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

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

#211

Post by safgasCVS »

listenallyall wrote: post #143
safgasCVS wrote: post #12

If I paid for WSJ and this is the low quality journalism I got I'd be peeved. This article barely touches on how it got to be so bad. Excuse me but no - a single paragraph stating the obvious 'benefits promised were too rich' doesn't cover it. How is it possible that a solvency ratio can drop from 100% to 75% in 18 years? This doesn't just happen because eh seemingly every pension administrator just decided. How much…

If you subscribed to the WSJ you wouldn't be reading one article in isolation, and you'd already be well-informed about this issue, because the paper has regularly covered it (due to its massive impact) in various forms for decades.

That's a fair response - I don't have a sub so can't say how much they covered it

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

#212

Post by safgasCVS »

ngould wrote: post #23
safgasCVS wrote: post #12

If I paid for WSJ and this is the low quality journalism I got I'd be peeved. This article barely touches on how it got to be so bad. Excuse me but no - a single paragraph stating the obvious 'benefits promised were too rich' doesn't cover it. How is it possible that a solvency ratio can drop from 100% to 75% in 18 years? This doesn't just happen because eh seemingly every pension administrator just decided. How much…

Care to enlighten us pension finance non-experts on what the article misses?

The thing is solvency ratios should move like icebergs. Demographics, life expectancy and salaries don't change that quickly. Ok so stock markets move but reviews should be annual to allow for course corrections. So seeing it get so bad in such a short amount of time is a bigger story

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

#213

Post by mistermann »

sykhic wrote: post #205
mistermann wrote: post #201

Earlier quoted context omitted.

I don't understand what this is referring to or how this is relevant, could you state it in a simpler manner?

I don't think I can. I gave an example of how people speak colloquially. For instance, one can mention Christianity in a discussion but that term means different things to different people. People will say things like, "Christians believe this..." without it being literally true. Most people speak colloquially and not in a technical sense. The phrase "Ayn Randian paradise" does not imply the sort of paradise envision…

> It's a reference to a belief commonly held by people who nominally agree with Ayn Rand's view as they understand it to be.

I asked a question specifically about that above, see: (b)

Is asking for substantiation of a claim, an insulting claim at that, now considered improper etiquette around these parts?

Ask yourself this: how do you know this to be true? Can you share where you've encountered Randians in sufficient numbers to form an opinion with high certainty? And, can you no longer find any trace of these people and their words?

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

#214

Post by [deleted] »

hn_throwaway_99 wrote: post #186
kartan wrote: post #80

Earlier quoted context omitted.

> Let's not pretend like this was ever seriously going to be sustainable. Why not? Each year machines become more efficient, and productivity has gone up. The main problem has not been to create wealth, it has been on how to share it. Politicians also say that health care for everyone is impossible, but there is a lot of countries that do just that. This is about setting expectations. If you convince your citizens th…

> Each year machines become more efficient, and productivity has gone up. That actually highlights a lot of problems with defined-benefit plans: sometimes economic circumstances change so drastically based on social or technological change that the promises of the past are no longer viable. How could places like Detroit or Puerto Rico continue to pay their promised pensions when their economic base has evaporated?

[deleted]

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

#215

Post by cobookman »

betterunix2 wrote: post #177
TheRealDunkirk wrote: post #167

Earlier quoted context omitted.

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?)…

Happened in the private sector. Most millennials don't trust pensions and prefer 401k. As you are in control of the money and there isn't much that could be changed unfavorably in 50 years.

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

#216

Post by dragonwriter »

fbonetti wrote: post #208
dragonwriter wrote: post #172

Earlier quoted context omitted.

> 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, surpr…

> It's already been established that pensions can be cut in bankruptcy, so, yeah, that's not even a question. Minor nitpick, but it’s in Illinois’ state constitution that pensions cannot be reduced. Republicans want to change the constitution to remove this rule, but Illinois is an overwhelmingly Democratic state so that’s never going to happen. It will be interesting to see how all of this plays out.

> Minor nitpick, but it’s in Illinois’ state constitution that pensions cannot be reduced.

Major nitpick, but in the event of municipal bankruptcy (the context of the store you responded too), federal bankruptcy law trumps state law—including the state constitution—because Supremacy Clause. The bankrupt entity doesn't cut pensions, the bankruptcy court does.

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

#217

Post by ericd »

dv_dt wrote: post #192
ars wrote: post #187

Earlier quoted context omitted.

Go read it again. The only reason the US is lower on a GDP basis is that the US does not have a VAT on goods and services (which as you know, hurts the poor much more than the rich). i.e. the US taxes the wealthy much more than virtually any other country.

The VAT figures into the "total taxes" of figure 1 as described in the last paragraph is broken out as "goods and services" category of fig 2. This still does not change the meaning of fig 1 where the US is strongly below average taxes. If the wealthy are the most taxed in the US, how is it what inequality of both income and wealth is massively skyrocketing in the US?

>If the wealthy are the most taxed in the US, how is it what inequality of both income and wealth is massively skyrocketing in the US?

Asset appreciation - a massive bull run in the stock and housing markets. The side effect is that those who own assets benefit far more than those who don't.

When everyone talks about Bezos making a huge amount of money this year, they're talking about his unrealized gains. If he actually tried to realize those gains into USD (at which point he'd pay taxes), his wealth would shrink very quickly as Amazon's market price dropped.

Also, VAT is a relatively regressive tax.

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

#218

Post by nerbert »

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.

As opposed to the people who are responsible for managing it, who must be the victims I assume?

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

#219

Post by felix_nagaand »

randysavage wrote: post #200
betterunix2 wrote: post #196

Earlier quoted context omitted.

Maybe so, but wealthy people seem to like living in high-tax areas like NYC and SF, and I am pretty sure they also like having paved roads, functioning transit systems, and all the other things they would lose if the state had to find a way to meet its obligations without raising taxes. Things are not yet hopeless and if we had politicians who did their jobs and demonstrated competent leadership we could sort out thi…

> if we had politicians who did their jobs and demonstrated competent leadership we could sort out this mess. This feels like the crux of the problem, but we've got the politicians we voted for. I'm starting to wonder if its even possible for the average person to vote in the long-term interests of their community against their own short-term interest. Some will... but the majority?

The majority won't because they haven't the luxury of time to understand the consequences of the politicians being voted into office. Your average person doesn't actually understand the differences between a Republican and a Democrat. They assume the label that works for them socially and run with their herd. Both of which are aimed off the cliff by the inane policy makers elected on popularity over policy. This system works and the average person is too short sighted to see the cliff, at no fault of their own.

For the most part the average citizens do everything they should and a bit more. Sadly resources are mismanaged and citizens carry the burden because our system is collectively failing to stop bad actors at every stop.

Every good solution ive heard comes at the expense of higher taxes especially on rent seekers and high income/ wealthy individuals and families. Ignoring the political suicide of going after those classes, the entire proposal is a catch 22. How can these victims be expected to trust a politician when they've been taken advantage of by politicians their whole lives?

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

#220

Post by closeparen »

cobookman wrote: post #215
betterunix2 wrote: post #177

Earlier quoted context omitted.

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?)…

Happened in the private sector. Most millennials don't trust pensions and prefer 401k. As you are in control of the money and there isn't much that could be changed unfavorably in 50 years.

A government changing its mind about pensions could easily change its mind about the favorable tax treatment of 401ks. Or go even further and follow HN's exhortations to implement a wealth tax. Upper-middle-class retirement funds are a huge component of inequality; reducing that can only be good, right?
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