So he's blaming public unions for the state Detroit is in?
That makes perfect sense.
However, public sector "collective bargaining" is a bad joke, given that there are only chairs on one side of the bargaining table. The bigger universe of interested parties have zero representation in the process. There is no natural force working to keep costs in line.
Seeing as how the unions have given into every single demand in order to save their collective bargaining rights.
Under any circumstances and in any economy, it is simply a matter of time before these costs reach a tipping point. We are at that time. There is simply no more money to give to these public sector unions -- period.
The $140 million shortfall in the budget is due to tax cuts for corporations. So we have reduced teachers pay to give that money to the wealthy.
When these people say there is no money around, they mean no money for everyone else.
We are the hungriest, most imprisoned of the developed world. Our national income equality is only rivaled by Singapore and Hong Kong, recently developed zones. Hong Kong being notorious for its lack of social welfare programs and safety nets.
We also have the most coddled, revolving door prison system in the developed world. Maybe some more serious consequences for actions would act as a better deterrent.
Our sentencing is also so completely out of whack, where drug selling charges for non-violent offenders mirror that of those committing manslaughter or worse.
We could resolve a lot of our state related budget debt just by reforming drug laws and drug sentencing, as opposed to making it worse for people. But then I guess that goes into a discussion over whether you view a prison institution as a potentially reforming one, or whether it is merely a place to lock away criminals.
I know a few people who have gone into prison and have come out much worse than when they went in, as an anecdotal reference. And unless you want to lock away all of these people for the rest of their lives, consuming mass amounts of tax payer revenue, we do have to release many of these criminals at one point or another as their sentence dictates. What we've seen though, is that these guys come out more dangerous and unstable than a lot of them went in. In many cases, they don't know how to readjust to the outside world, leaving them more antisocial than they were before.
In reality, we'll never be able to rehabilitate all of the people in prison. Some are just so broken they'll never be able to deal with the rest of society, and some are too dangerous to be trusted to do so. But, these small time offenders who get thrown into a brutal system for small crimes are coming out even more broken than they went in. That's not a productive system, it breeds people to act more violently than when they were arrested.
The Hobbesian idea that we need to act more cruel and punish people even more would seem to only exacerbate the current issue.
The thing about the term "revolving door prison system" is that highlights a system system is so inefficient in rehabilitation with overemphasis on punishment (for greater profits on the backs of the taxpayers) that those who go into jail almost always return, especially since privately owned prison systems have no incentive to rehabilitate whatsoever when their prime concern is profits over great social benefits.
There are so many things wrong with that article I don't know where to start.
So I'll start with a problem you're probably not expecting.
1. What do hedge managers do? They run funds into which very rich people put money to make even more money. Hedge fund managers move the money around in very risky ways to get the most enormous yields possible. (Wealthy investors believe they are entitled to double digit and even triple digit returns.)
You think investors in hedge funds make substantially more from investments than regular people can? Think again.
According to the article, the top 10 hedge fund managers in 2009 earned $25.3 Billion dollars. This includes $4B for John Tepper, and $3.3 Billion for George Soros. These personal earnings come straight out of the profits their funds made off of trading as well as management fees for the overall fund.
A typical hedge fund manager will earn "2 and 20%" that means the management company takes 2% of the total value of the fund every year, and 20% of all profits made. The bigger the fund and the bigger the profits, the bigger the payout from the manager.
But let's look at it from an investor point of view.
First: Consistency.
All of those top ten earners in 2009 made the amounts they did because their funds made a lot of money. But how many of those funds also made money in 2008. Three, of the top ten only George Soros, James Simmons and John Paulsen made a profit in both 2008 and 2009.
The top earner, John Tepper made gains of 130% in 2009. In 2008? it lost 27% . For those keeping score, if you'd invested $1000 with him in 2008, at the end of 2008 you'd have $730. Then in 2009 it gained 130% so you'd have about $1679 (before fees Not a bad two year return, but would you have stuck with the guy in 2008 after he lost 27% of your money?
Second Fees
The top earner, John Tepper made $4B because his Fund (a medium sized fund of $14B) gained over 130% last year. That's an incredible return. If you'd invested $1000 with him at the beginning of 2009 your money (before fees) would have grown to $2300
The second earner, George Soros, made $3.3B Last year. His fund company manages $27 Billion. It gained 29% last year. So if you'd invested $1000 with him, your money would have grown to $1290. I'll use Soros because Tepper's fund made an outlier profit.
That means if you'd invested in an S&P500 index fund (a fund which just mirrors the index) with $1000, you'd have 1,235 dollars.
Ok, at first glance, investing with George Soros looks like it was a good deal. You got $55 extra dollars on your investment of $1000 because he's good at guessing where the market will go. (if you'd invested a million it would be $50,000) But what did he charge you for that?
I don't know what his specific fund is so I'll go with the standard "2 and 20."
That means for the privilege of managing your money for you, you're paying the hedge fund manager 2% of the total amount and 20% of your profits.
Going back to the $1000. Let's say you invest that $1000 with George Soro's Quantum Fund. It made 29% in 2009.
Congratulations, you now have $1290. However, 2% of the total amount goes to management. So you have $1264. Oh, and 20% of the profits you made go to incentive fees for the fund managers picking your stocks (so they do a good job.) you made $264 in profit, another $52.80 off the top. Now you have $1211.20. Just hope there aren't any other fees.
Now compare that to an S&P500 index fund. Vanguard charges 0.18% of the amount as a management fee for their S&P500 index fund. other brokers are as cheap as 0.09%
So if you'd invested $1000 with a cheap index fund in 2009 you'd have $1235. They'll take 0.09% of the total as a management fee. So they're charging about 13c to manage that money. Take that off the top. Now you have $1234.87
So if you'd invested $1000 in a cheap S&P 500 index fund you'd end up with $1234.87, if you'd invested with George Soros (or really a typical hedge fund with returns like his), you'd end up with $1211.20
Where'd that $23 go?
That's why George Soros made $3.3 Billion last year.
Second point. I think the article just fails in its premise. Who decides what something is "worth" if it's not the market.
Suppose I invent a widget. It has no real use, but is quite entertaining and sells very well. My company sells 200 million widgets at a profit of $5 each. (say they cost $15 and I have a good profit margin of 33%). I just made a billion dollars.
Who has the authority to say what I did wasn't "worth" a billion dollars? I invented a toy, it didn't really add any serious benefit to society. But lots and lots of people bought it. There's a prima facie case is was because the market valued my efforts at $1B.
The hedge fund managers do exactly the same thing. They sell a product. In this case their product is "give us money and we'll use it to make money for you." Lots of people want to buy that product, and they make profits off of people buying that product.
Why is that "worth" anything other than what people are willing to pay for it?
Not to quibble over numbers, but I thought "2 and 20" was 2 percent of the invested amount (a one time fee) and 20% of annual gains. If I'm right, I think the calculation is a bit off (though not a lot), and there is some incentive to leave money in once place, since removing and reinvesting costs you another 2%.
Prison is meant to be a PUNISHMENT for a CRIME. Not a fancy day camp where people who did bad things go to talk about their feelings. It's time out for adults, not rehab for people who aren't famous enough to negotiate rehab.
There was me thinking prison was supposed to be punishment and rehabilitation. I think that's only the case in the UK not the US though. Still, we only decided against it being exclusively a punishment 100 years ago so I'm sure you'll catch up.
Not to quibble over numbers, but I thought "2 and 20" was 2 percent of the invested amount (a one time fee) and 20% of annual gains. If I'm right, I think the calculation is a bit off (though not a lot), and there is some incentive to leave money in once place, since removing and reinvesting costs you another 2%.
They cite this document as a source. It looks to be a brochure by UBS selling funds. I skimmed it to see where it might talk about costs but didn't see where specifically
However, that's consistent with my understanding. A fund doesn't work quite the same way as a brokerage. You pay brokerage fees to buy and sell stocks and hedge funds presumably also pay brokerage fees depending on how much they're buying and selling. But the fee they charge you is a % management fee per year.
And the full extent of that mentality is brought to bear when you ignore that the system often produces worse criminals than to takes in. How exactly does this help us as a society when we're PAYING the state to create a population of antisocial criminals that cause a continual loop of crime because they're put into an institution that is failing nationwide.
Yes, prison is meant to be a punishment, but you're creating a straw-man argument here by suggesting we either only get over-packed, gang ridden, violent producing prisons or a day spa rehab for celebrities. There is an in-between for these people, and if we don't reform the prison systems in this nation, and by extension our sentencing laws, we're going to be paying more as citizens for an unproductive institution.
As a conservative, supposedly concerned with the ballooning debt, this should be a prime place to start. Not by cutting funding, but by reworking the way prison works, our drug laws and the such so we don't need to spend as much.
I've mentioned it before on this site, but read Going Up The River by Joseph Hallinan to really understand whats going on in the prison system.
And dark, the job of prison should not be just to punish. A lot of these people really have it in them to lead a better life. Especially considering half of them already were, but drug possession is enough to fuck them for life. The system we have now takes minor offenders and turns them into professional criminals. All because the prisons job is to punish, not to rehabilitate. How does this benefit us as a society?
Having a little pot is enough to strip an enormous amount of your civil liberties. Hell, I think it's more than a gram of pot to keep you from ever voting again.
Easy answer: It doesn't. It does help promote the police state, which is what people all of these "conservatives" really do want, contrary to their libertarian ramblings.
Solution: Just execute them instead. Three strikes and you get a bullet.
But to be serious, your argument about minor drug offenders could just as easily be made about white collar criminals. They're not out raping and murdering people, why bother to put them on anything greater than house arrest? At that point, the cost of monitoring them is substantially lower than building prisons, housing and feeding them.
And from there, why not do the same for those convicted of manslaughter? Yeah, someone died, but they didn't mean to kill the person.
So now you've reduced prison to somewhere for murders, rapists, thieves, other violent criminals, pedophiles, and traitors.
1. I have some real doubt as to whether Public employees unions, and teachers unions in particular, are as a whole a good thing. Dark's link above gets at the reason.
I believe private unions are perfectly acceptable. Corporations by their very nature exist to enable people to act collectively. There's no reason why there can't or shouldn't be a corporation whose primary purpose is to sell labor. Which is exactly what a union is.
By the same token however, Unions ought to compete in the free market for labor. I'm very skeptical of "closed shops" that prohibit the company from hiring non-union employees because frankly that smacks of monopoly to me. Likewise, I'm skeptical of some of the legal protections for unions.
However, all of this works with private corporations because it's a business relationship. The corporation bargains with the union to purchase labor. The union tries to extract the highest possible price for its labor. This is good commerce. A union may also have political pull which may affect legislation, but the political pull of the union shouldn't directly affect the negotiations.
That's not so with public employees unions. There, the unions bargaining power and its political pull are one in the same. A union can tell the elected representative that it must agree or the union will not support him. Moreover, the elected representative has much less incentive to deal with because although he has to set budgets, its not directly his money he's playing with. This means public employees unions can also very easily cross the line from commerce into straight rent seeking.
2. I'm somewhat skeptical of some of the bargaining positions teachers unions take. Some of it is propaganda, but I think some schools do have a real problem with systems that force them to employ teachers solely on seniority and on a tenure system. That isolates teachers from the quality of their work. A high school teacher is not quite the same thing as a college professor. There are very real problems on the other side as well, but these are policy issues in the goal of providing better education, not something that should be sacrosanct because teachers want it.
3. On the other hand. If you really need to cut the state budget I'm pretty skeptical of claiming that cutting teacher salaries by 7% is the best way to do it. Many teachers are already not well paid, and I'm of the opinion that if we want real teaching talent, teachers have to be compensated at a level that will draw that talent.
