Pajamas Media

47 Comments

1. jharp:

For once I agree with you. Public pensions are in deep deep doo doo.

But let’s be clear. It was stolen by Wall Street, the same guys who stole all of the private pensions.

What we clearly need is more deregulation of Wall Street, right?

Thank God for social security or we’d have a lot of older folks eating dog food.

Oct 15, 2009 - 8:43 am 2. Old Soldier:

I live in NJ. Our state is run by Public Employee unions and our Governor is in bed with them, literally. The funds are bankrupt because they have been promised far too much while corrupt politicians have been stealing from the funds – not some anonymous “Wall Street” guy. A full-salaried and benefit retirement in early-middle-age after holding the easiest jobs in the world – sure those people are going to make more in the private sector.

Mr. Ott is absolutely correct, public employees should get the opportunity to participate in a 401k like the rest of us. Defined benefit pensions are time bombs.

I would go a step further and propose that government contracts with unions should be prohibited. As the example in the article illustrates, there is no advocate for the taxpayer in these negotiations – just the unions and the recipients of their campaign contributions diving up tax-payer money.

Oct 15, 2009 - 9:23 am 3. Old Soldier:

jharp: How can a street steal money?

Oct 15, 2009 - 9:24 am 4. ERIC SANDERS:

Well, I had my own company for 10 years before I passed a difficult civil service exam. And, yes, the bennies are great, just as they are for congressmen, and Wall Street types. You see, as a court employee, I do their divorces and corruption trials. My very first day at work here in I did a divorce hearing for a Wall Street guy. His BONUS that year, ‘06, was $230,000. No one was screaming bloody murder when some guy who clicks and drags his mouse to trade stocks and bonds gets that much money. No one seems to complain when some doofus who can hit or throw a ball makes so much money that families can no longer afford sporting events. Wall Street and professional sports are both quasi-government entities, requiring transportation, subsidy and help from our government. Yet, when the people who plow your street while you sleep, get spit on by inmates, run into burning buildings or deal with incredibly tedious and detailed paperwork get a nice paycheck and bennies, the losers scream.
The fact is, many government workers suck and are overpaid. Many are great and underpaid, too. How much can you give a court employee who spends each day dealing with child rapists? How much can you give an EMT who spends each day sticking G-tubes back into infected stomas of junkies who take the ambulance to the doctor? How much can you pay a HS teacher who teaches 20 year old, 240 LB 6′3″ juniors? I know one who does.
How much do you pay a cop who has to stick Vicks on his nose to walk through the urine stink halls of the projects looking for gangs? I’m open to suggestions, and volunteers for these jobs. There are certainly major problems with our economy in general, but we have to not divide and conquer each other. We need to work together so that business owners don’t get pounded with more insane taxes and government shrinks, quickly. But shrinking the court system where I work, for example, requires changing laws. Shrinking the government in general, requires action on your end. I think everyone agrees, that if you want a job done right, you have to pay. If you think something should be done by the government, you need to have a way to entice good people, like me, to do it. You really can’t have your cake and eat it too. You cannot cut pay and benefits and then complain when it takes you three days to fight your parking ticket or you cannot get out of your driveway on a February morning to go do your high paid job. If you don’t like my retirement package, you’re jealous. But I’ll never, ever be rich, not unless I win the lottery.

Oct 15, 2009 - 9:37 am 5. ERIC SANDERS:

So, I don’t get to post?

Oct 15, 2009 - 9:45 am 6. venividivici:

But let’s be clear. It was stolen by Wall Street, the same guys who stole all of the private pensions.

It’s also the fault of the pension trustees and company management. Back in the day, pensions used to be invested in bonds, earning enough interest to cover expenses over time. Pension trustees then tried to boost returns by investing in equities, which is actually pretty sound decision-making.

However, the problem was that the trustees started making bold assumptions about returns, which allowed the companies to contribute smaller cash contributions to cover the actuarial nut for long-term payouts. That meant that if the equity markets didn’t churn out year after year of 8% returns, the plans would be underfunded. However, the only way that would be a major issue is if in combination with a falling equity market, interest rates declined, because the liabilities of these pensions are calculated with a specific interest rate as the long-term discount factor. Well, interest rates hit record lows at the same time as the equity markets were tanking, so that meant the two biggest factors in determining the pensions level of funding/underfunding were both working against the pensions.

There are also some issues related to pension trustee compensation from various investment managers, i.e. kickbacks, as well as various issues relating to bonus compensation and benchmarking of performance and a lot of pension managers were making serious cash running these things, as if they were mutual fund managers and not public servants.

Anyway, it’s a bit more complicated than saying Wall Street stole the money. A good source of information is the blog “Pension Tsunami”. The guy who writes it is very much a straight shooter and keeps constant tabs on all these topics.

Oct 15, 2009 - 10:01 am 7. masstexodus:

Michigan is already doing the defined contribution thing for state employees i think.

Oct 15, 2009 - 10:09 am 8. Eric:

Last year Rep. Miller (D-CA) proposed eliminating 401k’s and nationalizing all their assets and then giving everyone a prorated amount in return. The details are a bit fuzzy but don’t be surprised if the “Progressives” come for the private retirement system after they gobble up the health care system. The private system is “unfair” after all in their minds because some people don’t have enough money to put aside in 401k’s, IRA’s or pension systems. Nor does everyone have access to them. So like health, rather than breaking down the legislative barriers to increased access government will destroy the system.

Your money isn’t really yours after all.

Oct 15, 2009 - 10:28 am 9. Poor Citizen:

The federal government must step in and guarantee that every government employee is given a pension. We need our government services and employees, both on the federal and local level. Without them, we would collapse. And remember, if you take away big gov (congress, executive, judicial), they are good value for money at just about 15 grand a year average for 20 or 30 years service. Thanks for the article.

Oct 15, 2009 - 10:48 am 10. Jerry:

Too bad everybody is right and everybody is wrong. Nobody wants to hear that.

My grandfather hired goons to keep his sweatshop employees from unionizing. When the union could no longer be denied, he paid off the union officers instead of his gangland goons. Power changed hands. What could you do. Principles were not at stake, but power was. Everyone agreed that the workers were being taken advantage of, but the unions were not the answer that the workers had hoped for. Communists have murdered more workers than the the Czars ever did, but during the Czars’ times workers were either serfs or recently freed serfs.

Those who complain about defined benefit pension over-payments or 401K market manipulations are subject to the same fights suffered by slaves and serfs around the world – minus the pitchforks and the pruning hooks used in the battles with muskets and Gatling guns. We are better off today, don’t you think? So far there is no blood flowing in the streets. A little perspective, please.

Oct 15, 2009 - 11:01 am 11. Old Soldier:

Poor Citizen: I disagree with every word you just posted.

No government employee needs a pension – they can save their money like the rest of us. Stop taxing savings if you want to help.

I don’t need my government or services. I’ll take the local police, courts, and national defense. You can keep the rest, I don’t want it.

We won’t collapse without government – you have it backwards.

Take a look at Federal Employee Pay rates – our bureaucrats are very well paid.

Oct 15, 2009 - 11:40 am 12. jharp:

Old Soldier:

“Stop taxing savings if you want to help.”

Savings aren’t taxed you dolt.

Oct 15, 2009 - 12:07 pm 13. Bender:

The legacy costs from government-employee pensions was bankrupting government even when the Dow was up over 13,000. Just ask Michigan.

Oct 15, 2009 - 12:12 pm 14. Charles R. Williams:

Part of the problem is that these plans have reasonably certain payouts and assume an impossible 8% long run return on their investments.

My wife and I are in the Ohio Teacher retirement system. Benefit cuts are in the works.

A second part of the problem is public sector unionism. It is too easy for unions to get what they want through the political process.

Oct 15, 2009 - 12:46 pm 15. jharp:

There isn’t a damn thing wrong with properly managed and properly funded pensions.

It’s kind of sort of how you attract good workers. They have worked in the private and public sector for decades.

90% of the blame lies with the Wall Street crooks. They same Wall Street crooks that Bush and Obama just bailed out will hundreds of billions of taxpayer dollars.

Always follow the money. Always. And guess how many of the Wall Street insiders lost money?

Oct 15, 2009 - 1:08 pm 16. jharp:

Charles R. Williams:

Part of the problem is that these plans have reasonably certain payouts and assume an impossible 8% long run return on their investments.
_______________________________________________________________

And here I thought that the stock market delivered 8% returns over the long haul.

What gives?

Wwasn’t the Dow about 1,000 when Reagan took office? I figure that’s about 3 doubling times ago @ 7%.

Let’s see, 1,000 to 2,000, 2,000 to 4,000, 4,000 to 8,000.

Hmmmm. We should be in good shape with the Dow at 10,000 today.

What went wrong?

Oct 15, 2009 - 1:39 pm 17. jharp:

By the way, the same ratios apply to the S & P 500 which is more than likely the better measure.

How about VVV? What did they teach you in Classics about that?

Oct 15, 2009 - 1:42 pm 18. Professor Guvinoff:

This is quite an old problem. The Chinese character for “Government official” is several thousand years old, and it is a stylized representation of a fat man sitting under a roof!

But traditional Chinese writing was a quintessential aristocratic invention: It is very tedious to learn, and represents a big obstacle on the path of the upstart. We can manage with 26 letters, which the Internet carries efficiently. We should do better than accept undeserved privilege as inevitable.

Oct 15, 2009 - 2:18 pm 19. Metz:

@16n jharp

According the the data here: http://www.standard.com/annuities/eforms/13038.pdf

the S&P has increased approximately 7.6% annually since the end of 1979. This even takes into account the disaster of 2008. (It was running almost 9% prior to that)

So indeed, what did go wrong? Could it be that the pensions were inadequately funded on an annual basis? Did the trustees invest in more risky investments rather than diversifying with an index fund? Are the future payouts such that a return close to 8% is insufficient? Why do pensions rely on a return at all, I thought profits/capitalism were the root of all evil?

I do agree with you on the bailouts. What a serious waste of MY money. And yes, since I am actually a taxpayer (you and your liberal friends should try it sometime), it is MY money. If you spent half the energy trying to grow your little sole proprietorship as you do trolling in here with nonsense, you would be as exasperated with the size of government and the waste they perpetuate as the rest of us.

And its okay, I don’t expect any sort of reasoned, logical answer from you to any of this. I’m sure you’ll do the usual and post some snarky remark and add another nickel to your “earnings” jar.

Oct 15, 2009 - 2:33 pm 20. biblio44:

‘Most government … participate in a “defined benefit” pension plan. That means that your tax dollars get used to make sure that, whatever happens in the stock market….’

What suckers! Don’t they know that the stock market is the place for your retirement – and Social Security – money? Didn’t they learn ANYTHING from W?

“Do you think, for example, that the county executive in Lehigh County, who has received some $75,700 in campaign contributions from union political action committees, is the best agent to drive a hard bargain with union bosses….”

Do you think a congressman who has received millions from the insurance industry is the best agent to vote on a national health care bill? Alas, such is the way of our world.

Oct 15, 2009 - 2:55 pm 21. UPS driver:

wasn’t the Dow about 1,000 when Reagan took office? I figure that’s about 3 doubling times ago @ 7%.
Let’s see, 1,000 to 2,000, 2,000 to 4,000, 4,000 to 8,000.
We should be in good shape with the Dow at 10,000 today.
What went wrong?

Its called THEFT.

The Mafia did it for years.

Anytime they needed money they just dipped into our teamster retirement pension and welfare trillion dollar fund.

Now the city, state, and federal government risk managers are our new Mafia overlords.

… My 9 years of non-refundable teamster union pension donations helped remodel a Las Vegas casino toilet.

Oct 15, 2009 - 3:17 pm 22. jharp:

Metz:

@16n jharp

According the the data here: http://www.standard.com/annuities/eforms/13038.pdf

the S&P has increased approximately 7.6% annually since the end of 1979. This even takes into account the disaster of 2008. (It was running almost 9% prior to that)
________________________________________________________

The number is 7.6 %. 2008 counts. Which I think is pretty good.

So indeed, what did go wrong? Could it be that the pensions were inadequately funded on an annual basis? Did the trustees invest in more risky investments rather than diversifying with an index fund? Are the future payouts such that a return close to 8% is insufficient? Why do pensions rely on a return at all, I thought profits/capitalism were the root of all evil?
____________________________________________________________

You tell me. All of the above?

To me the biggest culprits are the guys unloading common stock onto the masses at vastly inflated prices. Vastly. And there is a lot of folks in on it.

And I think the market is gonna be weak for possibly a decade. You tell me what industry is flourishing and will keep the market strong.

Oct 15, 2009 - 3:40 pm 23. Tcobb:

The solution is pretty simple–put a tax upon incomes that derive from the government. Put it at a rate that is adjusted every year so that the deficit from the prior fiscal year is recovered. That’s where all the real money goes. Follow the money. Do unto the government as they do unto us.

Oct 15, 2009 - 3:58 pm 24. margretto:

One of the problems is the retirement age. Why can’t gov’t workers work until age 65 like everyone else? We have so many young people retiring and then getting another gov’t job that they will retire from, therefore getting 2 pensions. I also don’t think that gov’t workers should be in unions, they are fighting the taxpayers.

Oct 15, 2009 - 3:59 pm 25. Federale:

I don’t think the walkback of current pensions will solve the problem. The only way is to reduce the pensions to something affordable. They will just have to rely on Social Security…….oooppsss.

Oct 15, 2009 - 4:07 pm 26. John:

Blah blah blah. You are a government slave, get used to it.

I’m here to tell you right now that your life will get worse every day for the rest of your life and government employees lives will get better ever day for the rest of theirs.

They own you. And no election, no political party and infinite amounts of outrage spewed over the internet will ever change that.

They have the badge and the guns. Now get your sorry ass back to work so they can retire earlier and with better benefits.

Oct 15, 2009 - 4:15 pm 27. mjs:

Old Soldier’s analysis is right on–There is no advocate for the taxpayer when the government enters into a contract with public employee unions. Arbitration panels are no better.

Oct 15, 2009 - 4:19 pm 28. Mutnodjmet:

California TEA PARTY groups have started an initiative to BATTLE THE UNIONS!

It promises to be as BIG as PROPOSITION 13!

More information can be found HERE.

http://templeofmut.wordpress.com/2009/10/15/freeing-state-employees-from-union-political-elites-deal-cas-1st-tea-party-initiative/

We will need ALL CALIFORNIAN TO HELP.

Oct 15, 2009 - 4:40 pm 29. Bilgeman:

Mr. Ott;

I wouldn’t worry overmuch about being bankrupted by government pension obligations, since once these obligations threaten to break the rice bowl of current and active government workers, then these “obligations” will be shown to be the empty promises that they really are.

The fact is that governments went bankrupt long ago, and have been spending “on the credit card” for longer than many of us have even been alive.
But now the interest payments on that debt is becoming greater than the revenue coming in can cover, so to quote another opportunistic public service con-man:

“What is to be done?”

And the answer, as is becoming abundantly clear from our Nobel-Prize winning Alleged Hawaiian, is to “…spread the wealth!”, (or more accurately:

“…spread the want!”.

This is the sort of “good news” you get when you’re told by your doctor that the surgery to remove your prostate gland will likely be completely successful.

Yes, there IS the pain and loss involved, but at least you can hope that they cut out the cancerous tumor along with the bits you’d rather have kept.

The Obama 5-Year Plan to “Share the Want” will accelerate the reckoning of the day that politics will consist entirely of one gang of civil servants battling another gang of civil servants, since by then, all private sector value-added wealth-creation forms of business will have moved far, far away or be performed entirely by illegal undocumented workers.

Or both.

I wouldn’t be surprised to see geriatric retired civil servant knife-fights for food stamps, (or whatever they’ll be calling ‘em then…Soylent Green rations?).

When the parasites get too ravenous, the host organism sickens, and then i is in the parasites’ best interest to cull the useless mouths feeding from their communal segment of intestinal tract.

Oct 15, 2009 - 4:53 pm 30. stevebourg:

…..your first idea, of placing new hireds into DC plans, is peanuts. It won’t save significant dollars for 10 years. Believe it or not, the answer is simple: Make the full pension retirement age……65……..that’s right. Second, get rid of the COLA adjustments on these RollsRoyce pensions for govt ‘ees. Third, lower the replacement ratio somewhat. Yes, do all three for actives!! No matter how close they are to retirement!! Reality check. They won’t do it until we the taxpayers revolt. And we are revolting with our feet. I can’t wait to take my modest retirement amount in my DC plans/IRAs, and move to a low tax state!!
Scott: Check out pensiontsunami.com to see the egregious, maniacal raping of taxpayers that’s occurring literally everywhere govt ‘ees exist.
And finally, guess what NYCity policemen get|? They get paid about $100k/year from age 22 to 42, plus family health ins for life, then pension of about 60% of pay plus COLA until they die at age 82 on the average. That’s $6,000,000 they receive from age 22 to 82…….by working 20 years……equals $300k/year worked. It’s unaffordable for taxpayers, paying these “servants” this much!! And similar pay happens in all big cities. Firemen are worse. For proof, see nypdrecruit.com
The union brags about it. I guess so!

Oct 15, 2009 - 5:08 pm 31. justmy2cents:

I agree.. “Old Soldier: Poor Citizen: I disagree with every word you just posted. No government employee needs a pension – they can save their money like the rest of us.

I agree: “One of the problems is the retirement age. Why can’t gov’t workers work until age 65 like everyone else? We have so many young people retiring and then getting another gov’t job that they will retire from, therefore getting 2 pensions.”

Oct 15, 2009 - 5:24 pm 32. Old Soldier:

jharp: “Savings aren’t taxed you dolt.”

Wow that’s news to me and my accountant. Interest from savings accounts are taxed as income, as are stock and bond dividends. Sales of stocks and bonds are subject to capital gains taxes. If you live in a blue state, the state probably hits you with all these taxes as well as the Feds.

Oct 15, 2009 - 6:27 pm 33. jharp:

Old Soldier:

jharp: “Savings aren’t taxed you dolt.”

Wow that’s news to me and my accountant. Interest from savings accounts are taxed as income, as are stock and bond dividends. Sales of stocks and bonds are subject to capital gains taxes.
_____________________________________________________________

It’s not news to the educated. It’s pretty basic.

You obviously don’t know the difference between savings and earnings.

Seriously, turn off Limbaugh and Hannity. They are making you into a fool and hurting America. No one is served by by you posting such ignorance.

Oct 15, 2009 - 7:39 pm 34. DavidN:

I agree about the retirement age. It needs to be 65 like in the private sector. The issue of double-dipping, or worse, is also a thing. If you work a job long enough to get a public pension, and then work *another* job long enough to get another pension, you get *both*. Here in California, we have over 5,000 workers collecting pensions of over $100,000 *each*. One fellow gamed the system, moved around from one city job to another, and collects just a bit short of half a million a year.

The one fallacy of several of the commenters is the idea that conservatives can just get elected and unilaterally change the rules. Even if the unions agree, the individual pensioners won’t, and they can sue in Federal or State court. My guess is if they have a contract that guarantees them a pension at a particular rate with a particular COLA, we’re on the hook for that exactly until they die, even if the rest of the country goes bankrupt. Health benefits too.

Here in California, local municipal bus mechanics went on strike a few years ago because the county was thinking of modifying their health care plan. As it stood, the individual employee payed nothing for his health care: no premiums, no co-pays, no deductibles, nothing. If he had a family, then he was on the hook for a whopping $6.00 a month premium to cover all of them. This was for both current employees and retirees (who are eligible to retire after 26 years of service).

When they went on strike, there was a new rule instituted by someone (I don’t know who). The board of directors of the county MTA consists of various local officials (members of the county Board of Supervisors, the mayors of various cities in the county, etc.). Those members of the board who received campaign contributions from the union involved weren’t allowed to participate in the negotiations. The talks deadlocked, and there was a strike for about a month…until the Union managed to win a lawsuit against the MTA, invalidating that rule, so that those guys they gave campaign contributions to were allowed back into the negotiations. The union, of course, got everything it wanted once it was allowed to negotiate with itself concerning how much of the taxpayer’s money it would get to keep.

Frankly this is the part I’m most pessimistic about. In 30 years, the guy who retires now at age 45 will still most likely be alive and collecting his pension, with COLAs and good health benefits. But the next 30 years of employees will have retired also, creating an enormous group of people collecting very generous benefits packages that the rest of the country won’t be able to afford. And the way the system is set up, there is nothing anyone can do about this.

Oh, and I forgot to mention that in California, a public pension is typically 90% of your pay the last year you worked. That includes all bonuses, overtime, and incentives the employee earned that last year. The union sued claiming that these things should be included in pension calculations, and a judge ruled in their favor several years ago. Private sector jobs and employees in California get screwed constantly, unless you’re a movie star, athlete, or singer…but the public sector is building its own phalanx of millionaires to replace them, and soon we’ll all be working for *them* rather than the other way around.

Oct 15, 2009 - 8:16 pm 35. LennyB:

The poster and many comments here are intentionally conflating two issues: whether defined-benefit pensions can work, and whether it is fair that people have them.

The first issue is compelling; the second is the kind of have vs. have-not issue that is typically associated with the liberal mindset, as is that rhetorical tactic, I’m sorry to say.

Many public pensioners would gladly take every dime to invest themselves if given the option. If they don’t have the option, or didn’t have it when they started working, it hardly seems reasonable to be critical of these workers and their pensions.

It’s worth considering that public pensions are generally funded with employee contributions (their money) and employer contributions (also the employee’s money — and not the taxpayers’ — considering a pension retirement match is a benefit no different than the generous 401k matches at many companies).

This poster injects a third very obviously objectionable element to rile up folks: taxpayer bailouts of the pensions when they are mismanaged. That’s not quite the same thing as whether employer/employee contributions can be managed sustainably in a defined benefit scheme. They certainly can be if the benefits are low enough, after all.

Mismanaged pensions are exactly that: mismanaged. Just like all the corporations that end up costing taxpayers bailout money via the willful mismanagement and abject laziness and greed of private sector workers.

But if the concern is whether or not they are inherently “fair”, well that’s not a very free market consideration — in the free market, laborers have a choice whether to work for guvment or work in the private sector. Right now is about the time where certain choices look better than others depending on where you are at now.

Re: the fairness issue, I just have one comment. Most people’s discomfort with other folks’ pension lies in the shifting of the actuarial risk. In a defined-benefit, the employer bears it. Without that, guvment salaries are going to have to go up to attract and retain the same worker.

Don’t get me wrong. Unions are the devil. Their me-first attitude is what drives public pensions into mismanagement in the first place, risking the best resource a pensioner will ever have. But cut the workers some slack, if you’re envious of the shrewd decision they made to smooth income in retirement at the cost of higher salaries now, all you are is a liberal at heart anyway.

Oct 15, 2009 - 8:33 pm 36. cdr164bn:

The easiest target in down times is the public employee. Many state government employees are not represented by unions either. It’s been my experience that not all pension plans are alike. Some are very liberal and are now in trouble. Some have been very conservative and are hanging on and even recovering a bit now that the DOW has passed 10,000. We can’t start feeding on ourselves when times get tough. That will only drive more people to protect themselves by forming alliances like Unions.

Public employees are an easy target but listen carefully to the critics. Public employees aren’t the bad guys here. They are all just trying to make a living and raise their families. Nobody’s getting rich, they are just getting by.

Oct 15, 2009 - 8:38 pm 37. LennyB:

And let me tell you something else. For those of you who resent the excellent retirement age for govt pensions, and prefer that the age be raised to 65, what is your real issue?

Perceived fairness, of course. But is that the age you yourself plan on retiring? Doubtful. Most responsible private sector workers who have their act together save their money and plan to be reasonably done by 60 or so.

But let me tell you what I think would happen in that scenario. Government tells a 20-25 year old college graduate, hey, here’s a great career, you only have to work 40 years to get a retirement benefit, and best of all, you can’t manage your own money to try to retire early. And we’re not paying you enough so that you can make that happen on your own. 20-25 year old says, forget that, I’m working for [UPS, Allstate, Home Depot, Used Car dealer, whatever]. By the time 20-25 year old is 30-35, government can’t afford him anymore. What do you get? A completely unsustainable talent pool with which to run anything, even government. You think government creates inefficiency and drags GDP now? Wait until that world exists, my friends.

Last: for all of you who think that “financial services” is a growth and value producing enterprise and are so employed, think again. That is the ultimate in rent-seeking, parasitic behaviour, and frankly it’s worse than government because it can’t defensibly be called overhead by any stretch of the imagination. Think you’re helping out productivity and economic competitiveness by leaching fees off of people who actually work? Try growing a garden or something, then you’ll be a productive part of society.

Oct 15, 2009 - 8:56 pm 38. LennyB:

Heavens, I almost forgot to include my own proposed solution. Sorry about that.

I notice nobody has advocated governments actually boost pension contributions right now, temporarily, in the short run while the markets are down to capitalize on future returns likely to be significant. Cost effectiveness wise, that’s got some merit in terms of the taxpayers keeping their obligation to their employees. That they shouldn’t have promised them is irrelevant. But that’s a hard pill to swallow for anyone whose issue is not the actual cost of fulfilling the terms of employment, but the fairness of what those terms were.

My solution is this: give employees the option to contribute more for the same benefit whenever actuarial projections require it (real ones, not fantasy 8+ percent ones), or allow them to opt out of the plan permanently without having to quit, paying them out their contributions, the employer contributions, and returns actually earned on both of those for the period they worked.

Any beneficiary cannot in good faith oppose paying for the benefit they will receive. Boosting an employee match from 8-10 percent to 15-20 percent is an excellent start and probably the maximum you’d need to do, as 20 percent is what most retirement planners will tell you is necessary. If you want the fancy govt pension, you’ve got to pay for it. Cutting benefits can also work, but if the taxpayers already forced involuntary contributions under those terms as a condition of employment, they’ll just end up paying more in a lawsuit. And you’ve got to pay the employee actual returns if they walk, otherwise you are stealing from them.

But, for the employees who stay, increased employee contributions means that the govts involved have to kick in at least what the employee kicks in. Some may call this a bailout, but remember, taxpayers are the employer here, and labor ain’t free. Gotta cough up the benefits. Taxpayers already structurally benefit from forcing employees to put their money into the public pension and paying them less in actual salaries. If you hate govt you won’t agree with what I just said. I hate the cable company, but I still pay them because I watch the tv.

But under no circumstances should any government appropriate funds to shore up a pension without an equal match from employees.

And if anyone here wants the job security of an entity that’s not going away, well, government is that entity. If you can stomach doing it, more power to you.

Oct 15, 2009 - 10:17 pm 39. Old Soldier:

jharp: You need to get out of Mom and Dad’s basement more often.

Why save the money I already paid income tax on if I can’t keep the earnings?

Oct 16, 2009 - 4:55 am 40. Commuter:

39. Old Soldier:

I doubt there was a single person reading the thread other than harpo who didn’t immediately understand that you were talking about interest on savings in comment #2. It required a rare fool to respond like harpo did in #12 and then backpedal himself into appearing even more clueless in #33, but he’s obviously up to both tasks.

And harpo, rather than just respond with your usual unsupportable nonsense about the 95% charade, wait for a thread where that’d be on topic and present your case again. I’ll be happy to clean your clock a 3rd time.

Oct 16, 2009 - 6:57 am 41. barb:

Thanks LennyB! I paid into my Government Pension Fund for 30+ years. The money was deducted from my paycheck twice a month. I had no access to it until I retired. The government was able to use it for whatever they chose to. I also paid into Social Security..first in the jobs I had in private industry (I started working when I was 13) and then in the last years working for the Federal Government…and guess what..Fed Retirees have this pension offset crap..which means we only get a small proportion of what we paid into the Social Security fund. Federal Government employees went through a long period when we had to bid for our own jobs against non-government contractors. After it was found that the government workers won the contracts and were more cost efficient…DoD and other Agencies decided to end the process of having Federal employees bid on their jobs. They decided to just give the jobs to contractors….thanks in a large part to Ted Stevens of Alaska.

Oct 16, 2009 - 7:56 am 42. Bilgeman:

#37 LennyB:
“By the time 20-25 year old is 30-35, government can’t afford him anymore. What do you get? A completely unsustainable talent pool with which to run anything,”

And you think that that state of affairs isn’t exactly what is extant in all too many communities around our nation today?

I would offer Detroit, Flint, Gary IN, Youngstown OH, and the entire state of California as examples that your future scenario arrived yesterday.
These are effectively ghost towns, (or becoming so), for business and pivate citizens, but they still have basically the same number of government employees.

Isn’t this somewhat analogous to the cockroaches getting atomic weapons and then nuking all of humanity so that they inherit the Earth?

The classic bargain that used to be the modus operandi of the Civil Service was a trade-off:

One accepted lower pay for the security of not being laid-off, excellent benefits, and near-immunity from the economic dangers of “Employment At Will”, which is the private-sector labor law of most of these United States.

Somewhere along the way, though, certain kinds of politicians and constituents accepted the meme that “losing skilled people to the Private Sector” was some kind of evil to be avoided at all costs.

This is humbug. Truly skilled people WILL be lost to whichever segment compensates them more to their liking, and there’s not much that can be done about it.

And it’s not like having a former civil servant go off and get a nicer office and a company car and greater compensation for actually producing something is the equivalent of being sent to Siberia, is it?

“But let me tell you what I think would happen in that scenario. Government tells a 20-25 year old college graduate, hey, here’s a great career, you only have to work 40 years to get a retirement benefit, and best of all, you can’t manage your own money to try to retire early.”

That’s nearly what will happen, with one small correction. The Government will force it’s employees to join a politically connected union’s bargaining unit, and then all questions of pension will be referred to the union.

I was 20 years a rank and file union member….believe me when I tell you that if pension and labor representation laws were actually enforced, we’d fill the prisons with labor bosses and their flunkies, (who in my personal experience enjoy a separate, two-tiered pension scheme as well as a better health care plan than their members).

Oct 16, 2009 - 8:10 am 43. Cybergeezer:

Ready for your welfare? Obama’s plan for you:
http://blog.heritage.org/2009/10/16/morning-bell-obamacare-puts-you-on-welfare/

Oct 16, 2009 - 9:50 am 44. myth buster:

jharp, my dad told me the answer to what happened to the pensions (he’s in charge of the fixed income investments for the New Jersey State Pension Fund- with $22 billion under his control, and I believe he is the second highest ranking employee there, so he is quite privy to this information). He told me that the problem is that politicians were overspending, outstripping anything that they could pay for with a growing tax base. When deficits resulted, nobody wanted to raise taxes, because nobody wants to be caught voting for tax hikes before an election. Their solution to the deficit problem was to raid the contributions to the pension fund. They couldn’t withdraw any money that was already there, but they could refuse to add any additional funds. Over the course of twenty years, this builds up to an insane amount of underfunding, after the rosy scenarios they paint as a facade for raiding the pension fund fail to come to pass, as any rational person would expect. Ergo, this is just like entitlement spending- politicians created a problem by promising more benefits without coming up with a way to pay for them.

I do have a solution, or at least a partial solution. Upon their 50th birthday, vested government workers shall be granted the option to take a $50,000 advance on their pensions, obligating themselves to work at least an additional five years (assuming the minimum retirement age is 55, adjust accordingly if it’s different). If they accept the advance, they shall incur a 10 point penalty on their pensions if they retire at 55. This penalty shall be pro-rated by 1 point per year if they work longer, disappearing entirely if the worker retires at or beyond age 65. The military implemented such a system a decade ago and called it REDUX (it was $30,000 at the 15th anniversary of enlistment/commissioning). About 9% of enlisted men and 5% of officers accepted the advance, significantly reducing the pension obligation on them. This advance shall be taxable. I expect that this advance should yield better effective returns than anything we can expect from the market (my expectation is 10-12%; the military version was 28%, but they were younger and the advance was smaller).

Oct 16, 2009 - 12:36 pm 45. LennyB:

@42 Bilgemann, interesting comment. I would submit that the situation you describe is the exact scenario in which govt employees are no longer secure, you won’t get any argument from me on that. The taxpayers cannot file bankruptcy, that more than anything else is the author of govt job security. But it’s not 100%, and if you have no more taxpayers, or you have less taxpayers, you have no more government. The govt employees cannot inherit the earth, so to speak, if there is no base of taxpayers who require government. Governments lay people off all the time when budget crises hit — the most immediate cause is generally not enough tax revenue, but that is always informed by how taxpayers there are and how much income/sales there are. If the tax base shrinks radically in a ghost town and people move away, government gets cut, or should get gut, in direct proportion. It is a myth that govt offers complete job security. It might even surprise you to know that there are plenty of govt agencies that are at-will employment.

But we agree on the larger point. Unions are truly evil, and in the public sector, they are rarely if ever necessary. While you cannot take away the right of employees to organize to have their interests represented, the unfortunate reality is that 100% of the time, union thugs are capitalizing on the discontent of those low in the ranks in order to profiteer off their labor. It is truly, truly disgusting. So politicians who enact legislation that makes union participation compulsory so that there will be more dues supporting democrats, they are the biggest threat, both to the govt workers who deserve compensation for their labor like everyone else, but also to the taxpayers who might be forced by politicians to compensate this labor at excessive rates.

Last, govts vary on their at-will status, pensions, and benefits. The municipal employee may not have the pension that a federal employee does, or vice versa. If you take a job at an agency funded by tax dollars right now, you are absolutely taking your chances, job security wise.

If I had one basic point here, it would be this: government pensions offered to employees are not a public benefit program, and should not be treated as a public policy issue for the taxpayers to grumble about as if it’s some kind of charity or assistance payment. Medicaid, medicare, welfare, and to a lesser extent (but still very much so) social security, these are the kinds of programs that the taxpayers must rightfully be concerned about. But pensions for public employees are completely different, they are compensation, pure and simple; sure they must be managed responsibly, and sure it’s a problem when they are not and they insert an opportunity for union wretches to profiteer at the expense of not just taxpayers but of the labor of the folks they purport to “represent”. But benefits are earned by people through their labor; when properly managed they are always funded with their money (and not taxpayers’) and they belong to them; and this is completely different than any government benefit program. What private sector folks (under the guise of “taxpayer concern”) are pissed about is simply that unlike companies, governments can’t go bankrupt and can’t revert their pension to the govt at reduced rates. Still further, at least governments acknowledge the liability of pensions in their deliberations. Private companies usually bend over backwards to conceal the liability until it’s already become a mortal threat. You simply cannot blame government workers for that, whether they are a $30k city code enforcer or a $100k high level manager.

Oct 17, 2009 - 8:54 am 46. Bilgeman:

#45 Lenny:
“If I had one basic point here, it would be this: government pensions offered to employees are not a public benefit program, and should not be treated as a public policy issue for the taxpayers to grumble about as if it’s some kind of charity or assistance payment.”

This would be the case if these pension programs would be allowed to fail if and when mismanaged or raided.

“What private sector folks (under the guise of “taxpayer concern”) are pissed about is simply that unlike companies, governments can’t go bankrupt and can’t revert their pension to the govt at reduced rates.”

Let’s be realistic here, they will try and maybe actually be bailed out by ERISA-like programs, if not by ERISA itself…and that puts the burden once again on the taxpayer, so that makes them “fair game” for debate.

“But pensions for public employees are completely different, they are compensation, pure and simple”

I agree with you here, it is compensation of a sort, deferred and promissory, but compensation nonetheless.
I would do away with all deferred pension schemes altogether and give all employees an untaxed sum for them to do with as they wish…save, invest or buy that Jet-Ski.
At the end of their career, they are presented with the tally of the amount of untaxed retirement money they have received, and if they’ve blown it all…well that’s just too damned bad. Sucks to be YOU and beat it,already!

But this pension benefit as compensation position then rather argues against your stance that public pensions should be treated as a “sacred cow”, because fundamentally you are arguing that the taxpayer has no right to determine the level of compensation of his own employees.

Good luck with that one.

I’m certain AFSCME, SEIU and Teamsters would heartily endorse this argument.

Now as to the unions, my personal feelings is that unionization should be outright banned for all levels of government employees.

The specter of competing loyalties rears it’s head there, as illustrated by Mr. Ott’s query above:

“Do you think, for example, that the county executive in Lehigh County, who has received some $75,700 in campaign contributions from union political action committees, is the best agent to drive a hard bargain with union bosses who are essentially part of his reelection campaign?”

Unions in America are a failing business model, and have been for decades, and like most other failing business models, they end up seeking rescue from a government subsidy to maintain the status quo that destroyed them, rather than reform what they do and how they do it.

In fact, it seems to have escaped every other observer of the ACORN affair that Unions are so decrepit and threadbare that one of their traditional role in elections: putting voters’ feet to hit the bricks was “outsourced” by the Democratic Party to this johnny-come-lately fly-by-night outfit.

Can you imagine ACORN being able to do it’s thing in the day of John L. Lewis’ UMW or Walter Reuther’s UAW?

It is to laugh, the cardboard cut-out that they now largely represent. The fact that they can no longer muster the muscle and had to be replaced by ragamuffin day-laborers marks a very clear waypoint on their fatal voyage of self-destruction.

I make an exception for SEIU, who fulfill a role of semi-thuggery once the stock in trade of my own old outfit, the Seafarers.

Paul Hall’s Seafarers used to earn extra “chops” by providing muscle to the ILGWU when the needle-trades workers, who were largely women, went on strike. This was done to protect the ladies on the picket line from the goons often hired by management to intimidate them.

What else are you going to do with a couple of ships’ crews worth of mugs hanging around the Brooklyn hall and waiting for a berth on a banana-boat?
It was Paul Hall’s genius to pack ‘em a box lunch and bus ‘em over to Manhattan to walk other outfit’s pickets.

“Private companies usually bend over backwards to conceal the liability until it’s already become a mortal threat.”

Under a defined-benefit pension, this may be so, but under a defined-contribution pension it’s not possible. The employer contribution is either there at the the end of the year or it isn’t, and if it isn’t, everyone takes their marbles and heads for the gangway…or the lifeboats.

At least that’s how it is now working here in the Oil Patch. The lateral communication among co-workers, current and past, is an unprecedented form of labor organization. The Unions can’t even get their foot in the door down here. Never have, and never will.

Within a week,via e-mail and cell-phone, everyone in the Gulf knows which outfit is in trouble and which outfit is hiring and paying “fat”.

A few years ago, Edison Chouest launched two brand new boats,(at 240′ LOA, small ships in reality), and could not find the crews willing to man them. Chouest has the reputation of being a “clock-watcher” outfit, and since they then paid as low as everyone else, no-one would touch ‘em.
They ended up having to increase compensation something like 75% across the board to man their ships, and this set off a bidding war for seagoing labor in that market.

Made it attractive enough for me to give “mudboatin’” a try.

But back to the issue at hand, I foresee that when the taxpayers revolt and the purges of the civil servants come, it will be the unions that will take an active hand in jettisoning those economic parasites deemed expendable to keep the larger parasite healthy on the host taxpayer.

Politicians will outsource their dirty work, and the schlubs at the end of that bag-line are the Labor bosses.

You watch and see.

Oct 17, 2009 - 10:54 am 47. Fred Beloit:

Harpo say: “Savings aren’t taxed you dolt.”
What is a tax? It is a fee charged by the government. When the government prints lots of money and borrows lots of money, the result is usually inflation, as we will all soon find out to our sorrow. So, in a way inflation may be viewed as a government-caused tax on every citizen. In that sense, savings are taxed through inflation.
Who’s your daddy, Harpo? Who’s the dolt?

Oct 17, 2009 - 12:15 pm

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