Hacker News Reader

Comment by beatpanda | Hacker News Reader

While we're on the subject of misleading language, let's talk about why this is always labeled as "pension reform" and not what it actually is, "reducing payments", or even better, "reneging on a contract."

I don't understand why it's controversial that California (or any other state) should be legally obligated to pay the pensions they promised to workers. People make long-term decisions based on those promised benefits, and pulling the rug out from under them is unconscionable. And, luckily, in California at least, illegal.

View on HN

Ok, that's great, but at a point you simply run out of money. There's nothing ethical about pulling funds out of public schools to pay public pensioners 100k+ pensions.

Politicians bribed unions with promises of payments which could not actually be sustained. That sucks, there need to be checks against that happening, but that doesn't need to be held sacrosanct at the cost of actual services.

There's a reason that the US has a robust bankrupcy court for individuals -- it doesn't matter if you signed a contract for 15% credit card debt; at the point you are out of money and can't pay the bills, there's nothing ethical about keeping someone enslaved to uphold it.

This is the exact same thing, except mostly it's their parents who elected corrupt politicians, so there's even less reason to hold people accountable for the decisions of irresponsible politicians two decades ago.

If the state is unable to pay, then that's not a reason to renege on only these payments - just as in the "robust bankruptcy court for individuals" doesn't mean that you get to skip that one bill that you dislike while all your other assets and creditors are untouched, also if the state of California goes bankrupt, then all outstanding debts are in it together instead of removing pensions while paying other bills in full. The state has a budget surplus, it better start saving it up to pay its future bills.

The fact that their obligations are unfunded is a major problem and borderline accounting fraud - they should start treating it as actual debt, even if suddenly noticing the elephant in the room would actually invoke talks of bankruptcy. Coincidentally, this would also mean that the voters can implement the required changes for future, no matter how scary the wording on the bill sounds.

There's nothing ethical about letting a minority claim the majority of a societies wealth.

You want to fund things? Get Trump to send a bill to Gates, Buffet, Koch's, etc.

Why blame the public system for the mess private capitalism is truly responsible for creating?

What? How did capitalism cause any of this? Politicians promised pensions assuming unrealistic consistent growth in their investments.

These funds stuck trillions of dollars in the stock market, which is exactly how Gates, Buffet, and Koch made their money. The pension funds are still getting massive returns. But that does not stop politicians from promising _even more_ than was possible.

Capitalism underlies the push for "unrealistic consistent growth in their investments." where "their" in this context primarily means "people who are ready filthy rich."

Capitalists want their investments to grow. Largely at the expense of others.

We'll put the pedal to the metal so the richest can earn more than is necessary. And poo-poo the notion that public workers should get even a smidgen of the same consideration.

Because it won't drive unreasonable growth if we're padding out health plans for the people that do the work.

> I don't understand why it's controversial that California (or any other state) should be legally obligated to pay the pensions they promised to workers.

One reasonable objection is that public pensions are never fully funded at the time they were negotiated with the public sector unions. This is done on purpose to make the cost look lower to get a better total compensation package. They know they will almost certainly be bailed out later. This is fraud.

Public workers should be forced into defined contributions plans like 401-Ks.

> I don't understand why it's controversial that California (or any other state) should be legally obligated to pay the pensions they promised to workers.

Because the people of California can no longer afford it. It's unfortunate that baby boomers allowed politicians to kick the can down the road by negotiating pensions rather than salaries, but now fiscal reality is settling in. And you want to talk about unconscionable, what they have in effect done is a money transfer from their children to them, since now younger generations have to pay the pensions, while receiving none of the benefits. That's why you're seeing movements like Generation Screwed here in Canada (http://www.generationscrewed.ca/).

Baby boomers didn't allow politicians to kick the can down the road, they demanded it. They got politicians of both parties to pander to them.

The baby boom generation makes me think of the "Half a Life" Star Trek episode.

Pension issue isn't renegging on past promises. Its because SB 400(passed in 1999) did retroactive increases on pension payments and lowered retirement ages. Undo those changes.

Won't that hurt people who were trusting that promise to be kept? That could have caused people to stay in the same job and not make their own retirement savings or change to a higher paying job for the 2 decades between 1999 and today.

SB400 was passed under promise that it wouldn't need tax payer support. So a promise is being broken either way.

We wouldn't be in the issue if Calpers wasn't terrible at investing. They did really stupid things like invest in the most risky tranche of CDOs during the subprime crisis. Thats not the fault of tax payers.

The most recent proposal I find reasonable. Keeping currently funded benefits but no guarantee on ones that haven't been given yet. The government keeps raising my minimum social security retirement age, but since I'm far from it that doesn't change my plans much. I don't see how changing future pension benefits is any different.

I understand your argument, and the real problem is that state never should have made those promises.

There's a difference between changing "if you work for us for another 20 years, here's what your pension would be" and "since you worked for us for another 20 years, here's what your pension is". As I understand it from the article, California's constitution prohibits changing how existing public-sectors accrue pension benefits going forward.

This is much more acceptable, IMO. It's the difference between "we're paying you less than you thought we would for work you did" and "we're going to pay you less for work you'll do in the future". There's an unethical opening for convincing people to take a lower compensation now in exchange for the right to earn a higher compensation later and then reneging on it (see also: firing people immediately before a vesting cliff).

Here's why:

https://en.wikipedia.org/wiki/Odious_debt

Private sector unions are essential and should get more protection from the government, but public sector unions don't make any sense to me.

Why is there any category of worker that you feel doesn't deserve the right to collective bargaining? Why should any group of workers be prevented from organizing for rights and benefits as a group?

This is a really tough question. And I don't think people really want to argue that workers shouldn't have the ability to form groups and collectively bargain.

To me, the current status isn't as simple as that. The current status that I see is that public pensions have outsized control over government spending, which means you can't just think of these unions in these simple happy terms.

It also seems perverse to many private sector workers that public workers, who are unionized, pay dues to the unions, which lobby the government for more benefits. Essentially the government is paying people to lobby against itself. Private unions don't have this conflict of interest, their funding is based entirely on profits based on the market.

I can tell you why I think so. When private sector unions negotiate an impossible deal with their employer, the employer goes bankrupt. When public sector unions negotiate an impossible deal, we all end up paying more taxes to make it possible.

In the US, the federal and state governments are functionally and legally unable to undergo bankruptcy. Although municipal governments can technically go bankrupt, only five cities have done it since the Great Recession, and none of those bankruptcies actually resulted in significant debt shedding. In that same timeframe, hundreds of thousands of businesses went through bankruptcy.

The suggestion is not that workers don't deserve the right to collective bargaining. The suggestion is that management typically has insufficient incentive to negotiate aggressively for efficient, sustainable labor contracts. It can yield results such as BART's overtime rules [1].

[1]:http://www.mercurynews.com/2016/11/02/bart-janitors-whopping...

Perhaps a solution to this is to allow public sector unions, but to require the general population ratify it.

I'm sympathetic to the parent comment. All workers should [be allowed to unionize]. But public sector unions are dramatically more effective. I don't know enough economics to convincingly argue it but this is what worries me:

1. Privatization has a terrible track record, but it gains steam when the government is hamstrung by the labor-cost differential.

2. Governments are paying social democrat labor costs, while taking in neoliberal revenues. This makes nice things look inordinately expensive.

3. Jealousy in the private sector fosters conservatism / lazy govt worker stereotypes.

...

Basically long term the private sector unions undermine their own cause.

Once again, if you have a bunch of short-sited actors (c.f. financialization of business) you better be damn well they reach some equilibrium.

These workers are not required to work for the public. But public workers do have a duty to work in the most efficient method possible for the public. If that means no pension or less pension, that is the deal. I don't support pulling pensions that have already been promised, though. That's nothing but breaking a contract.

Edit: To clarify first sentence, I mean that they do not have to take or hold these jobs.

That's true. But it's also true that contracts are subject to renegotiation in the case of bankruptcy. When we make financial deals we typically assume some of the risk of our financial partners.

Why consider renegotiating pensions, instead of all the other agreements with creditors?

Did the state, or any city, declare bankruptcy?

No. States (currently) cannot declare bankruptcy.

A city certainly can, and they have, e.g. San Bernardino, Stockton, Detroit.

On the flip side, even the existence of pensions is amoral. Promising the funds of future generations, which may never materializes, condems citizens for decades of wasted spending.

Just look at San Jose. Just look at Social Security. It is hard to identify these liabilities as working the way they were intended. And what do the people gain from them? Overpaid cops?

And yet the Canada Pension Plan is fully funded[0] and in no danger. California's problem is over-promising and mismanaging.

0 - http://www.osfi-bsif.gc.ca/Eng/oca-bac/as-ea/Pages/ascpp.asp...

I get angry whenever people use the words "fully funded" to describe CPP. On one hand it's true--but it's also very misleading.

After considering investment returns/time value of money/"net present value" of contributions:

If you were a baby boomer, you'll get ~2x what you put in.

If you were born in the 80's, you'll get half what you put in.

So yes, they "fixed" CPP by changing it so that younger people are legally obligated to "invest" their money in a pension fund that returns half of what it should return based on the contributions younger people are making.

I think CPP is in danger. The danger is that someone will create a clear enough explanation of how CPP was "fixed" and young people will decide that there is no reason for them to allow being screwed the way CPP does.

Agreed.

Pensions, done right, are nothing of the sort. You commit present funds to secure future payments. Social security, which is very much the opposite, has issues as a result.

(I assume you meant immoral, not amoral.)

Are you unaware of what people gain from Social Security?

Reply on news.ycombinator.com