The Pension Hole for U.S. Cities and States Is the Size of Japan’s Economy • Hacker News Board

Re: The Pension Hole for U.S. Cities and States Is the Size of Japan’s Economy

#101

Post by jwess » Mon, Jul 30, 2018, 10:01 PM UTC

sykhic wrote: post #33

Overal taxation in the U.S. is low compared to other OECD countries [1]. We, as a nation, decided that low taxes was the goal. As a result infrastructure is poor, toll roads are increasing, privatization of prisons, intelligence gathering, war, etc. are rising too. Yet Americans falsely believe they are overtaxed. The situation is easy to fix in economic terms but not in political terms. The road to an Ayn Randian pa…

Perhaps people feel overtaxed, not in absolute terms, but relative to the services provided? The US Gov collected approximately 3.3T in revenue in FY2016--more than $10,000 for every person in the country. By comparison, the Netherlands collected 255B Euros from a population of 17M, or about $17k USD per person (2016 figure, according to OECD statistics). Clearly, a much higher number at the federal level, but they have a much lower average provincial tax (~$1,500) compared to the average state tax in the US, which varies widely, but averages out to about $4,800, bringing the totals to ~$14,800/person in the US, vs ~$18,500 in the Netherlands. Yes, the Dutch pay a 25% premium, but in my opinion they get a good ROI for their tax dollars. I think the issue of ROI is a major barrier to increasing tax rates in the US.

Re: The Pension Hole for U.S. Cities and States Is the Size of Japan’s Economy

#102

Post by DanielBMarkham » Mon, Jul 30, 2018, 10:01 PM UTC

dunpeal wrote: post #88

anilshanbhag wrote: post #72

Earlier quoted context omitted.

Taxes being lower or higher are not what determine size of pension hole. Greece and Italy have higher taxes and still have a pretty big pension hole. The problem is public sector employees are promised pensions higher than county/city can afford. Unlike a corporation which has to balance its budget, city officials go beyond means with their promises in order to get elected and leave the problem for the next set. This…

> The problem is public sector employees are promised pensions higher than county/city can afford. Precisely. But in fact, it's worse: The people doing the promising and those receiving the benefits are in fact the same. Who makes the promises? Local and state government employees. Who receives the benefits? Local and state government employees. Who pays for them? Us ordinary taxpayers who can only dream of such swee…

The people doing the promising are the same as those receiving the benefits.

That's the key point. Budget broken so we can't pay for something? Let's talk about putting money in. Systemic problem where the people making decisions about spending the money are the same people receiving benefits? You can't write a check to fix that. This isn't a traditional "how much do we tax and what do we spend our money on?" public policy discussion.

Systemic problems are another kind of problem entirely. They deserve and require non-partisan attention and discussion.

Re: The Pension Hole for U.S. Cities and States Is the Size of Japan’s Economy

#103

Post by sykhic » Mon, Jul 30, 2018, 10:02 PM UTC

dunpeal wrote: post #88

anilshanbhag wrote: post #72

Earlier quoted context omitted.

Taxes being lower or higher are not what determine size of pension hole. Greece and Italy have higher taxes and still have a pretty big pension hole. The problem is public sector employees are promised pensions higher than county/city can afford. Unlike a corporation which has to balance its budget, city officials go beyond means with their promises in order to get elected and leave the problem for the next set. This…

> The problem is public sector employees are promised pensions higher than county/city can afford. Precisely. But in fact, it's worse: The people doing the promising and those receiving the benefits are in fact the same. Who makes the promises? Local and state government employees. Who receives the benefits? Local and state government employees. Who pays for them? Us ordinary taxpayers who can only dream of such swee…

I'm a public employee. I don't cause the government to write its contract with me to be the way it is. It's negotiated between my union and the state Department of Education. It is then voted on by the legislative branch and signed by the governor. It's a long process. At no point am I or my fellow workers the ones making the promises.

It costs money to run government. Employees need to be paid. We have had lay offs when budgets were constrained. The funding per pupil has steadily decreased the last 30 years and hence tuition has similarly increased. Our salaries relative to purchasing power has decreased over this time.

Re: The Pension Hole for U.S. Cities and States Is the Size of Japan’s Economy

#104

Post by rayiner » Mon, Jul 30, 2018, 10:02 PM UTC

ars wrote: post #74

sykhic wrote: post #33

Overal taxation in the U.S. is low compared to other OECD countries [1]. We, as a nation, decided that low taxes was the goal. As a result infrastructure is poor, toll roads are increasing, privatization of prisons, intelligence gathering, war, etc. are rising too. Yet Americans falsely believe they are overtaxed. The situation is easy to fix in economic terms but not in political terms. The road to an Ayn Randian pa…

I didn't realize US taxes were so high in comparison to other countries. You are looking at the wrong table. Look at the next table instead and see just how high the US is relative to other countries. The only thing we don't tax is goods, but that's to help lower income people - the same people you want to help.

You raise the other really important consideration, which is that if we were to raise taxes to the same levels as Germany or Sweden, taxes wouldn't go up on rich people and corporations: https://taxfoundation.org/how-scandinavian-countries-pay-the.... The top marginal tax rate for someone in California, even with the Trump tax cuts, is similar to someone in Sweden. The difference is that in the U.S., the 50%+ rate kicks in around $500,000-1,000,000 HHI, while in Sweden it kicks in at the equivalent of around $100,000 HHI. Sweden collects as much revenue from its 25% VAT, which is enormously regressive, as from income taxes.

Re: The Pension Hole for U.S. Cities and States Is the Size of Japan’s Economy

#105

Post by ars » Mon, Jul 30, 2018, 10:03 PM UTC

dunpeal wrote: post #98

ars wrote: post #83

Earlier quoted context omitted.

> A relatively small fraction of that And what would you do with the large number of unemployed people that would result? You can't just change one thing and ignore any consequences. And don't forget that the broken window fallacy only applies to economies where everyone is working full time. If they are not then it does not apply, and your analysis needs to be more thorough.

> And what would you do with the large number of unemployed people that would result? US demand for labor is at an all time high. They can find employment in the private sector and produce goods and services that benefit others.

But most of the money is spent on research and high tech manufacturing. Those are not easy fields to find private employment for.

Re: The Pension Hole for U.S. Cities and States Is the Size of Japan’s Economy

#106

Post by adventured » Mon, Jul 30, 2018, 10:03 PM UTC

dunpeal wrote: post #62

sykhic wrote: post #33

Overal taxation in the U.S. is low compared to other OECD countries [1]. We, as a nation, decided that low taxes was the goal. As a result infrastructure is poor, toll roads are increasing, privatization of prisons, intelligence gathering, war, etc. are rising too. Yet Americans falsely believe they are overtaxed. The situation is easy to fix in economic terms but not in political terms. The road to an Ayn Randian pa…

> As a result infrastructure is poor, toll roads are increasing, privatization of prisons, intelligence gathering, war, etc. are rising too. I wouldn't bundle military expenditure with the rest of public spending. Our military budget currently stands at a staggering $639bn (that's billion) for FY2019. In fact, there's a good argument that if we diverted some of these enormous funds to invest in other areas, those pro…

You could fix infrastructure by slashing the US military down to a reasonable size (~2.5% of GDP), there are no other large problems you can fix with that money. The scale of the entitlement problem, healthcare cost problem, etc. is far beyond anything that $150b-$200b per year will solve long-term.

I have no interest in seeing Chicago fix its pension problems by using funding taken from the US military. Chicago made its bed by intentionally, dramatically over-promising, it gets to sleep in that bed. National high speed rail? That would get my vote, so to speak.

We could throw some money at the university cost problem. However that's not lacking funding at all. In fact it has far too much funding, we need to deprive it of the federal slush money and legally mandate how funds can be spent (ie restrict admin spending). It's a massive theft cartel run by the admins at the universities, they're the ones that have universally benefitted by perpetually raising the cost. You can see that represented in the charts comparing the extreme expansion of admin cost & employment at universities, vs the employment of eg professors, over 30 years.

Re: The Pension Hole for U.S. Cities and States Is the Size of Japan’s Economy

#107

Post by kodablah » Mon, Jul 30, 2018, 10:03 PM UTC

sykhic wrote: post #100

kodablah wrote: post #79

Earlier quoted context omitted.

I'm always dismayed here and elsewhere to see everyone assuming that collection is the problem, not the dispensing and management. If someone proves incapable of proper budgeting, surely it is foolish to want them to have more money? Always sad that it's everyone but the policy and budget makers being blamed for the failures of policy and budget making. You can argue an honest politician can't survive, but you should…

I agree that it's largely a crisis of leadership. Both major parties are to blame. Kicking the can down the road, so to speak, has proved politically rewarding. I think that we, as a people, need to stop thinking that taxation is inherently bad. Taxation with incompetent governance is inherently bad. Taxation with little in return is bad. But taxation itself is not bad. Nor are we overtaxed in absolute terms. We are…

> I don't see how to get out of the mess we are in.

Gotta start at the top. Transparency and clarity of spending coupled with simplification of the tax code. In the meantime, deference to smaller regions can help (but not on everything) where accountability is more real.

> These are structural problems in the nation and I think secession is going to occur in the next 50 years or so.

Nah, apathy wins in these situations where boats are not rocked significantly on either side.

Re: The Pension Hole for U.S. Cities and States Is the Size of Japan’s Economy

#108

Post by jakecrouch » Mon, Jul 30, 2018, 10:04 PM UTC

sykhic wrote: post #33

Overal taxation in the U.S. is low compared to other OECD countries [1]. We, as a nation, decided that low taxes was the goal. As a result infrastructure is poor, toll roads are increasing, privatization of prisons, intelligence gathering, war, etc. are rising too. Yet Americans falsely believe they are overtaxed. The situation is easy to fix in economic terms but not in political terms. The road to an Ayn Randian pa…

Raising taxes is not the only way to improve public infrastructure. One can also lower the trade deficits, improve the technology the government uses, and legislate away some of the problems (jails would be less full if drug offenses didn't carry such harsh penalties). Taxation should only be tried when nothing else has worked. With 50% marginal income tax rates in many states, the US leans much more towards the communist than Randian side of the spectrum as it is.

Re: The Pension Hole for U.S. Cities and States Is the Size of Japan’s Economy

#109

Post by sykhic » Mon, Jul 30, 2018, 10:04 PM UTC

rayiner wrote: post #77

sykhic wrote: post #33

Overal taxation in the U.S. is low compared to other OECD countries [1]. We, as a nation, decided that low taxes was the goal. As a result infrastructure is poor, toll roads are increasing, privatization of prisons, intelligence gathering, war, etc. are rising too. Yet Americans falsely believe they are overtaxed. The situation is easy to fix in economic terms but not in political terms. The road to an Ayn Randian pa…

> Instead of asking why they have no pensions they seek to equalize status by falsely believing we can't afford any sort of pension. More accurately: we can't afford the pensions we've promised with the taxes we're willing to pay. It's not a normative argument but a descriptive one. And within the American free market, there is little incentive for people to pay more taxes to close that gap. Why pay more taxes to Ill…

I believe at some point in time California and other wealthy states will want to secede. They are subsidizing the poorer states and at some point they may question the benefits of the union.

Re: The Pension Hole for U.S. Cities and States Is the Size of Japan’s Economy

#110

Post by sp332 » Mon, Jul 30, 2018, 10:05 PM UTC

ProfessorLayton wrote: post #91

sp332 wrote: post #50

Earlier quoted context omitted.

The point is that these people worked under a contract that promised them a certain pension for a certain amount of work. Even if the amount was unrealistically high, reneging after the person has put in all the work is basically fraud, or theft of wages.

While you're right about the broken promise amounting to being defrauded, a similar argument could be made about tax payers who will be responsible for picking up the tab (Millennials, Gen Z etc.): They're going to have their wages taken for promises they never made in the first place, while also not having the same benefits enjoyed by those that came before them.

While the outcome might be similar, I think a new generation reneging on the deals for that reason might be more legitimate. But just saying "oh, we lied" or "oh, we don't feel like paying you what we agreed (e.g. by raising taxes)" is pretty bogus.