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The choice is raising taxes, reducing spending elsewhere, or demanding workers give up the pensions they were promised. Somehow I doubt anyone is going to agre

The choice is raising taxes, reducing spending elsewhere, or demanding workers give up the pensions they were promised. Somehow I doubt anyone is going to agree to pay more in taxes to cover pensions in their state or city. After all, why should the government keep its promises (especially if it means we have to pay for it)?

zajd 8y ago
> Somehow I doubt anyone is going to agree to pay more in taxes to cover pensions in their state or city. After all, why should the government keep its promises (especially if it means we have to pay for it)? I agree with it but then again I'm not opposed to paying taxes. Why shouldn't we provide for the retirement of our workforce?
- jstewartmobile 8y ago
  Boomers and their parents took out wayyy more than they put in. Whenever it has been time to pass the cup around for other groups, they haven't been what I would call generous. Look at the funding difference between Medicare and Medicaid if you want a feel for it. Given all of that, I'm not too excited about propping-up their pension shortfalls.
  - Haydos585x2 8y ago
    I agree with you. I think it's a bit dangerous to start splitting boomers out though. All it's going to do is create division between young and old resulting in defunding for both groups.
    - jstewartmobile 8y ago
      Between this, Iraq/Afghanistan, China's ascent, and global warming, defunding (by circumstance rather than choice) is probably inevitable at this point.
NTDF9 8y ago
The government doesn't keep its promises because it is not required by law that they are held accountable for dubious lawmaking. Put simply, representatives need to be on a personal financial hook (or penalty) for laws, rules and policies, even after they've exited office.
- TheRealDunkirk 8y ago
  Yes! Some city or state is going to go bankrupt because of this, and the people affected are going to sue. It will take at least a decade to work up to the Supreme Court, who will find (no matter WHAT the liberal/conservative makeup at the time) that, surprise, surprise, the government is NOT legally obligated to pay out the benefits they said they would. Various governments will try to implement various forms of austerity to make it work, and former employees are just going to have to suck it up. Don't worry though. This exact same thing is also happening to Social Security, which will crash around the same time, or shortly after, so everyone working now will get the shaft. Of course, the latest date I've seen (2038) is almost exactly when I should have been eligible to start drawing on it.
  - dragonwriter 8y ago
    > Some city or state is going to go bankrupt because of this, States cannot go bankrupt, without a change to federal law. Cities can and have, and pensions have already been addressed in that context. It's not a new question. > and the people affected are going to sue. It will take at least a decade to work up to the Supreme Court, who will find (no matter WHAT the liberal/conservative makeup at the time) that, surprise, surprise, the government is NOT legally obligated to pay out the benefits they said they would. It's already been established that pensions can be cut in bankruptcy, so, yeah, that's not even a question. > Various governments will try to implement various forms of austerity to make it work, They already are to prevent running into the major crises (e.g., recent pension funding requirements reforms in California.) > Don't worry though. This exact same thing is also happening to Social Security, which will crash around the same time, or shortly after, so everyone working now will get the shaft. Social Security won't crash; even with scenarios projecting Trust Fund exhaustion it still ends up paying at worst something like 2/3 of eligible benefits out or current revenues out to the limit of projections.
omegaworks 8y ago
>The choice is raising taxes, reducing spending elsewhere, or demanding workers give up the pensions they were promised. Why is there a fourth option for banks and not for pensions? Why is Quantitative Easing left out of this discussion?
- pathseeker 8y ago
  Quantitative easing was not for banks. Also, the bailouts to which you refer were not free money, they were loans with low interest rates that have been paid back. The pensions don't have enough money so easy access to debt does nothing to help them solve that problem.
  - omegaworks 8y ago
    >the bailouts to which you refer were not free money, they were loans with low interest rates that have been paid back. Any loan at an interest rate lower than the rate of return that can be earned by investing that money is essentially free money.
- betterunix2 8y ago
  QE is not something municipal governments can do, so it is irrelevant to this discussion. Since you brought it up, it is worth mentioning that QE actually contributed to the pension shortfall because pension funds suffer when interest rates are low.
spullara 8y ago
You could increase the taxes on pensions to return them to sane levels.
- xeromal 8y ago
  I feel wary of doing this because I feel this is what's going to happen with my IRAs. I was promised that if I pay my taxes now I don't have to pay them when I'm old, but supposed the next generation decides they want to change the rules. Do I just pound sand and give up? Pensioners were given a promise and now we're changing the rules. It feels wrong even if the promise was unrealistic.
  - dpatrick86 8y ago
    Just for clarification... you described a Roth. Usually, when someone says "IRA" without further qualification it would be assumed to be a traditional.
  - deleted 8y ago
    [deleted]
  - a_tractor 8y ago
    In a way, there is no way to complete avoid long-term risk. Sort of why we hang on to the saying "dont put your all your eggs in one basket." You should know that you are taking a risk by putting your money into your IRA. For all we know, the next generation could abolish private property and euthanize the elderly upon retirement. There is a lot that is wrong with the situation, and I am not sure what can be judged about their expectations being unrealistic without the benefit of hindsight that we have, but the principle I would use to determine what is fair is this, via Thomas Jefferson: does one generation have the right to impose debt on the next? I would say no. Did these pensioners think this scheme would need to be paid by the next generation, who would not benefit from it? Was there unanimous agreement about the pension schemes at the time? What did the detractors have to say about it? Who was right? I'd be interested in seeing the counter-arguments at the time, I bet we would learn a lot. Finally, this is how I see it: My father mortgaging a house that disappears when he dies, literally vanishes, except I inherit the mortgage that has to be paid off. Its a scheme that is literally the opposite of how western society become prosperous over time in the past. That said, I would be okay "taking responsibility" for past promises if we are the last generation to have to do that. As long as it is recognized as a total failure not to be tried ever again, I would feel ok about it in terms of helping people. Otherwise, if we are forced to deal with it in order to "save" the scheme itself or some convoluted spin that makes it look like successful government planning, then hell no. One way or another, someone is going to be making a sacrifice.
lr4444lr 8y ago
There is also simple attentuation. Workers have to pay more and for longer to be vested. They will receive a bit less, plans will be a little less generous. It has already happened in the NY teacher pension system. The sky isn't falling.
ngngngng 8y ago
Does stability in retirement add enough value to society and the economy for it to be a good investment? I've been an adult less than a decade, so without a return why should I pay for the promises of my predecessors? So many questions.
- betterunix2 8y ago
  I actually think the answer is simpler and more immediate than that. The government made a promise. If the government does not keep that promise, can it be trusted with other obligations? In fact, this problem of unfunded pensions has impacted municipal credit ratings and wound up costing taxpayers more in higher interest rates than they would have had to pay in higher taxes to stabilize the pension funds.
  - ngngngng 8y ago
    But why does the government get to make a promise with the money of someone that wasn't even born at the time (me)?
    - betterunix2 8y ago
      It makes no difference, because the promise was already made and now you have to choose between (a) destroying your government's credit rating or (b) making good on the promise. Complain all you want, but that's just the situation we find ourselves in.
      - randysavage 8y ago
        In the short term, sure. In the longer term, when increased taxes and decreased services impact the average person, these promises will be renegotiated.
    - toomuchtodo 8y ago
      Because the government existed before you and will exist after you’re gone. It exists (in part) to enable continuity of society, and that is the compact you agree to by remaining a resident/citizen.
chrisdhoover 8y ago
But even when a city says to unionized workers, you can keep your pension but new hires get moved to a 401k, the unions say no. See San Jose as an example
- betterunix2 8y ago
  Well, what exactly do you expect? Unions do not like having some members receive wildly different benefits from others because that breaks their unity. Gradual phase-ins are needed if you are going to move to a defined-contribution plan; see e.g. the introduction of 401k plans for NYC subway workers, which has been slow and mostly agreeable to the union. The other thing to keep in mind is that the problem is not merely that future pension obligations for new hires might not be funded. In some cases the problem is immediate or very near-term -- pension funds have become so depleted in some states and cities that retirees may not receive their checks, and in some cases people have been forced to accept less than they were promised (see the article for examples).
- dragonwriter 8y ago
  > But even when a city says to unionized workers, you can keep your pension but new hires get moved to a 401k, the unions say no. Well, yeah, because then 5 years down the road, when the city tries to shift pension contributions from the city to covered employees on the defined benefit plan, newer employees have no incentive to support the older employees and the employer can split the union. Which is why unions resist anything that gives different covered employees radically different contract interests.
0x4f3759df 8y ago
You neglected to include the possibility that the Fed bails out the major players (State of Illinois) with money printing.

zajd 8y ago

> Somehow I doubt anyone is going to agree to pay more in taxes to cover pensions in their state or city. After all, why should the government keep its promises (especially if it means we have to pay for it)? I agree with it but then again I'm not opposed to paying taxes. Why shouldn't we provide for the retirement of our workforce?

jstewartmobile 8y ago
Boomers and their parents took out wayyy more than they put in. Whenever it has been time to pass the cup around for other groups, they haven't been what I would call generous. Look at the funding difference between Medicare and Medicaid if you want a feel for it. Given all of that, I'm not too excited about propping-up their pension shortfalls.
- Haydos585x2 8y ago
  I agree with you. I think it's a bit dangerous to start splitting boomers out though. All it's going to do is create division between young and old resulting in defunding for both groups.
  - jstewartmobile 8y ago
    Between this, Iraq/Afghanistan, China's ascent, and global warming, defunding (by circumstance rather than choice) is probably inevitable at this point.

NTDF9 8y ago

The government doesn't keep its promises because it is not required by law that they are held accountable for dubious lawmaking. Put simply, representatives need to be on a personal financial hook (or penalty) for laws, rules and policies, even after they've exited office.

TheRealDunkirk 8y ago
Yes! Some city or state is going to go bankrupt because of this, and the people affected are going to sue. It will take at least a decade to work up to the Supreme Court, who will find (no matter WHAT the liberal/conservative makeup at the time) that, surprise, surprise, the government is NOT legally obligated to pay out the benefits they said they would. Various governments will try to implement various forms of austerity to make it work, and former employees are just going to have to suck it up. Don't worry though. This exact same thing is also happening to Social Security, which will crash around the same time, or shortly after, so everyone working now will get the shaft. Of course, the latest date I've seen (2038) is almost exactly when I should have been eligible to start drawing on it.
- dragonwriter 8y ago
  > Some city or state is going to go bankrupt because of this, States cannot go bankrupt, without a change to federal law. Cities can and have, and pensions have already been addressed in that context. It's not a new question. > and the people affected are going to sue. It will take at least a decade to work up to the Supreme Court, who will find (no matter WHAT the liberal/conservative makeup at the time) that, surprise, surprise, the government is NOT legally obligated to pay out the benefits they said they would. It's already been established that pensions can be cut in bankruptcy, so, yeah, that's not even a question. > Various governments will try to implement various forms of austerity to make it work, They already are to prevent running into the major crises (e.g., recent pension funding requirements reforms in California.) > Don't worry though. This exact same thing is also happening to Social Security, which will crash around the same time, or shortly after, so everyone working now will get the shaft. Social Security won't crash; even with scenarios projecting Trust Fund exhaustion it still ends up paying at worst something like 2/3 of eligible benefits out or current revenues out to the limit of projections.

omegaworks 8y ago

>The choice is raising taxes, reducing spending elsewhere, or demanding workers give up the pensions they were promised. Why is there a fourth option for banks and not for pensions? Why is Quantitative Easing left out of this discussion?

pathseeker 8y ago
Quantitative easing was not for banks. Also, the bailouts to which you refer were not free money, they were loans with low interest rates that have been paid back. The pensions don't have enough money so easy access to debt does nothing to help them solve that problem.
- omegaworks 8y ago
  >the bailouts to which you refer were not free money, they were loans with low interest rates that have been paid back. Any loan at an interest rate lower than the rate of return that can be earned by investing that money is essentially free money.
betterunix2 8y ago
QE is not something municipal governments can do, so it is irrelevant to this discussion. Since you brought it up, it is worth mentioning that QE actually contributed to the pension shortfall because pension funds suffer when interest rates are low.

spullara 8y ago

You could increase the taxes on pensions to return them to sane levels.

xeromal 8y ago
I feel wary of doing this because I feel this is what's going to happen with my IRAs. I was promised that if I pay my taxes now I don't have to pay them when I'm old, but supposed the next generation decides they want to change the rules. Do I just pound sand and give up? Pensioners were given a promise and now we're changing the rules. It feels wrong even if the promise was unrealistic.
- dpatrick86 8y ago
  Just for clarification... you described a Roth. Usually, when someone says "IRA" without further qualification it would be assumed to be a traditional.
- deleted 8y ago
  [deleted]
- a_tractor 8y ago
  In a way, there is no way to complete avoid long-term risk. Sort of why we hang on to the saying "dont put your all your eggs in one basket." You should know that you are taking a risk by putting your money into your IRA. For all we know, the next generation could abolish private property and euthanize the elderly upon retirement. There is a lot that is wrong with the situation, and I am not sure what can be judged about their expectations being unrealistic without the benefit of hindsight that we have, but the principle I would use to determine what is fair is this, via Thomas Jefferson: does one generation have the right to impose debt on the next? I would say no. Did these pensioners think this scheme would need to be paid by the next generation, who would not benefit from it? Was there unanimous agreement about the pension schemes at the time? What did the detractors have to say about it? Who was right? I'd be interested in seeing the counter-arguments at the time, I bet we would learn a lot. Finally, this is how I see it: My father mortgaging a house that disappears when he dies, literally vanishes, except I inherit the mortgage that has to be paid off. Its a scheme that is literally the opposite of how western society become prosperous over time in the past. That said, I would be okay "taking responsibility" for past promises if we are the last generation to have to do that. As long as it is recognized as a total failure not to be tried ever again, I would feel ok about it in terms of helping people. Otherwise, if we are forced to deal with it in order to "save" the scheme itself or some convoluted spin that makes it look like successful government planning, then hell no. One way or another, someone is going to be making a sacrifice.

lr4444lr 8y ago

There is also simple attentuation. Workers have to pay more and for longer to be vested. They will receive a bit less, plans will be a little less generous. It has already happened in the NY teacher pension system. The sky isn't falling.

ngngngng 8y ago

Does stability in retirement add enough value to society and the economy for it to be a good investment? I've been an adult less than a decade, so without a return why should I pay for the promises of my predecessors? So many questions.

betterunix2 8y ago
I actually think the answer is simpler and more immediate than that. The government made a promise. If the government does not keep that promise, can it be trusted with other obligations? In fact, this problem of unfunded pensions has impacted municipal credit ratings and wound up costing taxpayers more in higher interest rates than they would have had to pay in higher taxes to stabilize the pension funds.
- ngngngng 8y ago
  But why does the government get to make a promise with the money of someone that wasn't even born at the time (me)?
  - betterunix2 8y ago
    It makes no difference, because the promise was already made and now you have to choose between (a) destroying your government's credit rating or (b) making good on the promise. Complain all you want, but that's just the situation we find ourselves in.
    - randysavage 8y ago
      In the short term, sure. In the longer term, when increased taxes and decreased services impact the average person, these promises will be renegotiated.
  - toomuchtodo 8y ago
    Because the government existed before you and will exist after you’re gone. It exists (in part) to enable continuity of society, and that is the compact you agree to by remaining a resident/citizen.

chrisdhoover 8y ago

But even when a city says to unionized workers, you can keep your pension but new hires get moved to a 401k, the unions say no. See San Jose as an example

betterunix2 8y ago
Well, what exactly do you expect? Unions do not like having some members receive wildly different benefits from others because that breaks their unity. Gradual phase-ins are needed if you are going to move to a defined-contribution plan; see e.g. the introduction of 401k plans for NYC subway workers, which has been slow and mostly agreeable to the union. The other thing to keep in mind is that the problem is not merely that future pension obligations for new hires might not be funded. In some cases the problem is immediate or very near-term -- pension funds have become so depleted in some states and cities that retirees may not receive their checks, and in some cases people have been forced to accept less than they were promised (see the article for examples).
dragonwriter 8y ago
> But even when a city says to unionized workers, you can keep your pension but new hires get moved to a 401k, the unions say no. Well, yeah, because then 5 years down the road, when the city tries to shift pension contributions from the city to covered employees on the defined benefit plan, newer employees have no incentive to support the older employees and the employer can split the union. Which is why unions resist anything that gives different covered employees radically different contract interests.

0x4f3759df 8y ago

You neglected to include the possibility that the Fed bails out the major players (State of Illinois) with money printing.