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

[cpwill]

Then pay me the money up front. They chose to defer the salary. If they renege, it's theft.

I'm fully in favor of changing public employee compensation to salary up-front. Agree wholeheartedly. I think we'd even get a higher quality employee that way.

Unfortunately, calling something theft (and, remember, it's not theft when the government does it ) doesn't change the math. The math is that (broadly speaking, I don't know what state you are in or likely the particulars of that state's pension program) our public pensions are unsustainable, at the State and - though it might take a bit longer - Federal level. They are going to be changed, they are going to be reduced, and even as the benefits are reduced, the portions of our income that are taken to pay for them are likely going to be increased. Our emotional reaction to that likely series of events is immaterial to whether or not it will occur, and so it is wiser for us to plan for it now, as opposed to being even angrier when we are taken by surprise.

My personal preference is to freeze everyone's pension where they are currently at (so, for example, if you are 1/3rd of the way through a full retirement, you will get exactly what you have earned up to this date - about 1/3rd of your pension down the road), and shift to 401(k) matching so as to level the pain out and keep it from ever being too jarring or extreme, while still protecting the employees who have invested the most in the current system from losing what they've built up in years served. When you're in a hole, stop digging.

 

[Bullseye]

Thanks. I'm hoping to collect the pension that I'm vested in. The state runs a surplus every year, so it can afford to deliver on its promise.

May I ask what state?

 

[MTAtech]

[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.

NY, where I live, has a fully funded system. Those that don't can do what they promised employees -- fund their pensions!

 

[Bullseye]

You are ignoring the reality that the Federal government takes in massive amounts of money and only a very small amount would be needed to cover the SS shortfall down the road.
https://www.thebalance.com/current-u-s-federal-government-tax-revenue-3305762

NO, I am absolutely not overlooking the "massive amounts of money" the government takes in. What you are overlooking is that money is already spent and we have BORROW hundreds of billions more just to get through the year. Social security pays out nine hundred billion each year - about a quarter of our total spending. So no, "a very small amount" won't cover it.

As I have said, I take a very conservative approach to this matter. You pay your already incurred financial obligation first before you take on new ones. That is the fiscally prudent and honorable thing to do and the thing we must do.

Please note that a little over a quarter of that revenue comes from SS taxes. That means that in a future year with a shortfall where those specific SS revenues do not meet the payout for SS benefits, we still have nearly 3/4 of the federal budget, or in 2019, about 2.2 trillion dollars, to make up that shortfall.

LOL, only if we don't pay our other bills. Thank revenue is not net of costs, dude. That's the money we use to run government.

 

[VanceMack]

You cant create a system, hire people, have people dedicate a career to that system in good faith, only to renege on your retirement promises because you failed to manage your assets and prepare accordingly. What oyu CAN do is draw a line in the sand...stop making the same mistakes, pay off your obligations, and go forth and sin no more. Many of the municipalities have recognized this by understanding the value of contracting out previously held government jobs. More should do that. Where governments continue to promise retirement annuities they should be REQUIRED to pay as you go and fund them.

 

[VanceMack]

That we are HAVING this discussion...and discussing the viability of social security, and welfare programs, and every other program only further illustrates the suicidal nature of ignoring our immigration problems and continuing to bring in people that we cannot sustain.

 

[Neomalthusian]

NY, where I live, has a fully funded system. Those that don't can do what they promised employees -- fund their pensions!

Why didn’t workers in some states fund their own pensions? Pensioners made a corrupt deal with the taxpayers of the day to make promises and not adequately fund them.

Shouting “fund your pensions” is ignorant. Because who are you shouting this at? It is older Americans who need to experience the pain of the unfunded liabilities. They are the ones that created the unfunded liabilities.

 

[cpwill]

You cant create a system, hire people, have people dedicate a career to that system in good faith, only to renege on your retirement promises because you failed to manage your assets and prepare accordingly

Sure you can. You just shouldn't.

What oyu CAN do is draw a line in the sand...stop making the same mistakes, pay off your obligations, and go forth and sin no more. Many of the municipalities have recognized this by understanding the value of contracting out previously held government jobs. More should do that. Where governments continue to promise retirement annuities they should be REQUIRED to pay as you go and fund them.

If that gets written into law, expect it to face opposition from both sides of the negotiating table - government and union leadership. Making unfulfillable promises is good politics, inside union leadership or out.

 

[cpwill]

Why didn’t workers in some states fund their own pensions? Pensioners made a corrupt deal with the taxpayers of the day to make promises and not adequately fund them.

Shouting “fund your pensions” is ignorant. Because who are you shouting this at? It is older Americans who need to experience the pain of the unfunded liabilities. They are the ones that created the unfunded liabilities.

I don't know if I'd take it to the "they need to experience pain!!!!" level - that seems more vindictive than a wise basis for policy.

But yeah, the current situation is sort of like yelling at the banker because your parents wrote you a bad check.

 

[Neomalthusian]

I don't know if I'd take it to the "they need to experience pain!!!!" level - that seems more vindictive than a wise basis for policy.

It’s current law and default policy that the elderly and the pensioners themselves incur minimal if any burden for the unfunded liabilities. This means the unfunded liabilities have to fall somewhere, which means they fall onto a generation of mostly non-pensioners, who must also fund their own retirement if they’re going to have any. It’s a form of generational theft, and every dollar of unfunded liability is a dollar of evidence that pensions don’t work.

But yeah, the current situation is sort of like yelling at the banker because your parents wrote you a bad check.

I agree. Yelling at current taxpayersayers to “fund the unfunded liabilities!” is hypocritical. Pensioners themselves and their peers much more than any current taxpayers are who caused the unfunded liability. Entitled pensioners just sit back and say “pay the pension, take it from general taxes, I was promised.” Promised by whom? Not current taxpayers. Maybe former taxpayers, whose representatives in government articulating the so-called “promise” were themselves also pensioners of the same system.

But none of those facts are convenient to entitled pensioners. They still want to think of their pension as being paid by some rich public sector boss who is just greedy and unscrupulous and doesn’t want to pay people their pensions. This defies and ignores the way pension funding is actually set up to work.

 

[Kushinator]

That we are HAVING this discussion...and discussing the viability of social security, and welfare programs, and every other program only further illustrates the suicidal nature of ignoring our immigration problems and continuing to bring in people that we cannot sustain.

Immigration is the solution to our sub-replacement fertility trajectory... and when i say our, i speak of (most) of the developed world. You lack the knowledge to add anything of value to this discussion.

 

[vegas giants]

Why didn’t workers in some states fund their own pensions? Pensioners made a corrupt deal with the taxpayers of the day to make promises and not adequately fund them.

Shouting “fund your pensions” is ignorant. Because who are you shouting this at? It is older Americans who need to experience the pain of the unfunded liabilities. They are the ones that created the unfunded liabilities.

Nope. A deal was made. Don't care if you don't like it. A deal is a deal.

 

[VanceMack]

Immigration is the solution to our sub-replacement fertility trajectory... and when i say our, i speak of (most) of the developed world. You lack the knowledge to add anything of value to this discussion.

:lamo

Its comical when people like you make such inanely stupid comments and then want to try to attack someone elses intelligence.

Immigration is a great thing. We bring in around a million LEGAL immigrants a year. Legal immigration isnt the problem. I would think anyone with a pulse and a measurable IQ would have understood that. Maybe I should have used pictures...stick figures...etc.

 

[Neomalthusian]

Nope. A deal was made. Don't care if you don't like it. A deal is a deal.

My neighbor and I just struck a deal that you are going to pay for our new shared driveway and utility extension. Please PM me and I’ll tell you where to send the money. A deal is a deal.

 

[MTAtech]

Why didn’t workers in some states fund their own pensions? Pensioners made a corrupt deal with the taxpayers of the day to make promises and not adequately fund them.

Shouting “fund your pensions” is ignorant. Because who are you shouting this at? It is older Americans who need to experience the pain of the unfunded liabilities. They are the ones that created the unfunded liabilities.

So, you lay this problem at the feet of the employees? Public workers made a deal with local governments -- we'll work for generally less than we can get in the private sector, in return for better job security and a funded retirement.

Why didn’t workers in some states fund their own pensions? Because that wasn't the deal.

 

[vegas giants]

My neighbor and I just struck a deal that you are going to pay for our new shared driveway and utility extension. Please PM me and I’ll tell you where to send the money. A deal is a deal.

You and your neighbor can strike any deal you like. The deal was made with the state and the retirees. If you can't live up to this deal why should it be believed you would live up to any deal?

 

[Neomalthusian]

So, you lay this problem at the feet of the employees?

Absolutely, as well as older taxpayers specifically. A modest benefit cut as well as some sort of age and/or wealth-targeted tax increase would vastly more equitably distribute the unfunded liability than current law does.

Public workers made a deal with local governments

Public workers made a deal with older taxpayers back in the day that should have been illegal, because that deal entailed creating liabilities that would be paid by a generation of mostly non-pensioners.

 

[haymarket]

NO, I am absolutely not overlooking the "massive amounts of money" the government takes in. What you are overlooking is that money is already spent and we have BORROW hundreds of billions more just to get through the year. Social security pays out nine hundred billion each year - about a quarter of our total spending. So no, "a very small amount" won't cover it.

LOL, only if we don't pay our other bills. Thank revenue is not net of costs, dude. That's the money we use to run government.

Baloney. Even worse - yesterdays baloney that is on its way out. That money is not "already spent". Trump just came up with billions and billions and billions of dollars - $70 billion - to spend more on the military ... that was NOT already spent... funny how that happened.

Feel free to show me the shortfalls each year for the years you project and then show me how we could not take that from the budget because you claim there will not be money there.

SS is an obligation we have already made and the people getting the benefits have fulfilled their end of the deal. The government must fulfill their end as well or we are worth nothing as a people.

You don't want to go that route? Fine. We can raise FICA taxes now and pop the cap on contributions while freezing benefit levels and much of the problem simply vanishes. All we need is some leadership on this issue and the will to tell the right wingers to shove it with their doom and gloom "lets screw the people" ravings.

 

[vegas giants]

Absolutely, as well as older taxpayers specifically. A modest benefit cut as well as some sort of age and/or wealth-targeted tax increase would vastly more equitably distribute the unfunded liability than current law does.



Public workers made a deal with older taxpayers back in the day that should have been illegal, because that deal entailed creating liabilities that would be paid by a generation of mostly non-pensioners.

A deal is a deal. Break this deal and the state can not be trusted to ever make a deal again

 

[Neomalthusian]

You and your neighbor can strike any deal you like. The deal was made with the state and the retirees. If you can't live up to this deal why should it be believed you would live up to any deal?

Deals made between two parties that pin a cost on a third-party are usually not legally enforceable. In the case of defined benefit pensions, they have been legally enforceable.

You’re engaging in thinking error by addressing some unnamed “you.” “You” need to live up to “your” end of the deal!” Who do you imagine you are talking to? There’s no one there. You’re basically shouting at a mirror.

 

[cpwill]

Immigration is the solution to our sub-replacement fertility trajectory... and when i say our, i speak of (most) of the developed world. You lack the knowledge to add anything of value to this discussion.

That depends on the flavor of immigration, and the makeup of our social safety net. We need to have a policy shifting immigration in favor of higher-performers v family-chain-migration of low-skill workers if we want to make this argument.

 

[Neomalthusian]

A deal is a deal. Break this deal and the state can not be trusted to ever make a deal again

That’s exactly right, at least insofar as pensions are concerned. States are agreeing that they cannot trust themselves to make pension deals anymore, and never could be in the first place. It’s acknowledgement that pensions don’t work. They are very bad compensation tools that create massive long-term problems. States are moving toward phasing out defined benefit pensions, because of their horrible track record in terms of sustainability. Even if 10 out of 50 states had badly troubles pensions, even that is a terrible failure rate. Like abysmally terrible. No one can trust themselves to administer pensions correctly. Because they’re just terrible. Union managed pensions are a freaking nightmare too. So are public sector‘s. They’re just horrible. Bad ideas eventually go extinct. That’s what we are seeing with pensions. They’re bad ideas, and they’re going extinct. That is the way it has to be. You can’t rely on very bad ideas that don’t work indefinitely.

 

[vegas giants]

Deals made between two parties that pin a cost on a third-party are usually not legally enforceable. In the case of defined benefit pensions, they have been legally enforceable.

You’re engaging in thinking error by addressing some unnamed “you.” “You” need to live up to “your” end of the deal!” Who do you imagine you are talking to? There’s no one there. You’re basically shouting at a mirror.

But they ARE enforceable in this case. A deal with the state will ALWAYS pin the cost on the taxpayers. ALWAYS EVERYTIME.


You are saying a deal is NEVER good with the state.

 

[vegas giants]

That’s exactly right, at least insofar as pensions are concerned. States are agreeing that they cannot trust themselves to make pension deals anymore, and never could be in the first place. It’s acknowledgement that pensions don’t work. They are very bad compensation tools that create massive long-term problems. States are moving toward phasing out defined benefit pensions, because of their horrible track record in terms of sustainability. Even if 10 out of 50 states had badly troubles pensions, even that is a terrible failure rate. Like abysmally terrible. No one can trust themselves to administer pensions correctly. Because they’re just terrible. Union managed pensions are a freaking nightmare too. So are public sector‘s. They’re just horrible. Bad ideas eventually go extinct. That’s what we are seeing with pensions. They’re bad ideas, and they’re going extinct. That is the way it has to be. You can’t rely on very bad ideas that don’t work indefinitely.

No you are saying the state can NEVER make a deal with anyone. They can not make a deal to build a bridge because a year from now they may just want out of it.

 

[Zyphlin]

I'm part of a public pension plan job. When my wife and I began retirement planning, it's been with the assumption that said pension will absolutely not be there. If it is, that's wonderful....but I'm not ignorantly relying on the premise that people who are working are going to be paying for me while I don't work in 20ish years. If it's there, awesome, but I see a significant chance that they may not be...at least not in the same fashion they are currently.