Financialization – “a pattern of accumulation in which profit making occurs increasingly through financial channels rather than through trade and commodity production.” – Greta Krippner, University of Michigan (sourceWikipedia)

If you want one word to describe the biggest threat to the American economy, “financialization” would be the prime candidate. This is a threat that has no ideology. The left tends to blame economic challenges on the excessive power of oligarchs. The libertarian right tends to blame economic challengeson excessive regulations emanating from oversized government. But financialization empowered the oligarchs. And financialization is the toxic remedy that has, for a time, enabled oversized government.

Krippner’s analysis of financialization goes beyond its obvious manifestations – the most obvious being the loophole that allows hedge fund managers to avoid payingordinary income tax on the billions in bonuses they earn when they get lucky placing bets with other people’s money. An excellent in-depth… Read More

Imagine for a moment that two premises are beyond serious debate: (1) That there will be another financial crisis within the next five years that will equal or exceed the severity of the one experienced in 2009, and (2) That the political power of public safety unions will prevent local governments from enacting pension reforms sufficient to avert a financial disaster when and if the next financial crisis hits.

What will these public safety unions do?

It’s distressingly easy for politicians to dismiss both of these premises, but since for the moment we’re not, imagine the following: Major European banks have declared insolvency because their debtors have all defaulted on payments, the Chinese stock market has collapsed because their export markets are shrinking instead of growing, and the deflationary contagion reachesAmerican shores. Across the nation, speculative buying is replaced by panic selling. Housing prices fall, defaults accumulate, and the pension funds lose half their value overnight. In a cascading cycle reminiscent of 1929, deflation sweeps the global economy.

Meanwhile, pension reform has been limited to incremental adjustments to the… Read More

It came as a shock to learn that some of those who were around when unions first started infiltrating local and state governments actually welcomed the process. These were the days when unions were driving jobs overseas because of their unwillingness to negotiate new contracts in the face of foreign competition. “Let them come,” some observers said, “they’ll finally show these politicians what it’s like to try to run a unionized organization.”

We know how that turned out. The unions took over the government. Now they run nearly every city and county in California. Business and finance leaders play ball, or they’re targeted. And where the corpses of bankrupt industries once littered the American landscape, we now face the prospect of bankrupt cities and counties.

So here’s a modest proposal: Let’s embrace the process. Forget about the fight for a $15 minimum wage. That’s small thinking. Forget about unionizing home care professionals. That’s retail politics. Let’s aim for the pinnacles of power. Let’s force the elite of the elite to embrace unions where they live. Let’s force them… Read More

Remember Bell, California? Back in 2010 the Los Angeles Times reported thatBell city officials were receiving unusually large salaries, perhaps the highest in the United States. For example,Robert Rizzo, the City manager, had received $787,637.By September of that year,as reported on CNN, the California Attorney General filed charges againsteight former and current city officials. The public was outraged.

Not generally known however was the process whereby the City of Bell employees managed to pay themselves so much money. Earlier that summer theLos Angeles Times covered this part of the story, reporting “The highly paid members of the Bell City Council were able to exempt themselves from state salary limits by placing a city charter on the ballot in a little-noticed special election that attracted fewer than 400 voters.”

This use of barely legalmaneuvers to extract ridiculously generous salaries and benefits from taxpayers is not restricted to Bell, however. The Bell Syndrome… Read More

In a move of breathtaking hypocrisy, California’s legislators have unveiled a financially sustainable retirement security program for private workers, while keeping financially unsustainable pensions forpublic workers.

What private sector employers and private sector workers need to ask, more than anything, is if this new retirement security scheme is so great, why aren’t public employees going to also adopt it?

That’s a really good question. And the answer is simple: The pensions they’re already getting, paid for by taxpayers, are far. far better. Way better. Out of this world better. Crazy better. Goofy better.

Take a look at theofficial recommendationsmade on March 28, 2016 to the California Legislature. In this document, on page 53, there is a table showing “income replacement” based on years paying into the system at various contribution rates. At a contribution rate of 5%, after working 30 years, a participant can expect income replacement in retirement of 13.8%. That is, if they made $100,000 per year in… Read More

California’s minimum wage is set to rise to $15/hour over the next six years. While this topic has been beat to death, it is seldom pointed out that the inflation-adjusted minimum wage, based on 78 years of precedent, at most should only be around $10 per hour. Arecent UnionWatch post “Raise the Minimum Wage, or Lower the Cost of Living?,” proved this using CPI data. As can be seen, only once, in 1968, did the minimum wage in 2015 dollars exceed $10/hour.

Historical Minimum Wages Expressed in 2015 Dollars

A lot of things have happened since 1968, of course. To name just two, theearned income tax creditdidn’t arrive until 1975, and theAffordable Care Act, offering health insurance to low-income… Read More

Rolling back the power of government unions in a state like California is almost impossible. Their power has been unchallenged for so long that they now virtually control the state legislature, and their grip on local politicians extends to nearly every city, county, school district and special district.

But there have been reforms in some places, and they can serve as examples for municipalities throughout the state. Several Orange County cities have tried transparency ordinances of variable effectiveness. San Jose has restricted the use of binding arbitration. Voters in San Jose and San Diego have both passed pension reform measures. Cities scattered throughout California have grappled with unions over project labor agreements and prevailing wage laws. And in the courts, reformers have won the first round in the Vergara case, which challenges union work rules governing teacher dismissals, layoff preferences and tenure requirements.

Against the remorseless advance of the government union agenda, these and other measures are decidedly incremental. They are often overwhelmed by deceptive union measures that carry the reform label but are actually reactionary shams,… Read More

Everyone supports public safety, but conservatives are a special case. In modern times, it was conservatives, reactingagainst the rebellious sixties and the lawless seventies, who supported law enforcement when it was fashionable for liberals to see them as pawns of a discredited establishment. It was also during the 1960’s and ’70’s that we saw public safety unions acquire far more political power and influence,a rise fueled in part by an entirely justifiable resentment they felt at how theyweretreated by the media and in popular culture.

It’s a different world now. The riots of the sixties and the crime waves of the seventies have been replaced by new threats. Now we have global terrorist groups with access to new technologies that can unleash destruction at a scale unimaginable a generation ago. We have organized crime of unprecedented sophistication; drug cartels, cyber criminals, modern-day slavery networks. The United States, statistically, is a safer place than it’s ever been, but it doesn’t feel that way, and continual reminders at home and abroad reinforce these feelings of insecurity.

Conservatives have traditionally focused on… Read More