Immigration Debate

     

"Keep, ancient lands, your storied pomp!" cries she 
With silent lips.

 "Give me your tired, your poor,

 Your huddled masses yearning to breathe free,

 The wretched refuse of your teeming shore. 
Send these, the homeless, tempest-tossed to me,
 I lift my lamp beside the golden door!"

I disagree with most of the pundits who have claimed that the Republicans have put up a mediocre group of candidates for this year’s Presidential race. I watched one of the debates in South Carolina and believe that the four remaining candidates showed remarkable poise and ability.

It is true that not every one seems “Presidential” but each represents an important position or positions that the GOP’s eventual candidate would be wise to somehow work into his own campaign. However, on the issue of immigration I believe that they were all wrong.

I’m not talking about the absurd idea of shipping millions of immigrants back to Mexico where they can wait in line to apply for citizenship. I’m more concerned with the position laid out by Rick Santorum and seemingly accepted by the others. Santorum himself is the son of an Italian immigrant. His father came to this country at the age of seven, and Santorum is proof of how well immigrants can prosper and thrive in this country.

However, for Santorum citizenship means respect for the laws of one’s country, and the first act of every illegal immigrant was to break the law. Neither he nor any of the others ever considered whether the law itself was just or unjust. Political philosophers tell us that not only should an unjust law not be obeyed, but also that it must be opposed.

Does Santorum or anyone else think the law that prohibited East Germans from going over the Berlin Wall and leaving their country was just? Does anyone believe that escapees should have been returned to East Germany because they had broken East German law? Of course not.

Like Santorum I am a descendant of Italians who migrated to America over 100 years ago. True, they were legal immigrants who had to make their way through Ellis Island just like the Irish, the Germans, the Jews, the Poles, the Slovaks, and all the others who came through the so-called “Golden Door.” However, if these legal immigrants had come to this country after 1920 the great majority of them would have been illegal. What happened? Why did a country that had always kept its doors open to immigrants suddenly close them?

After the First World War a wave of prejudice and bigotry swept over this country that led politicians to severely restrict the flow of immigration. Many of the immigrants like my Italian ancestors could hardly read and write even in their own language, and since they were Catholic they were regarded as ignorant and superstitious. They were called wops and guineas and their crowded streets were believed to be breeding grounds of crime and depravity.

In the 1920’s racists and advocates of ethnic purity decided to stem the flow of immigration into this country. They wanted no more undesirables, especially if they practiced alien religions like Catholicism and Judaism.

Why should anyone support a law made during the 1920s that made a mockery of the Statue of Liberty and the famous poem written by Emma Lazarus.

Why do commentators like Pat Buchanan believe that the Mexicans who have crossed the borders of our country in order to find a better life for themselves and their families, will be different from the earlier immigrants? Last year I attended an early morning Mass in Princeton, New Jersey on the feast of Our Lady of Guadalupe. The priest told us that earlier, at 4:00 a.m., 600 Latinos had packed the church for a prayer service on that great feast. Are these hard working people undesirables?

If the law was different all of these immigrants could have entered the country peacefully without danger to life and limb and without employing criminals to guide them. I’m not saying we should be stupid or impractical. They should have to apply for citizenship and meet certain criteria. They should not immediately enjoy all the benefits of citizenship, for citizenship in this country should still be regarded as a great privilege.

Finally, opening up our doors again will provide great benefits. It is not just a question of who will cut our lawns, remove our garbage, or paint our homes, but how will we compete with China’s huge population with only 300 million people? Who will buy up our unused housing if our population continues to decline? Don’t immigrants now rent American apartments, drive American cars, and buy American products in American stores?

Finally, the pressure on those states that now bear the brunt of illegal immigration will be alleviated. The millions of dollars now spent on controlling the Mexican border can be allocated to other purposes. ###

Roberto Benigni's Pinocchio

                                                

                    

Although a huge hit in Italy, Roberto Benigni’s film version of Pinocchio, disappeared after a brief run in New York back in 2002.

What happened? I heard that the reviews were bad but at the time my favorite movie reviewers either didn't see the movie or brushed it aside as not even worth a review. Even so, given Benigni's worldwide stature, why did the distributor give up so readily?

I immediately suspected foul play. Perhaps, Hollywood was taking revenge for the way Benigni took over the Academy Award gala on the night he won his Oscar for “Life is Beautiful.”

Or maybe the critics couldn't stomach a Pinocchio that was so far removed from Disney's darling little puppet boy. After all, Carlo Collodi's original Pinocchio is the Italian Huck Finn. He is an impudent, mischievous rascal who refuses to be tamed or civilized and can never stay out of trouble no matter whom he betrays or hurts. Even before he is fashioned into a puppet, he is such an ornery  piece of raw wood that his original owner gives him away to poor Gepetto. On his first day after being fashioned into a puppet, Pinocchio runs away from home, gets Gepetto thrown into jail, and smashes a pedantic little cricket (Disney's famous Jiminy Cricket) with a hammer for presuming to give him good advice.

With the release of Benigni's Pinocchio on DVD we now have an opportunity to see that Benigni plays Collodi's puppet to perfection. He was made for the role. From the first moment we see him bounce into life in Gepetto's workship Benigni is entirely believable as the puppet boy. He plays the role with all of his characteristice innocence, bragadoccio, and feeling. 

Moreover, he has made a wonderful, magical movie. His wife, Nicoletta Braschi, again appears with him this time as an incredibly beautiful blue fairy or "fata."  The cinematography is equally beautiful and the special effects are spectacular. The opening scene with the Blue Fairy's carriage being drawn by hundreds of mice sets the tone of the whole movie as an enchanted adventure.

The DVD comes with two versions of the movie. One is in the original Italian with subtitles, and the other is a substantially shortened dubbed version. The dubbed version probably explains the commercial failure of the movie in America. Benigni's great comic voice and expressions have been replaced with a voice that sounds like a precocious American pre-teen. I guess the distributor thought that the subtitled version would not work with American children.

I watched the Italian version with my 12 year old grandson and he loved it. I’ve shown it to groups of educated seniors and they’ve loved it. Too bad, most American children and adults will never see this movie classic. 

Connecticut's Public Pensions

                                             A Tale of Two Pensions

The Connecticut State Teachers Retirement plan is one of the best in the country although neither the average teacher nor the general public seems to understand just how good it is. I’d like to compare its benefits to those provided by Social Security.  To do so, let’s compare twin brothers (we’ll call them Jeff and John) who entered the work force 35 years ago right after graduating from college at age 21.

Jeff became a teacher in a local public school and immediately was required to contribute 6% of his pay into the State Teachers retirement plan. It’s actually 7% but only 6% goes toward retirement. John went into the private sector and was required to contribute a little over 6% of his pay into the Social Security system and his employer was required to equal his contribution. If John had become self-employed, he would have had to pay the full amount.

Thirty-five years later Jeff is able to retire at age 56 on a full pension of 70% of his final average pay. He will get 2% of his pay for each year of teaching service. Normally, he would have to be age 60 to collect the normal or full pension but 35 years also qualifies for an unreduced pension. It is important to note that final average pay is based on his highest three years of salary. For example, if Jeff’s salary averaged $90000/year in his last three years of teaching, his pension would be  70% of the $90000, or $63000/ year for life.

Of course, brother John will not be able to collect his full Social Security benefit until age 66, ten years after Jeff retires. If we assume that John always made the maximum contribution to Social Security, at age 66 he will be able to get a little over $20000/year for his retirement income. The main reason for this disparity has to do with the benefit formula. The final average pay for Social Security calculations is based on the highest 30 years of service. It is easy enough to see that even though the two brothers had the same income every year, using the average of the highest three years pay will yield a much greater pension than a 30 year average.

Moreover, by the time John is able to retire Jeff’s pension will have grown to over $80000/ year due to cost of living increases which have been running between 2% to 3% per year.  To summarize, although he has worked 10 years less than his non-teaching brother, Jeff’s pension income will be about 4 times greater than John’s at age 66.

What is Jeff’s pension worth? To keep it simple just consider how much principal would be required to produce interest income of $80000/ year. At an interest rate of 4% it would take $2,000,000 dollars! This simple method is not exactly the way that the State’s actuaries actually figure out how much money the State has to come up with when a teacher retires but it gives us a good idea of the value of these pension benefits.

Speaking of actuaries, the State Teachers’ Retirement Plan is a “terminally funded” plan which means that when a teacher retires, the actuaries have to calculate the value of what the teacher will receive over his lifetime and add that amount to the “fixed” or “untouchable” portion of the State’s budget costs.  Interestingly, in a declining interest rate environment such as we have experienced in the past few years, the actuaries require the State to allocate even more money to fund retirement benefits. For example, at a 2% interest rate the State would be required to contribute $4 million dollars to fund Jeff’s $80,000 pension.

Denise Nappier, Treasurer

It was these declining interest rates that led the State Treasurer to conclude a few years ago that the Pension fund, despite record high returns, was underfunded and that significant bonding was required to make up the deficiency. According to the State Treasurer, Denise Nappier, if the State paid interest on these bonds at 4% and invested the proceeds at a higher rate, all would be well. Given what has happened to the economy since then, I wonder if her rosy prediction has come true.

Nevertheless, the State felt a need to reinforce the generous pension benefits of Jeff and the State’s 75000 teachers. But what about John? His taxes go to pay for his brother’s pension, but Jeff and all the other teachers in Connecticut do not pay into Social Security, the source of John’s retirement income. Because the State’s Pension existed before Social Security, the teachers in Connecticut do not participate in the Social Security system.

To summarize, Jeff can retire at age 56 with a retirement income of $67000 per year as well as future cost of living increases. Brother John can only retire 10 years later on approximately $20000 per year.

How did such a disparity come about? Basically, the Connecticut State Teacher’s Retirement plan’s benefit formula was designed to protect teachers, who were typically underpaid, from being destitute in old age. Until the last decade or so teacher salaries were too low to allow them to save for retirement on their own. However, a few years ago when the State decided to substantially increase teacher pay, it neglected to make an adjustment in the benefit formula. It made a slight modification in the cost of living formula for retirees but that was it. An attempt to change the average pay calculation formula from a 3-year average to a 5-year average failed largely through the efforts of the teacher unions and their friends in the legislature.

I want to make it clear that this call for pension reform does not imply criticism of teachers or their work. They have a very hard job especially today with a tangled web of government regulations, administrative red-tape, and social trends so averse to education. But as I indicated at the outset most teachers have only the faintest idea of how their pension plan works. Despite the evidence most believe that they have a poor plan especially compared to those of municipal police and firefighters, and the extremely generous plan of their colleagues in neighboring New York State whose pension obligations are helping to drive it into bankruptcy.

Given the current problems in both the national and state economies, now would be an appropriate time for the State of Connecticut to revisit the current pension benefits for all state employees, not just teachers. Minor modifications in pension benefit formulas can produce millions in savings and still provide adequate retirement income for state and municipal employees.

For example, basing final average pay on the last 5 or 10 years of service would produce significant savings. Just ask the actuaries. It probably would have eliminated the need for the costly bonding initiative. It would also eliminate a common form of abuse ("spiking") where municipal employees find ways to significantly boost salaries in the last three years of service.

A first step in the reform process should be the removal of elected officials from any future participation in the retirement system. Their current pension benefits should be frozen, and future payments could go into a defined contribution retirement plan. Otherwise, they would have no incentive to modify the existing arrangements. ###

Taxing General Electric

The Goose That Laid the Golden Egg                           

Last year in Fairfield, Connecticut protestors  denounced corporate giant GE for its failure to pay corporate federal tax .  GE’s corporate headquarters are in Fairfield, and the protests drew much attention from newspaper cartoons and stories. I can see why it was hard for GE to defend itself against these charges that put it in such a bad light. It has already been stigmatized as a big bad heartless selfish business giant.

I am not an employee or representative of GE, and the company does not need me to defend it, but I would like to put the issue in a different light. In my opinion, this GE flap was a classic case of trying to kill the goose that laid the golden egg.

GE is perhaps the largest landowner in the town of Fairfield and as such pays a huge amount of real estate taxes to the town. It is also one of the largest employers in the state of Connecticut. Its employees all pay their share of real estate tax on their own homes. Even if they are renters, part of their rent goes to pay their landlord’s real estate taxes.

In addition to real estate taxes, all GE employees from CEO Geoffrey Immelt on down pay their share of Federal and State Income tax. For example, most GE employees will pay between 30 and 40 percent of their income in federal and state income tax.

The company and its employees must also pay about 13 percent of salary into Social Security. That tax is sent to Washington where instead of going into the proverbial “lock box” it must immediately be lent to the debt-ridden government in order to pay its current expenses.

It is not hard to calculate that more than 50% of the income of each GE employee goes to pay federal, state, and local taxes. On top of that, consider that all these employees pay sales tax on practically every item they purchase. Although hidden from view, our state gasoline tax must add about a dollar to the purchase of every gallon of gas.

Despite all these taxes, demonstrators still protest about the failure of GE to pay corporate taxes. Don’t they know that a corporate income tax is really a tax on consumers? Corporations merely act as tax collectors for the government. The buyers or consumers of their goods and services are the ones who actually pay the tax. For example, whenever the State of Connecticut raises the tax on cigarettes, the price of a pack goes up accordingly. The tax is always passed on to the consumer. If GE hadn’t found a way to avoid the corporate tax, the price of every light bulb, refrigerator, and auto loan would have been that much higher.

I must admit that I own 500 shares of GE stock in my retirement plan. The value of the shares has rebounded since the market hit bottom in 2008, but the current price of about $18 a share is far below its $50 value of 10 years ago. It pays a small dividend of about 2% that is also taxed by both the Federal and State governments.

I guess that it was mainly the enormous losses that GE’s credit arm suffered in the recent financial meltdown that offset the company’s current gains and allowed it to avoid the corporate tax. I would also suspect that the company wisely took advantage of government tax credits designed to stimulate the search for alternative energy sources. I believe that GE is a very big player in the solar energy field. As a stockholder and a citizen I would rather see GE invest in energy for the future, and bonus employees who contribute to the effort, than send the money to Washington.