Andrew Cuomo

Across the nation, large and growing budget deficits have forced politicians from across the political spectrum, including some Democrats, to seek to bring public employee compensation under control. This has required them to take on government employee unions, which has created considerable friction between the unions and their traditional Democratic allies (a point I’ve noted elsewhere).

Many Democratic lawmakers’ reform proposals have not been as far-ranging as those put forth by their Republican counterparts, but deep-blue Rhode Island is a notable exception. In fact, the Ocean State’s  pension reforms are the boldest in the nation to date.

This weekend’s Wall Street Journal features an interview with Rhode Island State Treasurer Gina Raimondo, who designed the state’s pension overhaul. It is well worth reading. Rhode Island’s pension reforms confirms the characterization of pension reform by Utah State Senator Dan Liljenquist, who led his state’s successful pension reform effort: ”This is not a conservative-versus-liberal issue, this is a reality issue.”

Indeed. Liljenquist is a Republican, and therefore unlikely to get union support. Raimondo is a Democrat, but her state’s pensions faced a financial situation so dire that tackling the problem became a priority, even if it risked a union backlash. As the Journal‘s Allysia Finley notes:

The new law shifts all workers from defined-benefit pensions into hybrid plans, which include a modest annuity and a defined-contribution component. It also increases the retirement age to 67 from 62 for all workers and suspends cost-of-living adjustments for retirees until the pension system, which is only about 50% funded, reaches a more healthy state.

Several states have increased the retirement age or created a new tier of benefits for future workers, but reforms that only affect not-yet-hired employees don’t save much money. A lot of “people say we’ve done pension reform when all they’ve done is tweaked something,” Ms. Raimondo points out. “This problem will not go away, and I don’t know what people are thinking. By the nature of the problem, it gets bigger and harder the longer you wait.”

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In April, she convinced the state pension board to cut the discount rate by which the state calculates its pension liability to 7.5% from 8.25%. She claimed that 7.5% was a more honest number since the actual investment return rate over the last decade was 2.28%.

Of course, not all state pension reforms will be as comprehensive as Rhode Island’s, but for many states doing nothing is not an option. Today, a Journal editorial posits that New York Governor Mario Cuomo may have missed an opportunity in reforming his state’s public employee pensions.

The piecemeal reforms are a step in the right direction and would be more encouraging if the Governor hadn’t then declared pensions a closed issue. The legislation offers the relatively few non-unionized employees the option of 401(k)-style pensions, which they can take with them if they leave government service. It also raises the retirement age to 63 from 62 and trims today’s generous annuities—typically about $50,000 to $60,000 a year for career civil servants—by between 4% and 8% for new employees.

The state projects the reforms will save $80 billion over 30 years, which isn’t chump change. Even so, state and local governments will pay about as much on pensions in the next five years alone. Since these reforms apply only to future workers, pension costs will continue to grow, albeit at a slower rate. The savings are also dependent on lawmakers not goosing benefits once the economy recovers and the public isn’t looking. That’s what happened in 1983 after a pension fix seven years earlier.

Mr. Cuomo’s original pension plan was bolder, though still timid compared to the reforms New Jersey and Rhode Island Democrats passed last year that affect current workers and retirees.

Their need for political support from unions could make more Democratic politicians shy away from pursuing an aggressive pension reform agenda. But then they might face the wrath of voters who have to deal with, in Raimondo’s words, “[b]udgets that don’t balance, public programs that aren’t funded, pension funds that are running out of money, schools that aren’t funded …”

For more on public pensions, see here.

Over at the Washington Examiner‘s Opinion Zone, Wayne Crews and I explain why New York Attorney General Andrew Cuomo’s antitrust lawsuit against Intel is a mistake.

Calling Intel’s business practices “bribery” and “coercion” is little more than argument by assertion. Rebates and exclusivity deals are normal competitive behavior. Not only is Intel facing increasing competition in its home turf, that small segment is hardly the extent of the relevant competitive market. Intel faces an uncertain future as consumer tastes shift to smaller products powered by non-Intel chips. Cuomo’s antitrust lawsuit does not stand up to scrutiny. It deserves to be dropped.

Antitrust policies thwart the competitive process whenever and wherever they are applied.

A statement from New York Attorney General Andrew Cuomo this morning announces the launch of an antitrust lawsuit against chipmaker Intel. Intel supposedly is “bribing” and “coercing” computer manufacturers like Dell, HP into using its chips.

Intel gives them money and rebates to use Intel chips. Think about that; they don’t have to pay as much, and get paid themselves, to use Intel chips rather than AMD ones.

I like it when I get rebates and cash, myself, but I’m just crazy.

Let’s remember what abusive monopoly power is supposed to mean: reduced quantity sold, higher prices, suffering consumers. They’re “suffering” all right, with a plethora of wildly popular sub-$400 netbooks, thanks to a complex and efficient marketplace in which Intel plays an important role, along with all its business partners.

Intel does not enjoy government protection of its market share, nor does it operate in a vacuum, immune from discipline if if its rebates and “bribes” (note the language used by enforcers!) are somehow bad deals for consumers or computer makers. Intel has upstream suppliers, and downstream business customers that can revolt against and thereby discipline any monopolistic behavior, or exclusive arrangements that are unsatisfactory. If the downstream partner doesn’t make a sale, neither does Intel. If the downstream partner’s hardward sales suffer because of Intel, it can retaliate. Thus as far as abusive behavior is concerned, the market is self policing. The only thing that could prevent computer makers themselves from ganging up against Intel abuses would be the antitrust laws themselves.

Antitrust, more often than a consumer-protection phenomenon, is often protectionism. In this case, government bodies are deciding we have to buy from AMD and not Intel, and AMD gets protected from the ravages of competition. Consumers lose.

As far as competing chipmakers are concerned, they of course have no fundamental right to Intel’s customers. However they do have a right to make their own deals with computer makers more satisfactory than Intel’s. Opportunities abound in PCs, laptops, and netbooks; and moreso in handhelds that are gaining appeal and yet don’t rely on Intel.

Furthermore, why should AMD be the beneficiary of antitrust interference? Most chips are not found in PCs at all, but in vehicles and in appliances and handheld devices and gadgets of all sorts. You’ll find chips in new automobiles, coffeemakers, rice cookers, cell phones, watches, calculators, the pump at the gas station. They flush the toilet for you at the airport and turn on the sink; you don’t have to touch a thing thanks to the microchip. These might want a piece of the PC action; it’s a rhetorical and nonsense question, but why not forbid AMD from getting the market share and give it to these guys?

As particle physicist Michio Kaku noted in his remarkable book Visions, “By 2020, microprocessors will likely be as cheap and plentiful as scrap paper, scattered by the millions into the environment, allowing us to place intelligent systems everywhere.” Chips in “Wintel” desktop computers increasingly constitute just one subset of a vast semiconductor market. And guess what; fewer and fewer of the chips in non-PC devices are Intel’s. The trajectory of the marketplace is hyper-competitive, and there is no need for this antitrust action to warp things.

Some of us might be more impressed if Cuomo presented a thoughtful critique of governmental licensing and protection in his own legal industry, so that paralegals and other professionals could compete with monopoly lawyers. Now there is a realm of genuine monopoly power.

Richard Morrison and Cord Blomquist team up with special guest co-host Jeremy Lott to bring you Episode 41. We begin with a farewell to famed quarterback, Republican Congressman and former CEI Distinguished Fellow Jack Kemp. We then move on to China’s flu-related roundup of Mexican nationals, the race to replace Justice Souter and the new opportunity to SuperPoke the President of the United States. We round out the show with Andrew Cuomo’s allegations of scandal and a modest helping of Olympic News.

The current mortgage crisis came about in large part because of Clinton-era government pressure on lenders to make risky loans in order to make homeownership more affordable for lower-income Americans and those with a poor credit history,” the DC Examiner notes today.   “Those steps encouraged riskier mortgage lending by minimizing the role of credit histories in lending decisions, loosening required debt-to-equity ratios to allow  borrowers to make small or even no down payments at all, and encouraging lenders the use of floating or adjustable interest-rate mortgages, including those with low ‘teasers.’”

The liberal Village Voice previously chronicled how Clinton Administration housing secretary Andrew Cuomo helped spawn the mortgage crisis through his pressure on lenders to promote affordable housing and diversity.   Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis. He took actions that—in combination with many other factors—helped plunge Fannie and Freddie into the subprime markets without putting in place the means to monitor their increasingly risky investments.

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