Boohoo. Public service union members should have thought about that before pursuing a pyramid scheme retirement plan instead of a defined contribution pension like the rest of us.
Maybe the administrators of the pension accounts and financial planners for these organizations should have done better by the people who are busting their (collective) asses to provide services for you, the taxpayer?
With public sector unions, especially in smaller cities and states, the relationship is more incestuous and oftentimes the settlements aren't really made in good faith. The politicians desire the political support of the unions they are negotiating with, and figure by the time the pension bomb explodes it will be some other poor sucker's problem. Taxpayers are the ones that get screwed.
It's basically a deal negotiated by government employees among themselves, and approved by a politician who often needs to maintain favor among these employees.
Add to that the fact that these agreements only lead to a crisis long after the politician is retired (or dead), and it's no wonder these unsustainable deals get approved as a matter of course.
The federal government saw this coming 30 years ago, moved to a hybrid, mostly-defined-contribution system and (surprise!) is doing fine. Most state and municipal unions fought to keep their defined-benefit plans and now are going to suffer for it.
That National Review hit piece notwithstanding, in truth defined benefit plans are, technically speaking, the most efficient form of deferred compensation. Lowest overhead with maximum value received by the [average] retiree, which theoretically permits employers to minimize total amount of compensation.
The rub is that the employer needs to fully fund the liabilities as they accrue. Government and unions, however, have been content for state employers to "pay as you go"--use today's contributions to pay yesterday's liabilities. That's a recipe for disaster.
It sucks that we've thrown the baby out with the bath water--swapped pensions for 401(k)s. Defined benefit plans are annuities, and most economists agree that the most efficient retirement savings plan is an annuity. How we pay for that annuity is a different matter altogether. We know that people aren't rational enough to choose to put their retirement savings into an annuity, so it's obvious the employer should do this for them. The only real question is how to structure the premium payments so employers can't cheat (and employees can't be complicit in the cheating).
No insurance company would sell an annuity for as little as what governments claim they cost. And anytime you get a big pot of money, there will be corruption and cheating.
The most efficient retirement plan is having multiple successful children who are raised to take care of their parents.
Well, we are the ones paying those people's pensions, in the form of taxes, so we're the ones fucking ourselves over if they got too sweet of a deal right?
I am personally not going to get 50-100% of my maximum salary as guaranteed compensation for the rest of my life until I retire - are you? I'm not super enthusiastic about paying taxes for someone else to get a better retirement deal than me, either.
I'm fine with paying government employees what they're worth while they're working - hell, I think most of them deserve a raise. But they also should have defined contribution retirement plans, not defined benefit, like everyone else working in private industry.
And how does this square with this being a democracy ? Or to put it another way: you're also (indirectly, but ...) the ones promising sweet pensions to these people if they would just work. And they worked. Now you want to revoke your part of the bargain ?
Furthermore, if you refuse to pay for their pensions ... do future kids get to refuse to pay for yours ? (either directly, or through devaluing the currency, just in case your answer is that private sector pensions are safe)
But we all know that there's no answer here, so it'll be devaluation. At least that means private and public pensions are equally screwed (I'm leaning socialist, so I like fairness in the sense that people get treated the same).
So I think this argument actually works against you.
First, nothing can bind future generations. They can always change whatever they want to. In the United States, a future congress can revoke, alter or amend any law passed by a previous congress. So if you want your pensions to be secured, the benefits cannot be guaranteed by faith in future governments!
In this sense, a defined contribution plan is more secure than a defined benefit plan. This is because a defined contribution plan belongs to the recipient as soon as the funds are allocated - even if a future government changes the rules, the money that's already in your 401K is yours!
Consider the alternative - are you saying that future generations are always bound to the decisions of past generations, even though they may not even have been alive or of voting age? If a law is fair and benefits society, that future generation will respect it because it benefits society. If that law is unfair to them they can and absolutely should change that law! How could it be otherwise? As a socialist this should utterly appall you. Do you believe that laws put into place by capitalists and large corporations constitute binding pacts between governments and their citizens, and that any future government that seeks to amend them towards a more equitable balance is now acting unfairly?
If the median income in a nation is $40K, but the median pension given by the state exceeds that income, then who is suffering unfairly if the pension is reduced to be more in line with what the average worker earns? How as a socialist could you justify a pensioner earning more than a productive active worker?
Not so useful or interesting in terms of commentary, is it?
It's funny how you see this as a positive ? If people have this attitude, of course the result will be mercantilism, or worse : the hoarding of jobs/companies/markets and the only way to get into a specific jobs is to do whatever "the guild" wants, which I guarantee will include paying pensions.
And if you "go around" the guild, they will either regulate you out of existence or outright physically attack you. Before you say that can't work I'd like to point out that they did this in almost all of Europe for ~1200 years.
And under these conditions, I would understand that way of working.
Such things are the alternative. So, I would very much want people to have faith in government, and that very much means you have to pay up the promises made before.
> Consider the alternative - are you saying that future generations are always bound to the decisions of past generations, even though they may not even have been alive or of voting age? If a law is fair and benefits society, that future generation will respect it because it benefits society.
You mean, paying people for their work what they were promised when they started that work, for example ? Like pensions ?
> How as a socialist could you justify a pensioner earning more than a productive active worker?
I don't understand why this would be a problem for a socialist ?
> Consider the alternative - are you saying that future generations are always bound to the decisions of past generations,
What I don't understand is that as a supposed capitalist alternative you're actually advocating making promises (like pensions), then reneging on them. Your alternative is to lie. Make promises, and exploit people who believe them ...
I guarantee if there is one thing that kills markets faster than anything else it's a loss of trust. You're advocating, unless I'm mistaking, exploiting trust. This is just not going to work.
There's a reason most historical capitalist societies had extreme versions of holding people to their promises. Slavery, debtors' prisons, forced labor, indentured servitude, ... were "solutions" used by past societies to avoid this problem. There was presumably a reason they did this ... do you really want to go back ?
> If the median income in a nation is $40K, but the median pension given by the state exceeds that income, then who is suffering unfairly if the pension is reduced to be more in line with what the average worker earns?
If government pensions pay out more at retirement than the median worker makes while working, would you agree that under socialism this would be considered unfair to the worker, and overly exploitative for the pensioner?
No, because, firstly, this isn't true. The government simply has started to pay less. From any individual's perspective, I assure you they don't earn more in retirement than when they were working. If you have heard differently, I assure you that's propaganda.
Secondly, I would simply say that current government employees have the right to be paid the same as their predecessors. Lowering pensions ? No way I'd agree to that as a socialist. No way in hell. But you should raise the conditions for government employees.
They earn more than the average worker overall. In California the average government pensioner earns 26% more than the average non retired, currently working worker.
Source:
https://californiapolicycenter.org/what-is-the-average-pensi...
That's too much. As a socialist, I would find it clearly exploitative that a non worker is making more than an active worker. That's completely unjustifiable under socialism.
The point of a pension is to provide an income so a retiree doesn't live in poverty. Paying a pension that exceeds that of a younger worker who is actively working full time completely goes against that.
I don't understand where this is coming from. Personally, I am a socialist and I think it's too little.
If I look at it from a capitalist's perspective, I ... also think it's too little.
I'm sorry, just to be clear, are you saying that as a socialist, you think a young worker who is actively working and only making $40K a year should pay more to support someone who is making $50K a year but isn't working at all, because $50K is too little?
My dad (retired) was a career public employee. He paid into his pension every month of his entire career. He earned every damn penny he's getting right now.
This is not just a problem of public employees or their unions. You are on the hook for these payments and will remain on the hook even if starting today everyone had a defined-contribution plan. Yes, this is your problem too.
This feels like the crux of the problem, but we've got the politicians we voted for. I'm starting to wonder if its even possible for the average person to vote in the long-term interests of their community against their own short-term interest. Some will... but the majority?
For the most part the average citizens do everything they should and a bit more. Sadly resources are mismanaged and citizens carry the burden because our system is collectively failing to stop bad actors at every stop.
Every good solution ive heard comes at the expense of higher taxes especially on rent seekers and high income/ wealthy individuals and families. Ignoring the political suicide of going after those classes, the entire proposal is a catch 22. How can these victims be expected to trust a politician when they've been taken advantage of by politicians their whole lives?
When you can't resolve unsustainable debt without bankruptcy, then you will go bankrupt and credit rating be damned.
Detroit, Chicago, Illinois are just warm ups for the big battles over the next few decades.