January 18, 2020

Wholesale Inventories Fall

The Commerce Department said on Wednesday wholesale inventories dropped 0.5 percent during the month, confounding the expectations of analysts polled by Reuters, who expected an increase.

The data led many economists to cut their forecasts for economic growth in the April-June period, which was already expected to come in below the lackluster 1.8 percent annual rate posted in the first quarter. Deep federal budget cuts are holding back growth by trimming wages for government workers.

Yet despite ever-darker views of economic output around mid-year, policymakers and Wall Street economists appear confident the fiscal pain will prove transitory.

Employers also seem to see better days ahead. Data last week showed relatively robust hiring in June, raising expectations the economy was healing quickly enough for the Federal Reserve to begin paring back monetary stimulus later this year.

“While upcoming U.S. GDP data will continue to show a fairly weak picture, … the jobs market is healthier,” said Richard Gilhooly, an interest rate strategist at TD Securities in New York.

Wednesday’s data highlighted how bumpy the road to economic recovery could be this year. The decline in inventories in May was the sharpest since September 2011. The government also revised its estimate for inventories in April to show a 0.1 percent decline rather than a previously reported modest increase.

Inventories are a key component of gross domestic product changes. Economists at Macroeconomic Advisers, a respected forecasting firm, cut their estimate for second-quarter economic growth by a half point to a 0.7 percent annual rate. The firm sees a return to much stronger growth by the end of the year.

The declines in inventories during May were broad based, from long-lasting manufactured goods to groceries and farm products. The fall in durable goods stocks was the largest since December 2009.

However, sales were stronger than expected during the month, rising 1.6 percent.

Prices for U.S. government debt and stocks fell as traders awaited the minutes from the June Federal Reserve policy meeting, which will be released later on Wednesday.

In recent weeks, interest rates have been rising sharply as the Fed prepares to reduce its extraordinary monetary stimulus.

Last week, mortgage rates rose to their highest level in two years, depressing demand from potential homeowners, data from an industry group showed.

Interest rates on fixed 30-year mortgages rose for the ninth week in a row to average 4.68 percent in the week ended July 5, the Mortgage Bankers Association said. It was the highest level since July 2011 and a 10 basis point increase over the week before.

The surge in costs had been expected to push some undecided buyers into the market as they rush to lock in rates before they rise even more, but the MBA’s seasonally adjusted gauge of loan requests for home purchases fell 3.1 percent, the second straight week of declines.

Rates have been rising since early May, and the increase accelerated after comments from Fed Chairman Ben Bernanke last month that the U.S. central bank expects to wind down the pace of its quantitative easing program later this year if the economy improves as expected.

(Reporting by Jason Lange; Additional reporting by Leah Schnurr in New York; Editing by Andrea Ricci)

Article source: http://www.nytimes.com/reuters/2013/07/10/business/10reuters-usa-economy-mortgages.html?partner=rss&emc=rss

Brazil Seethes Over Public Officials’ ‘Super Salaries’

While civil servants in Europe and the United States have had their pay slashed or jobs eliminated altogether, some public employees in Brazil are pulling down salaries and benefits that put their counterparts in developed countries to shame.

One clerk at a court in Brasília, the capital, earned $226,000 in a year — more than the chief justice of the nation’s Supreme Court. Likewise, São Paulo’s highway department paid one of its engineers $263,000 a year, more than the nation’s president.

Then there were the 168 public employees in São Paulo’s auditing court who received monthly salaries of at least $12,000, and sometimes as much as $25,000 — more than the mayor of the city, Brazil’s largest, was earning. Indeed, the mayor at the time joked that he planned to apply for a job in the parking garage of the City Council building when his term ended in December after the São Paulo legislature revealed that one parking valet earned $11,500 a month.

As Brazil’s once-booming economy stalls, these “super salaries,” as they have become known here, are feeding newfound resentment over inequality in the nation’s unwieldy bureaucracies. Powerful unions for certain classes of civil servants, strong legal protections for government workers, a swelling public sector that has created many new well-paying jobs, and generous benefits that can be exploited by insiders have all made Brazil’s public sector a coveted bastion of privilege.

But the spoils are not distributed equally. While thousands of public employees have exceeded constitutional limits on their pay, many more are scraping to get by. Across the country, schoolteachers and police officers generally earn little more than $1,000 a month, and sometimes less, exacerbating the country’s pressing security concerns and long-faltering education system.

“The salary distortions in our public bureaucracy have reached a point where they are an utter and absolute disgrace,” said Gil Castello Branco, director of Contas Abertas, a watchdog group that scrutinizes government budgets.

Privileged public employees, once called maharajahs in a nod to the opulence of India’s old nobility, have long existed in Brazil. But as Brazil nourishes ambitions of climbing into the ranks of developed nations, a new freedom of information law requires public institutions to reveal the wages of their employees, from rank-and-file civil servants like clerks to cabinet ministers.

Though some officials are resisting the new rules, new disclosures at public institutions have revealed case after case of public employees earning more than Supreme Court justices, who made about $13,360 a month in 2012, an amount established in the Constitution as the highest salary that public employees can receive. In the Senate and Chamber of Deputies alone, more than 1,500 employees earned more than the constitutional limit, according to Congresso em Foco, a watchdog group.

State judges can do even better. One in São Paulo recently pulled down $361,500 in a month. That is not a typo: some judges in Brazil are paid more in a single month than their counterparts in high-income countries earn in an entire year. (The top annual salaries for judges in New York State are climbing to around $198,600.)

The recent revelations, including of an auditor in Minas Gerais State who earned $81,000 in one month and a librarian who got $24,000 in another, have spurred a strong reaction in some quarters. Joaquim Barbosa, the chief justice of the Supreme Court, revoked the super-salaries of the 168 employees in São Paulo’s auditing court in December. Another fed-up federal judge issued an injunction in October suspending payments to 11 cabinet ministers, but the attorney general said he would seek to overturn the ruling.

Some historians blame Portugal, the former colonial ruler, for creating a powerful public bureaucracy in which mandarins wield great influence and earn outsize salaries. Brazil’s byzantine judicial system also provides ways for certain senior civil servants to circumvent constitutional pay limits. Some collect pensions from previous stints in government — often their full salary at the time of retirement — after shifting into another high-paying public job.

Then there are the extra allowances for housing and food, the generous reimbursement rates for distance driven on the job and, of course, the loopholes. One provision dating to 1955 enables some public employees to take a three-month leave every five years. But those who forgo the leave, now intended to encourage workers to take postgraduate courses, can seek to collect extra money instead.

Some high-ranking members of the governing Workers Party, including Finance Minister Guido Mantega, have been able to get around the constitutional limit by receiving an extra $8,000 a month for serving on the boards of state enterprises, and many legislators are entitled to annual bonuses of more than $26,000 so they can purchase attire like business suits.

Still, in the developing world, Brazil’s Civil Service is envied in some aspects for its professionalism. Rigorous exams for an array of coveted government jobs generally weed out unprepared applicants. Pockets of excellence, like some public research organizations, have won acclaim in areas like tropical agriculture.

Lis Horta Moriconi and Taylor Barnes contributed reporting from Rio de Janeiro.

Article source: http://www.nytimes.com/2013/02/11/world/americas/brazil-seethes-over-public-officials-super-salaries.html?partner=rss&emc=rss

As Public Sector Sheds Jobs, Black Americans Are Hit Hard

At 34, Mr. Buckley, his two daughters and his fiancée have moved into the basement of his mother’s house. He has had to delay his marriage, and his entire savings, $27,000, is gone. “I was the kind of person who put away for a rainy day,” he said recently. “It’s flooding now.”

Mr. Buckley is one of tens of thousands of once solidly middle-class African-American government workers — bus drivers in Chicago, police officers and firefighters in Cleveland, nurses and doctors in Florida — who have been laid off since the recession ended in June 2009. Such job losses have blunted gains made in employment and wealth during the previous decade and undermined the stability of neighborhoods where there are now fewer black professionals who own homes or who get up every morning to go to work.

Though the recession and continuing economic downturn has been devastating to the American middle class as a whole, the two and a half years since the declared end of the recession have been singularly harmful to middle-class blacks in terms of layoffs and unemployment, according to economists and recent government data. About one in five black workers have public-sector jobs, and African-American workers are one-third more likely than white ones to be employed in the public sector.

“The reliance on these jobs has provided African-Americans a path upward,” said Robert H. Zieger, emeritus professor of history at the University of Florida, and the author of a book on race and labor. “But it is also a vulnerability.”

A study by the Center for Labor Research and Education at the University of California this spring concluded, “Any analysis of the impact to society of additional layoffs in the public sector as a strategy to address the fiscal crisis should take into account the disproportionate impact the reductions in government employment have on the black community.”

Jobless rates among blacks have consistently been about double those of whites. In October, the black unemployment rate was 15.1 percent, compared with 8 percent for whites. Last summer, the black unemployment rate hit 16.7 percent, its highest level since 1984.

Economists say there are probably a variety of reasons for the racial gap, including generally lower educational levels for African-Americans, continuing discrimination and the fact that many live in areas that have been slow to recover economically.

Though the precise number of African-Americans who have lost public-sector jobs nationally since 2009 is unclear, observers say the current situation in Chicago is typical. There, nearly two-thirds of 212 city employees facing layoffs are black, according to the American Federation of State, County and Municipal Employees Union.

The central role played by government employment in black communities is hard to overstate. African-Americans in the public sector earn 25 percent more than other black workers, and the jobs have long been regarded as respectable, stable work for college graduates, allowing many to buy homes, send children to private colleges and achieve other markers of middle-class life that were otherwise closed to them.

Blacks have relied on government jobs in large numbers since at least Reconstruction, when the United States Postal Service hired freed slaves. The relationship continued through a century during which racial discrimination barred blacks from many private-sector jobs, and carried over into the 1960s when government was vastly expanded to provide more services, like bus lines to new suburbs, additional public hospitals and schools, and more.

But during the past year, while the private sector has added 1.6 million jobs, state and local governments have shed at least 142,000 positions, according to the Labor Department. Those losses are in addition to 200,000 public-sector jobs lost in 2010 and more than 500,000 since the start of the recession.

The layoffs are only the latest piece of bad news for the nation’s struggling black middle class.

A study by the Brookings Institution in 2007 found that fewer than one-third of blacks born to middle-class parents went on to earn incomes greater than their parents, compared with more than two-thirds of whites from the same income bracket. The foreclosure crisis also wiped out a large part of a generation of black homeowners.

The layoffs are not expected to end any time soon. The United States Postal Service, where about 25 percent of employees are black, is considering eliminating 220,000 positions in order to stay solvent, and areas with large black populations — from urban Detroit to rural Jefferson County, Miss. — are struggling with budget problems that could also lead to mass layoffs.

The postal cuts alone — which would amount to more than one-third of the work force — would be a blow both economically and psychologically, employees say.

Pamela Sparks, 49, a 25-year Postal Service veteran in Baltimore, has a brother who is a letter carrier and a sister who is a sales associate at the Postal Service. Her father is a retired station manager.

“With our whole family working for the Post Office, it would be hard to help each other out because we’d all be out of work,” Ms. Sparks said. “It has afforded us a lot of things we needed to survive really, but this is one of the drawbacks.”

In Michigan, Valerie Kindle, 61, who was laid off in April as a state government employee, said the loss of her $50,000-a-year job with benefits had caused her to put off retirement. Instead, she is looking for work. Two relatives have also lost state government jobs recently.

“There hasn’t been one family member who hasn’t been touched by a layoff,” Ms. Kindle said. “We are losing the bulk of our middle class. I was much better off than my parents, and I’m feeling my children will not be as well off as I was. There’s not as much government work and not as many manufacturing jobs. It’s just going down so wrong for us. When I think about it I get frightened, so I try not to think about it.”

Mr. Buckley, the unemployed Chicago bus driver who now lives in his mother’s basement, said his mother, a Postal Service employee, had grown tired of him “eating up all her food.”

“She’s ready for me to get up out of here,” he said. In the meantime, Mr. Buckley says his life has drifted into the tedium of looking for decent-paying jobs that do not exist.

“I was living the American dream — my version of the American dream,” he said of his $23.76-an-hour job. “Then it crumbled. They get you used to having things and then they take them away, and you realize how lucky you were.”

Article source: http://feeds.nytimes.com/click.phdo?i=0f8af10726e64d4a9edc337cd7465b88

Leaders in Greece Agree to Deal to Form a Unity Government

The agreement appeared to break a political deadlock that had paralyzed Greece in the face of an acute financial crisis that threatened to infect other euro-zone nations, especially Italy. European leaders see the debt-relief deal struck with Greece on Oct. 26 as crucial to containing the crisis in Greece and insulating Italy, a much larger economy whose political leaders have also struggled to cut budgets and deal with heavy debt.

The agreement in Greece could not have come soon enough for its European partners, who have pressed the country hard to forge a broader political consensus behind the debt deal. But it was not clear whether the agreement would provide the certainty that skeptical investors are demanding to calm turbulent financial markets.

The debt deal requires that the Greek Parliament pass a new round of deeply unpopular austerity measures, including layoffs of government workers, in a climate of growing social unrest. It also calls for permanent foreign monitoring in Greece to ensure that it makes good on its pledges of structural changes to revitalize its economy, a requirement that many Greeks see as an affront to national sovereignty.

With a narrow and eroding majority in Parliament, Mr. Papandreou’s Socialist government found that it could not unify to push through such measures on its own, but Antonis Samaras, the leader of the conservative New Democracy party, opposed many of the debt deal’s provisions and demanded Mr. Papandreou’s resignation and a snap election. After days of frantic political wrangling, Mr. Papandreou survived a confidence vote in Parliament on Friday, setting the stage for Sunday’s compromise.

The new unity government, in which the major parties would share power, is widely expected to be led by a nonpolitician and to govern for several months, long enough to carry out the debt deal and pass a budget for 2011. The name of the new prime minister and the composition of the new cabinet are not expected to be announced until Monday, when the leaders will meet again, according to a statement Sunday night by the Greek president, Karolos Papoulias, who moderated the talks on Sunday.

In a statement early Monday morning, the Greek Finance Ministry said that delegations from the Socialist Party and New Democracy met on Sunday “to discuss the time frame of the actions” to implement the debt deal, and added that the two parties regarded Feb. 19 as “the most appropriate date for elections.”

In reaching the agreement, Mr. Papandreou agreed to meet Mr. Samaras’s demand that he step down as prime minister, while Mr. Samaras agreed to back the debt deal and a seven-point plan of priorities proposed by Mr. Papandreou that would essentially commit the new government to the terms of the debt deal.

Mr. Samaras is not expected to play a role in the unity government, but would be New Democracy’s candidate for prime minister in the general election.

In many ways, a new interim government for Greece buys time for European leaders to put together a stronger bailout mechanism that would protect larger economies from the risk of default, chief among them Italy. High debt, low growth and the diminishing credibility of Prime Minister Silvio Berlusconi have made that nation increasingly vulnerable.

“The decision is very positive, because it will appease the markets and because it shows that Greek authorities are doing what foreign leaders want them to do — to get on with implementing the conditions for the E.U. debt deal,” said Athanassios Papandropoulos, an economist and commentator for the conservative Greek newspaper Estia.

Still, he said, he saw little chance that a unity government could get Greece back on the road to economic, political and social recovery. “I don’t think it will work,” Mr. Papandropoulos said. “It will last three months, then we’ll have elections, and then we’ll have the same problems all over again.”

Landon Thomas Jr. contributed reporting.

Article source: http://www.nytimes.com/2011/11/07/world/europe/pressure-mounts-on-greek-premier-to-resign.html?partner=rss&emc=rss

Faltering Rhode Island City Tests Vows to Pensioners

But investors who bought the city’s bonds could do much better: Rhode Island recently passed a law intended to make sure that they would be paid in full, even in bankruptcy.

Retirees are wondering how the city can cut what they believed was a guaranteed benefit. “We put our time in, we put our money in,” said Walter Trembley, 74, a retired Central Falls police officer. “And the city, through their callousness and everything else, just blew it. They were supposed to put money in and they didn’t.”

Cities and local governments make lots of promises: to their citizens, workers, vendors and investors. But when the money starts to run out, as it has in Central Falls, some promises prove more binding than others. Bond lawyers have known for decades that it is possible, at least in theory, to put bondholders ahead of pensioners, but no one wanted to try it and risk a backlash on Election Day. Now the poor, taxed-out city of Central Falls is mounting a test case, which other struggling governments may follow if it succeeds.

If Central Falls, a city of about 19,000, is able to reduce the benefits its retirees now get — something they will fight — it would not only unsettle the millions of public workers and retirees across the country, but also reshape the compact between governments and their workers. Most public workers now pay a portion of their salaries toward their pensions, but they may balk if they see those pensions can be cut when they retire. And governments that, like Central Falls, have not enrolled all their workers in Social Security as a money-saving measure may have to rethink that strategy.

Millions of teachers, police officers, firefighters and other government workers have long believed that their pensions were untouchable, thanks to provisions in state laws and constitutions. But some of those promises are unclear or untested, said Amy B. Monahan, an associate professor at the University of Minnesota law school who has studied the myriad laws protecting public pensions in different states.

Just how those promises would stack up against promises made to others, like bondholders, is unclear. It is also unclear how those state laws would hold up in federal bankruptcy court, which has its own ranking of creditors.

“This will all be up to a court to decide,” Professor Monahan said.

But many cities and states have already signaled that their bondholders take priority.

When Jefferson County, Ala., was poised on the brink of bankruptcy this summer after defaulting on more than $3 billion of bonds to finance a new sewer system, the state moved to help. Alabama’s new governor, Robert Bentley, proposed a plan to replace the defaulted bonds with new ones issued with state backing, which could lower the borrowing cost and avert what would otherwise be the biggest municipal bankruptcy in American history. Bondholders would forgive some of the debt they are owed.

Mr. Bentley’s move contrasted with the lack of action by his predecessor two years ago when the city of Prichard’s pension fund ran out of money and it simply stopped sending retirees their checks. Despite a state law saying that the pensions must be paid, no one in state government moved to enforce the law or propose a rescue plan.

“I’m a little ticked about it,” said Mary Berg, 62, a retired assistant city clerk from Prichard, who said she had sent news accounts of the proposal to help Jefferson County to local officials, asking why the state had never helped her and her fellow retirees. “The state didn’t even look at Prichard.”

Teachers in New Jersey likewise got a cold shoulder when they tried to make the state comply with a law that it contribute a required amount to their pension fund each year. A judge ruled that their plan was not yet unsound, despite the state’s failures to make the payments. The teachers, who argued that by the time the plan qualified as “unsound” it would have collapsed, lost on appeal last year. But the state always sets aside enough money to pay bondholders.

Illinois has some of the strongest bondholder protections anywhere, which explains how a state that began its fiscal year with $3.8 billion in unpaid bills from last year — and whose pension system has less than half of the money it needs — is able to keeping selling bonds.

State law requires Illinois to make “an irrevocable and continuing appropriation” of tax revenues into a special fund every month that can be used only to pay bondholders. Illinois’s pension system claims to have a “continuous appropriation” too, but it does not have meaningful deadlines and has proved much more porous over the years.

The federal bankruptcy code says pensioners and general-obligation bondholders are both unsecured creditors, stuck at the back of the line and treated as equals. But there is maneuvering room in the welter of state and federal laws. After Vallejo, Calif., declared bankruptcy three years ago, it cut payments to bondholders, but let workers bear their loss in lower pay and skimpier retiree health benefits. Pensions were untouched.

In Central Falls, the pension plan for the police and firefighters is projected to run out of money in October. But officials there say short-changing the bondholders will not bring relief. The next time the city needs to borrow money, investors will simply demand more in interest, and they might decide all Rhode Islanders were a bad risk and charge all cities more.

“The last thing we want to do is increase borrowing costs for all our cities and towns, and therefore cause tax rates to go up across the state, because one city has fiscal problems,” said Robert G. Flanders Jr., the state-appointed receiver for Central Falls, explaining the new state law putting bondholders first in line.

After going 20 months without their pension checks, the 141 retirees of Prichard decided a third of a loaf was better than nothing and settled with the city. Their average benefit, which had been $1,000 a month, is now about $350. But they also get Social Security. Ms. Berg, the retired clerk, said she worried about the retirees of Central Falls, many of whom do not.

“I can’t imagine telling them that they have to take this 50 percent cut,” she said. “These are retirees, elderly people. They can’t go out and get new jobs.”

Katie Zezima contributed reporting from Central Falls, R.I.

Article source: http://feeds.nytimes.com/click.phdo?i=ea5d0ea56f0800fc54c726984f20bf10

Public Pensions, Once Off Limits, Face Budget Cuts

Conventional wisdom and the laws and constitutions of many states have long held that the pensions being earned by current government workers are untouchable. But as the fiscal crisis has lingered, officials in strapped states from California to Illinois have begun to take a second look, to see whether there might be loopholes allowing them to cut the pension benefits of current employees. Now the move in Detroit — made possible, lawyers said, because Michigan’s constitutional protections are weaker — could spur other places to try to follow suit.

“These things do tend to be herd-oriented,” said Sylvester J. Schieber, an economist and consultant who studies pensions.

The mayors of some hard-hit cities have said that the high costs of pensions have forced them to lay off workers: Oakland, Calif., laid off one-tenth of its police force last year after failing to win concessions on pension costs.

Elsewhere there is pension envy: some private sector workers, who have learned the hard way that their companies can freeze or reduce their pensions, resent that the pensions of public workers enjoy stronger legal protections. But government workers, many of whom were recruited with the promise of good benefits and pensions, say that it would be unfair — and in many cases, very likely illegal — to change the rules in the middle of the game.

It has been far more common for cities and states to adopt more modest retirement plans for future workers. But the savings from new plans are initially small, growing only over time. Other states have gone further, requiring workers to work more years before retiring, or to contribute a higher portion of their salaries toward their pensions. A few states have rolled back cost-of-living increases for retirees, prompting lawsuits. Reducing the rate at which government workers earn pension benefits — even modestly, as Detroit did — has been rare.

Pension funds can run out of money. In Prichard, Ala., a small city outside of Mobile, the fund ran out in 2009. The city stopped sending pension checks to its 150 retired workers, defying a state law that requires it to pay what it has promised. In the 19 months since the checks stopped, 18 retirees have died while waiting for their money.

When Gov. Scott Walker of Wisconsin, a Republican, moved to curtail the collective bargaining rights of public worker unions in the state, he exempted police and fire unions. But they often have among the most expensive pension benefits.

That is, in part, because they must be paid for more years. Because police work and firefighting are dangerous, physically demanding jobs, it is not uncommon for cities to promise workers full pensions after as little as 20 years of service, even if that means paying retirees from their 40s until they die. Such pensions are powerful recruiting tools.

When the mayor of Jacksonville, Fla., addressed a recent conference there for the trustees of police and fire pension funds, he said that he would not attend the “Guns ’n’ Hoses” boxing tournament on the last night. The mayor, John Peyton, had spent the past year in rancorous, fruitless negotiations trying to get his local unions to agree that future police officers and firefighters should have to work 25 years before getting full pensions, instead of 20, among other things.

“I fear that if I showed up, I’d be put in the ring and I’d come out unrecognizable,” he said, joking.

In Omaha, the police union recently agreed to reduce the benefits being earned by current officers after the city agreed to put more money into the teetering pension fund.

The struggles of Detroit, of course, are extreme. The report by the arbitrator, Thomas W. Brookover, noted that although the city’s unemployment rate was officially 28 percent, there was evidence that less than 37 percent of the city’s residents were actually working. The population had crashed. Property tax revenues were dwindling. Detroit had drained its rainy day fund, reduced overtime, offered property-tax amnesty, sold public assets, borrowed money, allowed casinos to set up shop — and still its deficits kept growing.

The average pension for retired police officers in Detroit is not especially rich: it is $28,501 a year. But with more than twice as many retirees as active workers, Mr. Brookover wrote, the costs of paying for the pensions “threaten both the city’s fiscal viability, as well as its wherewithal to provide public safety for its citizens.”

Detroit’s efforts to cover those costs through aggressive investing have not helped. In a 2010 report, an auditor warned that $103 million of alternative investments were unaccounted for. The city’s bets have included Tradewinds Airlines, which went bankrupt for the third time in 2008, and a luxury hotel in Detroit. The Securities and Exchange Commission is investigating.

The city initially sought to freeze its pension fund immediately, which is almost unheard of in the public sector. The arbitrator rejected that proposal, but agreed that the city could reduce the rate at which lieutenants and sergeants earn pension benefits from 2.5 percent of their salary per year to 2.1 percent. Although rare, the reduction is not particularly large, given the magnitude of Detroit’s problems. The arbitrator did not try to find a solution to the fund’s imbalance. 

Michigan’s new Republican governor, Rick Snyder, has taken a carrot-and-stick approach to the state’s troubled cities. The carrot: He scrapped the old way of distributing state aid, and wants to make aid contingent on having cities adopt “best practices,” which he says should include reducing the rate at which workers earn pension benefits. The stick: A new law allowing the state to appoint fiscal managers with broad powers over distressed local governments.

Mayor Dave Bing of Detroit referred to both carrot and stick in his budget address this month, when he spoke of the need to reduce pensions for current workers, and to move away from traditional pension plans to those more like 401(k)’s for “at a minimum all new hires.”

“If we are unable or unwilling to make these changes, an emergency financial manager will be appointed by the state to make them for us,” he said. “It’s that simple.”

Article source: http://feeds.nytimes.com/click.phdo?i=3a0f04e2c8fa9de1e474f561cdd064d5