The public pension problem

[ksen]

probably not

 

[boneyard bill]

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.​

Why do I have to keep pointing out that the "beloved deregulation" that you are talking about occurred under the Clinton Administration and with its enthusiastic support? If the Fed cannot control interest rates, why do interest rates always respond to what the Fed says it is going to do about them? As for bubbles, a trade-off between bond yields and bond prices is automatic. A decrease in bond yield simply means the price went up. So when you lower interest rates (i.e. bond yields) through the purchase of securities, which is how the Fed controls long-term rates, then you are automatically pushing up the price of the bonds. When you push interest rates to historically low levels you simply have to create bubble. If you understood how the bond market works, this would be obvious to you.

The same does not apply to stocks or real estate. A decrease in interest rates will not AUTOMATICALLY push up prices. But it will do so IF other factors are equal.

I don't know what tax increases we've been piling on the poor and the middle class. The poorest 47% of the population pays no income tax and gets their FICA tax rebated to them at tax time. So where are these tax increases we've been piling on the poor? I think your confusing us with Sweden when the lowest rate is 30%.

As far as income inequality is concerned, it has probably gone up more under Obama than under any other president. The biggest reason for this is probably the Fed's ZIRP policy. ZIRP stands for "zero interest rate policy." Banks can borrow money at somewhere between zero and .25% from the Fed. Obviously it doesn't take much to find an investment that yields more than .25% and when you add tons of leverage (i.e. derivatives) you can make a real bundle with money the Fed wouldn't dare ask to be repaid. Still, the big banks are insolvent! So somebody's getting that money, but the Justice Department won't prosecute.

 

[Loren Pechtel]

No. At the point of contracts signed under duress.

Would you sign a contract under duress?

How about addressing the issue rather than derailing?

- - - Updated - - -

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

Typical rhetorical anti-labor nonsense. And please do not even try the "strikes are extortion" horseshit, because
1) most labor agreements are not the result of strikes or threats of strikes, and
2) a strike is no more extortion than "take my offer or starve".

Rejecting reality doesn't make it go away.

Strikes are extortion and union leaders would be in jail if they weren't legally protected from the reality of their acts. The basis of a strike is pay-us-or-we-disrupt-your-business. That's extortion.

It also doesn't matter that most labor issues are resolved with strikes--if there's the threat of a strike that's extortion. Both sides know what will happen if they don't agree, it doesn't need to be stated.

There is no corresponding take-my-offer-or-starve, the company that didn't hire you doesn't do anything to interfere with getting a different job.

 

[Loren Pechtel]

Public employees should treat their city and state pension promises like what they really are: funding 100% of your retirement with junk bonds. Any financial planner would tell you that is an extremely poor strategy. The union leaders who negotiated such should be criminally liable for gross negligence.

No--it's not a matter of junk bonds, it's a matter of the city's taxing authority.

It's very bright on their part--they get the agreements without causing too much squawk and once the reality becomes known it's legally binding. Require 100% pension funding as the top budget item and we wouldn't see this sort of garbage.

- - - Updated - - -

Junk bonds do sometimes pay off. Some city and state governments will be able to honor these pensions. Therefore, it shouldn't be construed as fraud. A seller of junk bonds is not guilty of fraud. It is simply a demonstrably poor strategy to rely on them 100% and investing entirely in a single entity. I put the bulk of the blame on the side accepting a strategy that essentially amounts to investing entirely in junk bonds in a single entity.

A small, sustainable pension funded by the public is fair to offer if desired, plus private diversified retirement accounts with both employee and employer contributions for anything larger than a basic stipend.

Why should pensions be financed by bonds, junk or not, instead of through collected taxes? Wouldn't the fiscally responsible thing for municipalities be to figure out what your obligations are and then adjust the tax rate accordingly so you bring in enough to fund your obligations?

The problem isn't pensions. The problem is when politicians under the thrall of Grover Norquist decide to start deferring payments instead of requesting an appropriate level of funding that will meet the city's obligations.

Cities like Detroit never seem to have a problem finding money to pay for stadiums and other multimillion dollar business tax concessions. You'd think they'd be able to handle pension funding they had a had in negotiating.

Don't blame Norquist for something that's been widespread and long term.

 

[laughing dog]

Rejecting reality doesn't make it go away.

Irony, thy name is Loren Pechtel.

Strikes are extortion and union leaders would be in jail if they weren't legally protected from the reality of their acts.

You are simply wrong. Are you under the impression that people must work? That is a rather odd position for a self-proclaimed "moderate libertarian".

The basis of a strike is pay-us-or-we-disrupt-your-business. That's extortion.

No, the basis is "pay us what we want" or we don't work. That is basic capitalism.

It also doesn't matter that most labor issues are resolved with strikes--if there's the threat of a strike that's extortion. Both sides know what will happen if they don't agree, it doesn't need to be stated.

Most labor issues are not resolved with strikes. Nor is the threat of a strike on horizon in most negotiatins. You are simply have no idea what you are talking about.

There is no corresponding take-my-offer-or-starve, the company that didn't hire you doesn't do anything to interfere with getting a different job.

Do you mean the company that you are employed? They most certainly can. And it is not always the case that there are open jobs available. However, the firm can always move or hire scabs.

Sorry, but your argument that a strike or (more laughably) a strike threat is extortion is is based on ignorance and poor reasoning.

 

[Bronzeage]

Would you sign a contract under duress?

How about addressing the issue rather than derailing?

- - - Updated - - -

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

Typical rhetorical anti-labor nonsense. And please do not even try the "strikes are extortion" horseshit, because
1) most labor agreements are not the result of strikes or threats of strikes, and
2) a strike is no more extortion than "take my offer or starve".

Rejecting reality doesn't make it go away.

Strikes are extortion and union leaders would be in jail if they weren't legally protected from the reality of their acts. The basis of a strike is pay-us-or-we-disrupt-your-business. That's extortion.

It also doesn't matter that most labor issues are resolved with strikes--if there's the threat of a strike that's extortion. Both sides know what will happen if they don't agree, it doesn't need to be stated.

There is no corresponding take-my-offer-or-starve, the company that didn't hire you doesn't do anything to interfere with getting a different job.

There's no derail here. Just your assertions that people who have property have more rights than people who work for a living.

If a business owner can combine his property with other property owners and form a corporation, which has legal protection under the law, why can't working people form a corporation to combine their labor?


For some reason you call it extortion when a group of workers agree to cooperate and increase the value of their labor, but not when a corporation tells a worker he must work in unsafe situations in order to increase company profits.

 

[Canard DuJour]

There is no corresponding take-my-offer-or-starve, the company that didn't hire you doesn't do anything to interfere with getting a different job.

Garbage.

Firstly, "the company that didn't hire you" isn't relevant. The one that did is. That employer can do plenty to interfere with your getting another job. Shitty reference, blacklists, a few phone calls.. it's far easier for an employer to keep a worker out of a given trade than for workers to stop an employer trading.

A strike per se isn't equivalent to the threat employers can easily make. Secondary picketing would be equivalent and that's far more difficult.

Without even threatening future employment, merely having to change jobs, possibly move to a different area, with some period of unemployment is an enormous disruption for an employee with family.

You have no idea what you're on about.

The basis of a strike is pay-us-or-we-disrupt-your-business. That's extortion.

No, the basis is "pay us what we want" or we don't work. That is basic capitalism.

Exactly.

 

[Metaphor]

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.

Saints preserve us.

Everybody has the right to withhold their labour (that is, strike).

If you think it is morally wrong to withhold your labour, don't do it.

If you think everyone should be forbidden from withholding their labour, you are literally advocating slavery. Not 'literally' in a figurative sense: 'literally' in a literal sense.