71–80 of 86 posts
Earlier quoted context omitted.
OK, so, there are not jobs because the economy doesn't need them. So, the economy is producing the same with less jobs. So, where is the problem for covering the needs of the pensioners?
Haha no. There's too much wrong with your understanding for me to help. Good luck but you're on your own.
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That doesn't follow at all and isn't implied by the above model.
Ok, why are we unable to find productive work for the workers?
The point is, it's logically and economically possible. You seemed to be under the impression that this situation is inherently contradictory, when it is not.
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Imagine a desert island with three inhabitants: W, P, & U. W climbs trees every day to fetch coconuts and then swims them across the channel to a neighboring island where she barters them away for drinking water and then swims back with jugs full of water. P used to help W with the tree climbing, but is now too old to do the work. However, he long ago made a deal with W, and she's a man of her word, so she keeps him…
Well, P could take steps to help U learn to help W. e.g. giving them a bit of water, and training them to help W; instead of blaming U for the poor coconut yield. Which in turn would help W yield more coconuts, or be flexible to diversify how they get water to be robust against the coconut market. I get how you example illustrates how the amount of P's aren't dependant on the number of U's, but I think this example i…
Why do you want to add so many additional people to my already overcrowded island?!
People will have to pay a little more, a little longer, and take out a little less in some combination. I am sure the actuaries are smart enough to figure it out.
No. That is a dangerous attitude on this. There are limits to how much you can raise through taxes before you trigger a death spiral, where you scare off working age contributors, which increases the burden the rest have to pay, which scares off more contributors, and so on. That's exactly what happened with the dinosaur companies (GM, Bethlehem, etc) with unfunded pension obligations. The "legacy costs" made it so t…
But to address your concern head on - yes, the fund can go broke, and it's not the rest of the public's problem. That's the kind of loss that creates healthy risk aversion and should make for sensible negotiation by labor leaders and the politicians they put into office in order to limit corruption.
People will have to pay a little more, a little longer, and take out a little less in some combination. I am sure the actuaries are smart enough to figure it out.
What should scare people the most is the Illinois pension funds' assumption of ~ 7% real returns going forward. If the market stays flat in real terms for the next decade, which seems at least possible (if not plausible), it's significantly worse than their worst-case scenario, which is already probably unsolvable without some form of default.
Earlier quoted context omitted.
No. That is a dangerous attitude on this. There are limits to how much you can raise through taxes before you trigger a death spiral, where you scare off working age contributors, which increases the burden the rest have to pay, which scares off more contributors, and so on. That's exactly what happened with the dinosaur companies (GM, Bethlehem, etc) with unfunded pension obligations. The "legacy costs" made it so t…
Pension funds are usually funded by the contributions of the qualifying members in their tier, much less by taxes receipts in state funds in some kind of general debt obligation. You may also be confounding private and public pension funds, the latter of which I am guessing makes up the lion's share of what the article is talking about. Of what I know of actuarial work (not much, admittedly,) outlooks are calculated…
I'm not confounding anything; it's the same the problem in both cases: your organization accrued a liability with no asset to pay it, so you had to take the payments from newcomers to this system. Whether that happens within a private or a public pension fund doesn't change the dynamics of the core problem, which is that your organization is at a cost disadvantage to competing organizations, which then spirals out.
The example I gave was the dinosaur companies. Bethlehem offers $15/hour but must take out $1/hour to pay for unfunded pension obligations. NewSteelCorp offers $15/hour but needn't take out anything for legacy pension obligations. Where do the best workers go? And what does that to do the burden on remaining workers?
Likewise, every time you raise SS taxes to cover increased obligations, you're risking the flight of contributors to other countries and the underground economy.
I don't know what you think I'm "confounding" there; I see a recognition of a common pattern that I tried to explicate, with implications for the current problem. "Oh, this is public, not private" is non-responsive.
>Of what I know of actuarial work (not much, admittedly,) outlooks are calculated on the combination of many risk dimensions.
And my point was that the actuaries missed a big dimension, which is that the organization has actual competition. So when you say "oh, we'll just take one more dollar an hour from workers to shore it up, what's the problem?" you're failing to model the loss of contributing workers to companies that don't have to thusly gore them.
You're right that pension funds can retroactively change pension formulas, but they typically don't, and Social Security definitely hasn't cut pensions to something sustainable.
>But to address your concern head on - yes, the fund can go broke, and it's not the rest of the public's problem. That's the kind of loss that creates healthy risk aversion and should make for sensible negotiation by labor leaders and the politicians they put into office in order to limit corruption.
So you agree a pension fund can go broke, but are simply claiming that governments are immune to an analogous problem? I'd say it becomes the public's problem at that point, when there are millions of seniors that expected payments they can't get without raiding other critical government services. Why don't you?
Earlier quoted context omitted.
Pension funds are usually funded by the contributions of the qualifying members in their tier, much less by taxes receipts in state funds in some kind of general debt obligation. You may also be confounding private and public pension funds, the latter of which I am guessing makes up the lion's share of what the article is talking about. Of what I know of actuarial work (not much, admittedly,) outlooks are calculated…
>Pension funds are usually funded by the contributions of the qualifying members in their tier, much less by taxes receipts in state funds in some kind of general debt obligation. You may also be confounding private and public pension funds, the latter of which I am guessing makes up the lion's share of what the article is talking about. I'm not confounding anything; it's the same the problem in both cases: your orga…
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>So what if low birth rates break their system? Birth rates fund our social security system. It keeps the "Ponzi" scheme going. I think I'm having a hard time with it being called a Ponzi scheme. Had an individual invested the amount they put into SS into the market, it would not be a Ponzi scheme, and is essentially a 401K. Is SS is only a Ponzi scheme because of the way the government manages it? If I take a step b…
"Ponzi scheme" as a term is generally overused. It identifies a specific fraud, and things that look sorta vaguely like it may have any number of critical differences in those sorta-vague similarities that result in a completely different outcome, including potentially worse ones. It is not a sufficient analysis of the situation to stick the label "Ponzi scheme" on social security and think anyone has obtained any so…
I know that's a huge oversimplification. As GDP rises so does the tax revenue (assuming politicians stop cutting taxes) so I understand it's a little more nuanced than a simple scheme.
Also, when we had a SS surplus (in the 90s?), the politicians of course spent it all while increasing the debt. I don't think there is anything inherently wrong with the way it works financially, as long as the government manages it properly, which they aren't.
People will have to pay a little more, a little longer, and take out a little less in some combination. I am sure the actuaries are smart enough to figure it out.
It's not that simple when you have politics involved. We will keep borrowing more and kicking the can down road so that the next for the next generation to deal with until we can't borrow anymore. No different than how terribly indebted households keep borrowing and moving debt from credit card to credit card until there run out of options.
What politician is going to ruin his chance of re-election or election by supporting "people having to pay more, a little longer" or "people getting less".
Earlier quoted context omitted.
>Pension funds are usually funded by the contributions of the qualifying members in their tier, much less by taxes receipts in state funds in some kind of general debt obligation. You may also be confounding private and public pension funds, the latter of which I am guessing makes up the lion's share of what the article is talking about. I'm not confounding anything; it's the same the problem in both cases: your orga…
I'm not trying to be combative, but there are significant differences between public and private pensions that I don't think you're accounting for which stem from the legal mandates in the charter for how the public pension assets can be invested and the monopsony on the employment of public servants (e.g., there is no "competing" state trooper battalion operating at a better labor cost advantage). Pension funds do n…
Then you agree that you need to address the parallel's I've drawn if you want to maintain that position?
> (e.g., there is no "competing" state trooper battalion operating at a better labor cost advantage).
Are you reading my comments? In both replies, I already explained how there are relevant ways in public pension funds experience this problem: workers can be scared into other countries, other jurisdictions, other jobs, and the underground economy, with the exact same effect on ability to meet obligations. If you believe this can't happen, you need to flesh it out a bit more.
"It's not like there's another company they can work for lol" is how GM etc got into this mess.
> Pension funds do not necessarily impose an obligation on the operating budget of a municipality. That's what it means to say it can go broke
I don't know any non-trivial sense in which "a massive class of people expected pension payments that will be cut off" doesn't count as the public's problem.
To everyone in the world looking at the this, the problem is that a) lots of people are expecting to receive pension money and b) lots government services need to be provided, and we can't afford to do both.
You're saying it's "not a problem" simply because "you can just reneg on a) while paying b)"? That's a non-standard conception of "not a problem".