Let’s face it. Parents are going to have to move in with their children. That’s assuming the children haven’t already moved back in with them. 🙂
The politicians and labor leaders who concocted this devil’s brew deserve a special circle in hell.
There are a lot more lies and Ponzi structures embedded in the US financial system. The entire social contract (i.e. entitlements) is based on lies and faulty economics. The next 25 years will be spent fighting about money at all levels of government. Not a recipe for a happy electorate.
“An economic crisis is nature’s revenge on those who make and those who accept false promises; it is a holocaust of lies when the dross is burned away and only what is real and true remains.”
Dr. Mead, this is the very point I tried to make about the European debt crisis! Greece was and for years had been in violation of the treaty that created the euro. All the PIIGS have been in violation, or clearly headed that way, for years. See the provisions on government deficit and government debt here http://en.wikipedia.org/wiki/Maastricht_Treaty
As I said previously, no good ever comes of denying reality, and the reality was and is that some countries were violating important provisions of the euro treaty with impunity. No violations, no crisis!
Denial of reality also helped create the US credit crisis. What began as an effort by politicians to stamp out racism in home lending combined with government guarantees of mortgage payments to create a huge pool of borrowers who realistically had no prospect of repaying their mortgages.
Sure, there was some corporate skullduggery, and some borrowers were dimwits who thought home prices could never go down, or that they could cash out before prices slid. But without laws essentially forcing lenders to lend to Blacks and Hispanics and government guarantees of risky mortgages laid the foundation for the housing bubble, which led directly to the credit crisis.
What would prevent these economic calamities, whether in Vermont or Greece or Social Security, would be government financial accounting rules as strict as corporate accounting rules. When an Enron or WorldCom goes kaput, shareholders and employees are hurt, but not the whole economy.
But we’ll never have those strict government accounting rules, because pols of all parties want to be able to fudge the numbers. Which is one reason I’m conservative. No matter how good politicians’ motives, financial interventions by government usually succumb to the Law of Unintended Consequences.
Kolya, there are no such lies and Ponzi structures embedded in the US corporate system, because there’s a law known as ERISA. If a company of any size tries to welsh on its pension promises, it’s open to prosecution and severe penalties.
For unions and politicians, there’s no such law.
With respect to ERISA, please note that the premiums paid to the Pension Benefit Guaranty Corporation do not adequately cover pension promises made by private entities. Pension recipients of bankrupt companies with defined benefit pension plans get only a fraction of what they were originally promised.
AND, the companies are often given a pass, not held accountable. The PBGC, a government corporation, like Fannie & Freddie, has an implicit guarantee of taxpayer bailout if its own investment premises don’t work out and there is not enough $ to pay beneficiaries of plans it has assumed.
Most private sector employees no longer have db plans and those that do may or may not receive the pensions they were promised.
There used to be an implicit guarantee. Now I think it has evaporated and the Feds will never back up the PBGC. (There are many labor leaders over the years that have declaimed that it is not a government guarantee in order to avoide the political consequences of that; they will now be taken at their word.) They will just wind up paying what portion of the pension they have the money for. If that is a 50% haircut, so be it. Which is what seems increasingly likely in places like Rhode Island.
You are being way to nice to the public employees who benefited from this.
The fact is that they are no different from the people applying for (and getting) 500K mortgages on $16K incomes. They KNEW they were getting too good a deal. They therefore deserve any haircut they are going to get.
Frankly, even the taxpayers deserve their share of the blame. Any taxpayer voted “yes” on a local referendum, a pro-public employee Republican, or any democrat, deserves to be sentenced to live with a Tea Party member for at least 10 years.
They deserve the abuse.
Lovely quote of Carlyle. Kipling’s summary: “The Gods of the Copybook Headings with terror and slaughter return!”
And this system is different from Social Security… how, exactly?
California is liable for $500 billion — one half trillion — in unfunded pension promises to teachers, firefighters, police, public employees and prison guards…public “servants” all.
A friend’s retired father — a “teacher” — is now bringing home more in retirement than he brought home while “working” as an upper level public school administrator.
Ponzi would be proud….
We could apply ERISA to unions and political office holders. But why bother? Eric Holder, Obama’s federal attorney general. is a politicized lawbreaker himself, contemptuous of his sworn duty and unworthy of trust. Such partisan hacks would never prosecute, and federal judges refuse to hear cases they deem politically inconvenient. Chris Dodd and Barney Frank should be behind bars. In the face of such malfeasance, and given the usual leadership vacuum in Congress exemplified by Reid and Pelosi, such outrages will continue.
“Nationally, state and local government face something like $3 trillion in accumulated lies and deceit…”
One small correction – I believe the actual liability is much greater than $3T. I’m a Total Rewards Executive for a large health system and the trade press I read every week places the public pensions/health care obligations at closer to $15T. Of course that includes current COLA clauses.
Amongst us benefits pros, this situation has been known about and openly discussed for at least ten years. There’s a bomb in our midst and the trigger is the Baby Boom generation which hits 65 beginning this year. Most of corporate America shed their pension plans twenty years, or more, ago in favour of self-funded defined contribution schemes because they figured out what’s coming.
Unions and governments were much slower to act and the result is that we’re going to see pension plan failures spike up, and as Ihf above has ably noted, that’s going to leave the taxpayer (through PBGC) on the hook for a lot of the damage. If any of you need to understand why unionism is so desperate in recent years to make government help them get more members (EFCA, recent NLRB decisions, etc) it’s because many unions are sitting on pension time bombs. They have pension funds and retiree health plans which are lightly funded (meaning they only have a portion of the cash they need to meet future obligations on hand) and they know that without a sudden and large influx of new members, they’re dead in the water – they won’t be able to meet expenses.
Americans should be very concerned about the whole pension scheme underfunding problem because the total outlay to meet the obligations could nearly double out national debt when government and union retirement obligations are taken into consideration.
It’s that bad.
Like the great canon, Humpty Dumpty, the American pension system is sitting precipitously exposed to the smallest disruption that will inevitably send it crashing down to earth without hope of being pieced together by the ablest among us. Nay, in our situation, the king’s men will likely be the one’s trying most desperately to find a way to profit from and extend their reach of power while their own house of cards flutters in the wind. Foolish men have built their house upon the sand.
This pain must be shared.
Everyone receiving a pension (President to pauper)must see a cut in benefits.
Social Security, military retirement, federal retirees, congress critters, etc. must all take a big enough to make the system affordable to young workers and sustainable long-term.
My ox (military retiree/Social Security) must be gored and everyone else’s also.
Let’s face facts and share the sacrifice or face increasing acrimony and divisive policies.
With rare exception, nearly every US state and municipality has played the same deceitful game regarding public sector pensions by goosing the projected return on investments (the ‘discount rate’) to 7-8%. This had the effect of lowering the required annual contribution (from employees or the local government) and making the promise look affordable.
The average life of the the pension liability is 12-15 years, whether public or private, since the demographics are the same. Adjust the discount rate to a 4% or so 15 year rate (a few minutes with Excel) and see what happens to the unfunded liability of these plans. The net effect is that real debt quadruples for the high debt states (NJ, CT, IL, etc) but increases much more for nominally fiscally conservative states like NC or TN.
RI, IL, CA, CT and a few others are simply seeing the pain first. The pensions can’t be paid. Normally, there would be a big showdown with bondholders, because pensions are a serious contractual obligation, but politicians are too afraid to take on the bond market. They need the money.
To clarify Toni’s last point in the 5:55 am post, the Pension Benefit Guarantee Corp. only covers private sector pensions. Public sector retirees enjoy no coverage.
Wow, this is unexpected! Heh, just a little irony or is it sarcasm. Well, let’s see what are we going to do now? Punt? No, the game is just about over.
“And the Gods of the Copybook headings said ‘If ye don’t work, ye die’.”
– Rudyard Kipling
The major turning point will come when companies realize that that 55-year-old they are interviewing may have to be with them long enough to earn their 20-years-of-service award.
Live longer, work longer. A certain percentage of the population — maybe even a majority — will not be able to retire, but will be productive citizens up until the very end.
We’ll all be richer for it, as consumers stay productive longer.
Old people, listen up.
If you walk past a car lot and some dude greets you with the propostion that if you had him $500 cash for that new caddy and you take him up on it you do not get to sue the dealer for the car.
You old people have been paying the slicksters in washington your FICA and now, comically, think you will get your “entitlement”. LOL. Sorry, there is no money.
To compare these failed pension plans (including Social Security) to a Ponzi scheme is a bit wrong.
Ponzi pyramid schemes demand an exponential increase in contributors- therefore they burn out quickly.
Pension plans like CA’s or RI’s are based on wildly optimistic growth rates- but don’t look so crazy that only morons (the type who fall for pyramid schemes) go for them.
I might be splitting hairs but things are bad enough without using inaccurate and inflammatory language.
The problem with pensions is that the politicians and union leaders are hand in glove- and frankly there is a moral hazard that any short payments will be absorbed by the taxpayer.
What is needed- too late now- mostly – is to cap pension plans tightly and keep the self serving politicians out of it- maybe impossible- but we have to try.
And yet — count on R.I. voters voting for the same failed Democrat policies; count of things getting worse; and count on the U.S. taxpayer being asked to foot the bill.
Voting Democrat seems more of a deepening addiction than it does a rational decision.
Sad but true. As I keep telling my wife who is a public school teacher near retirement (not in RI) the politicians and the union “leaders” for years all engaged in magical thinking for their own short-term benefit. This is not unlike the behavior of national politicians with respect to Social Security, Medicare, etc. The self-serving nature of these people and their lack of respect for the long term future of their country and for future generations is despicable, and that’s an understatement. These pols should all be ashamed of themselves. If this were a just world, they would be prosecuted for their failure of stewardship, as certainly they would be if they were in private industry. These malfeasances are much, much worse than Enron, Madoff, etc. And the SOBs still have the nerve to refer to themselves as “public servants.”
Return with us now to those thrilling days of yesteryear: March, 2011. The Wisconsin budget controversy has generated sharp rhetorical clashes over ideology, budget priorities and tactics — and the largest sustained protests in Madison since the Vietnam War.
The main event: An argument over collective bargaining rights and compensation for state and local government employees that has spurred national interest.
Republicans, including Gov. Scott Walker, argue that sharply limiting union power is essential to reducing massive budget deficits at the state and local level. Democrats view the real intent as union-busting and say the GOP move unfairly punishes workers for recession-related woes.
Yesterday Wisconsin; today Rhode Island.
Tomorrow the United States of America.
In Michigan on Labor Day, a labor leader denounces the Tea Party, announces an army has been assembled to take the sons of bitches out. (The president of the US of A) sits idly by.)
Fast forward to November, 2012.
Said president is defeated in the election by a Tea Party-supported candidate who agrees with reductions in pensions and benefits for “working families.” He promises fiscal reality. No more Ponzi schemes. No more blue-state utopias.
Unionistas claim a stolen election and start filling the streets. Violence ensues from Detroit to Dover and from Berkeley to Bourbon Street.
We live in interesting times. This is not something I thought I’d ever see.
But from time to time, the tree of liberty must be refreshed with the blood of tyrants. (Rhetorically, of course.)
The American version of the Carlyle quotation:
“Reality always bats last.”
Here’s the most telling quote from the WaPo article:
Still, union leaders say the cuts being contemplated go too far. They note that generous retirement packages were meant to compensate the relatively low salaries of public workers. They also say the state could simply stretch out the calculation of its pension debt, or stick to more optimistic assumptions for pension investment earnings, to soften the blow on workers and retirees.
In other words, lie. These proposals don’t “soften the blow” at all — they merely hasten the day when Rhode Island goes insolvent and the pensions stop altogether. ..bruce..
The federal and many state goevrnments will owe Bernie Madoff an apology once a full manifestation of these pension Ponzi schemes is made.
#1) Repeal any exemption that state and local civil servants have from social security. #2) Eliminate entirely any “collective bargining” for any, and I mean any, person who gets a government paycheck. #3) At the state and local level, outsource everything except for law enforcement (yes, that includes fire fighting) and, but for the larget cities, eliminate city police depts and consolidate them with county sheriffs.
Public employee unions were a bad idea to begin with, and the pension crisis is but the most painful manifestation of it.
Not one heavily Democratic state is well run and solvent, and the most unionized states are the worst. California, Illinois, Massachusetts, Connecticut, Rhode Island, and New York are disasters aborning.
The blue model just didn’t freakin’ work, and the states that bought into it most fully are in the worst shape.
Progressivism, or modern liberalism (i.e. post-1900) with its quasi-collectivist philosophy and governing approach has been proven to be as completely incapable of sustaining a healthy economy as the Marxism-Leninism of the Soviet Union and the former Eastern Bloc.
The US must cut the scale of government back substantially to something more closely approximating the government’s role before the New Deal, or we, too, will end up like the increasingly ghost-town-like Detroit.
Alright, picture this: You’re a municipal employee funding current retiree benefits while nothing is invested for your future retirement needs.
You can definitely tell which way the wind is blowing and it is suddenly occuring to you that taxpayers do *indeed* have the ability to yank the rug out from under you by electing officials who will simply declare bankruptcy rather than strangle the taxpayers even more.
And you know that when your job is axed due to budget cuts or your “retirement” at forty-five doesn’t pay you enough to live on, that you will have to go back out into the real world and get a job, adding you to the ranks of the strangled taxpayers.
I think at that moment right there, the municipal vampires will suddenly become Tea Party stalwarts who have seen the light and become staunch advocates for property rights.
The pension payments they’re making now *could* be going into a 401k style account they own, but instead they are being thrown into the bottonless gaping maw of leviathan, never to be seen again.
Let me know when you want me to feel Sorry.. Because I do not.
The Unions are 100% to blame for this deceit.
And since obama is the Union Thugs friend, lets kick Obama out in 2012.
There is a term in economics, “external costs” whereby in a contract between party A and party B, significant costs are created for a party C, who is external to the contract. Pension liabilities, created by unions and politicians are the mother of all external costs. Both sides knew, long ago, that the future funds would not exist, without massive taxpayer bail outs. The future is now. We see it in the Post Office, many States, and in Social Security finances. It has become blatantly obvious because the boomer generation has now stopped paying, and is now demanding their “rights”, to an empty piggy bank. For generations, politicians dipped into the sacred “lock box” to buy their office, e.g. I gave you midnight basketball courts and did not raise your taxes. Magic!
There are only three peaceful solutions to this nationwide debacle:
Financially gut parties A, B, and C. Retired union officials, state negotiators, and decision makers must be cut off, no retirement funding. This will not be near enough, but it will damper future contract give away negotiations. Impose means tests: if you can eat off your savings, you dont get much from the government. Extend working age, to reverse the cash flow.
But the real hurt, going forward, is that millions now wholly comprehend that their guy lied to them, straight in their face. That hurts.
Mead, 2. Mogden, and 17. Zephyr, have the right emphasis in my view. The resolution that will be needed over the next 20 years or so will be easier for everyone –union or non-union, government or private — to swallow if the blame spotlight is shone on politicians prepared to create Potemkin villages of prosperity, to lie hideously to one and all in the name of protecting the halt, the lame, the workingman, the widows and orphans. Shine it also on the union cronies and corporate cronies who help them sell the lies. We can’t make them tell the truth, but we can throw them into Carlyle’s smelter and burn the lies out of them before they enjoy a long circulation.
The scariest part of the unfolding crisis for politicians at all levels, is when enough govt. employees and retirees figure out that they’ve been played, just like everyone else – and that those pension benefits they’d been promised, aren’t going to be there. That will be the tipping point when the people turn against their government, and the torches and pitchforks come up… Of course, the honest thing to do would be to face the crisis and deal with it honestly, but since when have our elected representatives ever acted in this manner? Intetresting times in which we live, are they not?
I live in RI and I will tell you, if there were a state drink it would be Kool-aid!
Our only hope is if we can figure out a way to monetize denial.
The sad math of promised union pensions is the shape of things to come.
Big gov has to go 401K for its employees. It would be a boost to the market and it would be fair to those of us in the private sector who have no other choice.
So will the retired union bosses and politicians who sold this steaming pile also see a decrement in their pensions?
Or are they more equal than the other animals?
I would also note that like many Washington Post news articles, it is, um, incorrect.
It states that the retirement age is 62. It is not. Many of the retired police and firefighters retired after 20 years, some as young as 40 years old. I have been following this story closely in the Providence Journal.
That which cannot continue, won’t. Anti-Trust the Labor Gang Monopolies break them up and make them compete against each other for work contracts. End the extortion and destruction of entire industries and the taxpayer.
US Returns to Center-Right Roots
03 August 2011
The US has returned politically to its center-right roots.
Recall that in the Nov 2010 election, the Democrats lost 63 US House seats and the Republicans gained those same 63 US House seats. It’s not that the Democrats lost 63 US House seats and the Republicans gained zero, for a total political change of only 63 seats. The total shift in political representation was a Democratic loss of 63 seats and a Republican gain of 63 seats for a total political shift of 126. Before the 2010 election, the Democrats had a huge majority in the US House and, after the election, Republicans have a huge majority in the US House. Add in the similar change in the US Senate, in US Governorships, and the huge 700+ change in state houses, and what you witnessed in the 2010 election was a massive change in political and/or economic philosophical allegiance, the US returned to its center-right roots. That US return to its center-right roots resulted in, at the ballot box, a corresponding massive rejection by the voting US public of Democratic policies of “Spend and then Tax” (Tax & Spend), deficit spending, over regulation, communist-styled, centrally-planned health care, and “Shovel-Ready Stimulus” program that was not “shovel-ready”, did not stimulate, and did NOT create jobs. All that the Republicans promised was to reduce the rate of increase of spending and to get the US budget under control – a Tea Party idea.
The fact that the “Left” (Marxists, communists, socialists, progressives, liberal Democrats) does not want to acknowledge the Left’s losses, is no surprise to me. The Left still may not realize how big and lasting the Left’s losses are.
We on the Right and in the Center must remember the last election, what we, the Center-Right, stand for, and, most importantly, we must not become complacent. We must continue the battle against the Left by controlling spending, re-visiting and re-legislating job and investment killing burdensome financial regulations, and repealing Obamacare.
Under Republican Governor Rick Perry, Texas has created 37% of the jobs in the entire USA in the last decade. From June 2009 to June 2010, Texas created 49.9% of all jobs in the USA.
The US has returned politically to its center-right roots. Just Say No to the Left.
Republican & Tea Party member
Largo, FL, USA
God Bless Reagan
God Bless America
“Just Say No to the Left”
Congress shall cut no check to an individual citizen.
Citizens shall not be legally liable for debt incurred by Congresses for which that citizen was ineligible to vote.
I love the poster that uses the word “welch”, as if the problem is evil companies or municipalities thumbing their noses at payments they promised to make. hey idiot, here’s the problem: NO ONE can make a 40yr promise to anyone else. Too much in the world changes, too much in the world of money changes. That’s why the feckless scum politicians that made these deals in the 1960s/70s should be vilified for eternity. In their zeal for votes and accolades, they sold their people of their municipalities down the river, in order to pay for a select few that happened to be on the public coffers. You don’t DESERVE those gold plated benefits just because some jack*** promised them to you. You deserve what we all get: the opportunity to compete, and the chance to succeed if you’re good and work hard. That’s it, genius.
September 6, 2011 at 5:55 am
Kolya, there are no such lies and Ponzi structures embedded in the US corporate system, because there’s a law known as ERISA. If a company of any size tries to welsh on its pension promises, it’s open to prosecution and severe penalties. For unions and politicians, there’s no such law.
Dear Toni: Then GM, when the pension fund was failing, didn’t fail because Obama saved GM and the pension thing. Does that make Obama a hero in your eyes? Not mine!
You folks are all delusional if you think these guys will give up anything. They will seize private 401Ks and pensions, tax people and business into oblivion and demand bailouts from Uncle Sam. And, if you dare resist, there is always rioting, mobs and bloodshed to convince you. It is the union way.
Obama said it was all Bush Jr. fault!
California the Golden state, Obama and the Democrats model for American future, is fast becoming the poster child for an bankrupt third world State!
An unholy alliance of Socialist Democrat politicians, Unions, and Illegal Aliens supporters are feasting at the trough of tax payers paid benefits while taxing & regulating business and the tax paying public into poverty.
The pandering of Left Wing Democrat Politicians to their constituency of Unions, Illegal Aliens and open border supporters, are driving business and citizens to other states & countries, while leaving the parasites & welfare leeches in an increasing bankrupt, crime ridden, dysfunctional state!
For years California has ignored economics 101 and imported Criminals, Uneducated Parasites, and poverty from Mexico, which increased Medical, Welfare, Crime, Prison, etc. & adding a estimated 22 billion per year to Calif. State expense to support the invading horde of Illegal Aliens while exporting business and educated tax payers.
Like all Socialist countries the results have been a astronomical increase in social welfare, schooling, prison cost etc. and a lowing of Living standards, Heath care, Education standards, Tax receipts & finally Bankruptcy.
The policies of Obama and Wash. DC Democrats are intent on following Calif. policies and Pro-Illegal Aliens, Pro-Unions and Anti-tax paying citizens and are endorsing the same socialist process of rewarding the Corrupt, Stupid, Foolish, Lazy, Greedy & Criminal while punishing the responsible, honest, law abiding & hard working citizens of American.
Failure to abide by our Constitution against invasion & enforce our Immigration laws and constraints on wages and benefits for public employees will result in turning the Golden State into MexiCalif and the end of the Calif. Dream and the beginning of the MexiCalif. Nightmare!
Amnesty & Citizenship as a reward for their invasion of the USA, with chain immigration will result in the rest of the USA turned into a Spanish speaking third world cesspool and follow California into a polluted, over populated, Spanish speaking, third world Nation of Crime, Corruption, Poverty, Cruelly & Misery modeled on Mexico!
This will result in a population depending on Welfare and the Democrat party, thus assuring the lock on power for the Socialist Democrat party of the United States of Mexico!
I have been saying for years that we should give New England to Canada for a sixer of Molsen’s.
Ahhh, democracy, hard work, that. To be an informed voter takes more than a ten minute read of the local paper the morning of the election. It all starts with the voters. They weren’t duped by the people they elected, they were just lazy.
Grear analysis, Mr. Mead.
And I could not agree more with Bruno Behrend (posting #8) who writes ‘You are being way to nice to the public employees who benefited from this.’
It is they — public sector employees — who scammed the system through the unholy alliance of their unions and the politicians, and it is they who should take the fall — not the taxpayer.
Back in the day, union reps led by Jimmy Hoffa Sr. looted the pention plans of honest workers. Thankyou Hoffa for your contribution to the ERISA LAWS. Private industry unions belonging to the building trades are in fact covered under the ERISA LAWS. Why have goverment pentions been left out of the same laws that govern the building trades due to HOFFA and the Teamster gangsters of the early sixties ? Our pentions are in tact, when did politicians make theirselves above thei own laws nd WHY ?
I was made aware of California’s pension problems way back in the 90’s. Public employee benefits, always generous, went into hyper-drive after Jerry Brown executive ordered public employees unions into existence in the 70’s. Within 20 years, the dismal future of PERS and STRS was obvious to anyone who cared to look as benefit levels had been based on ridiculously unrealistic future rates of return on pension investments.
It all boils down to this: you can not expect a different result when you have a system where unions line the campaign coffers of the officials they’ll be negotiating with (I’d say “negotiating against” but that’s not the way it goes as the unions and officials are basically partners), and, as Prof. Mead points out, are long gone when it finally hits the fan.
It would be interesting to know how states without public sector unions are faring with their future pension obligations.
Thank you, Prof. Mead for speaking the truth, plainly and without political distortion or spin.
Those of us who have seen and been warning of the public bill coming due for decades have been ignored and vilified for doing so. Numbers do not lie, and those numbers make our present course completely unsustainable. Rhode Island, California, Illinois, New York, Michigan, Greece and the Federal Gov’t are all headed in the same direction by various degrees.
Those who would ignore or evade arithmetic in order to deceive either themselves or others are either fools or knaves, cynical liars and thieves, the moral equivalents of Charles Ponzi and Bernie Madoff.
Now contrast the sobering numbers you have presented with the increasingly heated and violent rhetoric of the left–most recently by Hoffa and our President in Detroit–Detroit of all places, whose vacant lots and ruined buildings stand as a poster child for the blue state model of high taxes, union control and “progressive” decline.
The President is himself innumerate and cannot present a budget to Congress, so he relies more and more on divisive rabble rousing, characteristic of all those who cannot face the truth. Like all committed men of the left, the President cannot add anything but votes or the numbers of a mob. There is never enough government expenditure, and never enough taxes. The only “solution” in this playbook is to increase the rhetorical attacks on “the rich” to double or triple their contributions, while the debt and deficits grow exponentially. This is the equivalent of pouring more water faster into a bucket with no bottom, and demonizing those who have the water.
All men and women of good will must reject this approach, if we are ever to look out problems squarely in the eye, and begin to solve them as a people.
If you substituted “California” for “Rhode Island” and “Golden State” for “Ocean State” you wouldn’t have to change much else – except the CA legislature’s collective heads are ensconced firmly in their posteriors.
So now it’s the poor workers who were “bamboolzled”? Those poor worker unions. They had no idea they were being taken advantage of as they negotiated raise after raise. Let’s all feel sorry for them.
In the 1930’s Stalin used the slogan ‘2+2=5’ to push an unworkable economic planning scheme. The result was a catastrophe. Numbers are the enemies of the left. Our modern Stalinists want their numbers to be true and in their arrogance and knowledge that they are incapable of error they soon convince themselves that those numbers are true and reflect reality. In the 1960’s, when Castro had a disastrous sugar harvest he merely extended the year to 18 months and turned it into a record harvest that was bragged about by leftists all over the world, probably with the faculty of Brown among them. The people of Rhode Island elected these geniuses, the workers were happy to get those contracts, the numbers were obviously wrong. I cant believe there were no CPA’s in RI who didnt spot the anomalies, but people voted in the leftists anyway. This is the state that looked at a sub-moron like Patrick Kennedy and found him worthy to take his place as their representative in DC long after it was clear to even the meanest intelligence what a half-wit he was. Whitehouse, Chafee…is there no low to which the electorate of RI will not sink? So there’s an easy fix to the problem; confiscate 50% of the assets of every registered Democrat in Rhode Island to pay for the programs they voted for. Paying their fair share.
“…I don’t know if the Ocean State is unusually rich in both knaves and fools or if some other factor is at work.”
Considering that Rhode Islanders continue to vote Democrat decade after decade with the same disastrous results, it would be safe to say that the fools far outnumber those of us who swim against the tide.
What I want to know is who are the actuaries from my parent’s and grandparent’s generations that didn’t have the common sense to project the risk of cost of living increases across the life of the pension systems they devised.
Were they ignorant, incompetent, criminally negligent, or downright thieves who aided creating a system that would steal the fruits of their children’s and grandchildren’s labor?
I have absolutely no sympathy for the unions and their workers. How many tens of millions of dollars do the various unions donate to Democrat election campaigns year in, year out? How many millions did the unions spend in Wisconsin for the recall initiative this summer?
Right now, the political campaign donations are drop in the bucket relative to the unfunded pension liabilities. However, if this money had been applied to the employees’ pensions every year, the problem would not be so huge right now. But that makes too much sense doesn’t it?
If I’m a union worker, I’d be wondering why my union has so much additional money to contribute to political campaigns, but is shorting me on benefits? I’d also like to know how well-funded are the pensions of the union management?
Many, many, many of the unions have separate pension funds for the union leaders (fully funded). Their members should swiftly vote to fold those plans into the rank and file programs.
Time for some “solidarity” don’t you think?
I don’t know. I find this all darkly humorous, personally. This is classic hoist-by-own-petard stuff.
We have two generations who absolved themselves of guilt in the involuntary transfer of debt from one generation (theirs) to another (mine). And now, faced with the consequences of promising themselves too much, they feel cheated.
As we all know, the wave of county and muncipal bankruptcies is just the beginning.
But speaking personally, for ages, I’ve been told that Social Security will go broke in 2032, which coincidentally is the year I turn 65. That was stated as though it were a good thing: worry not, current retirees, your benefits are safe. Personally, I never found this particular line of reasoning especially comforting.
It’s axiomatic that no one in my generation believes services (fire, police, schools, roads, medical care, libraries, …) when we retire will be anywhere near what they are, today if they are present at all. There are real consequences (more crime, more crowded schools, lower quality health care, unrepaired roads, stretches of beach with no lifeguards in attendance, etc.). At the same time we can safely assume there will be an ever-expanding list of rules and regulations, high unemployment, an increasingly competitive labor market and age discrimination to look forward to as we get older and need to keep our jobs. We get to see all the unsupported programs collapse (Social Security, Medicare, California, Rhode Island, Illinois…).
We know we’re getting stuck with the bill to end all bills for unfunded mandates and unpaid-for promises. There is likely to be out of control inflation that will wipe out our savings (assuming the Fed doesn’t just keep printing money in QE1-QE2 fashion and wipe out our savings the old-fashioned way).
What grates about this situation is the service-with-a-smile component. It’s not just that we’re getting wrecked but that two generations of our fellow citizens have stood by and watched it happen and ask us to say, “Thank you, sir, can I have seconds?”
Their response to complaints about the COLA formula for entitlement programs or concerns that defined-benefit programs are unsustainable has been either a deeply self-righteous “we earned these benefits!” or a growl that any shortfall is someone else’s problem, that some villain-of-the-week just hasn’t paid their fair share. “If Bush (whatever) or Corporate America (whatever) then we wouldn’t be here!” Right-o. My taxes will go up to what? And I’m supposed to pay how much for medical insurance under the new program?
At the end of the day the recipients of any massive tax increase will be my generation. We know it. They know it. It’s less shameful though to not recognize the burden you’re placing on the next generation. The current batch of retirees couldn’t bear the shame and the next batch of retirees, the baby boomers, are shameless. Caught between those two poles is my generation, reviled by the baby boomers and their parents.
The current retirees’ happiness with this solution, though — five lifeboats on the Titanic, all of them filled with the rich and elderly while my generation goes down with the ship — has always rested on the assumption that my generation will be quiet, meek and accepting of these lies and self-serving platitudes. It assumes my entire generation is nothing more than sheep happy to be sheared. This ignores the simple fact that if you write the rules so a certain type of behavior is egregiously punished (earning, reporting your income, getting taxed to death) that behavior will change. As we all know, this is why a luxury tax doesn’t collect as much as lawmakers who propose it estimate. If you punish work and savings for an entire generation, they will not work (or will work no more than strictly required) and they will not save in any medium you can attach.
And yet there is no end to the outrage from these two generations and their adherents in the dumber-than-a-sack-of-hammers 20-something generation that’s following mine that elected Obama. For example, the current outrage that the Republican Congress is not willing to accept dramatic increases in tax rates to fund the expansion of federal government under the democratic congresses of 2006-2010, or to begin to pay for the unfunded mandates of the last several decades. The tangible moral outrage that corporations aren’t hiring when they can’t calculate costs under the current regime’s vague rules and procedures. Rational behavior is the new damning behavior.
End of day? My generation will not sign up to pay 70 cents on the dollar on taxes to support the benefits of a corrupt, venal generation that at every opportunity turned a blind eye to the problems of our nation. If at $100k, 70 cents of every dollar I earn gets me the same lifestyle as a person who earns $30k and requires me to pay $16k in health insurance premiums under Obamacare, I will sign on with a company for a job that pays $30k and let the government pick up the tab for the health care coverage. It didn’t work in Russia, or Europe, and it won’t work here.
I find it almost incomprehensible that an entire generation believes they can stick it to my generation and that all will be well if they just keep sticking it to us harder. Raise the national debt? Thank you. Beautiful solution. More, please, sir.
That the current generation of retirees and the forthcoming generation will fight tooth and claw to keep their unsupportable benefits, well look at Greece. Look at Wisconsin. Look at the speeches of Obama in 2011 or the commercials for NY-26 race where a Paul Ryan figure was pushing grandmother over the cliff. We know this will get ugly.
But at the end of the day: own.petard.hosted.upon. At the end of the day it doesn’t matter how ugly it is because whether you’re cursing my generation or accepting the reality, either way the money won’t be there to pay the bill when it comes due.
My generation has been viewed as sheep for decades but at the end of the day we’re just not that interested in paying the tab for another generation’s party, as they rock their way into the great beyond and try to take it all with them.
Having lived in “Vo Dilun” for 7.5 years up until mid 2004, I can tell all the non-residents reading this:
You think you’ve seen corruption? Then you ain’t seen Rhode Island! It’s a way of life and tradition in the Ocean State. Do a search on how many of the local judiciary has been thrown in jail if you really want a laugh.
Sadly though, it wasn’t always that way. Remember Rhode Island is the cradle of the Industrial Revolution in North America (Slater’s Mill), you see it’s remnants all over the state. Yes kiddies, once upon a time in America, citizens could build a prosperous business and a community would form around it. Sure, unions became a necessity to curb the abuses of early capitalism, but as soon as Democrat politicians (speaking of a long tradition of corruption-Tammany Hall anyone?) set them up to be reliable voting blocks and the pay-offs to Union Bosses started, well it was only a matter of time before you end up with well, what you have now.
But I’m sure they’ll blame it on the Tea Party, George Bush, the Japanese Tsunami, Sarah Palin, Global Warming etc.
Old saying: When you find yourself in a hole the first thing is to stop digging.
All states and cities need to immediately go from the current Defined Benefit plans to Defined Contribution plans. That way the liability is current and there won’t blow up in the future. The taxpayers will see each year how much they are contributing to the retirement of the employees and there will be no surprises later. The unions will resist because there would have been a taxpayer revolt if the promised liabilities has been clear when the benefit packages were approved.
I am a Univ. Prof. in the Midwest and each year the Univ. and I contribute to my TIAA/CREF acct. There is no future liability for my employee and no outlandish inaccurate estimate for the future. When I retire my acct. is mine and the money is already there.
But, how the states and cities will get around their current liabilities is, of course, still a problem, and as the article and comments make clear, it is hard to see how the promises made can be kept.
Meanwhile, they’re paving the streets with gold in Mississippi, Alabama, Florida, Arkansas, Oklahoma!
Here in my economically-distressed town in southwestern PA, property taxes have doubled since 2006, and are now equal to about 7% of the market value of properties. The reason, says the town council and the school board, is the rising cost of the city’s and the teachers’ health care insurance and pension benefits. In my neighborhood of 543 homes, 147 are for sale. Cheap, too!
Call me Pollyanna, but after reading these posts, I see cause for hope.
The best Republicans, the fiscal conservatives, are the opposite of the CA and RI pols and their union allies. They’re now ascendent over the RINOs.
This is the best time for them to be ascendent *because* of the looming retirement of Baby Boomers. People tend to get more conservative as they age – even some former hippies – and today twice as many people call themselves conservative (40%) as liberal (20%). It’s a good bet that Baby Boomers who are smart and/or appalled at Dem overreach see for themselves that Social Security and Medicare can’t go on as they have been.
That’s why I think 2012 may at last be the year that FDR- and BHO-style magical thinking about economics starts to be replaced by smart solutions. We just have to hope that conservative politicians and donors play their cards right.
But all of you out there blaming politicians in general should think twice. The electorate gets exactly the politicians it deserves. If voters don’t get involved and donate or volunteer at the primary level, the ultimate candidate – from local school board to Leader of the Free World – will be determined by others who DO care.
Example #1: DailyKos types in ’06 and ’08.
Example #2: Tea Party types in ’10.
Example #3: yet to be determined in ’12.
We Americans get exactly the politicians we deserve, because elections are determined by those who volunteer, donate, or both. I urge my fellow conservatives to do so.
LOL! RI is a solid blue state! It voted for Obama and will vote for him again. The progressive/left wing voters of the state have knowingly or blindly gone along with the corruption between the democrats and the public employee unions, and unlike a state like WI where the voters have woken up and brought the corruption to a screeching halt, there is no sign that the good progressive voters of RI are going to do anything except let the corruption continue. So the answer is simple. Raise taxes. Raise income, sales, excise, gas, food, property, car just raise those taxes as much as they need to be raised and pay for everything, and let the democrats vote for even more benefits for themselves and the public employee unions. After all RI is a progressive state. Its residents, who voted for Obama, surely want to pay more taxes in a good progressive cause? Of course the state could kick the democrats out and go red…but then it wouldn’t be progressive anymore. Nope, I think more taxes are what RI wants and needs!
Suggestion — don’t throw out the loaded phrase, “Ponzi scheme,” if you haven’t a clue what it is or you might misuse it. As Mead did.
Does Rhode Island really need to exist? Really? Let it go belly up like a corporation would who pays too much in labor costs. Perhaps Conn. and Mass. can bid on who wants what’s left of it.
WRM is adding an important point of view to the current debate.
But it’s not so clear to me that we should be focusing our attention on public sector pensions. Actually they may prove to be a misleading indicator.
Recently Nobel Prize winner Michael Spence wrote a book called Convergence, where he argued that in the coming decades, there will be a big increase in the number of countries that achieve middle income status. I think he said it will be like 80 percent of world population by 1950.
Historically, it’s true, that if you go back and see who was rich, say a hundred years ago, it’s not that different from who is rich today. (Argentina being a big exception with the NYT op-ed editors presumably wanting us to follow suit.) But that looks now to be changing. Developing countries, it seems increasingly clear, are getting things right.
Recently, Standard Chartered and I think Citbank, predicted that global growth thru 2030 would be in the four to five percent range per year. Of course, they could be wrong. But why? The Internet is the greatest purveyor of human capital in human history. Of course this should help those trying to catch up. Yes, there are short term issues, but if those growth predictions are quasi correct, then stock returns should be very robust. And so the pension crisis may not be what it seems, provided pension funds are properly diversified.
I would argue that the problem with public sector unions is that they get to use taxpayer money to play politics. I know NY. According to the CPS, we have about 1.1 million public sector employees. How much do they pay in union dues? Let’s say $700 dollars per person. Do the math and you see that these guys collect maybe $750 million in union dues per year. That kind of money completely dwarfs what private sector groups bring to the table.
And per Steve Malanga, a lot of this money also goes to pursue other, non pension related issues that affect the culture. Less than rational immigration policies. A war against the notion that children deserve a mother and a father. Preferential treatment based on ethnicity that seems not to be achieving its intended goals.
The real damage of public sector unions, I would argue, is what they are doing to the country. Don’t focus on pension funds. Focus on per capita GDP. That in my view will be a better metric going forward of what we are forfeiting.
What’s needed is some Sarbanes-Oxley style accountability for the Federal and State Governments. It could be called the “Government Accounting Reform and Citizen Protection Act” or the “Government and Auditing Accountability and Responsibility Act”.
I say we put some transparency in place, flick on the light and watch all the cockroaches scatter.
Hear, Hear. Rhode Island is California writ small. And the reason is the same: politician whores to big union johns.
Uncomfortable with ‘Steven’s’ extensive rant on generational warfare. I had to listen to that ‘My Generation’ crap growing up, as well as all the other in-group/out-group sweeping generalizations and characterizations. A vile and pointless exercise.(For one thing it was not the Baby-Boomers who invented ‘sex,drugs, and rock ‘n’ roll’ – it was the war baby generation.)
FUD – fear, uncertainty and doubt. Create enough of that and the police state moves in. Generational name-calling only increases the FUD. If Obama is the Saul Alinsky acolyte he is supposed to be (or the incompetent boob he appears to be), the idea is to generate more FUD. If all these pension systems go belly-up there is going to be a lot of potential profit taking as the elderly dump their assets on the market and shrink the sphere of their living space. All those goodies can be packaged and sold overseas, or to Texans! (LOL). Think about it, Steven; cities and companies exist as legal fictions; it is the people that will be hosed. Take advantage of it, help reapportion the assets to more productive places. Bitterness and resentment is a prime emotion for the creation of FUD.
Seriously — are they any blue states NOT in a similar situation?
To put it quite simply, in RI union “leaders” demanded a pension system they knew was ultimately insolvent.
The politicians made promises they knew couldn’t be kept to curry union favor during their terms in office. Cleaning up the mess would be someone else’s problems.
Union members happily accepted a pension that was lucrative on paper but worthless in reality as the bill could never be paid.
The taxpayers and the union members ultimately will both have to share the burden and the price – with less generous pensions being the eventual outcome.
Both the taxpayers and rank and file members who won’t find the pensions they were promised are the victims here.
Union “leaders” and the politicians who agreed to their demands are the guilty parties.
This is happening in just about every state to lesser degrees – the only difference is when the bill comes due and how much it will be.
Will we ever learn these lessons and create a sustainable and affordable system of government? It doesn’t seem so.
Hey, JD, are you sure you’re from Rhode Island? We do have a State Drink. In fact, we have two: Del’s Lemonade and Coffee Milk!
steven is exactly right on the trashing of his generation by mine [I am 65]. But I hang with and drink with a lot of 30-35 year olds, and there are not like Steven. Their idea of politics is a big joke, like Colbert and Stewart. And many are learning to be takers rather than makers. We can’t do much to help you fix this: but why do you vote for Obama, Boxer, and all of the people who are doing this to you.
@Philip per #70:
Re #43 “welch” I object!! We of Celtic descent object to being identified as non-payers or tight fisted (Scotch tape) or easily enraged (getting our Irish up)
Seriously, the noise you all hear is the sound of chickens coming home to roost (thanks to William Buckley)
Morally bankrupt states will soon find their fiscal coffers empty as well, and like any insolvent company or household, the citizens of such will be forced to leave, to find their future elsewhere. The great migration has already begun- witness the flight of business from Illinois and New York, the barren landscapes of what used to be the fertile promise of California’s valleys, and the ghost town of Detroit, long a symbol of American ingenuity and muscle. Yes, Progressives, this is all your doing. Anyone but the most willfully ignorant and disingenuous can look at an electoral map and witness blue state rot, decay, desperation, and decadence. Leave a Liberal/Progressive in charge of anywhere or anything long enough and it will eventually resemble the hippo compound at the zoo.
Social Security trust fund is gone, [pointless vulgarism for ‘squandered’ deleted] by spineless, irresponsible corruptocrats unwilling to be truthful with the public about the pile of IOU’s now filling government vaults instead of cash (I know, it’s a metaphor). Descending into the red with Medicare to follow within the decade, these are, as Rick Perry said, the crumbling remnants of the Great Society. FDR was an economy stifling nincompoop, not a savior, and Obama is doubling down on stupid, following the Roosevelt playbook to a tee.
History seldom repeats itself completely however, and Obama is certainly not the messiah that bloated corpulent cheerleaders like Oprah and Chris Matthews thought he would be. He is doing the same damage, causing the same poverty and destruction that FDR did using the same policies of failure- government spending, market manipulation, nationalization of industry, oppressive regulation, disregard for the rule of
law. This time around, it won’t take 12 years to figure out that our leader is [not as smart as the author of this comment].
WRM, I may be mistaken but I did not infer a partisan slant in your exposition. However, reviewing responses led me to consider “Political Man” and its theme. One idea I took from its reading was that such a strictly polarized use of the terms progressives and conservatives (for party politics as practiced in U.S.)is misleading.
That is, “impassable barriers on each side are firmly established by basic law and court decision. Neither party, nor any party, can move beyond a certain point soon reached without a change in the constitution and radical constitutional change is not on the program of either party…to interpret such difference in terms of progressivism and conservatism is entirely misleading and fails to show the true dead-center nature of American two-party politics.”
Rhode Island’s dilemma, true enough, came during ascendancy of blue model politico-economoc dominance. Yet, blue model design strengthened the basic established U.S. position post World War II. Now, model’s viability has begun to threaten same established position in 21st century. Thus, its economic/political difficulties have become focus of federal, state and local goverments while the electorate has become more at odds with itself generally (leftist/rightist and conservatives/progressives) and might miss underlying impetus to accelerating change in which collapsing systems have become but a function.