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Public Pension Crisis: Two options remain -- Implosion or Reform

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Neomalthusian

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[h=1]The end of the road for America’s public pensions crisis?[/h]

State and local pensions are badly underfunded. There are usually two types of thought processes concerning public pensions. One is the entitled "I earned my pension, fund it!" mentality, which is basically head-in-the-sand denialism like we saw on full display in Detroit. The other is the one that recognizes that you can't fix a disaster by doing more of the thing that caused the disaster.

I start this thread based on a digression in another one.

Eventually we will be cutting benefits in a lot more pensions. This will pick up significantly when Generations Y and Z wake up and realize what's been going on.
 
Neomalthusian said:
[h=1]The end of the road for America’s public pensions crisis?[/h]

State and local pensions are badly underfunded. There are usually two types of thought processes concerning public pensions. One is the entitled "I earned my pension, fund it!" mentality, which is basically head-in-the-sand denialism like we saw on full display in Detroit. The other is the one that recognizes that you can't fix a disaster by doing more of the thing that caused the disaster.

I start this thread based on a digression in another one.

Eventually we will be cutting benefits in a lot more pensions. This will pick up significantly when Generations Y and Z wake up and realize what's been going on.
Click to expand...

Do you have any hard evidence to present that states will not be able to pay pensions in the future?
 
Neomalthusian said:
[h=1]The end of the road for America’s public pensions crisis?[/h]

State and local pensions are badly underfunded. There are usually two types of thought processes concerning public pensions. One is the entitled "I earned my pension, fund it!" mentality, which is basically head-in-the-sand denialism like we saw on full display in Detroit. The other is the one that recognizes that you can't fix a disaster by doing more of the thing that caused the disaster.

I start this thread based on a digression in another one.

Eventually we will be cutting benefits in a lot more pensions. This will pick up significantly when Generations Y and Z wake up and realize what's been going on.
Click to expand...


You cannot lump all public pensions into one. Most states have their own system, and it dependent on that particular state how well it does. Not all public pensions are doing badly or are underfunded. Some actually are pretty self funded and are doing well.
 
i am vested in a public pension that i accepted as deferred salary. i worked for a much lower wage than my education and skills should have warranted, and the pension was one of the benefits intended to offset that low wage. changing the terms now amounts to wage theft. it's the same thing as if Neomalthusian's employer from 1999 sent him a letter stating that his wage back then was unsustainable and demanding that he pay the difference. my state consistently runs surpluses, and is about to come into a lot of money from internet sales taxes. shore up the ****ing pension.
 
Clearly, something has to give. Voters need only look to Oklahoma to appreciate what tax cuts can mean for public services. Teachers have not received a raise in a decade and the only way they can afford to accept the pay, the third-lowest in the U.S., is by negotiating a four-day school week in 90 districts, freeing teachers up to take jobs at Walmart on Mondays to make ends meet.
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Presumably the guarantee of a pension was another factor in making a decade of declining real wages halfway palatable. You can call it "head-in-the-sand denialism" but I can imagine most people readily understand why it sucks to accept lower pay in exchange for deferring some of your compensation, only to have the latter taken away from you.
 
Helix said:
i am vested in a public pension that i accepted as deferred salary. i worked for a much lower wage than my education and skills should have warranted, and the pension was one of the benefits intended to offset that low wage. changing the terms now amounts to wage theft. it's the same thing as if Neomalthusian's employer from 1999 sent him a letter stating that his wage back then was unsustainable and demanding that he pay the difference. my state consistently runs surpluses, and is about to come into a lot of money from internet sales taxes. shore up the ****ing pension.
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We actually have something in common. Imagine that
 
haymarket said:
Do you have any hard evidence to present that states will not be able to pay pensions in the future?
Click to expand...

Yes, one of the problems (using Social Security as an example) with defined benefit pensions is that the cost of living (the basis for pension benefits) is rising faster than wages (the basis for pension funding). You cannot expect a fixed percentage of income (the flat FICA payroll tax) to support rising (via COLA) benefit payments unless income rises as fast as inflation.


EDIT: There are also other factors at play such as the changing ratio of current workers to current retirees and that retirees are living longer after retirement yet workers enjoy a fixed retirement age.
 
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In the late '40s a lot of babies were being born, a lot more than in the early '40s. The reason for that is well known. It wasn't a problem, but then, the birth of a baby was a natural occurrence and didn't cost $30,000 like it does today.

In the '50s, there suddenly weren't enough schools. The reason for that is also well known, and was a natural result of the sudden increase in births. We built more schools, of course.

Now, there's a lot more people retiring than there were a few years ago. The reason for that should be well known, but it seems to be a crisis that can only be solved by screwing people out of pensions they've worked and paid for.

It's a crisis, don't you know, the sky is falling! Who could have predicted this?
 
ttwtt78640 said:
Yes, one of the problems (using Social Security as an example) with defined benefit pensions is that the cost of living (the basis for pension benefits) is rising faster than wages (the basis for pension funding). You cannot expect a fixed percentage of income (the flat FICA payroll tax) to support rising (via COLA) benefit payments unless income rises as fast as inflation.


EDIT: There are also other factors at play such as the changing ratio of current workers to current retirees and that retirees are living longer after retirement yet workers enjoy a fixed retirement age.
Click to expand...

I understand the theory. But can you or anyone else show the the actual numbers where states will not be able to make good on their pensions?
 
Neomalthusian said:
[h=1]The end of the road for America’s public pensions crisis?[/h]

State and local pensions are badly underfunded. There are usually two types of thought processes concerning public pensions. One is the entitled "I earned my pension, fund it!" mentality, which is basically head-in-the-sand denialism like we saw on full display in Detroit. The other is the one that recognizes that you can't fix a disaster by doing more of the thing that caused the disaster.

I start this thread based on a digression in another one.

Eventually we will be cutting benefits in a lot more pensions. This will pick up significantly when Generations Y and Z wake up and realize what's been going on.
Click to expand...

Fund it. You can afford what is important
 
ttwtt78640 said:
Yes, one of the problems (using Social Security as an example) with defined benefit pensions is that the cost of living (the basis for pension benefits) is rising faster than wages (the basis for pension funding). You cannot expect a fixed percentage of income (the flat FICA payroll tax) to support rising (via COLA) benefit payments unless income rises as fast as inflation.


EDIT: There are also other factors at play such as the changing ratio of current workers to current retirees and that retirees are living longer after retirement yet workers enjoy a fixed retirement age.
Click to expand...


Some plans have Tiers to adjust for the population of workers being less, and having more time in before receiving full benefits. This, I believe, is fair. The new employees come in knowing what the plan is in their tier and employees in tiers before them do not get screwed out of what was basically, a contract with employer.
 
haymarket said:
I understand the theory. But can you or anyone else show the the actual numbers where states will not be able to make good on their pensions?
Click to expand...

Again, I will address Social Security since 'states' is to broad (and data is harder to find).

Without changes in projected revenue (FICA tax increases) the 'pay as you go' revenue would require about a 20% reduction in benefits (starting in about 2034).

https://www.marketwatch.com/story/t...stees-report-contains-no-surprises-2018-06-11
 
Neomalthusian said:
[h=1]The end of the road for America’s public pensions crisis?[/h]

State and local pensions are badly underfunded. There are usually two types of thought processes concerning public pensions. One is the entitled "I earned my pension, fund it!" mentality, which is basically head-in-the-sand denialism like we saw on full display in Detroit. The other is the one that recognizes that you can't fix a disaster by doing more of the thing that caused the disaster.

I start this thread based on a digression in another one.

Eventually we will be cutting benefits in a lot more pensions. This will pick up significantly when Generations Y and Z wake up and realize what's been going on.
Click to expand...

One thing that states and cities have going for them is that they are immortal. They will always have a revenue stream, so it's just a matter of balancing the two better.

Federal pensions and benefits are not a problem. The Feds can't run out of money. The Feds should be a much larger part of the pension system, because they can simply add money when it is needed, paying for benefits in real time. Putting pension responsibilities on states and cities is almost as much of a problem for the economy as private sector benefits (which are also just saved income) are.

Pensions and other defined benefits are becoming extinct in the private sector (unless you are at the top), probably for good reason. The temptation to raid the coffers for immediate gratification is just too great, and there is not nearly enough oversight, or rules, on this. (I once represented a steelworker who was 0-for-7 on pensions, because every company he worked for raided the pension funds before they went under.) If you were lucky, your pension plan was "converted" to a 401K by the employer, usually at a loss.

It is all deferred compensation. If your employer can afford to contribute to a retirement plan, they can afford to pay you more in the present instead. For that reason, savings plans are a drag on present income, so they are a drag on aggregate demand. Saving for retirement is obviously a good thing for individuals, but it's a bad thing in the aggregate, if it is paid for by the private sector, to the extent that pension funds are not plowed back into real investment (investment in production, not money-farming).

The main problem with "saving for retirement" as a country is that the safest savings are simply dollars; but dollars saved out of income are a drag on the economy (lost aggregate demand). Since it is the economy that ultimately pays for everything, it would be best to maximize production (and therefore income), and simply distribute that income in a more equitable fashion, including taking care of retired workers. But that would take a lot more government involvement, and this is America, where, for no good reason, people put more trust in companies than they do in their government. (Present government excepted, of course, since Trump is an idiot, and he isn't interested in the welfare of Americans.)
 
ttwtt78640 said:
Again, I will address Social Security since 'states' is to broad (and data is harder to find).

Without changes in projected revenue (FICA tax increases) the 'pay as you go' revenue would require about a 20% reduction in benefits (starting in about 2034).

https://www.marketwatch.com/story/t...stees-report-contains-no-surprises-2018-06-11
Click to expand...

Why would it require any reduction in benefits. I have never seen any stats which say the government will not have the funds to cover the projected shortfall. Have you?
 
vegas giants said:
Fund it. You can afford what is important
Click to expand...

The problem with that snippy and oversimplfied 'solution' is that fixed revenues support only fixed spending. Budgeting is the process of allocating income to cover expenses. If you wish to allocate more of your income to one budget catagory (increase sending in that area) then you must reduce spending in some other budget category. What other spending should be cut to make more funds available to cover the 'more important' pension fund shortfalls?

The idea of raising taxes is obviously going to be touted as the "fund it' solution but - how is it fair to current (or future) taxpayers to be forced to make up for the stupidity (corruption or greed) of past management promises? The 'but you promised' argument falls short of explaining why anyone should stay in a given state (or city) that demands that they pay added taxation for past corruption or fantasy accounting used to make those (decades old?) promises.
 
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haymarket said:
Why would it require any reduction in benefits. I have never seen any stats which say the government will not have the funds to cover the projected shortfall. Have you?
Click to expand...

I provided you the link - it's up to you to read it.
 
ttwtt78640 said:
The problem with that snippy and oversimplfied 'solution' is that fixed revenues support only fixed spending. Budgeting is the process of allocating income to cover expenses. If you wish to allocate more of your income to one budget catagory (increase sending in that area) then you must reduce spending in some other budget category. What other spending should be cut to make more funds available to cover the 'more important' pension fund shortfalls?

The idea of raising taxes is obviously going to be touted as the "fund it' solution but - how is it fair to current (or future) taxpayers to be forced to make up for the stupidity (corruption or greed) of past management promises? The 'but you promised' argument falls short of explaining why anyone should stay in a given state (or city) that demands that they pay added taxation for past corruption or fantasy accounting used to make those (decades old?) promises.
Click to expand...

Civil service jobs are open to everyone. If you think its such a great deal get one. I say bring back pensions for everyone. Make the Feds do it.
 
haymarket said:
Do you have any hard evidence to present that states will not be able to pay pensions in the future?
Click to expand...

Playing dumb never wins you arguments, so I'm not sure why you do this. There is plenty of evidence that the current funding structure of public pensions in numerous states will not be able to pay benefits. The evidence is called the sum of all GASB 68 unfunded net pension liabilities.

holbritter said:
You cannot lump all public pensions into one. Most states have their own system, and it dependent on that particular state how well it does. Not all public pensions are doing badly or are underfunded. Some actually are pretty self funded and are doing well.
Click to expand...

You're absolutely right. However that doesn't mean there isn't crisis level underfunding among the nation's pensions.

Helix said:
i am vested in a public pension that i accepted as deferred salary.
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A pension is a pension. It's funded by contributions from plan participants. Plans whose past participants refused to contribute sufficiently to fund the benefits are the ones that typically have major funding problems today.

i worked for a much lower wage than my education and skills should have warranted, and the pension was one of the benefits intended to offset that low wage.
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Unless plan participants (which includes employee contributes matched by taxpayers) put enough money into the plans, then the benefits "intended to offset the low wage" was a scam. You got scammed, and you participated in scamming yourself by not deferring enough of your pay into the plan.

changing the terms now amounts to wage theft.
Click to expand...

Unfunded pension liabilities amount to theft, unless benefits are cut commensurately with any general tax bailouts needed to address the funding crisis.

shore up the ****ing pension.
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Shoring up the pension requires a grand bargain, i.e. a tax bailout coupled with benefit cuts. Another possibility would be an age-based tax or contribution (i.e. the older you are, the more you pay). There is a reason older people need to feel a significant share of the pain. That reason is that they were the ones who got too much of a tax break by underfunding the pensions decades ago.
 
vegas giants said:
Civil service jobs are open to everyone. If you think its such a great deal get one. I say bring back pensions for everyone. Make the Feds do it.
Click to expand...

OK, and I say not, thus our votes cancel each other.
 
ttwtt78640 said:
I provided you the link - it's up to you to read it.
Click to expand...

But I have read up on this extensively. I have never seen one bit of evidence that the US government cannot meet the shortfall in SS payments.

We can raise the SS tax.
We can use other government revenues to meet the shortfall.

There is no reason to cut benefits as promised.

My father was born in 1925 and like many in the Greatest Generation was a strong fiscal conservative. He taught me to be the same. One of his rules was you never ever incur a new debt when need the money to pay for ones you have already incurred. In other words, you don't go out and buy a new car when you have not yet paid off your old one. I believe that is the conservative economic philosophy and I support it.

Se we as a nation have a debt in terms of SS payments promised to people who earned them. We must pay those bills before we incur any new debts. If that means going into the regular budget aside from FICA payments - we simply do that. It is the fiscally conservative thing to do... not to mention the honorable thing to do as well.
 
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ttwtt78640 said:
OK, and I say not, thus our votes cancel each other.
Click to expand...

Other countries can do this. Its time American citizens got the full benefit of being one of the richest countries o the planet. Another aircraft carrier does nothing for me
 
Neomalthusian said:
Playing dumb never wins you arguments, so I'm not sure why you do this. There is plenty of evidence that the current funding structure of public pensions in numerous states will not be able to pay benefits. The evidence is called the sum of all GASB 68 unfunded net pension liabilities.QUOTE]
Click to expand...
please show me the states which will not have the money to pay promised pension benefits.
Click to expand...
 
haymarket said:
But I have read up on this extensively. I have never seen one bit of evidence that the US government cannot meet the shortfall in SS payments.
Click to expand...

Meet it how? SS is a 'pay as you go' system that had previously built up a surplus (the 'trust me' fund) which is fast being depleted. Once the 'trust me' fund is gone then FICA revenues will no longer support SS benefit obligations (promises?) meaning that either FICA taxes must be raised, SS benefits cut or a combination of both.
 
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