They Should Print It in Red Ink

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Sooner or later you run out of other people’s money:

After purchasing the Boston Globe in 1993 for a then-record $1.1 billion, the financially troubled New York Times just announced that it sold the 141-year-old paper to Boston Red Sox owner John Henry for a mere $70 million. That’s a straight 93% loss. Figuring in two decades of inflation would only make it worse — as does the fact that the Times retains the Globe’s pension liabilities, estimated at over $100 million.

Leaving aside all the changes in the media environment in the past 20 years, the pension-liability burden is the worst of it, and for no good reason. The 401(k) should be the standard model for retirement plans — fixed contributions, not fixed benefits, with the employee controlling his own retirement funds. Personal responsibility, not the entitlement mentality. Also, while you’re at it: Screw the unions and their obsolete collectivist class-warfare mindset.

21 comments

  1. You know, since the NYT has been hemorrhaging so much money, perhaps one could return the favor of the eminent domain used to make its big headquarters by condemning it for economic blight.

  2. Oh come on, they’ve been printed the editorial pages in red ink for years. Truth in advertising and all that.

  3. The real estate is the only part of the Times machine that makes money. They lease out most of the building to various Federal agencies, thus paying for it with your tax money and getting the benefit of free government security protection.

  4. Cumultive inflation since 1994 is 57.6%. That $70 million is worth only $29,680,000 in 1994 dollars. Thats a 97.032 % loss.

  8. He appears to be a Democrat but not particularly staunch. He has donated to Republicans in the past when it is to his advantage to do so. But overall, he looks like a mini-Soros, or has the potential to be.

  9. I fail to see why it has become dogma on the right that fixed benefits are bad and fixed contributions are good. This seems to involve unnecessary state intrusion into private contract. What an employer offers as an inducement for employment should be the business of employer and potential or actual employee. Personal responsibility has nothing to do with it. If I am promised X in return for employment and accept, I have exercised personal responsibility, and the remaining responsibility lies with the entity that has made the promise.

    I think where this idea that fixed benefits are bad is coming from is threefold: (1) a recognition that certain kinds of promises are not fundable even in principle, e.g., any promise with automatic cost of living adjustments, (2) the general lack of fiscal responsibility in the promises made to public employees, and (3) legal tolerance of the failure by both private and public entities to fulfill their responsibilities by funding their promises that are fundable.

    It has never, to my knowledge, been conservative to outlaw executory contracts or to fail to enforce contracts (with certain very limited exceptions). All problems with fixed benefit pensions can be fixed by three simple changes to current law: (1) unfunded liabilities from fundable pension promises (a) are priority items in bankruptcy ahead of state and local taxes and secured liabilities, and (b) no value is to be given to tax creditors, secured and unsecured creditors, and shareholders in a reorganization or liquidation if there remain any unfunded liabilities with respect to such promises, (2) expenditures to fund pension programs are fully deductible for tax purposes, but accruals are not, and (3) unfunded liabilities from pension programs that cannot be fully funded are general, unsecured credits. The first change is important with respect to pensions from private entities because it utilizes ongoing market forces rather than the state to ensure that fundable promises are in fact fully funded. The third change is important with respect to pensions from public entities because it makes clear from the beginning that open-ended promises may have little or no value and therefore greatly reduces the incentive to accept such promises.

    Now it may be that if fixed benefit pensions were subjected to such legal requirements, employers would no longer find it attractive to offer them. That would be an acceptable market response to insisting that a particular type of contract be made enforceable at no public expense. Or it may be that employers would find that such contracts are a good way to attract and to retain employees. I do not care which result occurs. I do care about letting markets find optimal solutions and about the state enforcing contractual promises.

    I also point out that there are millions of voters who have fixed benefit pensions. It is bad tactics to alienate them by abandoning conservative principles of preserving freedom of contract and of enforcing existing contracts when it is not necessary.

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