8 ms·

Who will pay Puerto Rico's pensions?

59 points by brownbat 11y ago

magoon 11y ago
Nobody, it seems. They committed to lifetime payouts of 75% of the average of a worker's three highest years of salary, retiring at age 55 after 30 years of service. And that's not for employees of a thriving/growing business -- but for government agencies that, over time, don't/shouldn't grow and profit. I'd like to see the original calculations they used as a basis for these decisions.
- Vivtek 11y ago
  The original calculations were pretty simple: "Will this get me more votes?" Puerto Rico has always assumed that the economy would soon be turning the corner and everything would work out, with a healthy helping of cargo-cult New-Jerseyism.
  - galfarragem 11y ago
    This problem is widespread in all social states (democracies) all around the world. Electoral system and responsible management doesn't play very well together. Before 'shit hit the fan' is almost impossible to any government to have enough power to change anything unpopular. I wonder what the solution for this is.
    - yummyfajitas 11y ago
      Neoreactionaries promote a return to monarchy or corporate rule as a solution to this. I'm not particularly onboard with their solutions, but they are the only group of people I can see who fully recognize the problem: democracies are fundamentally short term focused and unable to do complex planning. They are certainly well worth reading (obviously skeptically).
      - tomjen3 11y ago
        There is also the libertarian solution to government pensions: don't have them (this does not mean don't have the retirement savings, it means give the money to the employee, possibly in the form of a retirement account or higher wage). It is incidentally this solution that it seems they are taking with new hires.
        newjersey 11y ago
        As much as I hate the middle road, that's the correct approach here. No, pensioners will not get a full pension. The negotiated cut I'd propose would not promise a "life of dignity" or anything to the pension ers but rather frankly, a responsible person should not starve with this amount of payments. Congress must act to clear the roadblocks here. It is disgusting to say that the current and future generations to pay for pensions that they don't get if they were to join today. I think that's the only reasonable solution. Of course, nothing will happen because old people vote and young people don't. So much for "think of the children" and all that talk.
    - SilasX 11y ago
      Usually, for constitutional provisions requiring that every such promise be accounted as (or better, paid for with) a government debt on par with their "real" bonds. Because that's what they are: the government claiming it's putting its full faith and credit behind your pension. It's horrible that they can treat it as ultra-reliable when promising it, but can shuck it off like it's nothing. It's also why I don't understand all the whining (here and elsewhere) about requiring the Post Office to actually fund its pensions rather than just assume Uncle Sam will have infinite funds to cover it later, and we Totally Won't Renege or anything.
      - justin66 11y ago
        >It's also why I don't understand all the whining (here and elsewhere) about requiring the Post Office to actually fund its pensions rather than just assume Uncle Sam will have infinite funds to cover it later Some people believe the post office is required to pay quite a bit more into those pension funds than is necessary for their financial well being. Nobody in that discussion claimed or assumed the government has infinite funds to cover the post office's obligations. It's as if you were having a discussion with yourself that happened to occupy the same space as another, ongoing discussion on the same topic. Hence the way some tried to engage with you (unsuccessfully) and some just downvoted you.
        SilasX 11y ago
        I explained (with visible frustration) how it's eminently fair to expect a business to fully fund its obligations. If someone believes that the way this is calculated is unreasonable, then their primary complaint needs to be about that way, not (as every commenter does on this issue) complain about the mere requirement to fund the pension. A complete argument would look like this: "It's unfair to require the post office to fund future benefits by X standard, when common, reasonable practice is to use more lenient standard is Y." A complete but stupid argument would have X="include all obligations forever" and Y="ignore stuff after 75 years". This is because post-75 years can have non-trivial implications for its sustainability, and assuming them away does require belief in a bottomless pit. I'm interested in an exchange of ideas on this issue; I just wish people were capable of presenting a defensible argument about the Post Office pension requirement. Your own argument on the thread [1] does not meet that standard, as it was just "wow, that would be a lot of money". Well, yeah, if you've promised something with a (net discounted present) value of $75 trillion, then yeah, it's gonna be a pain to fund! Why is that an unreasonable requirement that you not just kick the can down the road? I'd like to hear an intelligent answer to that question. "They hate the Post Office and want it to fail" doesn't count as one. [1] https://news.ycombinator.com/item?id=11464618 https://news.ycombinator.com/item?id=11464618
- FussyZeus 11y ago
  The calculations were, I'd assume, that it made for a lot of popular politicians.
- vkou 11y ago
  The original calculations probably counted on a growing economy, 6% year-over-year inflation, and pension fund returns to trivialize this obligation.
- api 11y ago
  In every case worldwide the error was assuming continuous growth at mid 20th century rates (when many of these plans were put into place).
- kspaans 11y ago
  The amendment brushed off concern about future financial strain on the pensions, saying their investments were producing revenue twice what actuaries had approved, so the “measures won’t be burdensome.” I wonder if that's a lie, or just very selective quoting (I think this was for the 1973 bill though).
- Spooky23 11y ago
  Most of these schemes were cooked up in the late 60s/early 70s. They assumed a few key things: - Makeup of workforce. Government in 1970 was an army of clerks with higher turnover which has since shifted to professionals with automation. - historically reasonable inflation - economic growth - 7-9% annual returns Few places actually find their obligations and those who do (like New York) pay dearly when the market goes south. I've been told that in the 60s the assumption in New York was 5% inflation, population of 40M in 2010, booming industry in western and central NY, etc. Also, the change in status for women changed the dynamic -- secretaries and clerks were contributing big bucks for pensions they would never receive!
- LeifCarrotson 11y ago
  If you assume that the number of workers is static, and also that the average 55-year-old will live to 85, and that new workers get paid about 75% what a 27-year-veteran makes, then the calculations and solutions are simple: Require everyone in the agency to put 100% of their salary into the pension fund, or double your budget for staff salaries and direct it to pensions.
- rewrew 11y ago
  It gets worse the deeper you get into the article -- they're paying "Christmas Bonuses" instead of their bond payments-- they know they can't pay for any of this and they appear not to care.
6stringmerc 11y ago
Well if going on Greece's relationship to the EU as a guiding framework, where Germany ended up pretty much funding what got deployed, I'm going to have to go with the United States. It sure ain't going to be Puerto Ricans living on the island. Oh, and it ain't going to be Illinois either. They're the next name on the 'bag-o-crap' pension outlook.
- barking 11y ago
  I don't think that is an accurate thing to say. There seems to be a widespread misunderstanding of the word bailout which leads people to believe that what was given was a gift rather than a loan with a lot of strings. And a lot of the motivation was self interest in order to prevent contagion and also to allow the banks with loans in bailout countries to recover their money. Much of the money that went in went straight out again in loan repayments and a lot of debt was transferred from private debtors onto the shoulders of the taxpayers in those countries.
  - yummyfajitas 11y ago
    Lets look at this in terms of resources. For years, Germans worked hard making things and Greeks reaped the benefits of German labor via imports. Now Greece is unable to make enough things for themselves, and Germans are bailing them out. The bailout results in Germans making more things which then get shipped to Greece. How is this not a gift from Germany to Greece? Will the Greeks ever provide goods and services to Germany which exceed what the Germans gave them? If so, when?
    - yequalsx 11y ago
      For years German and French banks gave massive amounts of cheap credit to Greeks and the Greek government. The so called bailout is nothing more than the German government giving money to Greece with strings attached so that Greece can then give the money to German banks. The banks don't pay for their bad loans. The Germans benefitted from the euro and the imbalances that monetary union has created. Greeks suffer for their dumb loans but not the German bankers.
intrasight 11y ago
Many states and municipalities will soon be facing their own pension crisis. We can all rest-assured that all our taxes will be going up.
- rayiner 11y ago
  There is a limit on the ability of states to raise taxes to cover pension obligations. There is already a net internal migratory pattern from northern states to southern ones. States like raising taxes to fund pension obligations will only accelerate that trend, gutting the tax base those states are counting on to make ends-meet.
  - khuey 11y ago
    This is already happening in New Jersey.
    - hkmurakami 11y ago
      I was surprised when I heard that the departure of hedge fund manager David Tepper (worth $10B) from New Jersey to Florida is causing a legitimate fiscal planning challenge for the state. http://abcnews.go.com/US/wireStory/billionaires-move-puts-jersey-tax-rates-spotlight-38288362 http://abcnews.go.com/US/wireStory/billionaires-move-puts-je...
      - duaneb 11y ago
        Hmm, maybe delaware should jack up pensions.
  - intrasight 11y ago
    I meant "all" as in federal taxes going up - to fund these failed states and municipalities.
innocentoldguy 11y ago
This isn't just a problem in Puerto Rico. My state is dealing with this issue, and their solution was to cut pensions. I know several people who worked for the state for 30+ years, who were promised life-long health insurance and other benefits as part of their pension packages, who are not getting any of those benefits now. Even after all the cuts they have done, it still isn't working.
rayiner 11y ago
This is the whole point of bankruptcy: when past mistakes collide with present reality, the best way forward is almost always a controlled restructuring of everyone's expectations. Unfortunately, there are various roadblocks in the way of sensible bankruptcies for government entities swamped with pension debt. The major problem is that there is no provision in the bankruptcy code for a state to file for restructuring. Furthermore, there are statutory and constitutional protections for pensions, which are usually the most unsustainable sort of debt for states and municipalities. One state at the cutting edge of this situation is Illinois: the Illinois Supreme Court has in recent years struck down various measures to attempt to restructure the state's untenable pension obligations. Such measures will prevent the state from making a controlled crash landing and will instead result in the state flying straight into the ground at 600 mph.
- CamperBob2 11y ago
  Such measures will prevent the state from making a controlled crash landing and will instead result in the state flying straight into the ground at 600 mph. The Illinois court is just taking advantage of an obvious moral hazard, aren't they? Can't they assume the Feds will bail them out as usual?
  - tyoma 11y ago
    The Illinois supreme court is only interpreting the Illinois state constitution, which guarantees state employee pensions. If state lawmakers want the court to deliver a different result, they have to amend the state constitution.
    - bdavisx 11y ago
      And considering that they haven't passed a state budget since 2014, I don't see that happening any time soon.
- superuser2 11y ago
  Institutional lenders are in the risk management business. If they are seriously harmed by a realistic proportion of debtors defaulting, it's because they should have known better than to write those loans. Are we really going to say that to sick and elderly people being thrown out of hospitals, evicted from their homes, and cut off from food and medicine? To their adult children who must now destroy their household finances to meet the government's obligations in its stead, or carry the guilt of letting mom and dad die of treatable conditions in a shithole? >controlled restructuring of everyone's expectations This euphemism seems appropriate when applied to banks and businesses for whom counterparty risk is a cost of doing business. For individuals who gave their entire adult lives to an institution in exchange for security in retirement, it seems tone-deaf. Maybe taxpayers need to bite the bullet and pay what it costs to run the services they're benefitting from.
deleted 11y ago
[deleted]
Spooky23 11y ago
A: US states are nominally sovereign, they just don't pay what they can't pay. Not sure about the nuance of a US Territory vs a state.
yummyfajitas 11y ago
Consider two individuals. One is a 65 year old Puerto Rican government worker who repeatedly voted for politicans who made promises that were mathematically impossible to keep. If anyone is responsible for the current mess, it's him. The second is a 24 year old software engineer in California. He never had the opportunity to vote in any election prior to 2010 (when the mistakes were deliberately made) and never got to vote in PR. A bailout would be a hugely immoral transfer of wealth from the second person to the first. Puerto Rico and Illinois need to be made an example of. As the rest of the country watches PR and Illinois collapse they might demand that their politicians engage in some degree of fiscal responsibility.
- ra1n85 11y ago
  Sadly, you illustrate a lesson that must be first documented and then learned from. Some, who find the hard realities of this arithmetic a bit too at odds with their ideology, will fail to do either. Unfortunately, a lot of these folks are in the media, academia, and government. It's like the Great Leap Forward, but just replace homemade steel with public service, and massive starvation with massive debt.
- PhantomGremlin 11y ago
  a hugely immoral transfer of wealth That phrase pretty much describes the primary function of the US federal government these days, doesn't it? No, not kidding, not sarcastic. fiscal responsibility When does fiscal responsibility come to the US federal government? We can solve the problems of places like Puerto Rico with the equivalent of loose change lost under the sofa cushions, compared to what the feds have promised everyone!
- thefastlane 11y ago
  it would be the height of immorality to renege on contractually agreed-upon compensation for workers.
  - yummyfajitas 11y ago
    California and NY have no contract with Puerto Rican or Illinois pensioners.
fiatmoney 11y ago
The US has kind of lost track of the reason for having colonies. What exact benefit does it receive for maintaining control and responsibility for a low income quasi-country with its own separate ethnicity, language, and culture? Protecting the Panama Canal from the Kaiser's dreadnoughts?
- gkop 11y ago
  Obligatory link to the great CGP Grey video on US territories: http://youtu.be/ASSOQDQvVLU http://youtu.be/ASSOQDQvVLU
- saganus 11y ago
  What about protecting it from Chinese interests? Not really sure if this is plausible, but maybe if you let enough Chinese capital into Panama, they can defacto control it, vs having the US impose restrictions on Chinese capital investments in strategic property or whatever.
  - fiatmoney 11y ago
    With a very few exceptions, the US has been pretty adept at keeping foreign influence out of its hemisphere since the 1800s. It also begs the question of why the US would care.
  - saganus 11y ago
    Right... and Panama is not PR.... not sure how I thought of Panama when talking about Puerto Rico... I guess that's what the downvote is for. :(
nradov 11y ago
This is why defined benefit pensions are a bad deal for everyone: employees, employers, and taxpayers. Pension plans encourage employers to defer expenses by over promising and under funding (moral hazard), only to stick taxpayers with the obligation later and force pensioners to take a haircut. Governments should terminate their pension plans and switch employees to defined contribution plans like 401(k) with contribution matching. That way the employee retirement funds will be safe even if the employer goes bankrupt.
- clevernickname 11y ago
  This is a big part of Trump's health care plan: Tax-free "health savings accounts" with no limits, that can be freely shared between family members, and are transferred to them at no cost as part of your estate when you die. https://www.donaldjtrump.com/positions/healthcare-reform https://www.donaldjtrump.com/positions/healthcare-reform
- bdavisx 11y ago
  Actually, pension plans are pretty good when the company/government funds them the way they are supposed to be funded.
  - nradov 11y ago
    Lots of things would work pretty well if everyone did what they're supposed to do.
seivan 11y ago
Applies to Sweden as well. Becoming the gender students and Middle East little collective pension fund. Puerto Rico isn't alone nor anything apecial when it comes to blown up pensions. If you want to read more about it Tino Sanandaji has done a lot of research on this and can make you wonder how dumb a nation and its people can get in such a short duration. http://foreignpolicy.com/2016/02/10/the-death-of-the-most-generous-nation-on-earth-sweden-syria-refugee-europe/ http://foreignpolicy.com/2016/02/10/the-death-of-the-most-ge...

59 points by brownbat 11y ago

Nobody, it seems. They committed to lifetime payouts of 75% of the average of a worker's three highest years of salary, retiring at age 55 after 30 years of service. And that's not for employees of a thriving/growing business -- but for government agencies that, over time, don't/shouldn't grow and profit. I'd like to see the original calculations they used as a basis for these decisions.

Vivtek 11y ago
The original calculations were pretty simple: "Will this get me more votes?" Puerto Rico has always assumed that the economy would soon be turning the corner and everything would work out, with a healthy helping of cargo-cult New-Jerseyism.
- galfarragem 11y ago
  This problem is widespread in all social states (democracies) all around the world. Electoral system and responsible management doesn't play very well together. Before 'shit hit the fan' is almost impossible to any government to have enough power to change anything unpopular. I wonder what the solution for this is.
  - yummyfajitas 11y ago
    Neoreactionaries promote a return to monarchy or corporate rule as a solution to this. I'm not particularly onboard with their solutions, but they are the only group of people I can see who fully recognize the problem: democracies are fundamentally short term focused and unable to do complex planning. They are certainly well worth reading (obviously skeptically).
    - tomjen3 11y ago
      There is also the libertarian solution to government pensions: don't have them (this does not mean don't have the retirement savings, it means give the money to the employee, possibly in the form of a retirement account or higher wage). It is incidentally this solution that it seems they are taking with new hires.
      - newjersey 11y ago
        As much as I hate the middle road, that's the correct approach here. No, pensioners will not get a full pension. The negotiated cut I'd propose would not promise a "life of dignity" or anything to the pension ers but rather frankly, a responsible person should not starve with this amount of payments. Congress must act to clear the roadblocks here. It is disgusting to say that the current and future generations to pay for pensions that they don't get if they were to join today. I think that's the only reasonable solution. Of course, nothing will happen because old people vote and young people don't. So much for "think of the children" and all that talk.
  - SilasX 11y ago
    Usually, for constitutional provisions requiring that every such promise be accounted as (or better, paid for with) a government debt on par with their "real" bonds. Because that's what they are: the government claiming it's putting its full faith and credit behind your pension. It's horrible that they can treat it as ultra-reliable when promising it, but can shuck it off like it's nothing. It's also why I don't understand all the whining (here and elsewhere) about requiring the Post Office to actually fund its pensions rather than just assume Uncle Sam will have infinite funds to cover it later, and we Totally Won't Renege or anything.
    - justin66 11y ago
      >It's also why I don't understand all the whining (here and elsewhere) about requiring the Post Office to actually fund its pensions rather than just assume Uncle Sam will have infinite funds to cover it later Some people believe the post office is required to pay quite a bit more into those pension funds than is necessary for their financial well being. Nobody in that discussion claimed or assumed the government has infinite funds to cover the post office's obligations. It's as if you were having a discussion with yourself that happened to occupy the same space as another, ongoing discussion on the same topic. Hence the way some tried to engage with you (unsuccessfully) and some just downvoted you.
      - SilasX 11y ago
        I explained (with visible frustration) how it's eminently fair to expect a business to fully fund its obligations. If someone believes that the way this is calculated is unreasonable, then their primary complaint needs to be about that way, not (as every commenter does on this issue) complain about the mere requirement to fund the pension. A complete argument would look like this: "It's unfair to require the post office to fund future benefits by X standard, when common, reasonable practice is to use more lenient standard is Y." A complete but stupid argument would have X="include all obligations forever" and Y="ignore stuff after 75 years". This is because post-75 years can have non-trivial implications for its sustainability, and assuming them away does require belief in a bottomless pit. I'm interested in an exchange of ideas on this issue; I just wish people were capable of presenting a defensible argument about the Post Office pension requirement. Your own argument on the thread [1] does not meet that standard, as it was just "wow, that would be a lot of money". Well, yeah, if you've promised something with a (net discounted present) value of $75 trillion, then yeah, it's gonna be a pain to fund! Why is that an unreasonable requirement that you not just kick the can down the road? I'd like to hear an intelligent answer to that question. "They hate the Post Office and want it to fail" doesn't count as one. [1] https://news.ycombinator.com/item?id=11464618 https://news.ycombinator.com/item?id=11464618
FussyZeus 11y ago
The calculations were, I'd assume, that it made for a lot of popular politicians.
vkou 11y ago
The original calculations probably counted on a growing economy, 6% year-over-year inflation, and pension fund returns to trivialize this obligation.
api 11y ago
In every case worldwide the error was assuming continuous growth at mid 20th century rates (when many of these plans were put into place).
kspaans 11y ago
The amendment brushed off concern about future financial strain on the pensions, saying their investments were producing revenue twice what actuaries had approved, so the “measures won’t be burdensome.” I wonder if that's a lie, or just very selective quoting (I think this was for the 1973 bill though).
Spooky23 11y ago
Most of these schemes were cooked up in the late 60s/early 70s. They assumed a few key things: - Makeup of workforce. Government in 1970 was an army of clerks with higher turnover which has since shifted to professionals with automation. - historically reasonable inflation - economic growth - 7-9% annual returns Few places actually find their obligations and those who do (like New York) pay dearly when the market goes south. I've been told that in the 60s the assumption in New York was 5% inflation, population of 40M in 2010, booming industry in western and central NY, etc. Also, the change in status for women changed the dynamic -- secretaries and clerks were contributing big bucks for pensions they would never receive!
LeifCarrotson 11y ago
If you assume that the number of workers is static, and also that the average 55-year-old will live to 85, and that new workers get paid about 75% what a 27-year-veteran makes, then the calculations and solutions are simple: Require everyone in the agency to put 100% of their salary into the pension fund, or double your budget for staff salaries and direct it to pensions.
rewrew 11y ago
It gets worse the deeper you get into the article -- they're paying "Christmas Bonuses" instead of their bond payments-- they know they can't pay for any of this and they appear not to care.

6stringmerc 11y ago

Well if going on Greece's relationship to the EU as a guiding framework, where Germany ended up pretty much funding what got deployed, I'm going to have to go with the United States. It sure ain't going to be Puerto Ricans living on the island. Oh, and it ain't going to be Illinois either. They're the next name on the 'bag-o-crap' pension outlook.

barking 11y ago
I don't think that is an accurate thing to say. There seems to be a widespread misunderstanding of the word bailout which leads people to believe that what was given was a gift rather than a loan with a lot of strings. And a lot of the motivation was self interest in order to prevent contagion and also to allow the banks with loans in bailout countries to recover their money. Much of the money that went in went straight out again in loan repayments and a lot of debt was transferred from private debtors onto the shoulders of the taxpayers in those countries.
- yummyfajitas 11y ago
  Lets look at this in terms of resources. For years, Germans worked hard making things and Greeks reaped the benefits of German labor via imports. Now Greece is unable to make enough things for themselves, and Germans are bailing them out. The bailout results in Germans making more things which then get shipped to Greece. How is this not a gift from Germany to Greece? Will the Greeks ever provide goods and services to Germany which exceed what the Germans gave them? If so, when?
  - yequalsx 11y ago
    For years German and French banks gave massive amounts of cheap credit to Greeks and the Greek government. The so called bailout is nothing more than the German government giving money to Greece with strings attached so that Greece can then give the money to German banks. The banks don't pay for their bad loans. The Germans benefitted from the euro and the imbalances that monetary union has created. Greeks suffer for their dumb loans but not the German bankers.

intrasight 11y ago

Many states and municipalities will soon be facing their own pension crisis. We can all rest-assured that all our taxes will be going up.

rayiner 11y ago
There is a limit on the ability of states to raise taxes to cover pension obligations. There is already a net internal migratory pattern from northern states to southern ones. States like raising taxes to fund pension obligations will only accelerate that trend, gutting the tax base those states are counting on to make ends-meet.
- khuey 11y ago
  This is already happening in New Jersey.
  - hkmurakami 11y ago
    I was surprised when I heard that the departure of hedge fund manager David Tepper (worth $10B) from New Jersey to Florida is causing a legitimate fiscal planning challenge for the state. http://abcnews.go.com/US/wireStory/billionaires-move-puts-jersey-tax-rates-spotlight-38288362 http://abcnews.go.com/US/wireStory/billionaires-move-puts-je...
    - duaneb 11y ago
      Hmm, maybe delaware should jack up pensions.
- intrasight 11y ago
  I meant "all" as in federal taxes going up - to fund these failed states and municipalities.

innocentoldguy 11y ago

This isn't just a problem in Puerto Rico. My state is dealing with this issue, and their solution was to cut pensions. I know several people who worked for the state for 30+ years, who were promised life-long health insurance and other benefits as part of their pension packages, who are not getting any of those benefits now. Even after all the cuts they have done, it still isn't working.

rayiner 11y ago

This is the whole point of bankruptcy: when past mistakes collide with present reality, the best way forward is almost always a controlled restructuring of everyone's expectations. Unfortunately, there are various roadblocks in the way of sensible bankruptcies for government entities swamped with pension debt. The major problem is that there is no provision in the bankruptcy code for a state to file for restructuring. Furthermore, there are statutory and constitutional protections for pensions, which are usually the most unsustainable sort of debt for states and municipalities. One state at the cutting edge of this situation is Illinois: the Illinois Supreme Court has in recent years struck down various measures to attempt to restructure the state's untenable pension obligations. Such measures will prevent the state from making a controlled crash landing and will instead result in the state flying straight into the ground at 600 mph.

CamperBob2 11y ago
Such measures will prevent the state from making a controlled crash landing and will instead result in the state flying straight into the ground at 600 mph. The Illinois court is just taking advantage of an obvious moral hazard, aren't they? Can't they assume the Feds will bail them out as usual?
- tyoma 11y ago
  The Illinois supreme court is only interpreting the Illinois state constitution, which guarantees state employee pensions. If state lawmakers want the court to deliver a different result, they have to amend the state constitution.
  - bdavisx 11y ago
    And considering that they haven't passed a state budget since 2014, I don't see that happening any time soon.
superuser2 11y ago
Institutional lenders are in the risk management business. If they are seriously harmed by a realistic proportion of debtors defaulting, it's because they should have known better than to write those loans. Are we really going to say that to sick and elderly people being thrown out of hospitals, evicted from their homes, and cut off from food and medicine? To their adult children who must now destroy their household finances to meet the government's obligations in its stead, or carry the guilt of letting mom and dad die of treatable conditions in a shithole? >controlled restructuring of everyone's expectations This euphemism seems appropriate when applied to banks and businesses for whom counterparty risk is a cost of doing business. For individuals who gave their entire adult lives to an institution in exchange for security in retirement, it seems tone-deaf. Maybe taxpayers need to bite the bullet and pay what it costs to run the services they're benefitting from.

deleted 11y ago

[deleted]

Spooky23 11y ago

A: US states are nominally sovereign, they just don't pay what they can't pay. Not sure about the nuance of a US Territory vs a state.

yummyfajitas 11y ago

Consider two individuals. One is a 65 year old Puerto Rican government worker who repeatedly voted for politicans who made promises that were mathematically impossible to keep. If anyone is responsible for the current mess, it's him. The second is a 24 year old software engineer in California. He never had the opportunity to vote in any election prior to 2010 (when the mistakes were deliberately made) and never got to vote in PR. A bailout would be a hugely immoral transfer of wealth from the second person to the first. Puerto Rico and Illinois need to be made an example of. As the rest of the country watches PR and Illinois collapse they might demand that their politicians engage in some degree of fiscal responsibility.

ra1n85 11y ago
Sadly, you illustrate a lesson that must be first documented and then learned from. Some, who find the hard realities of this arithmetic a bit too at odds with their ideology, will fail to do either. Unfortunately, a lot of these folks are in the media, academia, and government. It's like the Great Leap Forward, but just replace homemade steel with public service, and massive starvation with massive debt.
PhantomGremlin 11y ago
a hugely immoral transfer of wealth That phrase pretty much describes the primary function of the US federal government these days, doesn't it? No, not kidding, not sarcastic. fiscal responsibility When does fiscal responsibility come to the US federal government? We can solve the problems of places like Puerto Rico with the equivalent of loose change lost under the sofa cushions, compared to what the feds have promised everyone!
thefastlane 11y ago
it would be the height of immorality to renege on contractually agreed-upon compensation for workers.
- yummyfajitas 11y ago
  California and NY have no contract with Puerto Rican or Illinois pensioners.

fiatmoney 11y ago

The US has kind of lost track of the reason for having colonies. What exact benefit does it receive for maintaining control and responsibility for a low income quasi-country with its own separate ethnicity, language, and culture? Protecting the Panama Canal from the Kaiser's dreadnoughts?

gkop 11y ago
Obligatory link to the great CGP Grey video on US territories: http://youtu.be/ASSOQDQvVLU http://youtu.be/ASSOQDQvVLU
saganus 11y ago
What about protecting it from Chinese interests? Not really sure if this is plausible, but maybe if you let enough Chinese capital into Panama, they can defacto control it, vs having the US impose restrictions on Chinese capital investments in strategic property or whatever.
- fiatmoney 11y ago
  With a very few exceptions, the US has been pretty adept at keeping foreign influence out of its hemisphere since the 1800s. It also begs the question of why the US would care.
- saganus 11y ago
  Right... and Panama is not PR.... not sure how I thought of Panama when talking about Puerto Rico... I guess that's what the downvote is for. :(

nradov 11y ago

This is why defined benefit pensions are a bad deal for everyone: employees, employers, and taxpayers. Pension plans encourage employers to defer expenses by over promising and under funding (moral hazard), only to stick taxpayers with the obligation later and force pensioners to take a haircut. Governments should terminate their pension plans and switch employees to defined contribution plans like 401(k) with contribution matching. That way the employee retirement funds will be safe even if the employer goes bankrupt.

clevernickname 11y ago
This is a big part of Trump's health care plan: Tax-free "health savings accounts" with no limits, that can be freely shared between family members, and are transferred to them at no cost as part of your estate when you die. https://www.donaldjtrump.com/positions/healthcare-reform https://www.donaldjtrump.com/positions/healthcare-reform
bdavisx 11y ago
Actually, pension plans are pretty good when the company/government funds them the way they are supposed to be funded.
- nradov 11y ago
  Lots of things would work pretty well if everyone did what they're supposed to do.

seivan 11y ago

Applies to Sweden as well. Becoming the gender students and Middle East little collective pension fund. Puerto Rico isn't alone nor anything apecial when it comes to blown up pensions. If you want to read more about it Tino Sanandaji has done a lot of research on this and can make you wonder how dumb a nation and its people can get in such a short duration. http://foreignpolicy.com/2016/02/10/the-death-of-the-most-generous-nation-on-earth-sweden-syria-refugee-europe/ http://foreignpolicy.com/2016/02/10/the-death-of-the-most-ge...