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

#61

Post by lovich » Mon, Jul 30, 2018, 9:37 PM UTC

sushid wrote: post #13

justaman wrote: post #4

Its funny that the government is as bad with money as the people. Truly a good representation.

It's nice for the previous generations that got something out of nothing. Too bad that "nothing" is my generation and we'll be putting our "contributions" into a pit that will give us actually nothing in return when it's time for us to retire. As I get older I realize why people say if you're not a liberal at 20, you have no heart but if you are not a conservative by 30, you have no brain (or something to that effect…

The previous generations are far more conservative than our generation and they are still all for these sort of entitlements. This is not a liberal vs conservative argument, this is a "fuck you, I got mine" argument from the beneficiaries of these pensions currently

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

#62

Post by dunpeal » Mon, Jul 30, 2018, 9:37 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…

> 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 problems you mentioned (infrastructure, etc) would be fixed.

> The situation is easy to fix in economic terms but not in political terms.

The article is about defined-benefit pensions. Nobody has those anymore, not in the US. This is a large group of privileged individuals, who years ago got themselves a sweetheart deal as employees of the state. It's basically another case of the previous generation mandating extremely comfortable benefits for themselves, and passing the bill to the next generation.

These are people who worked for the government their entire lives. They may not be rich, but they were generally comfortable, and certainly not the neediest part of the population. They can stand a modest cut to their pensions.

Otherwise, your argument is that all of us should pay substantially higher taxes to bankroll these lucky few individuals who got themselves a sweetheart deal thanks to their affiliation with state and local government. In most places, you'd call that "corruption".

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

#63

Post by gascan » Mon, Jul 30, 2018, 9:38 PM UTC

AnimalMuppet wrote: post #49

toomuchtodo wrote: post #10

Earlier quoted context omitted.

> Let's not pretend like this was ever seriously going to be sustainable. There’s a bit of nuance to it. Predictions were made based on historical market returns we’re only now discovering are unrealistic going forward (7-8% historically, 4-5% predicted going forward). The only issue is that no “relief valve” was constructed in the event predicted returns turned out to be inadequate to fully fund the system, triggeri…

Were predictions made based on historical market returns? Or were the predictions optimistic even when they were made? My understanding (which is from a distance, and could easily be wrong) was that even when made, the estimated returns were optimistic - not necessarily wildly optimistic, but toward the top end of the historic range of returns. This reduced the burden of funding the pensions at the time they were def…

It was probably both. Surely there is always a little optimism (our active fund manager can get us 8% instead of 7%!). But also-

For the period 1950 to 2009, if you adjust the S&P 500 for inflation and account for dividends, the average annual return comes out to exactly 7.0%

But, now economists are speculating that was an exceptional period (the post-war period) and "normal" return is probably more like 4-5%.

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

#64

Post by gok » Mon, Jul 30, 2018, 9:38 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…

That is not the issue this article is talking about. Public pension spending in the US is not especially low compared to the rest of the OECD [1]; as a portion of GDP it's larger than Norway or the Netherlands, which have much higher taxes.

The issue is that those pensions have been comically mismanaged; edit: and were not sustainable in the first place

[1] https://data.oecd.org/socialexp/pension-spending.htm

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

#65

Post by AnimalMuppet » Mon, Jul 30, 2018, 9:38 PM UTC

jimjimjim wrote: post #40

you know that research test they do where the subject can have $5 now or $50 at the end if they don't take the $5 and a disappointing amount of times they go for the $5. The problem is everyone cheers on the politician that says you can have the $5 AND the $50.

> The problem is everyone cheers on the politician that says you can have the $5 AND the $50.

And once that politician is gone, if one of the new candidates says "no you can't", that candidate will not be elected.

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

#66

Post by vuldin » Mon, Jul 30, 2018, 9:39 PM UTC

This is a good example of the type of debate that well-meaning, thoughtful people decide just steer clear of due to the (lack of) perspectives of the majority of those currently taking part in the conversation.

The United States spends the better part of a trillion dollars per year on its military. A relatively small fraction of that would solve any issues their social welfare programs currently have.

It's a matter of prioritization and the perspective of those leading the discussion. Instead of turning focus towards changing priorities (the priorities are already seemingly in their favor), they turn to how expensive and unmaintainable the programs are that they wish to further de-prioritize. In the process, they draw attention away from the stark contrast of funding between various government programs. Namely social welfare vs military, or improving their society vs destroying others.

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

#67

Post by ythn » Mon, Jul 30, 2018, 9:39 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…

> Yet Americans falsely believe they are overtaxed.

Perhaps the observation of government wastefulness is conflated with feeling overtaxed. There are two ways the government can raise more money:

1) Raise taxes

2) Use existing taxes more efficiently

If you look at where the tax money is going, infrastructure is one of the smallest pieces of the pie. Why not divert defense and/or social service tax to infrastructure for a few years?

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

#68

Post by russh » Mon, Jul 30, 2018, 9:39 PM UTC

abledon wrote: post #31

How much money does one need to live in retirement? If they are doing daily exercise(1-2hr), cut out most processed foods and sugar , no alcohol , cook all their food from scratch using cheap staple ingredients , entertain themselves with books , community , local events and cut out expensive vacation plane trips (only an invention of the past century). An ‘uncomfortable’ lifestyle shift but doable for a human. [edit…

Totally doable... right up until you fall ill or start to have medical issues and you can't care for yourself.

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

#69

Post by kevmo » Mon, Jul 30, 2018, 9:40 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…

50 years of Cold War propaganda exacted its price. Communism, socialism, and taxes are trigger words for a large number of Americans aged 40 and over.

One thing I really appreciated about Bernie Sanders was that he did not shy away from the term "socialist". It's engendered a conversation America really needed to start having.

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

#70

Post by rayiner » Mon, Jul 30, 2018, 9:40 PM UTC

AnimalMuppet wrote: post #49

toomuchtodo wrote: post #10

Earlier quoted context omitted.

> Let's not pretend like this was ever seriously going to be sustainable. There’s a bit of nuance to it. Predictions were made based on historical market returns we’re only now discovering are unrealistic going forward (7-8% historically, 4-5% predicted going forward). The only issue is that no “relief valve” was constructed in the event predicted returns turned out to be inadequate to fully fund the system, triggeri…

Were predictions made based on historical market returns? Or were the predictions optimistic even when they were made? My understanding (which is from a distance, and could easily be wrong) was that even when made, the estimated returns were optimistic - not necessarily wildly optimistic, but toward the top end of the historic range of returns. This reduced the burden of funding the pensions at the time they were def…

Until the 2008 recession, the vast majority of Illinois public pension funds assumed returns in excess of 8%: https://www.civicfed.org/iifs/blog/comparing-investment-retu.... That was more than the market returned in 1960-1980, but less than the market returned from 1980-2005.

But, those projections don't include unplanned pension benefit increases for existing retirees, which happens periodically.