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

#181

Post by dragonwriter » Tue, Jul 31, 2018, 12:13 AM UTC

chrisdhoover wrote: post #131

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)?

But even when a city says to unionized workers, you can keep your pension but new hires get moved to a 401k, the unions say no. See San Jose as an example

> But even when a city says to unionized workers, you can keep your pension but new hires get moved to a 401k, the unions say no.

Well, yeah, because then 5 years down the road, when the city tries to shift pension contributions from the city to covered employees on the defined benefit plan, newer employees have no incentive to support the older employees and the employer can split the union. Which is why unions resist anything that gives different covered employees radically different contract interests.

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

#182

Post by ghein » Tue, Jul 31, 2018, 12:18 AM UTC

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?)…

This is exactly why people have been screaming about this problem for a couple of decades.

It is going to be HUGE and do incredible damage. Retirees will be hurt catastrophically, costs of government borrowing will skyrocket, programs will be cut massively, workers will abandon government.

The issue is that the costs of meeting the prior obligations will be completely impossible. States, cities, and school districts will go bankrupt, massive numbers of people will be fired, and taxes will go up while service goes down.

Unfortunately the politics prevent a fix today and prevented a fix 10 or 20 years ago when it would have been much cheaper. The fix will happen in 10 to 20 years and it's going to be horrific.

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

#183

Post by sykhic » Tue, Jul 31, 2018, 12:25 AM UTC

harryh wrote: post #175

sykhic wrote: post #109

Earlier quoted context omitted.

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.

Countries do make agreeements on water usage. Even countries that don't like each other. Like Pakistan and India.

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

#184

Post by sykhic » Tue, Jul 31, 2018, 12:28 AM UTC

mistermann wrote: post #176

sykhic wrote: post #168

Earlier quoted context omitted.

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 suppo…

There is colloquial and there is technical usage of terms. I’m speaking colloquially. Like some people generally refer to the US as a Christian nation. They typically mean this in the sense of history or values and don’t necessarily mean to say that a majority of the population fits their personal definition of what a Christian is.

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

#185

Post by greedo » Tue, Jul 31, 2018, 12:29 AM UTC

milesvp wrote: post #124

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'm not sure how much I trust these tax rates. My understanding was that government spending is roughly 33% of GDP here in the US. This was true when I was in undergrad, and it looks to be roughly correct today. https://www.usgovernmentspending.com/percent_gdp (not sure how much I trust this site, but it corroborates what I learned in undergrad with only a few minutes of googling). This means that the tax rate must b…

Federal marginal tax rates for 2018 are capped at 37% if you make $500K ($600K for a couple). If you're hitting that plus 8% for state, then I don't have too much sympathy. And that's a marginal rate, not an effective rate (which it seems you're conflating).

If you earned $500k, and were single/no deps, and just took the standard $12K deduction, your Federal tax would be 29% ($145K). I can't imagine someone with that income not having more deductions or IRA/401 contributions that would minimize the tax burden, but I suppose there's always someone out there completely clueless.

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

#186

Post by hn_throwaway_99 » Tue, Jul 31, 2018, 12:35 AM UTC

kartan wrote: post #80

0x00000000 wrote: post #8

>For the past century, a public pension was an ironclad promise Let's not pretend like this was ever seriously going to be sustainable. It's just a big middle finger to future generations while an opportunistic generation got to suck the system dry in prosperous times then peace out.

> 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?

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

#187

Post by ars » Tue, Jul 31, 2018, 12:37 AM UTC

dv_dt wrote: post #117

ars wrote: post #87

Earlier quoted context omitted.

What are you talking about? The wealthy are not low taxed, the US taxes the wealthy more than just about any other OECD country. Source: https://www.taxpolicycenter.org/briefing-book/how-do-us-taxe... Figure 2.

What are you talking about? figure 2 is a share of total tax total revenues by source. Figure 1 shows that Us total tax percentage of GDP is lower than every OECD nation out there with the only lower total tax share in the nations of Korea, Ireland, Chile and Mexico. The figure 2 breakdown also does not distinguish between taxes on Income + "profits", and capital gains and corporate taxes where the wealthy accrue sig…

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.

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

#188

Post by dunpeal » Tue, Jul 31, 2018, 12:38 AM UTC

hn_throwaway_99 wrote: post #174

dv_dt wrote: post #154

Earlier quoted context omitted.

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 poli…

Exactly. Not to mention that by the time it gets to the elected official's desk for signature, it's been negotiated between government employees and their senior managers, who are also government employees...

It's basically a deal negotiated by government employees among themselves, and approved by a politician who often needs to maintain favor among these employees.

Add to that the fact that these agreements only lead to a crisis long after the politician is retired (or dead), and it's no wonder these unsustainable deals get approved as a matter of course.

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

#189

Post by ars » Tue, Jul 31, 2018, 12:40 AM UTC

sykhic wrote: post #93

ars wrote: post #74

Earlier quoted context omitted.

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.

The next table (the one below, right?) shows only the relative percent of where taxes come from. It does not describe tax rates. It merely states that around 50% of U.S. tax revenue come from taxing income and profits. This is not the tax rate on that source.

> The next table (the one below, right?)

Yes.

> shows only the relative percent of where taxes come from. It does not describe tax rates.

I know. But if the US is to raise rates they would raise them on Goods and Services, not on income because the tax is already very heavily skewed toward income.

And regardless of that, the breakdown alone shows that the US tax code is more progressive than other countries.

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

#190

Post by randysavage » Tue, Jul 31, 2018, 12:41 AM UTC

sykhic wrote: post #103

dunpeal wrote: post #88

Earlier quoted context omitted.

> 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…

Is there no level of personal responsibility involved? If the whole of my retirement was tied up in the promises of one entity... I have to imagine I'd be deeply concerned when my pension is underfunded. And underfunding is not new, there has been plenty of time to adjust on a personal level.