Whenever a failed CEO is fired with a cushy payoff, the outrage is swift and voluminous. The liberal press usually misrepresents this as a hypocritical “jobs for the boys” program within the capitalist class. In reality, the payoffs are almost always contractual obligations, often for deferred compensation, that the companies vigorously try to avoid. Believe me. I’ve been on both sides of this kind of dispute (except, of course, for the “failed” bit.)
So where’s the liberal outrage with a story like the pension swindle in El Monte, California? This is about a dying town, with a per capita income of $10,316 and a quarter of its population below the poverty line, that is paying a pension to one of its retired (at the age of 58) city managers of more than $250,000 per year. Adjusted for inflation. With medical for him and his wife. And survivorship benefits. And too which he contributed nothing.
Or another retired city manager who collects $216,000 per year, allowing him to “take some things off his bucket list” such as golfing at the Old Course at St Andrews. And it looks like the public is paying for more than just green fees. His retirement came shortly after being swept up in an anti-prostitution sting operation.
More broadly, with Trump’s cabinet nominations and his presidency, there is currently an enormous amount of discussion about conflicts of interest in the public sector. All of these discussions completely ignore the most flagrant example.
Many politicians, especially Democrats, get elected with huge support from public sector unions. When it comes to negotiating the compensation of public employees, the unionists sit, in essence, on both sides of the table. The politicians buy the support of the unions with public money. The favorite coinage for this corrupt bargain is pension and other retirement benefits since the real cost of the bribery is easily obscured with bogus assumptions, especially about expected investment returns. The end result is public pension plans that are underfunded by trillions and the occasional bankruptcy in a place like Detroit.
This is such a glaring conflict that I have tried to find if there are any laws against it. So far, I have found nothing. I have, however, found an Atlantic article by a clearly leftwing journalist who started off very sympathetic to public unions but who had a Damascene moment when he was a reporter in a small California town:
Over the next couple years, I nevertheless came to see the several downsides of the union’s influence. Contract negotiations were held in private, with the City Council representing Rancho Cucamonga residents and union reps representing the firefighters. This posed a structural problem, for the interests of elected officials weren’t particularly aligned with the public, whereas the union negotiators had a personal stake in whatever compensation package was adopted. To be more specific, if a City Council member behaved in a fiscally irresponsible manner, it wouldn’t matter for at least a few years, by which time ambitious pols would have moved on to a county post or the state legislature. And lavish compensation packages could easily be obscured by combining what appeared to be a reasonable salary, the only number the public was likely to hear, with exorbitant pay for overtime or over the top fringe benefits.
But if a City Council member crossed the fire union? The consequences were immediate. As soon as the next election rolled around, they’d face a well-financed challenger. On his campaign mailers, he’d be photographed flanked by handsome firefighters. On weekends, friendly guys in fire-coats would go door to door on behalf of their would be champion. “We’re very concerned that Councilman X is endangering public safety by refusing to do Y,” they might say. Or else, “Challenger Z is a crucial ally in our effort to make this city safer.” The incentives were clear.
The left goes nuts when a private company is contractually obliged to use its own money to pay off a failed CEO. Or the leftists dust off their little-used copies of the Constitution and start quoting the Emoluments Clause when there is the prospect of a foreign visitor to the presidential inauguration taking a bag of peanuts from the minibar in a Trump hotel. But when leftwing politicians collude with their public union supporters to rack up unpayable pension bills in the trillions, we get…crickets. So I ask…where’s the outrage?
Red Flags over Goldman Sachs
Just to prove that I am an even-handed insulter, here is a rant about my former employer, Goldman Sachs.
The scandal at 1MDB, the Malaysian sovereign wealth fund from which it appears that billions were stolen by politicians all the way up to the Prime Minister, continues to unfold. At last count, law enforcement officials in seven countries are investigating this, with the unsurprising exception of the officials whose boss did the stealing. As the slogan of the Malaysian Tourism Board puts it, “Malaysia, truly Asia.”
Here’s a prediction: Goldman Sachs is going to bleed for this one. There were more red flags fluttering over these deals than in a May Day parade.
These included the extraordinary fees that Goldman was paid for underwriting the debt of 1MDB (a total of $306 million for raising $3.5 billion, which is at least 10 times a normal level). When the head of the bank in Asia questioned the fees, he was overruled by Gary Cohn, then Goldman’s President and now Trump’s nominee to head up the National Economic Council. Drain the swamp, indeed.
There was also the murky role played by an intermediary called Jho Low, who continued to be involved in the bond deals despite being turned down twice when he applied to become a private client of Goldman. Finally, 1MDB requested that the proceeds of the bond offerings were paid to a small, private Swiss bank. The use of a bank like this was unusual enough that a senior Goldman banker had to meet with compliance officers from the Swiss bank to in order to persuade them to take the money.
At a company meeting, Lloyd Blankfein, the CEO of Goldman, held up these deals as examples for the rest of the regional employees: “Look at what [names of the bankers] did in Malaysia. We have to do more of that.” Sorry, Lloyd, but this was not doing God’s work.
Once again, it appears that Goldman has lost its historic ability to overrule short-term greed in favor of the long-term variety.
One of my greatest pleasures is finding out that someone whose work I admire is a libertarian to boot. I have recently experienced this with Lionel Shriver, the authoress of We Need to Talk About Kevin (made into a very creepy movie) and The Mandibles. In addition to being very good writing, The Mandibles is supposed to deal with explicitly libertarian themes, such as the collapse of society following a crisis in an over-indebted America. I anxiously await its delivery by Amazon.
Shriver recently caused social justice warrior outrage with a speech she gave in Brisbane, Australia, where she insisted that the writer’s craft required “cultural appropriation” if she is not to “designate my every character an aging 5-foot-2 smartass.” She then topped it off by donning a sombrero at the end of the presentation.
Here is a good interview with Shriver from Reason, which discusses the Brisbane speech at length. Even better, here is the NYT guest editorial she wrote in which she outed herself as a libertarian, entitled “I Am Not a Kook.” It included these words:
I cannot be the only American repeatedly forced to vote Democratic because the Republican social agenda is retrograde, if not lunatic — at the cost of unwillingly endorsing cumbersome high-tax solutions to this country’s problems. My comrades and I don’t all sit around reading Ayn Rand novels, either. In fact, the abundance of my natural political bedfellows don’t call themselves libertarian — though “socially progressive economic conservative” is a mouthful. We aren’t bigots, and we’re not evangelical. We’re live-and-let-live about sexuality, accept man-made climate change and believe in evolution. But we’re also concerned about the national debt, oppressed by an arcane, punitive tax code, and unenthusiastic about widespread dependency on the state.
After speculating how such a reasonable, fundamentally American position could have been successfully stigmatized as extremist, Shriver finishes up with:
Voters like me — who believe that environmental quality, health and safety, and security needn’t be purchased at the cost of our liberty, and who defend the right to make our own mistakes as a crucial aspect of being human — deserve political representation. We’re ornery, and we don’t like being told what to do, but we’re not kooks.
Weybridge, United Kingdom
 Probably even accurate accounting would not be sufficient for voters to apply effective control. Voters only really pay attention when something hits their wallets through taxes. Therefore, they are unlikely to control future promises even with accurate information. What is required is 100% pre-funding of these liabilities on a completely arm’s-length basis, in cash and when they are granted. Or, as the private sector is increasingly doing, the conversion of defined benefit to defined contribution pension plans.