my scandal stories skewered David Dinkins in the 1989 and 1993 mayoral campaigns, I chronicled the devolution of his nemesis, Rudy Giuliani, from hero prosecutor to used 9/11 memorabilia salesman.

As awkwardly as I felt about it, Carl Paladino's toughest shots at Andrew Cuomo this fall were garbled renditions of two 6000-word exposes I'd done here about Cuomo's HUD record. For a week in the 2009 mayoral campaign, I couldn't turn on the TV without seeing a Bloomberg commercial drawn from my expose of Bill Thompson's conflict-ridden home mortgage. But I'd delivered one cover-story blow after another throughout the cycle about everything from the mayor's culpability in the Deutsche Bank fire debacle to his own governmental incest with Bloomberg L.P.

It was always the conduct that prodded me to write, not the person. And that is what I lived for, a chance to say something that revealed and mattered. To me, the story will always be the thing. It is all I can see.

I believe I have much left to learn, still armed with my notebook, and thus much left to tell you. It may be books or blogs or something in between. I hope to bring my trademark interns with me because they have, for more than 30 years, helped me think young, especially when it comes to the climate and water crises. The city and state beat are precious to me, but what is happening to our nation is also a frightening pull on me, so I don't know what I will wind up writing in this new life.

I have loved my bond with you and have never traded an inch of truth for a moment, or even a season, of access. I tell the young people still drawn to this duty that it is the most honorable one in America, and that I have never met a corrupt journalist. I even met one, Tom Robbins, so brave that when he heard I was leaving, he quit himself and didn't even tell me he was. "I'm going out with the guy who brought me to the dance," Robbins told me after he resigned, crafting a lede with the very fiber of his life.

"If a newspaper writes the story of its city without compromise or calculation," I wrote in that 50th anniversary piece, "it is as breathtaking as a ballet, each detail another artful step. Put us together as bound volumes in the memory of this grandest of cities and the Voice reads like a classic, ever passionate and principled."

I will pray it always does.

- 30 -

Wayne and Tom, we salute you. The city is in your debt, more than most New Yorkers know.

Sleeper Candidate?

Rattner Credits Harry Wilson

With Saving General Motors,

Praises His Financial Acumen




A surprising article came in yesterday on the Internet -- Wayne Barrett of the Village Voice wrote a column on Runnin' Scared, the Voice's political blog. That title was used in the 1960's for a Voice column written by Mary Perot Nichols (1926-96), a scourge of corrupt politicians.

The article was headed: "HARRY WILSON'S WAR; STEVE RATTNER CREDITS MUCH OF GM'S RESCUE TO OBSCURE NY COMPTROLLER CANDIDATE". You can click here to read Barrett's highly informative piece.

It is a fascinating account by Rattner, the former car czar now under fire for paying the tribute required by the disgraced Alan Hevesi to do business with the New York State pension funds. In his new book, "Overhaul", Rattner describes the Federal intervention which not only saved General Motors from bankruptcy and possible liquidation, but rescued thousands of suppliers to GM from the prospect of substantial losses. This would have led to escalating unemployment, primarily in middle America. He gives Harry Wilson credit for the government strategy and for persuading/threatening creditors, bondholders, unions and the company into accepting it.

Wilson, at this point practically a complete unknown, is the Republican candidate for State Comptroller, opposing incumbent Thomas P. DiNapoli, who was installed by Assembly Democrats, led by Speaker Sheldon Silver, when Hevesi was forced to resign from the position to which he had just been re-elected. DiNapoli has now been Comptroller for three and one half years, and is running for what would in fact be a second term.

Meanwhile, the state has plunged further into financial disaster, with the Comptroller issuing periodic warnings against overspending. It is said in politics that the Comptroller must be more fiscally responsible than the Governor (or the Mayor), but how much more responsible he should be is debatable. There is a great difference between pious statements and using the powers of the office to restrain spending. However, considering Rule 8-F: "Do not bite the hand that feeds you", it is understandable that an unelected official not tangle too fiercely with the legislative leaders who gave him the honored position that he holds, an office that will benefit him for the rest of his life as his pension will be computed on his highest three years in salary, and the job pays $151,500, which really isn't much for the sole trustee of funds that have exceeded $120 billion. The salary suggests another Rule, 8-M: "He who pays the piper calls the tune." The theme in both Rules is evoked in Rule 8-FM: "Whose bread I eat, his song I sing." When Hevesi was Comptroller, he received two pensions, one for his legislative service for twenty years, and the other for his professorship at the City University of New York. Hevesi was a triple dipper.

DIGRESSION: Anyone who can figure out why the three Rules cited above are named and numbered as they have been is invited to send us the answers. Winners' names will be published, unless you crave anonymity, in which case your wishes will be respected.

RESUMPTION: No one knows for sure what a person will do once elected, and we have been both pleased and disappointed over the years by the action and inaction of public officials. More often than not, their performance falls short of their promises.

We have deliberately not gone into the details of what Wilson did with GM. They are laid out in Barrett's article, and are relatively complicated for readers who are not that financially sophisticated. The plan, however, seems to have worked out well so far with the company showing multi-billion dollar profits midway through 2010. The success so far of the GM intervention reflects credit on the Obama administration and the people who put the plan together.

The difference between financial brilliance and political success, however, is wide and deep. Before there is any kind of a contest for State Comptroller, people will have to learn who the candidates are. If they know, they can make their choice, applying whatever standards they see fit. If they do not, the election is likely to be a formality. Races for lesser offices tend to attract minimum attention, and in this case there was no primary in either party which would have provided opportunity for exposure by the candidates. That has a disproportionate negative effect on the less well-known candidate, in this case Wilson.

The next eight weeks will show us whether the Republican candidate can ignite widespread feelings against incumbency and the public demand for fiscal responsibility and truth in budgeting into support for himself. The more people who find out about Harry Wilson, the more likely that possibility will become. But the odds are against Wilson because of the predicted Democratic blowout for governor and the two Senate seats, and because the public is even less aware of the Comptroller race than the primary for Attorney General, where five candidates are competing to oppose Daniel Donovan, District Attorney of Staten Island, the Republican nominee. The current AG is Andrew Cuomo, who is, as you know, seeking higher office.

The Republican ticket this year is stronger at the bottom than at the top. Their task is to identify themselves to the voters and present their case. But in a state with 19 million people, spread over different media markets, that is far easier said than done, unless the candidate approaches Bloombergian resources.



StarQuest #703 09.08.2010 893 words