Thursday, March 08, 2007


The 2007 Pig Book



In case you missed it, Citizens Against Government Waste (CAGW) released their 2007 Pig Book on March 7. Reminding us all that insane spending of tax dollars DOES occur, a companion report rightly points out that waste likewise diminishes the competitiveness of the U.S. marketplace. Given the work of the Paulson Committee and other advocates of deregulation, excessive outlays should make news beyond CSPAN.

CAGW president Tom Schatz applauded some restraint but urged lawmakers to keep tightening their belts before spending other people's money. Here are a few of the goodies he cites as part of the "2,658 pork projects at a cost of $13.2 billion" included in the Defense and Homeland Security Appropriations Acts for fiscal 2007.

<< 1. $1,190,000,000 for full funding of 20 F-22A fighter jets, which the Government Accountability Office criticized as unnecessary and out of date;

2. $5,500,000 for the Gallo Center to study the effects of alcohol and drug abuse on the brain;

3. $1,650,000 to improve the shelf life of vegetables;

4. $1,350,000 for the Obesity in the Military Research Program; and

5. $1,000,000 for a telescope searching for extra-terrestrial intelligence. >>

Click here to download the 2007 Pig Book in its entirety. As you read, don't forget the words of British historian Lord Acton - "Power tends to corrupt; absolute power corrupts absolutely."

At a time when programs like Social Security and Medicare represent behemoth unfunded liabilities to taxpayers (not to mention more than a few state and municipal pension and health care programs), do we really need a space alien telescope or vegetable research? Decide for yourself next election cycle.

Labels: ,

posted by Susan Mangiero at 3/08/2007 10:00:00 PM | 0 comments | links to this post  

Tuesday, February 06, 2007


Is Means Testing Mean?



If you think means testing of benefits is well, mean, then get ready to defend yourself, if you can. In the just released, long-awaited "best seller", Budget of the United States Government-Fiscal Year 2008, President Bush lays out his plan to tax the wealthy. Click here to download all or part of the budget.

According to Financial Times reporters Caroline Daniel and Krishna Guha ("Bush wants to means-test middle-class benefits," February 5, 2007), the $2.9 trillion budget "represents a challenge to parts of the system of entitlements enacted as part of the Great Society agenda of the 1960s."

Key questions arise, some of which are listed below.

1. What constitutes "wealthy" and how often will the definition change?

2. How will wealth be measured for purposes of means testing? Income? Property? Private Benefits? Gross? Net? Nominal? Real? Adjusted by Geographic Region or Household Size?

3. Is means testing really fair?

4. Would privatization of federal benefits empower more people financially by changing incentives to save?

5. What is the likely economic impact of means testing?

6. How will companies and municipalities be adversely affected by means testing of Social Security and Medicare or will they gain?

What a field day for the economists and politicians!

Editor's Note:
Check out the online U.S. debt clock. Hit the refresh button a few times for a real scare as estimated indebtedness increases by large amounts within a matter of seconds.

Labels: ,

posted by Susan Mangiero at 2/06/2007 05:40:00 AM | 0 comments | links to this post  

Thursday, January 04, 2007


Pension Contagion - Should We Worry?



Similar to many of my peers, I spent the last few days in the same shape as this fella. Anxious now to avoid suspicious coughs or sneezes, I've been pondering what contagion might look like in the pension world. The upshot? Not a pretty picture.

Broadly defined, the spread of bad financial news, like a transmitted disease, moves quickly, has the potential to wreak havoc and is hard to contain once unleashed. This is why policy-makers worry about anything that can accelerate diminished investor confidence and panic market participants into selling off positions they would otherwise choose to hold.

Contagion itself is dangerous but when you consider what some describe as an inevitable convergence towards one global market, with trading that occurs 24/7, the potential for serious harm is real. Continued technological advances, international deregulation and investors' willingness to go offshore promote lightening speed information flow. When bad news hits, it's the shot heard 'round the world. Having worked on three trading desks during volatile times, I know firsthand how quickly things can change.

Taking a page from science, the "butterfly effect" describes how tiny changes can lead to large-scale disturbances. Click here to read about meteorologist Edward Lorenz and his seminal work in chaos theory. Does his notion that the flap of a butterfly's wings in Brazil can set off a Tornado in Texas apply to pensions?

Let's consider some facts.

1. The graying of the global population is real.

2. Life expectancies are climbing in the U.S. and in most developed countries.

3. Countless U.S. and non U.S. government plans are hamstrung by reluctant taxpayers, binding labor contracts and defined benefit plans with fixed terms.

4. Regulatory reform here and abroad has accelerated the need for liquidity.

5. Companies around the world rely on higher return (read higher risk) investments to close the pension gap.

6. Shareholders in U.S. companies are preparing for the worst with the first batch of annual reports that reflect FAS 158 compliance, similar to the FRS 17 effect in the UK. GASB 45 is keeping public plan leaders up at night.

7. Many companies outsource or have global staffs with benefits offered to all.

8. Different country governments and multinational companies alike invest in each other's securities.

Market returns are correlated. Labor mobility exists. Companies buy and sell around the world. News travels fast.

What does that infer? Pension contagion is a real possibility.

Editor's Note:

The World Bank website links to some research papers about financial contagion that may be of interest.

Labels: ,

posted by Susan Mangiero at 1/04/2007 12:04:00 AM | 0 comments | links to this post  

Thursday, December 14, 2006


Angelina Jolie, Christopher Cox and Pension Funds



Strange bedfellows? Maybe not. Here's why.

1. Angelina Jolie has agreed to play the role of Dagney Taggart in the film verson of Ayn Rand's best-selling book, Atlas Shrugged.

2. Christopher Cox wrote a review of Letters of Ayn Rand.

3. Christopher Cox heads the SEC.

4. The SEC just proposed several major changes that potentially impact pension funds' investments in hedge funds, securities issued by companies that comply with the Sarbanes-Oxley Act of 2002 and non-U.S. issuers of equity, respectively.

In addition, U.S. Treasury Secretary Henry Paulson is busy advocating improved regulations in order to promote U.S. competitiveness. His remarks to the Economic Club of New York referenced a forthcoming Conference on Capital Markets and Economic Competitiveness early next year that will address regulatory, accounting and legal issues. He added that the strength of the U.S. economy can be a springboard to reform entitlement programs and "focus on economic and educational policies that will add jobs, improve productivity, and result in tangible income growth for all Americans."

With a new Congress and talk of regulatory investigations and oversight hearings, school's still out on how pension sponsors are likely to fare. At the same time, given the clear and significant link between regulation and pension finance, we all have a vested interest in monitoring what's happening in Washington.

Angelina may do a terrific job at entertaining us as capitalist heroine but it's the lawmakers and chief regulators who are getting the big reviews in pension land. No popcorn but lots of action.

Labels: , ,

posted by Susan Mangiero at 12/14/2006 12:12:00 AM | 0 comments | links to this post