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

#171

Post by randysavage » Tue, Jul 31, 2018, 12:02 AM UTC

betterunix2 wrote: post #169

gok wrote: post #53

> It is increasingly likely that retirees, as well as new workers, will be forced to take deeper benefit cuts. Boohoo. Public service union members should have thought about that before pursuing a pyramid scheme retirement plan instead of a defined contribution pension like the rest of us.

Like it or not these pensions are already legal obligations of state and local governments. Yell about or at the unions all you want, but if these obligations are not met, get ready for lawsuits and negative consequences for municipal credit ratings. Would you rather pay somewhat higher taxes now to cover pension obligations, or significantly higher taxes later because of the higher muni bond rates your state will ha…

Good luck keeping the highest end of you tax base around to cover the shortfalls.

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

#172

Post by dragonwriter » Tue, Jul 31, 2018, 12:03 AM UTC

TheRealDunkirk wrote: post #167

NTDF9 wrote: post #17

Earlier quoted context omitted.

The government doesn't keep its promises because it is not required by law that they are held accountable for dubious lawmaking. Put simply, representatives need to be on a personal financial hook (or penalty) for laws, rules and policies, even after they've exited office.

Yes! Some city or state is going to go bankrupt because of this, and the people affected are going to sue. It will take at least a decade to work up to the Supreme Court, who will find (no matter WHAT the liberal/conservative makeup at the time) that, surprise, surprise, the government is NOT legally obligated to pay out the benefits they said they would. Various governments will try to implement various forms of aus…

> Some city or state is going to go bankrupt because of this,

States cannot go bankrupt, without a change to federal law. Cities can and have, and pensions have already been addressed in that context. It's not a new question.

> and the people affected are going to sue. It will take at least a decade to work up to the Supreme Court, who will find (no matter WHAT the liberal/conservative makeup at the time) that, surprise, surprise, the government is NOT legally obligated to pay out the benefits they said they would.

It's already been established that pensions can be cut in bankruptcy, so, yeah, that's not even a question.

> Various governments will try to implement various forms of austerity to make it work,

They already are to prevent running into the major crises (e.g., recent pension funding requirements reforms in California.)

> Don't worry though. This exact same thing is also happening to Social Security, which will crash around the same time, or shortly after, so everyone working now will get the shaft.

Social Security won't crash; even with scenarios projecting Trust Fund exhaustion it still ends up paying at worst something like 2/3 of eligible benefits out or current revenues out to the limit of projections.

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

#173

Post by ghein » Tue, Jul 31, 2018, 12:04 AM 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…

There are political choices behind the decline in infrastructure.

It costs NYC $2.1B per mile to build the Second Ave subway while in Europe it costs $200-500M per mile. There's California High Speed Rail, and then there's just the cost to build a condo in San Francisco (see the "historic" laundromat in The Mission).

You have interlocking legislation, many reasons and opportunities to sue, esoteric work rules. Regardless of the validity of each element the structure as a whole is patently absurd and abhorrent.

Then you have government spending. A university does not need much beyond some blackboards and some professors to teach most everything from Philosophy to French to Advanced Data Structures to Topology. Certain PhDs need more equipment but essentially all the expensive equipment should be paid for by research grants or contracts.

Over the past decades more and more classes are taught by adjuncts at Starbucks level wages. Meanwhile the percentage of staff and spending on administrative functions has climbed dramatically. Adjusting for inflation, from 1947 to 1995, overall university spending increased 148 percent. Administrative spending, though, increased by a whopping 235 percent. Instructional spending, by contrast, increased only 128 percent, 20 points less than the overall rate of spending increase.

Obama promised to invest in "shovel ready jobs". There was a backlash because so much money was being spent on construction and thus, due to the current makeup of construction workers, the vast majority of money would go to men. Spending was adjusted to include other projects so that the gender balance of spending would be more palatable.

So to get $1 in new infrastructure spending you need an additional $1 in net new other government services. Or possibly much more than $1, depending on the various worker populations. This in an environment where you're getting only 25% to 10% of your initial money's worth.

So $1 in net new infrastructure costs $20 or more.

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

#174

Post by hn_throwaway_99 » Tue, Jul 31, 2018, 12:04 AM UTC

dv_dt wrote: post #154

dunpeal wrote: post #125

Earlier quoted context omitted.

Read sykhic's comments below. These unsustainable sweetheart deals were negotiated by the government employees and their unions.

Isn't there equal responsibility for politicians & gov'ts who agreed to the negotiated contracts? Were they not agreeing in good faith?

Corporate management and worker unions have what I'd call a "healthy" adversarial relationship. Corporations want to pay workers as little as possible, unions want workers to make as much as possible, so hopefully you get a decent compromise.

With public sector unions, especially in smaller cities and states, the relationship is more incestuous and oftentimes the settlements aren't really made in good faith. The politicians desire the political support of the unions they are negotiating with, and figure by the time the pension bomb explodes it will be some other poor sucker's problem. Taxpayers are the ones that get screwed.

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

#175

Post by harryh » Tue, Jul 31, 2018, 12:06 AM UTC

sykhic wrote: post #109

rayiner wrote: post #77

Earlier quoted context omitted.

> 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.

California would have a HUGE water problem if they left the US. That alone is pretty much a deal breaker.

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

#176

Post by mistermann » Tue, Jul 31, 2018, 12:08 AM UTC

sykhic wrote: post #168

mistermann wrote: post #150

Earlier quoted context omitted.

> The road to an Ayn Randian paradise in which everyone fends for themselves will lead us to ruin. It always depresses me to read comments like this. Rand's central themes were about corrupt relationships between pseudo-capitalists and government, the immorality of a desire for the unearned, and the consequences of what will happen to a society that can't be bothered to concern themselves with ethics. Well, one of th…

I use Any Randian to describe those who publicly cite her and they tend to have a certain political philosophy that is best described by me as, "I've got mine, fuck you." I'm not critiquing her personally or her philosophy. It's sort of like Ghandi's famous quote on Christianity. He said, "Your Jesus I like. Your Christians, I do not."

> I use Any Randian to describe those who publicly cite her and they tend to have a certain political philosophy that is best described by me as, "I've got mine, fuck you."

a) Do you think it is responsible to be opaque on whom you are attributing the belief to, particularly considering the topic of conversation and the fact that her warnings on the matter were clear?

b) These people you cite, are they Ayn Rand supporters, or critics who "think", despite no actual evidence beyond 4th hand also-uneducated opinions, that Rand's philosophy was anything remotely resembling "I've got mine, fuck you." Here's a fun experiment: try to google up a statement by an actual Objectivism supporter that supports anything near that sentiment, and observe how many false hits you get of the latter in your search.

> I'm not critiquing her personally or her philosophy.

Of those HN'ers who hold an opinion on Rand, you belong to a very exclusive club in my experience. Regardless, your sentiment now being explicit is good enough for me, thanks for straightening it out.

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

#177

Post by betterunix2 » Tue, Jul 31, 2018, 12:08 AM UTC

TheRealDunkirk wrote: post #167

NTDF9 wrote: post #17

Earlier quoted context omitted.

The government doesn't keep its promises because it is not required by law that they are held accountable for dubious lawmaking. Put simply, representatives need to be on a personal financial hook (or penalty) for laws, rules and policies, even after they've exited office.

Yes! Some city or state is going to go bankrupt because of this, and the people affected are going to sue. It will take at least a decade to work up to the Supreme Court, who will find (no matter WHAT the liberal/conservative makeup at the time) that, surprise, surprise, the government is NOT legally obligated to pay out the benefits they said they would. Various governments will try to implement various forms of aus…

Well, let's just say that somehow what you are saying is correct. How comfortable would you be investing in a long-term muni bond after that? If you were a contractor, how would you feel about working on a long-term project for a state or local government? Who would want to work for the government when there is no way to trust that any of the benefits will materialized (other than the salary; then again, who knows?)

It's not just former employees that will suffer. Everyone suffers when states have to pay higher interest rates on their bonds because of poor credit ratings (that's what bankruptcy does to a state) or have to pay more for workers and contractors. Everyone will have to pay higher taxes and everyone will receive less from the government.

I cannot understand the logic of not making good on government obligations. You can take the position that the government should stop promising pensions, but how can anyone think it is a good idea for the government to fail to pay for the pensions it already promised people (or, frankly, any other promise the government made)?

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

#178

Post by ghein » Tue, Jul 31, 2018, 12:09 AM UTC

betterunix2 wrote: post #169

gok wrote: post #53

> It is increasingly likely that retirees, as well as new workers, will be forced to take deeper benefit cuts. Boohoo. Public service union members should have thought about that before pursuing a pyramid scheme retirement plan instead of a defined contribution pension like the rest of us.

Like it or not these pensions are already legal obligations of state and local governments. Yell about or at the unions all you want, but if these obligations are not met, get ready for lawsuits and negative consequences for municipal credit ratings. Would you rather pay somewhat higher taxes now to cover pension obligations, or significantly higher taxes later because of the higher muni bond rates your state will ha…

The guarantees - constitutional in some states - are what will cause the problem to be bigger.

When you can't resolve unsustainable debt without bankruptcy, then you will go bankrupt and credit rating be damned.

Detroit, Chicago, Illinois are just warm ups for the big battles over the next few decades.

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

#179

Post by candiodari » Tue, Jul 31, 2018, 12:09 AM UTC

landryraccoon wrote: post #159

chris_mc wrote: post #115

Earlier quoted context omitted.

Why in the ever loving fuck are you blaming the _workers_ for this shortsightedness instead of the government organizations who are about to fuck those people over when they're 70? Maybe the administrators of the pension accounts and financial planners for these organizations should have done better by the people who are busting their (collective) asses to provide services for you, the taxpayer?

> Why in the ever loving fuck are you blaming the _workers_ for this shortsightedness instead of the government organizations who are about to fuck those people over when they're 70? Well, we are the ones paying those people's pensions, in the form of taxes, so we're the ones fucking ourselves over if they got too sweet of a deal right? I am personally not going to get 50-100% of my maximum salary as guaranteed compe…

> Well, we are the ones paying those people's pensions, in the form of taxes, so we're the ones fucking ourselves over if they got too sweet of a deal right?

And how does this square with this being a democracy ? Or to put it another way: you're also (indirectly, but ...) the ones promising sweet pensions to these people if they would just work. And they worked. Now you want to revoke your part of the bargain ?

Furthermore, if you refuse to pay for their pensions ... do future kids get to refuse to pay for yours ? (either directly, or through devaluing the currency, just in case your answer is that private sector pensions are safe)

But we all know that there's no answer here, so it'll be devaluation. At least that means private and public pensions are equally screwed (I'm leaning socialist, so I like fairness in the sense that people get treated the same).

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

#180

Post by ghein » Tue, Jul 31, 2018, 12:12 AM UTC

NTDF9 wrote: post #17

betterunix2 wrote: post #9

The choice is raising taxes, reducing spending elsewhere, or demanding workers give up the pensions they were promised. Somehow I doubt anyone is going to agree to pay more in taxes to cover pensions in their state or city. After all, why should the government keep its promises (especially if it means we have to pay for it)?

The government doesn't keep its promises because it is not required by law that they are held accountable for dubious lawmaking. Put simply, representatives need to be on a personal financial hook (or penalty) for laws, rules and policies, even after they've exited office.

A major problem is that this is a case of I'll be gone, you'll be gone.

The union leaders and the politicians - typically in their 50 to 70s - who made the promises will be dead by the time the 25 year old new hires try to collect their pensions at 55 or 65. The incentives are all sorts of screwed up and it's very difficult to create a healthy set of constraints for this kind of bargaining.