A $76,000 Monthly Pension: Why States and Cities Are Short on Cash
nytimes.com
nytimes.com
I'm not super familiar with city and state government jobs, but I do know something about military and federal compensation. They frequently pay less in salary, but have better benefits. This makes it an apples to oranges comparison when trying to talk about what they pay in comparison to non government jobs.
I was a military wife for a lot of years and I have spent a lot of time trying to figure out how to convey this. At one time, my army spouse was nominally making about half the income of someone else close to me, but take home pay for my spouse and this other person was nearly identical and I never spent a dime on doctor's visits or prescription medication. The primary difference in our quality of life was that my husband's income supported a family of four and this other individual was single and childless at the time.
So it gets really confusing because sometimes the take home pay for government jobs is less, but the total compensation package can be better. This means that two people arguing about it can both be right and unable to see the other point of view.
The military will cover 75% of tuition for active duty members. Most states charge military members in-state tuition. When my ex took college classes at low cost community colleges in California, his books typically cost more than tuition. His tuition was practically pocket change.
When he was stationed in a designated war zone, we got a tax break for that.
When we were in on base housing, we did not get a housing allowance. We also did not get a water bill or electric bill. We only had to pay for a phone.
While stationed in Germany, I got free dental care on base even though spouses usually don't get free dental anymore. Similarly, we could have gotten free braces for my oldest son while stationed at a different remote location.
When shopping on base at a px or bx, you pay no taxes. They may or may not also have lower prices on some items.
I routinely had a Power of Attorney so I could handle my husband's affairs while he was deployed. I never paid for such. We had access to legal assistance for free for such items.
Medical coverage for the family is free, including out patient doctor's visits and most prescription medication. Further, I am alive when by all rights I should be dead in part because we got stationed at Travis AFB just as the shit was really hitting the fan. The hospital there is a teaching hospital that serves all military branches for eight western states.
Most people have no idea how well developed the military medical system is and the sorts of resources that can be made available in cases of serious medical crisis. I have a genetic disorder that was diagnosed late in life. My husband's medical benefits alone were practically like a second income for us because I was in the ER all the time at zero cost. This was true even when visiting relatives who happened to live near military bases. I just went to the nearest military medical facility, even if it was a different branch of the military.
Military personnel are sort of outcasts when deployed elsewhere in the US. We tend to not have a local bank account and military spouses have high unemployment rates because locals don't want to hire them. The military does what it can to make up for that, such as offering free check cashing on base at the bx or px.
When in on base housing, I was able to check out a lawn mower and other items for free for purposes of maintaining the yard to the standard required by the military. I didn't have to buy any of those things. They even provided grass seed for free so we could reseed our yard when the 115 degree summer heat in the High Desert killed our grass.
There are so many things you get for free in the military for just flashing your ID card that some people who leave after a single stint are shocked at how poor they are after leaving. A much higher percentage of a military check is discretionary than is the norm for most jobs. If you stay in 20 years or more, you will get retirement benefits without doing any retirement planning or savings whatsoever.
As a young military spouse, 90% of my budgeting concerns was making sure we had enough food in the house. Retirement planning, stressing about medical bills and other normal issues for most Americans was simply not a part of my life.
May I ask why? Because they know you're going to move soon, or any other reasons?
Another factor is that frequent moves make it nigh impossible to develop a real career. If you have a serious education and want a professional career, this is largely out of reach for most military spouses. Nursing is just about the only exception that I know of. Nursing pays fairly well and there is typically a shortage of nurses just about anywhere you go. If you want any other kind of serious career, being a military spouse is a huge obstacle to working that out.
If you are content to deliver papers or wait tables, you can probably get those kinds of jobs. But better jobs mostly don't want you (edit: and just may not have openings when you need them or may not exist at all in some locations).
However, I do digital nomad type work currently. It fits in nicely with the kinds of expectations I have for my life that are rooted in having been a military wife.
There are also times when I wish a regular job was a viable option for me because there are certainly downsides to what I do.
Lots of military spouses have resumes that look a lot like ones for homemakers: gaps in employment, changing jobs regularly, involvement in multi-level marketing, etc. Many of those things are red flags in their own right.
source: was AD Marine.
Thanks for sharing this. This is something that has been extremely important for me to realize. When it comes to holding strong and passionate view points on any topic. I have to stop and understand that there is a reason that the person with an opposing view point may also be right from the perspective of their world view and I’m simply blind to it because I may never fully be able to understand their world view and they may never understand mine.
We all go through anywhere from slightly to drastically different life experiences that inform our world view. And it’s something I force myself to be more conscious about. But thank you for bringing this up in your context and experience.
Just pay government employees more so taxpayers, the government, and potential employees can all go in knowing the trade offs and let the employees manage their own retirement like everyone else.
Of course I don't have a problem with military families being provided cheap healthcare.
And I am not up for writing an opus on it in comments here. Suffice it to say that raising your right hand and swearing to give your life for your country is a little different from your standard job.
I said you should pay government emmployees more now and let them save for their own retirements. You should want that instead of being forced to stay in for 20 years to get any retirement benefits.
And being in the military is statistically not the most dangerous job.
https://www.fool.com/investing/general/2014/03/15/dying-for-...
It isn't the danger per se. I'm aware other jobs can maim or kill you. But uniquely the military can ask you to die for the cause. There is a difference there.
One of the reasons the military takes care of family is so military members can focus on the mission and not be distracted by worrying about such things.
The military medical system needs to exist to support the mission. In times of war, soldiers need medical care. Owning the facilities and having military medical personnel is essential to be able to trust that treatment.
So one of the reasons military families have access to free medical is because if you rest, you rust. Having doctors sitting around doing nothing waiting for war does not prepare them to handle the medical needs of a war time army.
Treating the families of the military members gives them a means to practice medicine so they stay sharp.
It's a very complex and elegant logic behind the decisions that have built the system we have currently. It is unlike just working for a paycheck. This is why words like duty and honor get used so much.
Maybe I will blog about it sometime. This probably just scratched the surface. And I don't think you get where I am coming from at all.
My father had shrapnel in his head. Because of it, he couldn't get new life insurance. It caused blind spells which caused him to quit at least one job that I know of. He was sometimes unemployed for months at a time after leaving the army.
There are lots of veterans who are disabled and never get their act together again. You see high rates of homelessness.
Anyway, I am going to stop here. I don't think you have really understood anything I have said and my comments are being downvoted.
I'm also not arguing against former soldiers being eligible for additional compensation in the form of separate disability insurance if they were injured in the line of duty.
https://www.uspsoig.gov/blog/be-careful-what-you-assume
https://www.govexec.com/pay-benefits/2016/12/obama-administr...
This seems like a pretty big budget item, especially since most CA government pension funds haven't achieved their expected 7.5% return consistently for years if not decades. Eventually the money to pay for these large pensions comes from money that would have been spent on other things.
A good reason department heads in education shuffle every three years
Bust your ass with overtime for 3 years and you can reap the benefit for the rest of your life.
I also recall the NYCFD had a problem with that and with people claiming disability right before retirement. The rate was something like 90%.
As a result a fireman who made a base of $100K per year (just a guess), might end up with a full pension at 50 that pays him/her $150k per year until death.
I know that was a guess, but sounds crazy high for a fireman. In my rather well-off Western European country a fireman makes about $45k per year before European taxes and deductions.
In big cities, $100k is actually pretty typical. I found a link from 2014 suggesting you reach $100k after 5 years.[1]
[1]https://www.villagevoice.com/2014/02/12/the-fdny-is-a-force-...
Most pensions historically.
People entering the job market today (or even most of the millennial generation) were never offered these final salary pensions. Instead we get defined contribution plans, 401Ks, or nothing at all.
The key difference being that defined contribution plans (and 401Ks) are always only worth what was contributed (and investment performance profits). Things like your final salary, final position, or year of retirement (except for IRS rules that give significant tax advantages) don't mean very much except contributing more to these funds.
It is a better system from a larger society perspective (nothing is "loaned") but may result in few actually being able to afford retirement.
We'll see how this plays out with baby boomers retiring to give some indication as to what the younger generations may be up against.
Because the pension formula is an age-based benefit factor times years of service; for the “2% at 55” plan, the benefit factor ranges from 1.426% at age 50 to 2% at 55 (hence the name) to 2.418% at 63+.
So someone retiring at 63+ with 37¼ years of service will get just over 90%.
But that's a plan that is common to run of the mill civil service. Public safety pensions tend to have higher benefit factors at the same age (but top out, in benefit factor terms, sooner), so that level can be reached earlier.
> It seems that it's based off of years of service instead of quality of service...
Job type will effect which plan you are in.
That seems like the big story: making plans assuming such a high average is simply malpractice. There are employee behaviors worth changing (e.g. the common problem of juicing final salary using overtime) but most of the blame should go to the people who signed off on that plan.
At least in the U.S. we don't have parties which are funded by unions. The unions contribute, and get out the vote, but that's rarely uniformly going to one party which gets a veto-proof majority everywhere. You see divides — e.g. the teachers unions lean Democratic but the police, firefighters, and prison guards lean Republican — and a lot of local politics showing counterexamples for any of those trends.
It's also not really the point I was interested in, namely that several generations of officials choose to cook the books so they could make politically popular moves without raising taxes or even cutting them. This is not a problem specific to pensions and it's definitely not limited to a single party as e.g. three decades of Republican magical thinking about tax cuts paying for themselves should demonstrate.
"Davis, who was elected in 1998 with more than $5 million in campaign contributions from public employee unions, says that if he had it to do over, he would not support the pension improvements."
http://www.latimes.com/projects/la-me-pension-crisis-davis-d...
"... how in 1999 the California Public Employees’ Retirement System orchestrated the approval of a 50 percent retroactive pension increase for state employees amounts to an autopsy of a public-policy crime. It is literally incredible that CalPERS told the Legislature that such a huge gift of money would have little or no long-term cost to state taxpayers because the dot-com boom then driving the stock market sky-high would never end."
http://www.sandiegouniontribune.com/opinion/sd-calpers-menda...
[2009] Californians questioning why their state budget is in perpetual red ink need look no further than the California Public Employees’ Retirement System’s (CalPERS) implicit forecast in 1999 that the Dow Jones Industrial Average would reach 25,000 by 2009, 595,000 by 2049 and 28 million by 2099 and that its investment earnings would rise alongside.
http://www.sandiegouniontribune.com/sdut-pensions-and-partyi...
They made nowhere close to that and now state and local governments in California contribute over $50bn annually to CalPERS alone.
To add insult to injury, Senate Bill 400 under Gray Davis (who was later recalled in a special election) retroactively increased pension payments for people who had already retired and started drawing pensions. And CALPERS keeps two sets of books, dramatically overstating the actual performance of their investments. [1]
It's a horrible mess - nobody wants to strip the earned retirement away from retirees, but the math just doesn't work out. When the market provides better-than-predicted returns, employee contributions are reduced and benefits are increased. When all of those extra returns are wiped out by a bubble popping, everything stays the same and the difference is made up by taxpayers. And it's incredibly attractive for politicians to buy the support of unions and their membership, when the cost won't be paid until long after they're termed out of office.
[1] https://www.nytimes.com/2016/09/18/business/dealbook/a-sour-...
As you've stated, actuarial calculations + short term politics don't mix.
If people like public pensions let them have it, but let only people in their sector pay for it. It is absolutely immoral for someone to pay a tax to fulfill the promise of a decade old decision on someone else. Few things show how clearly people forget the State doesnt have money of its own than thinking that the state can fulfill an obligation without taking more from the innocent bystanders.
Defined benefit plans should have a defined tax scope, and if they fail, they go bankrupt and thats it.
Some are promoted into management, but most org charts are naturally pyramids, so there aren't enough of those jobs for everyone. So what to do with someone who is now too disabled for another blue collar job and is not a "competitive candidate" for a white collar job?
I know because in europe we have an unrealistic retirement age and my father like many other lost his job in the 2008-2012 crisis. Been unemployed ever since.
What happens is that in the 50-65 braket you’re a huge liability with severe productivity drops and companies tries to fire you at the first chance they get.
The european system at least has some protections against unreasonable terminations, so we aren’t fully appreciating the maddnes it would be a free job market, but company closing or figuring out how to fire the old employees in masse drops huge chunks of unemployed for life into the society.
This is becoming a serious issue and it is going to peak in 20 years when all the people like me that don’t enjoy full time national contracts and their protection will get past their productivity prime.
Of course not, as you probably wouldn't have this weird "retirement age" thing in the free-market absent government intervention. It's almost unheard of, and I'm not surprised. Reading through this thread of all the little "abuses" and "loopholes" that people are figuring out to game the Government-decreed system of retirement is very worrying and eye-opening.
The vast majority of blue collar jobs are in the private sector and they don't get pensions with COLA and free medical when they turn 50 or 55. It doesn't seem fair that government workers are treated differently.
If someone is disabled there are government programs to help them, but I see little evidence that the many of those government workers retiring at 50 are actually disabled or incapable of work since many go on to have another career.
that said the benefits in some states are ludicrous, cops spike their payout the last few years and retire with $200k pensions and healthcare for life at 50, then move on to your 2nd careers. In the private sector even if you max out your 401k you'd never come close to that sort of retirement.
Folks that could and would provide for their future selves like this via 401k programs cannot, as you point out, on account of contribution limits. Saving outside tax-advantaged accounts is certainly doable but hardly seems fair vs the pensioner's tax treatment mentioned in the article.
https://fee.org/articles/by-the-numbers-how-dangerous-is-it-...
Our 'productivity' has gone up by at least 2% per year. If you understand compounding you realize how significant that impact is. We're in front of a next generation work automation tsunami. The notion that 'working longer' is 'needed' as a consequence of anything besides a completely failed and derailed socio-economic model is absurd.
So, presumably there is a surplus.
Except no.
When people ask "where is the money?" the 1% respond "not enough money. Not enough surplus. You need to work until you are 68 now".
This contradiction is, oddly enough, rarely addressed.
Perhaps the problem isn't not enough work or not enough money. Perhaps they are both scapegoats for the real problem: wealth inequality driven by (among other things), tax evasion.
Yes and no. I used to have this same intuition but think that people today, even on the low bracket, have a better life than the previous generations mid-wealthy had. Think how much an iphone would be worth in 1950, and think how many people have it today. It is definitely a great measure of wealth. Look at the internet that has made entertainment virtually free: if you have an internet connection there is no shortage of content ever. And we still produce more content! Who works to produce more content if you could not watch all of youtube right now!
We will turn to idleness only when the benefits we get by further work are less than the value of it. When auto-piloted airplanes with auto-drilled oil and auto-cooks and auto-hotels will make everyone travel a lot more and work less, but maybe at that point we will want to work to get our seat to go to Mars, or the latest art exhibition, or the greatest meal, or better life for your kids.
My dad retired from a manufacturing job at 55 because it was putting too much of a strain on his body
My mom retired because she could and they wanted to enjoy their life together while they were still relatively young.
Oregon population: 4,000,000
Pension deficit 2017: $25,000,000,000
Per-capita share: $6,250
Assuming a large portion of the pensions will get spent on goods, services, and donations in state, it doesn't seem like a huge disaster, depending on how it grows.
So maybe ~13K per tax paying person in outstanding pension obligations alone?
That is a big deal.
Then that would be an obligation of about $300 per tax paying worker per year over their working lifetime. The average yearly salary in Oregon is $50,000. The article makes it out through anecdote that this is why they didn't have gas to send trucks out for a road repair.
In the last 20 years Oregon has had near 1% per year population growth as well.
The article is focused on outlier pensions for a collegiate athletic director paid partly out of sports merchandising and a medical school head who was an eye surgeon.
In other words, this person now owes nearly 1% of their disposable income for life to cover _currently_ unfunded pensions with no corresponding increase in goods or service levels.
To put it another way, this person will work ~1/3 of a year out of their career to pay for unfunded pensions.
(Also, I made a mistake, that number was household income)
Otherwise now the government now has less money to spend. Aka the "no fuel for trucks" you mention.
State tax is deductible from federal taxes up to $10,000. So you can pay that $300 without it all coming out of after tax income.
Most people may not go over standard deduction, but dollar wise state tax is probably paid by high earners who will, since there is a graduated income tax in Oregon.
I don't see how the extra expense won't ultimately result in additional taxes.
Every new expense comes out of your savings rate (or your rate in paying off principal if you're in debt). To understand "kitchen table economics", you're always better looking at the wealth growth rates (or lack thereof) when trying to weigh how much of a burden something is.
That and a large portion of pensioners flee to states without an income tax or at least states with a better climate and lower cost of living. The statistics of state employees leaving my home state for such states alone are shocking.
The government paying its debts and not committing wage theft is a public good. It's a pivotal decision point in whether we are a functioning civilization with a rule of law or a third-world regime on its way down. It may be convenient in this one isolated instance to renege, but the knock-on effects of the message it sends - that public servants will be paid only when convenient - will be huge. Although that may be just as well, if you hope to minimize the role of government going forward.
If you want to reduce the role of government to only a narrow core of tasks for which there is no alternative, you probably still don't want to send the message that workers in government will be arbitrarily deprived of the compensation for which they've agreed to labor, since presumably in that case it's even more essential that the set of tasks to which government is reduced is done by people who are competent and motivated.
Raising a tax on someone to pay the public benefit of another is also wage theft. Please remember the State doesnt have assets of its own, everything it has it takes from someone else. So if you find it reasonable to pay a special tax on minimum wage jobs to pay a 55-old retired man 70 grand a month of a benefit, you can volunteer your wage and your salary to achieve such a nice ideal.
The article links the lack of public services to high pensions. It´s painted as if there were no other options but to cut on pensions.
"In the meantime, mounting pension costs mean that a generation of schoolchildren is growing up in the area with no theater program, no orchestra, no wood shop and minimal sports, chorus and art."
Because pensions are the only reason. Maybe increased inequality, the lack of taxing of the top 1%, money wasted on lobbying, are also causes. But we are not offered any data.
Problem is with the human wetware. People want to read a story.
The bigger issue, from what I've read, is that governments agreed to huge pensions in contracts with public employee unions. In exchange for lower salaries. Because pensions were deferred costs.
One thing a lot of people (who do not work in gov't) don't recall is that while the economy was roaring back then, Oregonians working for the gov't went for years without so much as a cost of living adjustment. Some of the perks they got from PERS were in lieu of getting a raise. So while I think PERS made some stupid decisions, let's not all heap blame on the workers and demand they suffer now. Gov't work pays crap and part of the benefit is supposed to be a little more long-term security.
That does not even start to describe it fairly. "Extremely sweet" would be more accurate since civil servants and the like get to retire with almost their best pay ever, while the rest of us get something averaged over dozens of years.
> and I have witnessed years of inadequate inflation raises
So you think the private sector gets "adequate" inflation raises? Not everyone works in tech.
That system changed in 1984. Now the FERS annuity is (for most people) about half of their highest pay. https://en.wikipedia.org/wiki/Federal_Employees_Retirement_S...
(It's still a decent deal, but it's not a defined benefit plan based on your highest pay)
??
Additionally, locality pay is included for the calculation. It’s not just base pay. This means if he moves to DC for a few years and then later to “rest of US” (unspecified, lowest paid parts of the country) his time in DC may be what they use to calculate his pension and not his last few years.
Even in tech, it's pretty common to have to switch specialties, fire your boss, move, etc., to ensure you're getting market rates.
Honestly, if public sector employees think they're paid unfairly, they should talk to their union reps about decoupling seniority from particular districts, departments, etc.
The 3rd world will be more numerous, the current citizens of the first world will not. We're already seeing societal strains rising from the introduction of 3rd world peoples intended to make up for the missing offspring of existing 1st world peoples so I highly doubt things will work out as easily (and peacefully) as you assume they will.
When you borrow, you borrow from someone else's past/present labor and obligate your future labor. (Where 'you' can be an individual, organization, or society.)
In my view, borrowing is always from the past. You cannot borrow that which has not yet been created.
For example, imagine I take a loan to buy a house. The people who built the house invested their labor with the expectation of future payment. Or if they spent their wages, then the firm that fronted their wages invested labor into building the firm with the expectation of future payment.
Generally, if one borrows, someone else must loan. This means that if you are consuming before producing, then at some point in the economic chain, there is someone who has produced but not yet consumed.
It is in this sense that I conceptualize borrowing as coming from the past.
This notion is reflected in the GDP equation of a closed economy: GDP = C + I. Any consumption over production must be balanced by investment, which is itself past production.
Of course, if we are to conceptualize literally, then borrowers do not borrow from either the future or the past. They borrow from banks.
Controlling assets is not the same thing as consuming, and money is designed to designate control rather than consumption. I can borrow money to buy stocks, which are nothing more than a promise of a corporate future. etc. People and entities do not have control because they have produced, but because they have controlled, or are part of the system that magnifies control to create more of it (through the banking system).
We elect to accept this system of the government determining who can control assets based on a vision of human society, or simply because we cannot object in a meaningful way. We borrow almost exclusively from money created by the government. In the end we borrow from nobody, but borrow by means of a de facto authority. The mutual agreement of human wills is more powerful than any sort of temporal precedence.
In that sense we borrow from neither the past nor the future. Of course you are correct that a large portion of borrowed funds are used to control tings that have already been produced. But the money is created at the same instant the loan is made. And it must be repaid by future labor or returns. Since it is not necessary for the money to be used to purchase something that already exists (and another large portion of borrowed funds are used for futures of myriad kinds), but it is always true that future results must be used for repayment, I think it is more accurate to say we borrow from the future.
Our debt is around 1x GDP and 1/5th American households' and non-profits nominal wealth [1]. (This excludes public sector assets, corporate assets, and foreigners' assets in the United States.) All of that is subject to future taxation.
I don't like big deficits. (They imply future taxation, service cuts or inflation.) But our debt burden is easily manageable, particularly considering our suboptimal inflation attainment.
[1] https://en.wikipedia.org/wiki/Wealth_in_the_United_States
There are plenty of non-pension cases where debt is an effective tool, i.e. borrowing to make efficiency/productivity improvements which exceed the cost of servicing and repaying the debt. Imbalanced pensions are more like borrowing to pay for operational expenses.
[1] I’m willing to entertain the idea our economic system as a whole undercompensates secretaries and overcompensates executives. That’s a different issue.
Someone in my family ran a fire department in the 80s and 90s. They had no money and in this state arbitration made negotiations difficult for management to win. So they gave away pension and health concessions that were cheap then.
The number one issue with these systems are public safety pensions, because of the amount of overtime earned by these employees. Administrative staff and professionals are mostly exempt and not that big of a deal.
Nobody in 1990 would have predicted the decade of double digit cost increases that came in the 2000s and 2010s.
Pension contributions did have fiscal impacts, at least in states that require that pensions actually be funded.
For example, I doubt that software engineers are competively paid, when compared to industry. But that is more of a function of how ridiculously high industry pay is.
Please provide sources to counter the assertion that state/local employees often get large pensions in lieu of salary.
Or would she look for a job that pays enough to cover her cost of living today, since that's a prerequisite to reaching the pension age?
https://transparentcalifornia.com/salaries/2017/san-francisc...
I don't immediately see examples of 'pensions in lieu of salary', but those are some pretty substantial total packages, with benefits alone reaching ~$60k+/yr for many public officials.
Given the cost of living in the area, it sounds like they might actually be paying competitive salary, though it also looks like a lot of the people in that 3% are actually firefighters or sheriff's officers who pull in a lot of overtime.
"Benefits" also isn't a great category to look at, because I'd be willing to bet that if you're a software developer your benefits package is pretty expensive too and you just don't realize it. Going by their definition of "benefits", and looking up some of my own records, it looks like $60k is not that hard to hit. Insurance and 401(k) matching (or pension contributions, for a government employee) are more expensive than you probably think they are.
I know that's not true of teachers in other states; Oklahoma teachers look like they're getting shafted.
But in Illinois, where we have a public pension crisis, I don't have trouble coming up with evidence that public sector employees did not make cash comp sacrifices for their defined-benefit pensions.
Her degree is at a higher level, she's a civil engineer and with a professional license on top; as a tech person,I make about 50% more.
If she went to a private company, that actually paid women the same as men, we would make almost the same. Her choice was to bet on the state after having been exploited in the private sector and with no recourse.
[1] https://www.washingtonpost.com/news/powerpost/wp/2018/04/11/...
First, any senior skilled tech employee takes a big pay cut to work in government. Programmers, doctors, scientists, engineers.
Second, the bulk of the federal workforce has been squeezed down on pay over the past 15 years. https://www.washingtonpost.com/news/powerpost/wp/2018/01/05/...
federal unions and their Democratic supporters point to data released by the Federal Salary Council. In 2016, the council, using Labor Department surveys, determined that federal employees are paid 34 percent less on average than private-sector counterparts — a finding in line with previous annual reports.
Note that Republicans argue with the above quote, of course -- we know that Republicans argue in bad faith (aka they lie) on any issue relating to their main goal - tax cuts for the rich. See (amongst many stories)
http://theweek.com/articles/766632/liar-paul-ryan
Paul Ryan cruised to national prominence on the realization that there was no longer any immediate penalty for a Republican lying constantly, about everything. (Donald Trump would later take advantage of this fact.)
If you said that there are problems with federal recruitment, retention, and removal of poor employees, that would be a largely true statement. But a large number of fed employees are underpaid.
Yea, it’s insane.
Don’t believe me? Look it up - https://transparentcalifornia.com/salaries/2017
That's happening to some extent already, but there are a lot of people who would do very well in the private sector who choose public service. For society's sake, we don't want that to be such a big sacrifice that nobody smart would do it.
"Government employees" could be running departments or administering budgets that would be director-level positions in a private corporation.
But, yeah, it seems like too much to pay $600k per year for checking that applicants correctly filled in the phone number on their 124-J forms. But I'm not sure it's always that clear cut.
There are about 421,000 police officers in the US.
https://www.statista.com/statistics/191694/number-of-law-enf...
If you look past Fox News sensationalist headlines, they said 146 were killed in the line of duty last year. http://www.foxnews.com/opinion/2017/06/11/americas-police-of...
https://www.usatoday.com/story/money/careers/2018/01/09/work...
The most common cause of death on the job were intentional shootings, which claimed the lives of 46 officers last year. Almost as many officers died in car accidents.
Only 46 actually died from intentional shootings.
This whole it or the defecit thing seems like a common talking point for progressives now that Republicans have shown their true colors, but if your goal is to actually govern a country, it does matter.
At the very least you should be able to see how increasing our debt increases the payments we need to make to service that debt. 7.4% of our latest budget was just paying for the debt we've already racked up. That's tens of billions of dollars that could have been spent on something worthwhile, but instead we're just paying for the past.
The rich can leave. You can't, especially at the state level.
You can't raise taxes, the rich leave. You lower taxes, the rich suck money out of the local population until they get a better deal. All states are in competition to lower taxes. A much more comprehensive solution is necessary.
So what do you do when the rich leave for Mars? Chase them there to make sure you get your pound of flesh?
Is this really the kind of world we should strive to create?
>>You lower taxes, the rich suck money out of the local population until they get a better deal.
Maybe you're looking at it wrong. The rich aren't cows to be milked. The relationship between an individual and a jurisdiction should be mutually beneficial.
If the jurisdiction has something the wealthy individual wants, they will invest there.
If the jurisdiction is losing wealth as a result of the activity of the wealthy individual, then clearly there are negative externalities that it is not punishing with penalties, or subsidies that it is providing without a proportionate benefit, that wealthy people are taking advantage of.
The solution there is to change the way government programs are structured to make business models that suck wealth out unviable.
If the programs that the taxes the rich pay for provide a greater benefit to the rich than the cost of the taxes, the rich will move/invest in that jurisdiction. The stable equilibrium is not zero taxes with no government.
As for growing income inequality, the solution is not forcibly redistributing income with a totalitarian world government that destroys/sanctions independent jurisdictions until they fall in line.
The solution is to find out what structural forces allow those with greater capital to accumulate wealth at a faster rate than those with less capital.
Perhaps the government is introducing structural barriers to full economic participation.
One example would be transaction taxes, like the sales tax. These advantage larger organizations that can avoid financial transactions by keeping their activity in-house, something smaller businesses can't do by virtue of being more specialized.
Another example would be securities laws, which necessitate use of highly paid professionals to get approval from the centralized regulatory gatekeeper to offer stock to the public.
It now costs $6 million to do an IPO, and many elite in the government and securities sector are looking to shut down unregulated cryptocurrency token sales that offer people who can't afford those sums a more affordable means of raising capital.
Maybe those concerned with wealth inequality are not concerned enough about these things, and are inadvertently contributing to the very centralization that is behind these problems by calling for more power to be given to centralized governing institutions in their pursuit of tax collection.
Something like 12 out of 20 of the wealthiest counties in the US are suburbs of Washington D.C. Maybe you're not looking in the right place for the source of the problem.
This doesn't require a world government.
The US already has tax laws on the books for when people renounce their citizenship for tax purposes. Some states like CA are pretty aggressive in suing people who attempt to leave their jurisdiction before realizing capital gains to avoid taxation.
The ability to hide wealth/earnings in general is a bigger deal, and that can be dealt with through treaties without requiring world government.
I think people at once need to be realists and understand that capital flight and over-reliance on a few individuals is a real thing, but also not go too far and assume government institutions are powerless and can only exert their power by bending over backwards.
And that just lengthens the timeline on when the state starts suffering from its high tax policy. Now on top of high taxes, enterprising individuals also have to worry about financial penalties for leaving the state. The wealthy already in the state will be less inclined to leave, while the wealthy outside the state will be less inclined to come.
The delayed effect of hikes to national taxes on the residency of the wealthy is actually a disadvantage, because it results in people not taking it into account when voting on policies.
On the other hand, when the effect of something is immediate, voters take it into consideration.
So I view the high mobility between states as an advantage, because it results in state policies being better structured to avoid economic harm.
>The ability to hide wealth/earnings in general is a bigger deal, and that can be dealt with through treaties without requiring world government.
There's no solution to the wealthy simply getting up and leaving the high tax jurisdiction for good, in order to avoid incurring future tax debts. What's collected on an exit tax is nothing compared to what that individual would have contributed had they stayed.
Tax treaties and the like will not prevent this, because when you live in a country with a lower income tax rate, your tax obligations are lower. This makes it financially advantageous for any highly productive individual to leave a high tax jurisdiction.
Prior to around 2006, GASB allowed governments to avoid reporting pension liabilities on the balance sheet. Instead, pension liabilities were reported in the footnotes.
From 2006 onward, GASB started to tighten-up requirements, and eventually brought governmental accounting in-line with private sector accounting (aka liabilities are reported in full).
Once the new regs took effect...news reports about cities declaring bankruptcy started increasing.
So don't work there.
A Federal bailout of state pension obligations becomes a political (not financial) problem. Why would states that are 80%+ funded agree to bail out states that are only 50% funded? Do the states that are 100% funded receive a credit to use in other ways? There's also substantial moral hazard; if the Feds backstop state pensions as-is, they would be rewarding numerous instances of local self-dealing. This would be an order of magnitude more expensive and more contentious than TARP, which barely passed even as the economy was (supposedly) near death.
I think it's more likely that we see what happened in Greece: significant property tax hikes. You can siphon a huge amount of value out of the real estate markets through gradual but steady increases in taxes and fees, if you're willing to sacrifice appreciation (see Chicago). Ironically this may be a great way to promote affordable housing too, as residential real estate becomes a less attractive investment.
"Unsustainable" pensions are a politician's way of punting the issue -- rather than hit the budget today by paying market rate, they promise far above market rate later on when some other sucker is in office. And everybody -- including the people whose taxes will end up paying for it -- falls for this over and over and over.
I don't know about everybody. Lots of people benefited from lower-than-possible taxes over the years, sold their houses for large piles of cash, then move to Arizona or Florida or something where taxes are lower, houses are cheap, and there's no snow.
He was going to be the next Chris Christie/Scott Walker and then would be a presidential contender for 2020-2024.
Fast forward 4 years and he's achieved none of his goals, further entrenched his opposition, almost lost the Republican primary to a far-right flank, and is now ranked the 2nd least popular governor in America.
Oh and he left the state without a budget for half of his first term because of a failed grudge match with the speaker of the house, which increased our cost of debt and messed up the financials for many colleges in the state... among other things.
- You have politicians who are in charge of everyone's budget, wanting to show results before the next election. You don't want taxes to go up immediately, so you do a deal with the workers to pay them later. On the worker side, if you have a final salary scheme (or max salary), and you've had colleagues you've worked with for decades, well why wouldn't you promote them?
- The "pay them later" will require you to pay them more, because we all discount a dollar tomorrow over a dollar today. We might not be around, money might not buy the same, and we generally find it hard to put off anything pleasurable. So we need more tomorrow if we're gonna do that deal. A lot more.
- Bad predictions also come from bad incentives, not just bad accounting. It makes it a lot easier to suppose your investment will make 2% more each year, and this internet bubble is the perfect "evidence" that it might happen. Bad predictions will feed back into bad accounting.
But as for the article itself, aren't football coaches the highest paid staff of any organisations that have them? Even the military? I understand the NYT wants people to read their articles, and thus has humans in the pictures instead of pie charts, but it's the pie charts that tell you there's a problem, not the people.
But I have to imagine in a lot of cases that would lead to people being impoverished later in life, which is not especially humane.
secondly, its just an intergenerational wealth transfer. another excess of the selfishness of the boomer generation. Who will pay the price ... the school kids getting a crap education in 35 student classrooms in crumbling buildings in a towns who's infrastructure is going to literally fall apart in 2 decades time from zero maintenance. Ah well at least we kept the promises some corrupt politicians made in the 90s to well-off gov workers.
It's compensation earned in exchange for labor under a negotiated agreement. The fact that the check is separated from the labor by years rather than days doesn't suddenly make it "an entitlement."
The time to complain about entitlement, selfishness, and intergenerational wealth transfer was when we were promising those pensions, not now that the bills are due.
If I live twice as long my 401k doesn't magically double.
How do you feel about annuities? They can function very much like a pension. Why do you think most people choose not to buy them?
Anyway, the crux of the problem its very difficult walk the line of having institutions that safely guarantee massive financial payouts 50+ years into the future. From the perspective of the seller its an asymmetric risk. We can't even accurately predict the yield on government bonds 5 years from now.
The logical thing would be to phase in mandatory 401k contribution and healthcare savings accounts with fixed amount in high-rated bonds. But that might put a dent in the ability of Coca-Cola/Disney/Comcast Co. to suck the American consumer dry so its probably a no-go in our political environment.
Government workers are certainly in a special privileged class.
I hope to have the chance to reverse this trend in my career, but I have no illusions that gaining this lost trust will come easily.
[0] http://www.people-press.org/2017/05/03/public-trust-in-gover...
1. Progressively lower pensions. Skim off the top earners.
2. Create projects for the community and declare that the saved money will be used for those projects for better optics.
This won't lower trust in government pensions by that much because this is just correcting what is seen as "unfairly high" pensions.
Wouldn't it be a great idea if the government just stopped making payments on its loans that, in hindsight, were a bad idea?
The government would be quickly replaced with one who would undo this change. Nobody would support it. This is so ridiculous I think you're trolling.
For the last nearly 40 years every state has been playing the game of trying to attract corporations with massive tax breaks against the promise of jobs. Then a lot of the time the promised jobs never appear. Meanwhile the state is still out millions or billions of dollars in revenue.
Corporations and the wealthy can afford to hire lobbyists to write favorable policies. Working class people cannot and have been eating the brunt of all the tax breaks the rich and powerful and connected have received.
Maybe a handful of people in some states have abnormally high pensions. That’s not the source of the problem. Those pensions were solvent until they were treated like a piggy bank by corrupt and bought politicians.
I sometimes have mixed feelings about that, but generally agree that inflammatory language does not foster reasoned, meaty discussion.
Pensions are NOT a drop in the bucket by any measure. Maybe for the USA they're less important. But for the rest, safety net is most of a country expenses. Then you add that population in the first world tends to shrink and the model in most countries where current workers pay for retired ones... and you have a very serious problem.
Yet, every single part of our society, from pensions, to investments, to government planning, to retirement advice for people working in the private sector is based on the insane notion that 3% GDP growth is perpetually sustainable.
The difference is politicians had domain over the pension funds and decided to "borrow" from them and make them insolvent. The workers are not the ones to blame, the politicians who thought using the pension funds as a piggy bank are. Stop blaming the workers. They didn't cause this problem, and they paid into those retirement funds.
The politicians who caused the problem are the ones who want you to blame the workers, stop being their patsy.
That's false. One of the requirements of a qualified plan under section 401 is that the employee has a nonforfeitable right to plan benefits: https://www.irs.gov/retirement-plans/plan-sponsor/401k-plan-...
The corporations who tell workers that the corporation can take money out of employer 401k plans without authorization are trying to scare the workers, stop being their patsy.
>The politicians who caused the problem are the ones who want you to blame the workers, stop being their patsy.
The workers should have known that future promises to pay which would drive the government into insolvency were promises made in bad faith. This doesn't absolve the politicians of their sins, but the workers are not innocent lambs either.
I’m bored of arguing with you though. It serves no purpose because you are just regurgitating right wing talking points.
The many tens of billions of dollars spent on pensions annually in California alone dwarf any tax breaks given to companies. And California is very stingy with those anyway. For comparison California's annual budget is just about $270bn according to Ballotpedia.
Oh yeah that’s the detail everybody loves to skip over; these workers PAID into their pensions. They earned that money.
Again, if the pensions aren’t solvent it’s because of corrupt politicians and nothing else.
Stop trying to blame workers for receiving a benefit they worked for and deserve.
And as far as the pension eclipsing tax breaks; another red herring. The pensions should be getting paid out of a relevant fund. AND while any one tax break may not match the payout of the overall fund there are many many corporate tax breaks written into the laws that collectively cut state budgets to shreds.
https://calmatters.org/articles/commentary-surging-pension-c...
While I agree with the overall point of the comment. I down voted it because of the tone with which it was made and it's lack of attempt to brings any facts or references to bear in reinforcing its claims.
A prime example of states spending their money poorly to the benefit of big businesses is another HN topic. The headline is about eminent domain, but the article talks about the 3 billion "investment" that was given to Foxconn that seems unlikely to pay for itself even in an optimistically estimated 25 years.
Edit: Also, several of the "factual" claims made were... hard to believe without any numbers to back them up.
We gotta strengthen organized labor and fight for living wages and pensions for all persons. The 1% have way too much and keep getting richer, while the rest fall behind and the middle-class languishes.
How to approach this fairly is a whole other can of worms; there will almost inevitably be some unjust outcomes.
There are 2,032 people making over $100,000 per year. The sum of their pensions is $252,144,041.04 per year. If each were capped at $100,000 per year that would be $203,200,000 per year, so a potential savings of $48,944,041.04
[0] http://www.pers.ms.gov/Content/Supplemental/persfacts_figure...
$200k is a completely arbitrary assumption. And if your cost savings are off by an order of magnitude, it is basically insignificant, at <1% of the budget.
If you can wave a wand and reduce benefits, targeting only the top 2000 is probably not the most effective use of your magic.