• This is a political forum that is non-biased/non-partisan and treats every person's position on topics equally. This debate forum is not aligned to any political party. In today's politics, many ideas are split between and even within all the political parties. Often we find ourselves agreeing on one platform but some topics break our mold. We are here to discuss them in a civil political debate. If this is your first visit to our political forums, be sure to check out the RULES. Registering for debate politics is necessary before posting. Register today to participate - it's free!

Moody’s Downgrades Chicago Credit Rating To ‘Junk’ Bond Status

Moody's holds the City accountable, points to the irresponsible SSC decision and Rahm whines about it. Amusing as hell.

Rahm....now that guy is a clown.

I lived in Chicago as a young married woman and loved it. Sadly, I think it's just too far gone. It may resemble Detroit soon.
 
Rahm....now that guy is a clown.

I lived in Chicago as a young married woman and loved it. Sadly, I think it's just too far gone. It may resemble Detroit soon.


As well as a Clintonista.


Oh.....that was you walking in the stiletoes downtown, eh? :2razz:
 
I do hate the cold and winterweather Monte. Oh and the other 6 months of missing sunshine. But somebody other than Joe Walsh has to keep them on their toes around here. :2razz:

Joe Walsh!! Life's been good.
 
Another big problem, is unrealistic assumptions about returns on pension plan assets. This bias toward unrealistic assumptions occurs both in the private and public sectors. For purposes of illustration, below is the data for IBM, which has an underfunded corporate pension plan:

IBMPension_Assumptions_Example.jpg


The plan assumes an 8% annual return. To put this assumption into a larger context, the 30-year Treasury yield is currently around 3.1%. An assumption somewhat above the Treasury yield might not be too bad, but one that is more than 2.5 times that yield is inflated. It is also inconsistent with the conservatism principle that is at the heart of accounting, but the application of that principle falls short of the ideal.

The end result is that firms can readily maintain unrealistic pension plan assumptions in their financial statements (with the overly optimistic assumptions being confined to the notes to the financial statements--that's why due diligence is so important). In practical terms, the rosy assumptions rationalize a pension funding level that is consistently below what is actually required. Over time, a large unfunded pension liability accumulates.

IMO, the underfunded nature of public and private pensions argues strongly for pension reforms that would require full funding (capping the underfunded liability at a modest percentage of the overall pension obligation to allow for fluctuations in returns and costs) and place a ceiling on estimated returns (perhaps no more than 100 basis points above the average 30-year Treasury yield over a set period of time). More robust funding requirements and more realistic assumptions about returns would greatly reduce the risk of chronic underfunding and the accumulation of substantial unfunded liabilities. Moreover, if returns proved higher than expected, the difference between pension assets and pension obligations would allow for reduced funding for a period of time, hence funding levels would, over the longer-term, be appropriate with respect to the actual pension obligations.

You make an excellent point, and you're quite right. Here in Canada, the rates of return on pension investments have been quite good, with the exception of the financial crisis worst years and have often seen double digit returns. Perhaps in Canada the variety of investments allowed within a pension plan are broader.

I'd also note that in pension plans here, the pension board/administration sets the deposit rates for both the employees and employers, based on actuarial models, investment return history, age of current retirees, number of current employees, etc. It is not a fixed or bargained amount or percentage of salary. Neither the employees nor the government has any control over the rate.

I feel bad for people in the US who've worked their whole lives and retired on a promise of pension income that they had every right and expectation to receive. Planning for your needs in retirement isn't something you can do on the fly or in your late 60s, 70s or 80s. Governments, in my view, have an obligation to keep promises made to those retired but should also have the ability to bring the plans more into financially viable status going forward. But there's no question in my mind that governments in the US have badly mishandled many public sector pension plans.
 
Another Democrat-run major city going down the toilet. But i'm sure that somehow and someway, the blame will be laid on Republicans.
 
Just cancel the pensions. These are govt employees which means they are affirmative action hires and should have never had the job in the first place. The taxpayers owe them nothing.

Well, that's absurd on pretty much every level.
 
I do hate the cold and winterweather Monte. Oh and the other 6 months of missing sunshine. But somebody other than Joe Walsh has to keep them on their toes around here. :2razz:

Bootcamp, made the mistake of being there when it snowed.
 
Back
Top Bottom