7 ms·

Government granted pensions work well in other places, like Sweden for example. I'm sincerely wondering why they aren't working in the US?

Larrikin 9y ago
The specific problem in this case is the massive corruption through all levels of government and politics in Illinois. http://abc7chicago.com/archive/8973798/ http://abc7chicago.com/archive/8973798/
- dmm 9y ago
  How did corruption harm the Illinois pensions? Were governors using pension contributions to buy yachts? People keep using the word "corruption" but I think this situation arose simply because pension funding was continuously deferred. Is the deceptive? Yes, because the state is making promises it can't keep but it's not an example of corruption.
  - toomuchtodo 9y ago
    It’s fraud. Promise the benefit, but pay for it.
  - lotsofpulp 9y ago
    Governments use GASB accounting standards, and non-government entities have to use IFRS accounting standards. There are completely different and far more stringent requirements for non-government defined benefit pensions (PPA 2006), and far more lenient standards, if you can even call them that, for taxpayer funded pensions. If that doesn't scream corruption, I don't know what does.
ptero 9y ago
I suspect one reason is that the teams granting pensions are usually long gone before it is time to pay for them. I strongly suspect that union leaders negotiating big pensions generally do not care much for the welfare of the people they claim to negotiate for (e.g., union workers). Negotiators almost certainly know that what they ask for is unsustainable and that a more sustainable schema will be better for the workers (their benefits wound not have to be trimmed), but negotiating for bigger future payouts brings bigger career benefits and plenty of time to not be associated with this when the system finally fails.
UrukParthian 9y ago
Because everybody wants their cake on hand and to eat it at the same time. US politicians promise pensions but instead of (realistically) setting aside money, they divert money on the basis of the most optimistic models of revenue. Then you have the financial side where funds spend other people's money. It's more sickening when you realize they skim a few percentages of the total pension money. It doesn't sound much until you realize that even 1% of a few trillion is a few billion in raw profit. And this is before funds down a profit! We have a massive bubble and we either expand our way out of it (seasteading or space). Or we have a wave of massive nihilism when older people have pensions cut and the young notice a lack of loyalty to upholding promises.
lotsofpulp 9y ago
There are a lot of details that distinguish defined benefit pension plans. One is if the pension is promised by a federal government that can print money, so Sweden's pension would have to be compared to the US Federal government's pension. https://www.aei.org/wp-content/uploads/2018/03/Automatic-Adjustments-Within-Entitlement-Programs.pdf https://www.aei.org/wp-content/uploads/2018/03/Automatic-Adj... Sweden actually just made some great changes to their pension system, and in fact it's no longer a defined benefit plan in the traditional sense, so your benefit is not guaranteed (aka defined). Sweden went ahead and said we're not giving you any promises, and pension payments will be adjusted on an ongoing basis due to demographic and investment return changes. On the other hand, you have state level and local governments in the United States that have traditional defined benefit pensions (you get at least $x based on this formula, frequently with a built in cost of living increase). Not only that, but some governments baked this into their constitution, so there's no way for these to be reduced. And state and local US governments can't print money, so they only have two options: cut costs and raise taxes. On top of the above, there are perverse incentives for the people who set the pension benefits. Obviously, the union workers want the most they can get. The politicians need union votes to get elected (everyone in the union votes, but most Americans don't vote in local/state elections). So politicians can choose whichever actuary uses the most liberal assumptions to make the costs seem lower than they are, the unions vote for them, but of course the contributions to the pension fund to ensure these benefits is NOT required. So politicians can also choose to forego them, which they did and leave it for future generations.
RobertoG 9y ago
There is a big difference between a country with its own currency (like Sweden and the federal USA) and a state like Illinois or a country member of the Euro. Sweden can't run out of money. How many resources they decide to use in their old people is a political decision (taking into account economic factors like inflation and real resources available). At the end of the day, this is decided by the current generation, so, this narrative of "jeopardizing the future" make not sense. The quality of life of the old people of the future will be determined by the real resources available in the future and the political will of the voters then. Illinois can run out of money, so, it's not only if they have the will to give a good quality of life to their old people: they could be unable to do that. The reason the federal government could choose to solve the problem it's not because it has more money but because it can issue money.
kolbe 9y ago
I can't speak for the entire USA, but here in Illinois, we are acutely burdened by having high crime, large/corrupt government, low income taxes, and a decaying private sector. Here's a great example of the way things work in Illinois. The most powerful man is a man named Mike Madigan, speaker of the Illinois House and Chair of the Illinois Democratic Party. He has a fun little trick that he likes to play on the people he serves by essentially stealing money from us via property tax assessments. The first assessment on any property's taxes in Chicago is generally outrageous. It's like this because he wants you to appeal, because Madigan & Getzendanner is Cook County's largest firm in the commercial and industrial appeals process[1]. And rumor has it, they're also the largest in residential property tax appeals, too. I doubt Sweden's government has such egregious types of government scams. And I'm sure Sweden's government is designed to serve its people, not bleed the powerless dry. [1] https://www.illinoispolicy.org/investigation-madigan-firm-the-biggest-player-in-commercial-property-tax-appeals/ https://www.illinoispolicy.org/investigation-madigan-firm-th...
Dirlewanger 9y ago
Because America suffers from a severe dearth of caring about the greater good.
bassman9000 9y ago
https://www.thelocal.se/discuss/index.php?showtopic=56824?showtopic=56824 https://www.thelocal.se/discuss/index.php?showtopic=56824?sh... . It would take approximately 40 years of full contribution to get about 50 % of salary upon retirement in the Swedish pension system( is the rough estimate correct)? Compare to, e.g., the city of SF, where you only need to work 23 years, and can retire before 60.
sol_remmy 9y ago
Because America is 400m people not 10m people like Sweden, not a homogenous population, etc. Its more accurate to compare America to the EU than to one wealthy EU member state (Sweden)

Larrikin 9y ago

The specific problem in this case is the massive corruption through all levels of government and politics in Illinois. http://abc7chicago.com/archive/8973798/ http://abc7chicago.com/archive/8973798/

dmm 9y ago
How did corruption harm the Illinois pensions? Were governors using pension contributions to buy yachts? People keep using the word "corruption" but I think this situation arose simply because pension funding was continuously deferred. Is the deceptive? Yes, because the state is making promises it can't keep but it's not an example of corruption.
- toomuchtodo 9y ago
  It’s fraud. Promise the benefit, but pay for it.
- lotsofpulp 9y ago
  Governments use GASB accounting standards, and non-government entities have to use IFRS accounting standards. There are completely different and far more stringent requirements for non-government defined benefit pensions (PPA 2006), and far more lenient standards, if you can even call them that, for taxpayer funded pensions. If that doesn't scream corruption, I don't know what does.

ptero 9y ago

I suspect one reason is that the teams granting pensions are usually long gone before it is time to pay for them. I strongly suspect that union leaders negotiating big pensions generally do not care much for the welfare of the people they claim to negotiate for (e.g., union workers). Negotiators almost certainly know that what they ask for is unsustainable and that a more sustainable schema will be better for the workers (their benefits wound not have to be trimmed), but negotiating for bigger future payouts brings bigger career benefits and plenty of time to not be associated with this when the system finally fails.

UrukParthian 9y ago

Because everybody wants their cake on hand and to eat it at the same time. US politicians promise pensions but instead of (realistically) setting aside money, they divert money on the basis of the most optimistic models of revenue. Then you have the financial side where funds spend other people's money. It's more sickening when you realize they skim a few percentages of the total pension money. It doesn't sound much until you realize that even 1% of a few trillion is a few billion in raw profit. And this is before funds down a profit! We have a massive bubble and we either expand our way out of it (seasteading or space). Or we have a wave of massive nihilism when older people have pensions cut and the young notice a lack of loyalty to upholding promises.

lotsofpulp 9y ago

There are a lot of details that distinguish defined benefit pension plans. One is if the pension is promised by a federal government that can print money, so Sweden's pension would have to be compared to the US Federal government's pension. https://www.aei.org/wp-content/uploads/2018/03/Automatic-Adjustments-Within-Entitlement-Programs.pdf https://www.aei.org/wp-content/uploads/2018/03/Automatic-Adj... Sweden actually just made some great changes to their pension system, and in fact it's no longer a defined benefit plan in the traditional sense, so your benefit is not guaranteed (aka defined). Sweden went ahead and said we're not giving you any promises, and pension payments will be adjusted on an ongoing basis due to demographic and investment return changes. On the other hand, you have state level and local governments in the United States that have traditional defined benefit pensions (you get at least $x based on this formula, frequently with a built in cost of living increase). Not only that, but some governments baked this into their constitution, so there's no way for these to be reduced. And state and local US governments can't print money, so they only have two options: cut costs and raise taxes. On top of the above, there are perverse incentives for the people who set the pension benefits. Obviously, the union workers want the most they can get. The politicians need union votes to get elected (everyone in the union votes, but most Americans don't vote in local/state elections). So politicians can choose whichever actuary uses the most liberal assumptions to make the costs seem lower than they are, the unions vote for them, but of course the contributions to the pension fund to ensure these benefits is NOT required. So politicians can also choose to forego them, which they did and leave it for future generations.

RobertoG 9y ago

There is a big difference between a country with its own currency (like Sweden and the federal USA) and a state like Illinois or a country member of the Euro. Sweden can't run out of money. How many resources they decide to use in their old people is a political decision (taking into account economic factors like inflation and real resources available). At the end of the day, this is decided by the current generation, so, this narrative of "jeopardizing the future" make not sense. The quality of life of the old people of the future will be determined by the real resources available in the future and the political will of the voters then. Illinois can run out of money, so, it's not only if they have the will to give a good quality of life to their old people: they could be unable to do that. The reason the federal government could choose to solve the problem it's not because it has more money but because it can issue money.

kolbe 9y ago

I can't speak for the entire USA, but here in Illinois, we are acutely burdened by having high crime, large/corrupt government, low income taxes, and a decaying private sector. Here's a great example of the way things work in Illinois. The most powerful man is a man named Mike Madigan, speaker of the Illinois House and Chair of the Illinois Democratic Party. He has a fun little trick that he likes to play on the people he serves by essentially stealing money from us via property tax assessments. The first assessment on any property's taxes in Chicago is generally outrageous. It's like this because he wants you to appeal, because Madigan & Getzendanner is Cook County's largest firm in the commercial and industrial appeals process[1]. And rumor has it, they're also the largest in residential property tax appeals, too. I doubt Sweden's government has such egregious types of government scams. And I'm sure Sweden's government is designed to serve its people, not bleed the powerless dry. [1] https://www.illinoispolicy.org/investigation-madigan-firm-the-biggest-player-in-commercial-property-tax-appeals/ https://www.illinoispolicy.org/investigation-madigan-firm-th...

Dirlewanger 9y ago

Because America suffers from a severe dearth of caring about the greater good.

bassman9000 9y ago

https://www.thelocal.se/discuss/index.php?showtopic=56824?showtopic=56824 https://www.thelocal.se/discuss/index.php?showtopic=56824?sh... . It would take approximately 40 years of full contribution to get about 50 % of salary upon retirement in the Swedish pension system( is the rough estimate correct)? Compare to, e.g., the city of SF, where you only need to work 23 years, and can retire before 60.

sol_remmy 9y ago

Because America is 400m people not 10m people like Sweden, not a homogenous population, etc. Its more accurate to compare America to the EU than to one wealthy EU member state (Sweden)