The public pension problem

[SimpleDon]

http://www.bloomberg.com/news/artic...rn-cities-as-1-trillion-shortfall-set-to-grow

Decades of luxurious union retirement benefits are coming home to roost.

It is simply the result of an entire system that fails to prioritize priority needs of its employees and its public. This is not helped in any way by freak outfits that constantly lie like Moody's and Standard and Poors....These rating agencies acted clueless just before the 2008 blow up...They really should be replaced with some standard government rating system tied to performance. Perhaps you could consult with Senator Warren on that one. As usual, you blame the unions and the common man for the mess. The main problem with the common man is one of being cut off from any kind of factual information by outfits who find it profitable to keep the public in the dark about nearly everything.

Again, you can thank Ben Bernanke and Alan Greenspan for ridiculously low interest rates that have not only created bubbles but have also left pension funds starving for return. They've had to turn to the stock market to get any kind of yield at all, but that involves greater risk and the risk will soon be realized when the Bernanke-created stock market bubbles crashes.

But I think the unions are definitely at fault here as well. It was the pension problem that bankrupted General Motors and, ultimately, Detroit as well. Union members need to wake up. Their union leaders negotiate huge pension benefits that can't be met but assure that they'll get re-elected. Meanwhile, the workers are left holding the bag when the pension funds go belly up.

Why would a union bargain for benefits far off in the future, instead of cash right now?

It's pretty simple. They agreed to work for less than was due, in return for payments in the future. A responsible government would make sure there was money to pay these obligations when the time comes. Is that an oxymoron?

A pension is deferred compensation, not charity or welfare. It's popular these days in conservative circles to blame unions for this, but the real problem is the public will not allow a government entity to amass a reserve for pension funds. The Mayor says "We need money to replace the roof on the Civic Center," and a teabagger shows up to say, "You've got $22million sitting in savings account and you want more of out money? No way."

Corporations can declare bankruptcy and escape their pension benefits, but that is a special kind of treachery. A government could do it too, but how would any one of us look ourselves in the mirror again, knowing we had been a part of something like that?

You asked the right question, but I disagree with the answer. Personally, I rather have the money up front, and I suspect that most union members would too. So why DO they negotiate high pension benefits? Because the money's not there. The union leadership can't any higher wages because the money isn't there to pay them so they negotiate for higher pensions. The politicians they're dealing with know the money won't be there in the future, but that's a problem that their successors will have to deal with. So the union leaders and the politicians get re-elected, but the promised benefits prove to be ephemeral.

The problem is that conservatives' unwavering dedication to maximizing the incomes of the very wealthy will invariably hit these road bumps as more and more money has to be found and squeezed out of the economy to keep increasing the incomes of the very wealthy.

The wealthy pay the majority of the taxes. In order to relieve them of this burden taxes have to be lowered on the wealthy and the difference made up by either increasing taxes on the poor and the middle class or by increasing goverment debt. Both methods have been used, the increases in sales taxes and payroll taxes for example, with the lowering of corporate taxes, income and property taxes completing the shift of money to the very wealthy. But shifting the tax burden increasingly to the poor and the middle class has its limits, especially since their wages are being intentionally suppressed to further increase profits and the incomes of the very wealthy.

So government debt has ballooned in order to reduce the tax burden on the very wealthy. Some of the debt built up in order to increase the incomes of the very wealthy is obvious, the national debt primarily in the form of Treasury bills held not too surprisingly by the very wealthy.

But other government debt is not so obvious like the underfunding of the public pensions. Or underfunding infrastructure or education. All of which puts us on a downward spiral. Dramatically over compensating the very rich at the costs of possibly not being able to dramatically over compensate the very wealthy in the future.

Both of you are ardent supporters of these economic policies to transfer income from the poor and the middle class to the very wealthy. So the question for you is where do we stop?

I personally have profited from these policies. From lower taxes and from the stock market bubble currently building. But I recognize that we are eating our young, trading our future for gains now. We are feeding a monster that will never be satisfied. Today the very wealthy are happy with the tax cuts and the profits from the suppressed wages of the poor and the middle class. But someday they will come after the incomes of people like me and my children.

How do you two justify the continued increasing of the incomes of the wealthy at the costs of everyone else? Are you wealthy yourselves? Or don't you understand what it means to trip that voting machine next to (R) all of the time?

* You are wrong Bill, the continuing asset bubbles have less and less to do with the Fed lowering interest rates and more to do with the approximately twenty trillion dollars that has been shifted from wages to profits over the last thirty five years of neoliberal economic policies. This is money far in excess of what can be invested in the real economy in the US of making products for consumption. In essence this large amount of excess financial capital has made the interest rate setting mechanism of the Fed almost useless in directing the economy. Especially when we now foolishly allow the banks to speculate with federally guaranteed money that they can create out of thin air. All done in pursuit of your beloved deregulation.​

 

[laughing dog]

That happens certainly (what dismal said) but everyone involved is on the public dole. The larger problem is that everyone is on the public dole and no one is accountable for their decisions in the long term. They're all getting their bennies in the end.

Public pensions are not deferred compensation. That's horseshit. They're more like golden parachutes. If all public sector employees were working for minimum wage all their lives that might have some validity. But that is hardly the case.

You are simply wrong. Negotiations over labor contracts do explicitly trade off current compensation with benefits such as pension, so pensions are a form of deferred compensation. That is true regardless of the current wage being paid to employees.

The notion that anyone would think that public employees should be paid the minimum wage in order to justify a pension is a mystery to me. Public employees do a wide range of work. In my state, public employees include engineers, nurses, and professors - all of whom earn above the minimum wage in the private sector and in the public sector. Those people doing the equivalent jobs in the private sector typically have access to pensions (either defined benefit or defined contribution). How would anyone expect to attract quality people into the public sector with compensation packages that are substantially less than those in the private sector?

 

[ksen]

I guess the line where contracts should stop being enforceable is at employment contracts.

 

[Bronzeage]

That happens certainly (what dismal said) but everyone involved is on the public dole. The larger problem is that everyone is on the public dole and no one is accountable for their decisions in the long term. They're all getting their bennies in the end.

Public pensions are not deferred compensation. That's horseshit. They're more like golden parachutes. If all public sector employees were working for minimum wage all their lives that might have some validity. But that is hardly the case.

A public pension has no comparison to a golden parachute. Golden parachutes are bonuses paid to CEO who crash their company and leave the ruins for share holders.
Calling it such shows contempt for public employees, which has become common among today's conservatives. It's strange that government employees are pariahs, unless a terrorist kills them in their office. In that case, they become heroes.

This is comparable to people who think teachers are over paid because they have the summer off.

I don't know of any public jobs which pay comparable public sector. The pension benefits make up the difference. When I was a mechanic, there were always openings for auto and truck mechanics with the city, but it would mean at least a $1000 less a month. Even the Post Office paid much less than I made at a dealership.

Calling pensions "golden parachutes" and claiming it is unearned might make stealing a public pension easier and might ease the conscience of those who propose such a thing, but it is theft, plain and simple. Nothing can excuse such a thing.

 

[T.G.G. Moogly]

That happens certainly (what dismal said) but everyone involved is on the public dole. The larger problem is that everyone is on the public dole and no one is accountable for their decisions in the long term. They're all getting their bennies in the end.

Public pensions are not deferred compensation. That's horseshit. They're more like golden parachutes. If all public sector employees were working for minimum wage all their lives that might have some validity. But that is hardly the case.

You are simply wrong. Negotiations over labor contracts do explicitly trade off current compensation with benefits such as pension, so pensions are a form of deferred compensation. That is true regardless of the current wage being paid to employees.

The notion that anyone would think that public employees should be paid the minimum wage in order to justify a pension is a mystery to me. Public employees do a wide range of work. In my state, public employees include engineers, nurses, and professors - all of whom earn above the minimum wage in the private sector and in the public sector. Those people doing the equivalent jobs in the private sector typically have access to pensions (either defined benefit or defined contribution). How would anyone expect to attract quality people into the public sector with compensation packages that are substantially less than those in the private sector?

That's special pleading. A job is a job is a job. There's nothing "honorable" about public sector jobs compared to private sector.

My larger point is still that no one is accountable in the end because all parties involved in these negotiations are on the public dole when they "retire." Instead of raising taxes to pay off these liabilities just let the people go back to work. That's what folks in the private sector are forced to do when fortunes change.

There should be no public pensions and retirements - period - unless these monies are earned, deducted, and then set aside for retirement. There should be no general tax money used to fund these liabilities. Unions are not even an issue.

And I don't consider myself a conservative. I'm financially conservative and socially liberal, which is what I think most people are.

 

[T.G.G. Moogly]

Calling pensions "golden parachutes" and claiming it is unearned might make stealing a public pension easier and might ease the conscience of those who propose such a thing, but it is theft, plain and simple. Nothing can excuse such a thing.

Theft is making me continue to work for another decade because I am forced to save for retirement while those earnings are taxed to pay pensions and retirement packages for public sector workers long retired.

 

[Togo]

My larger point is still that no one is accountable in the end because all parties involved in these negotiations are on the public dole when they "retire." Instead of raising taxes to pay off these liabilities just let the people go back to work. That's what folks in the private sector are forced to do when fortunes change.

There should be no public pensions and retirements - period - unless these monies are earned, deducted, and then set aside for retirement.

Which is exactly how the system works. The workers fund their pension through money earned, and deducted. As with a private scheme, the employer also pays in. The only difference is that the government then borrows all the money (i.e. doesn't set it aside in the first place) and uses it to fund tax cuts. When the worker retires, their benefits are based on the amount paid in over their lifetime.

There should be no general tax money used to fund these liabilities.

Ok, but we'll need a tax increase to make up the hole that will leave in government funding. In effect, the government will have to surrender money as it becomes due, where it gets put into a dedicated fund and invested.

The only reason it comes from general taxation now is because government stole the initial funds.

I'm financially conservative and socially liberal, which is what I think most people are.

Doesn't that just mean you like social programs but don't want to pay for them?

 

[ksen]

Keep posting joedad!

I'm almost there!

 

[Bronzeage]

Calling pensions "golden parachutes" and claiming it is unearned might make stealing a public pension easier and might ease the conscience of those who propose such a thing, but it is theft, plain and simple. Nothing can excuse such a thing.

Theft is making me continue to work for another decade because I am forced to save for retirement while those earnings are taxed to pay pensions and retirement packages for public sector workers long retired.

Would you prefer they work until death?

No one forced you to save for retirement. That was your choice. It was your choice to live on less and save for the future. The difference between you and a public pension, is the public pensioners relied on you to keep your word and allow them to collect their money.

 

[T.G.G. Moogly]

Keep posting joedad!

I'm almost there!

The argument seems to be that financial security is different between public and private sector employees and that public sector employees are more worthy. I'm not convinced.

 

[ksen]

Keep posting joedad!

I'm almost there!

The argument seems to be that financial security is different between public and private sector employees and that public sector employees are more worthy. I'm not convinced.

If that's what the argument seems to be to you then you should reread the argument because that's not the one being made itt.

 

[T.G.G. Moogly]

Doesn't that just mean you like social programs but don't want to pay for them?

That would mean I am not financially conservative, which I am. If I was not financially conservative I would try to get someone else to pay towards my financial needs. If my financial needs were met I would be happy knowing that everyone's financial needs were met. Hence my social liberal bias.

Financially speaking, we all live downstream. I fail to see the distinction between public and private on the subject. When private pensions become strained payouts are reduced because the money is just not there.

 

[laughing dog]

You are simply wrong. Negotiations over labor contracts do explicitly trade off current compensation with benefits such as pension, so pensions are a form of deferred compensation. That is true regardless of the current wage being paid to employees.

The notion that anyone would think that public employees should be paid the minimum wage in order to justify a pension is a mystery to me. Public employees do a wide range of work. In my state, public employees include engineers, nurses, and professors - all of whom earn above the minimum wage in the private sector and in the public sector. Those people doing the equivalent jobs in the private sector typically have access to pensions (either defined benefit or defined contribution). How would anyone expect to attract quality people into the public sector with compensation packages that are substantially less than those in the private sector?

That's special pleading.

No, it is not.

A job is a job is a job. There's nothing "honorable" about public sector jobs compared to private sector.

Didn't say it was honorable, so what is the point of that straw man?

My larger point is still that no one is accountable in the end because all parties involved in these negotiations are on the public dole when they "retire." Instead of raising taxes to pay off these liabilities just let the people go back to work. That's what folks in the private sector are forced to do when fortunes change.

Ah, the two wrongs make a right argument.

There should be no public pensions and retirements - period - unless these monies are earned, deducted, and then set aside for retirement.

They were. The issue now is why is there a shortfall. As I wrote earlier, there are number of possible reasons why there is a shortfall. How the shortfall is managed ought to depend on the factors for the shortfall. For example, suppose the X% is due to inadequate labor contributions and 1-X% is due to employer incompetence. Then those ratios are a fair method to apportion the solution.

There should be no general tax money used to fund these liabilities. Unions are not even an issue.

Since general tax money is used to pay the compensation, your solution is literally impossible.

And I don't consider myself a conservative. I'm financially conservative and socially liberal, which is what I think most people are.

Interesting but irrelevant.

 

[Loren Pechtel]

Because future benefits don't cause current spending. Give them dollars now and the taxpayers/the stockholders will scream. Give them pension dollars and cook the books and it's somebody else's problem.

.

It's a rhetorical question. The point is, a pension is deferred compensation. Anyone who threatens a pension is stealing money from working people. It's easy to obscure the issue by making noise about unions, but the crux of the matter is this is money already earned for work already done.

Is there any city or state where people would agree to a retroactive tax hike, going back years? I don't know of any. Would it be any different?

Lavish pension benefits are because the unions extorted the money from their employers in the past.

 

[Loren Pechtel]

You're missing the fundamental issue--cooked books.

There is nothing more cooked than the US stock exchange.

Corporate earth is running on cooked books.

But union books were openly negotiated and transparent. They could not be cooked.

Once again if we just believe the opposite of what you say we will know the truth.

1) It wasn't the union books I was referring to, but the city books making the pensions look tolerable.

2) Where's your evidence the union books are open?

 

[Tom Sawyer]

Lavish pension benefits are because the unions extorted the money from their employers in the past.

So what? It was still part of their compensation package. Taking away a pension is no different than saying "We were paying you too much in salary than we now think we should have for the past ten years. Give us a $10,000 refund on what we paid you".

 

[Loren Pechtel]

I guess the line where contracts should stop being enforceable is at employment contracts.

No. At the point of contracts signed under duress.

 

[ksen]

lol

 

[Loren Pechtel]

Lavish pension benefits are because the unions extorted the money from their employers in the past.

So what? It was still part of their compensation package. Taking away a pension is no different than saying "We were paying you too much in salary than we now think we should have for the past ten years. Give us a $10,000 refund on what we paid you".

What part of "extorted" did you miss?

Because that's what a strike is--extortion.

 

[Bronzeage]

I guess the line where contracts should stop being enforceable is at employment contracts.

No. At the point of contracts signed under duress.

Would you sign a contract under duress?