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Saturday, February 25, 2012 3:25 PM


Bill to Destroy California Businesses Introduced in Senate; Bill Mandates Employers with 5 or More Employees to Create "Personal Defined Benefit Plan" Managed by CALPers


The gall, arrogance, and stupidity of public union pandering has reached new heights. A senate bill sponsored by written by Sen. Kevin de León, D-Los Angeles seeks to force businesses with five or more employees to create personal defined benefit plans, managed by CALPers.

The Sacramento Bee reports California Democrats push pension plan for nongovernment workers

Senate Bill 1234, written by Sen. Kevin de León, D-Los Angeles, would require businesses with five or more employees to enroll them in a new "Personal Pension" defined benefit program or to offer an alternative employer-sponsored plan.

The new system's investments would be professionally managed by CalPERS or another contracted organization. Employees would contribute about 3 percent of their wages through a payroll deduction, although they could opt out of the plan.

The fund would assume much lower investment returns than the 7.75 percent that the California Public Employees' Retirement System says its investments will generate, de León said.

Steinberg rejected suggestions that Democrats are pushing de León's bill to fend off pressure to enact substantial public pension changes.

"Absolutely not. We're not running away from it," Steinberg said, calling de León's bill the private sector "bookend" to public pension reform measures he expects lawmakers will send to Brown before the current session ends.
Pure Insanity

There is no polite way to put this so I won't. Sen. Kevin de León is clearly a certifiable nutcase.

Stoctkon and Vallejo California are both bankrupt over insane promises made to public union employees. So is Detroit Michigan, Central Falls Rhode Island, Providence Rhode Island, and Harrisburg Pennsylvania.

Numerous other cities will eventually be forced to seek bankruptcy. Los Angeles and Oakland are at the top of the list.

Numerous airlines and GM went bankrupt over defined benefit pension plans.

De León's bill would bankrupt countless small businesses trapped in its wake.

Things That Would Happen If Passed

  1. Immediate large-scale firings by small businesses. No small business owner in his right mind would have over four employees. 
  2. Any business that could, would leave the state. 
  3. Many businesses that do stay would be destined to go bankrupt.
  4. California would end up like Detroit or Greece

States on the Right Path

The road to reform is 180 degrees opposite. Governor Scott Walker in Wisconsin, Governor John Kasich in Ohio, and Governor Mitch Daniels are on the right path.

Five Point Road to Reform

  1. End collective bargaining of public unions
  2. Scrap Davis-Bacon and all prevailing wage laws
  3. Scale back existing pension benefit promises via bankruptcy if necessary
  4. Eliminate defined benefit pension plans
  5. Institute national right-to-work laws

Corruption of America

The gall, arrogance, and stupidity of Senate bill 1234 sponsored by Sen. Kevin de León, D-Los Angeles, is absolutely stunning.

Here are a few particularly relevant paragraphs from my post Fatally Flawed Approaches to the Budget Deficit and Taxes; Debt Will Swell Under 3 of 4 Republican Hopefuls' Tax Plans 
Porter Stansberry wrote a tremendous article on The Corruption of America and how public unions are at the center of it.

Golden State on road to Greece, by way of Detroit

Stansberry touched on Detroit in his article and so did the Orange County Register in an editorial Golden State on road to Greece, by way of Detroit

The Chicago Tribune reported Chicago teachers asking for 30% raises over next 2 years.

Is that insane or is that insane? The only way to stop such insanity is by ending collective bargaining of public unions, scrapping Davis Bacon and all prevailing wage laws, and instituting national right to work laws.

Legal Bribery

As long as public unions, corporations, and lobbyists can bribe legislators with campaign contributions, then bills are going to be written by public unions, corporations, and lobbyists.
Tax reform alone cannot and will not work. In addition to a balance budget amendment, something must be done to rein in the power of public unions and corporate lobbyists at the center of this mess.

Ending collective bargaining rights of public unions and passing right-to-work legislation would be a wonderful first step.

Addendum:

I missed the words "Employers could make voluntary contributions into the fund." Sorry, but I still don't buy it. This would be the first step towards mandated involuntary contributions. Moreover, maintenance of the plan would cause headaches, and giving money over to CALpers to manage is inane.

If people want to enter such programs on their own, let them. Mandating businesses offer such plans is another ridiculous burden on all businesses, especially small businesses. Nothing at all stops private companies from offering such plans.

Who is going to guarantee these benefits anyway, and who will be at risk when the plans fail to meet the goals? The answer today may be one thing, the answer down the road is sure to be taxpayers and businesses.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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