Who will pay Puerto Rico's pensions?
reuters.com
reuters.com
One state at the cutting edge of this situation is Illinois: the Illinois Supreme Court has in recent years struck down various measures to attempt to restructure the state's untenable pension obligations. Such measures will prevent the state from making a controlled crash landing and will instead result in the state flying straight into the ground at 600 mph.
The Illinois court is just taking advantage of an obvious moral hazard, aren't they? Can't they assume the Feds will bail them out as usual?
If state lawmakers want the court to deliver a different result, they have to amend the state constitution.
Are we really going to say that to sick and elderly people being thrown out of hospitals, evicted from their homes, and cut off from food and medicine? To their adult children who must now destroy their household finances to meet the government's obligations in its stead, or carry the guilt of letting mom and dad die of treatable conditions in a shithole?
>controlled restructuring of everyone's expectations
This euphemism seems appropriate when applied to banks and businesses for whom counterparty risk is a cost of doing business. For individuals who gave their entire adult lives to an institution in exchange for security in retirement, it seems tone-deaf.
Maybe taxpayers need to bite the bullet and pay what it costs to run the services they're benefitting from.
When you put it like that it sounds like they had zero responsibility for the situation. It's usually populist policies that are democratically elected that lead to this situation in the first place - it's interesting how politicians always get the blame but the people who voted/campaigned/supported them because it was in their direct interest at the time aren't even considered.
Reality is a lot of pension systems around the world are unsustainable and built on the assumption that population and economy will continue to grow. Even the mandatory "private" pension funds in my country (Eastern Europe) mostly buy government bonds and that ends up being spent by the government. And nobody is even talking about reducing government spending or getting a sustainable budged they are just worried their privileges don't get touched and throw around nonsensical demagoguery to rationalize their views.
I find it hard to be sympathetic with people that cause this kinds of problems in the first place and impose it on others trough democratic process.
We have no evidence that government workers voted to defund their own pensions - presumably that was everyone else.
Why does the state get to annul the future compensation once the work is done ?
Even weirder: why do libertarians here seem to be in favor of the state doing so ? You'd think breaking contracts would be a huge no-no for them.
Small businesses have to accept bad debts sometimes. When dealing with sovereign debt, or other similarly large scale lending, risk is proportional to your political power vs the debtors'
I'd like to see the original calculations they used as a basis for these decisions.
Puerto Rico has always assumed that the economy would soon be turning the corner and everything would work out, with a healthy helping of cargo-cult New-Jerseyism.
I wonder what the solution for this is.
I'm not particularly onboard with their solutions, but they are the only group of people I can see who fully recognize the problem: democracies are fundamentally short term focused and unable to do complex planning. They are certainly well worth reading (obviously skeptically).
It is incidentally this solution that it seems they are taking with new hires.
Congress must act to clear the roadblocks here. It is disgusting to say that the current and future generations to pay for pensions that they don't get if they were to join today. I think that's the only reasonable solution.
Of course, nothing will happen because old people vote and young people don't. So much for "think of the children" and all that talk.
It's also why I don't understand all the whining (here and elsewhere) about requiring the Post Office to actually fund its pensions rather than just assume Uncle Sam will have infinite funds to cover it later, and we Totally Won't Renege or anything.
Some people believe the post office is required to pay quite a bit more into those pension funds than is necessary for their financial well being. Nobody in that discussion claimed or assumed the government has infinite funds to cover the post office's obligations.
It's as if you were having a discussion with yourself that happened to occupy the same space as another, ongoing discussion on the same topic. Hence the way some tried to engage with you (unsuccessfully) and some just downvoted you.
A complete argument would look like this: "It's unfair to require the post office to fund future benefits by X standard, when common, reasonable practice is to use more lenient standard is Y."
A complete but stupid argument would have X="include all obligations forever" and Y="ignore stuff after 75 years". This is because post-75 years can have non-trivial implications for its sustainability, and assuming them away does require belief in a bottomless pit.
I'm interested in an exchange of ideas on this issue; I just wish people were capable of presenting a defensible argument about the Post Office pension requirement. Your own argument on the thread [1] does not meet that standard, as it was just "wow, that would be a lot of money". Well, yeah, if you've promised something with a (net discounted present) value of $75 trillion, then yeah, it's gonna be a pain to fund! Why is that an unreasonable requirement that you not just kick the can down the road?
I'd like to hear an intelligent answer to that question. "They hate the Post Office and want it to fail" doesn't count as one.
You're being entirely too generous to yourself by characterizing your attitude as "frustration."
The amendment brushed off concern about
future financial strain on the pensions,
saying their investments were producing
revenue twice what actuaries had
approved, so the “measures won’t be
burdensome.”
They assumed a few key things:
- Makeup of workforce. Government in 1970 was an army of clerks with higher turnover which has since shifted to professionals with automation. - historically reasonable inflation - economic growth - 7-9% annual returns
Few places actually find their obligations and those who do (like New York) pay dearly when the market goes south. I've been told that in the 60s the assumption in New York was 5% inflation, population of 40M in 2010, booming industry in western and central NY, etc. Also, the change in status for women changed the dynamic -- secretaries and clerks were contributing big bucks for pensions they would never receive!
Require everyone in the agency to put 100% of their salary into the pension fund, or double your budget for staff salaries and direct it to pensions.
The second is a 24 year old software engineer in California. He never had the opportunity to vote in any election prior to 2010 (when the mistakes were deliberately made) and never got to vote in PR.
A bailout would be a hugely immoral transfer of wealth from the second person to the first.
Puerto Rico and Illinois need to be made an example of. As the rest of the country watches PR and Illinois collapse they might demand that their politicians engage in some degree of fiscal responsibility.
It's like the Great Leap Forward, but just replace homemade steel with public service, and massive starvation with massive debt.
That phrase pretty much describes the primary function of the US federal government these days, doesn't it? No, not kidding, not sarcastic.
fiscal responsibility
When does fiscal responsibility come to the US federal government? We can solve the problems of places like Puerto Rico with the equivalent of loose change lost under the sofa cushions, compared to what the feds have promised everyone!
Not really sure if this is plausible, but maybe if you let enough Chinese capital into Panama, they can defacto control it, vs having the US impose restrictions on Chinese capital investments in strategic property or whatever.
It also begs the question of why the US would care.
And a lot of the motivation was self interest in order to prevent contagion and also to allow the banks with loans in bailout countries to recover their money. Much of the money that went in went straight out again in loan repayments and a lot of debt was transferred from private debtors onto the shoulders of the taxpayers in those countries.
Now Greece is unable to make enough things for themselves, and Germans are bailing them out. The bailout results in Germans making more things which then get shipped to Greece.
How is this not a gift from Germany to Greece? Will the Greeks ever provide goods and services to Germany which exceed what the Germans gave them? If so, when?
And as for breaking the eurozone rules, well even Germany did that when it suited them.
I am not an expert on the Greek economy but I'd imagine that tourism makes up a lot of their 'exports'. Otherwise I don't know. They are a relatively small country and so are unlikely have many indigenous multi-national brands that you or I would have heard of.
As far as real resources, you seem to agree with me that the Germans worked hard to make stuff that was then sent out of Germany ("boosted German exports"). Germans work, Greeks consume.
I guess when the British empire stole stuff overseas for consumption in Britain, that was bad for Britain and good for the world? If production is good and consumption is bad, maybe we can tax the poor and make them work but give the proceeds to the rich?
German bankers are not made to pay for their profligacy. Also, clearly the Germans do reap the benefits of their labor. It's hard to argue otherwise given their GDP per capita, purchasing power parity, standard of living, and relative power in Europe.
Germany needs a monetary union so that it can be the exporter it is. The import/export imbalances caused by the monetary union has led to the situation Greece and Germany find themselves in. Both parties are at fault.
Also, clearly the Germans do reap the benefits of their labor.
Blatantly false.
http://www.tradingeconomics.com/germany/balance-of-trade
http://www.tradingeconomics.com/greece/balance-of-trade
You even acknowledge this one sentence later: "Germany needs a monetary union so that it can be the exporter it is."
I agree that the Germany government is, in part, responsible for policies that make Germans poorer and Greeks richer. So what?
It seems like you want to blame Germany since unfortunately the only solution for the Greeks is for the Germans to keep sending them even more stuff (even though the Germans didn't make the Greeks unproductive).
Not sure about the nuance of a US Territory vs a state.
http://abcnews.go.com/US/wireStory/billionaires-move-puts-je...
Puerto Rico isn't alone nor anything apecial when it comes to blown up pensions.
If you want to read more about it Tino Sanandaji has done a lot of research on this and can make you wonder how dumb a nation and its people can get in such a short duration. http://foreignpolicy.com/2016/02/10/the-death-of-the-most-ge...