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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

#151

Post by sykhic »

sheepmullet wrote: post #147
sykhic wrote: post #126

Earlier quoted context omitted.

Pensions are not inherently unsustainable. They exist in the private sector in other countries and there are still some well funded private sector pensions in the U.S. They don't work well if they are not properly funded. Corporations got rid of pensions not because the concept is inherently unsustainable but because it's more profitable to do away with them. My pension plan is not a good one. You characterization of…

> If pensions are inherently unsustainable then you must conclude that it is unsustainable for a society to care for itself. How do you figure? It is unsustainable for us to support all people over e.g. 60. But we can support the 5% over 60 who really need the support and can't look after themselves.

Supporting that 5% who really need it would effectively be a means tested pension system. The point of a pension (retirement savings) is to prevent masses of destitute elders. The goal is to have a society in which masses of elderly are not left without means to live at a reasonable standard. That’s the purpose of a pension system. If the goal can be effectively accomplished in another way then I support it. I’m not personally tied to the notion of a pension system.

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

#152

Post by dunpeal »

sheepmullet wrote: post #149
dragonwriter wrote: post #145

Earlier quoted context omitted.

> Also notice that some of the worst problems are in locations that already have very high local and state taxes, such as California. California has, along the US states, a fairly moderate pension issue measured per capita or per GDP. It has big absolute numbers, as with nearly every other issue, because it's a very big state.

> California has, along the US states, a fairly moderate pension issue measured per capita or per GDP. A more important question is how much room to manoeuvre does California have? If California increases taxes by 5% to fix the issue how many businesses and highly paid employees will leave?

Not much, I think. It's already about tied with NYC for highest state+local taxes in the nation.

Also, no reason to believe just 5% will fix the issue.

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

#153

Post by toomuchtodo »

ngngngng wrote: post #136
betterunix2 wrote: post #127

Earlier quoted context omitted.

I actually think the answer is simpler and more immediate than that. The government made a promise. If the government does not keep that promise, can it be trusted with other obligations? In fact, this problem of unfunded pensions has impacted municipal credit ratings and wound up costing taxpayers more in higher interest rates than they would have had to pay in higher taxes to stabilize the pension funds.

But why does the government get to make a promise with the money of someone that wasn't even born at the time (me)?

Because the government existed before you and will exist after you’re gone. It exists (in part) to enable continuity of society, and that is the compact you agree to by remaining a resident/citizen.

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

#154

Post by dv_dt »

dunpeal wrote: post #125
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?

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?

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

#155

Post by anonuser123456 »

aurailious wrote: post #30
ngould wrote: post #23

Earlier quoted context omitted.

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

Laws were changed to intentionally weaken pension funds and then articles like this are funded to further destabilize trust in them. Another way of saying it: rich people were unhappy they have to pay taxes.

Sounds rather conspiratorial. You should provide some evidence for such a claim.

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

#156

Post by [deleted] »

xeromal wrote: post #48
spullara wrote: post #22

Earlier quoted context omitted.

You could increase the taxes on pensions to return them to sane levels.

I feel wary of doing this because I feel this is what's going to happen with my IRAs. I was promised that if I pay my taxes now I don't have to pay them when I'm old, but supposed the next generation decides they want to change the rules. Do I just pound sand and give up? Pensioners were given a promise and now we're changing the rules. It feels wrong even if the promise was unrealistic.

[deleted]

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

#157

Post by soVeryTired »

anilshanbhag wrote: post #72
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…

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…

Pension holes mostly formed because interest rates dropped. Higher interest rates mean less money can be paid in to fund a pension today, since it will grow faster.

The critical error that pension providers made was to buy equities and 'alternative' investments instead of bonds. Had they bought bonds, their assets would have matched their liabilities. Instead, they assumed riskier investments would grow faster, effectively making pension promises cheaper.

Following the financial crisis, rates were cut aggressively, making bond prices and the present value of pension liabilities soar. IMO this is an under-appreciated facet of the financial crisis that's still waiting to bite us.

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

#158

Post by landryraccoon »

analog31 wrote: post #128
ngngngng wrote: post #113

Earlier quoted context omitted.

Does stability in retirement add enough value to society and the economy for it to be a good investment? I've been an adult less than a decade, so without a return why should I pay for the promises of my predecessors? So many questions.

In my view, yes, for at least a couple of reasons. First, because people survive whether you want them to or not, and driving old people into poverty will end up burdening you in some other way, probably worse. We pay a lot for not having a decent safety net. Second, old people vote. If you drive a political wedge between the young and old, I can't say what will happen, but it won't involve the young ending up on top…

> First, because people survive whether you want them to or not, and driving old people into poverty will end up burdening you in some other way, probably worse. We pay a lot for not having a decent safety net.

You're falsely trying to paint the choice as only between driving retirees into poverty and paying the full pension.

I certainly won't be receiving 60-100% of my maximum salary forever after I retire, and I won't need nearly that much in order to not be in poverty. And IMO it borders on unjust to underfund a pension with tax dollars while those workers are working, then force younger workers that weren't even old enough to vote when those benefits were created to now shoulder the burden.

Why can't we cut pensions, without eliminating them? Why can't the state switch from defined benefit to defined contribution plans, like practically ever other non-government employee gets?

> If you drive a political wedge between the young and old, I can't say what will happen, but it won't involve the young ending up on top.

This is true only up to a point. The old aren't exactly going to be the ones who will win if the economy collapses or the country descends into chaos, are they?

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

#159

Post by landryraccoon »

chris_mc wrote: post #115
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.

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 compensation for the rest of my life until I retire - are you? I'm not super enthusiastic about paying taxes for someone else to get a better retirement deal than me, either.

I'm fine with paying government employees what they're worth while they're working - hell, I think most of them deserve a raise. But they also should have defined contribution retirement plans, not defined benefit, like everyone else working in private industry.

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

#160

Post by dragonwriter »

sheepmullet wrote: post #149
dragonwriter wrote: post #145

Earlier quoted context omitted.

> Also notice that some of the worst problems are in locations that already have very high local and state taxes, such as California. California has, along the US states, a fairly moderate pension issue measured per capita or per GDP. It has big absolute numbers, as with nearly every other issue, because it's a very big state.

> California has, along the US states, a fairly moderate pension issue measured per capita or per GDP. A more important question is how much room to manoeuvre does California have? If California increases taxes by 5% to fix the issue how many businesses and highly paid employees will leave?

> A more important question is how much room to manoeuvre does California have?

That's very hard to say.

> If California increases taxes by 5% to fix the issue how many businesses and highly paid employees will leave?

Even if it was a simple as taxes being a single number where distribution of the taxes doesn't matter, there's no consensus on the average effect of increases. And, in reality the distribution probably matters intensely.

(And, of course, taxes aren't the only lever; maybe California instead radically cuts back on mass incarceration; to the extent that California has less room to maneuver in taxes it has more on spending, which in some ways is better for this purpose—spending cuts tend to also inherently reduce the rate at which the problem is made worse, before you even consider how the savings are applied. Either spending or tax, though, may take ballot action or legislative supermajority, because much of State spending in CA is programmed by Constitution/ballot measure, and tax increases can't be done with a simple legislative majority.)

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