Short Takes with Gregory Bresiger – Greece, Government Enterprise and Crybaby Ballplayers

The Next Greece?

The events in Greece are one of the great tragedies of our time. Those of us in other Western countries with advanced welfare states shouldn’t think that “it can’t happen here.”

It can.

Here is the problem: Pols, at the urging of many of their constituents, keep expanding the length and breadth of welfare services. Many people, blinded by what they think is a something for nothing deal, are dazzled by the seeming limitless resources of the modern welfare state. They keep demanding more and more, with little consideration of costs today and to generations unborn. In the most advanced of these welfare states—ones in which the nation is taking a backdoor to socialism—there is a dangerous byproduct: A contempt for people who produce much of the wealth that finances governments.

These people are those who run businesses of all kinds and pay a big part of the taxes to support this expanding state. By piling on taxes, regulations and cultural condemnations—-television and other popular American media often depict business people as uneducated, avaricious swine—-the welfare state, through tax and spending policies, discourages commerce and thrift. Yet the latter are building blocks in the improvement of living standards.

It’s really quite simple. In general, the more you tax something, the less you get of it. The less you tax something, the more you get of it (Personally, I’m for ending all taxes forever on blackberry brandy, books—the knowledge tax—and tickets to Boston Bruins and New York Yankee games.

But here’s the tragedy: When one taxes business to death, as they do in Greece, you kill the golden goose that allows a country to pay for welfare services. In the early 1960s, the German Federal Republic erected one of the largest welfare states in Europe.

So why didn’t it crash and burn like Greece?

It had some of the highest economic growth rates in the world. Ergo, it could afford to pay for its welfare state. I have many objections to the welfare state that go beyond economics. But the point here is some welfare states have a reasonable approach to paying bills. Others, like Greece, are self-destructing. This self-destruction is coming for others that don’t learn from Greece. You don’t work the golden goose to death.

Government “Enterprise” in New York—An Anniversary Forgotten

One of the reasons Greece’s economy is a mess is because the government loses so much money by trying to do things that it can’t effectively: Run businesses that traditionally have been the province of risk taking entrepreneurs. So we have the oxymoron of “government enterprise.” The words government and enterprise should never be in the same sentence, yet we have lots of government enterprises in Western countries. Almost all of them are flawed in one way or another. They usually lose a lot of money or provide poor service or are run by political flunkies without any business knowledge (Here in New York City we had a government run an off-track betting operation that actually lost a ton of money. How can the house lose on horse racing when the odds are stacked in favor the house? It was chock full of political hacks).

Amtrak is the U.S. passenger rail system started in the 1970s when dozens of private railroads were driven into bankruptcy by abusive government regulatory policies. Since then the government trains have lost billions of dollars. Amtrak policies have also led to train wrecks such as the recent one in Philadelphia. Here in New York City we have our continuing train wreck—the New York City subways, which have been run by a government authority since 1940.

This year is the 75th anniversary of government control of the subways. But no one is holding any parties as they did when a private management company opened the subways back in 1904. The subways then made money and were considered “an engineering marvel.”

That all stopped once the government refused to let the private management companies raise fares. However, once the government took complete control of the lines in 1940—in the 1920s and 1930s the government started a competing system, which, of course, immediately started losing boatloads of money—the subways have been deteriorating because they are starved for improvement money because they are always in the red. That means the system is falling apart. What makes a business well-run is profits. The subways, under government control, have none of that.

Most New York City residents who live outside of Manhattan in the outer boroughs, such as Brooklyn, Queens and the Bronx, dread taking the subways. They are a mess. Trains shake. Off-peak service is egregious. Kids, trying to cage money from captive riders in cars, fly through the air in acrobatic shows that spook many riders.

The system is always in the red. It is perpetually on the verge of financial disaster and screaming for more aid from the state and federal governments. Line extensions such as the Second Avenue Subway are not just years behind—they are generations behind! The Second Avenue Subway proposal, which goes back to at least the 1940s, has had three bond issues approved by the voters. And they’re still years behind as well as requiring more money.

The New York Subways, the same as Amtrak, Fannie Mae, Freddie Mac, the egregious U.S. Post Office and the government enterprises in Greece, are examples of why the government should not even pretend to run a business.

Crybaby Baseball Players

Many baseball players pretend to be happy until it comes time for a new contract. Then you would think from their public statements that they are more persecuted than Sacco and Vanzetti. It is now a year and half since the Yankees couldn’t re-sign their All-Star second baseman Robbie Cano. He ended signing up with another team, the Seattle Mariners. That team made him a fatter offer.

Cano signed for 10 years for around $250 million while the Yankees “only” offered him some $175 million over seven years. I don’t begrudge Cano signing for more years and money. Everyone, in any field, should make hay while in one’s prime. One never knows when one’s prime will end in any endeavor. Here’s what I resent: When he turned down the Yankee offer he actually complained that the “Yankees had disrespected” him. Disrespected?

If that’s disrespect, please give me a triple portion of it and fill up doggy bags for me to take home. Cano is typical of many sports and entertainment stars today. They have fabulous incomes. Yet few seem happy. Many are resentful. Like many high profile, “hey, look at me, I’m great,” team owners, they are spoiled brats.

By the way, passing on Cano at that pay and for those years has been a good thing for the Yankees. Last year, in Cano’s first for Seattle, he had a good, but not great, year. This year has been the worst of his career. Yet Seattle is on the hook for all those years.

As we often say in these pages: Don’t pay through the nose.

About The Author

Gregory Bresiger

Gregory Bresiger is an independent business journalist from Queens, New York. His Personal Finance articles have appeared in publications such as The New York Post & Financial Advisor Magazine. He is the author of the eBooks “Personal Finance For People Who Hate Personal Finance” and “MoneySense”.