3 ms·

I just think we shouldn't be bankrupting the state and cities to pay for these pensions.

dalke 12y ago
Going back in time, when the person first started as an employee, the employer made a promise that the person would receive a pension upon retirement. That was part of the employment contract negotiation. People decided on a job based in part on the entire earnings, which includes both salary and pension. Some people are willing to take a lower salary in order to have a higher pension, while others prefer it the other way around. If the state and cities are going bankrupt then why did they enter the contract in the first place? What was the economic planning they did which let them conclude - apparently falsely - that they would be able to keep their side of the bargain, and how has it broken down? Personally, I believe it's a combination of continued pressure to lower taxes and continued pressure to outsource government work to more expensive private businesses, especially when tied to the philosophical idea that the government should be small enough to 'drown it in the bathtub.' In other words, another solution to not going bankrupt is to raise taxes, rather than breaking existing contracts.
- cmdkeen 12y ago
  It's because people live longer. When defined benefits were introduced many people died before retiring, or if they did retire lived a handful of years. Today it is perfectly possible to live longer post retirement than you spent working in these kind of jobs. Taken to its logical conclusion if there was a miracle pill that added 50 years to every lifespan the annuity system would implode. Yet people, being people, don't like to accept that things have changed. They stick to talk of contracts (where it is only accrued, previous years that are contractually earned) without seeing the upside. Basically you can have this pension and die at 70 or a less generous one and live until 80.
  - dalke 12y ago
    Your argument is that the economic planners of 40 years ago didn't expect this increase in longevity. They knew of course that people were living longer. Do you have any evidence which might suggest that they significantly underestimated the increase? For example, http://en.wikipedia.org/wiki/File:Life_Expectancy_at_Birth_by_Region_1950-2050.png http://en.wikipedia.org/wiki/File:Life_Expectancy_at_Birth_b... shows a pretty linear growth. Assuming retirement at about age 60, http://www.infoplease.com/ipa/A0005140.html http://www.infoplease.com/ipa/A0005140.html says white males in the 1950s had 16 years of life expectancy, and it's 22 years now. Not only is the trend increasing at a relatively constant rate, but living "longer post retirement than you spent working in these kind of jobs" appears to be relatively uncommon. Most people spend about 40-45 years working, and about 1/2 that more on pension. Unless you can point to some really firm numbers, I think you are incorrectly underestimating the expertise of the actuaries of decades ago.
- mtviewdave 12y ago
  If the state and cities are going bankrupt then why did they enter the contract in the first place? What was the economic planning they did which let them conclude - apparently falsely - that they would be able to keep their side of the bargain, and how has it broken down? Keep in mind that the politicians who put these bargains in place are long gone. And the politicians who later didn't fund the pension funds adequately are also long gone. None of them have to deal with the aftermath of their choices (and indeed one of the side-effects of the push for term limits over the last 30 years is that it's now guaranteed that politicians will not have to deal with the long-term consequences of their actions). It's been my observation that many voters have strong opinions on what government expenditures should cost. Opinions that are driven by their gut, and not by any sort of market-based reality. But politicians have to satisfy both the market and the voters. If the market demands that the salary for a position be X, while voters think it should be X*0.85, then one way for politicians to deal with it is to defer the remaining 15%. They may convince themselves that it will work, or they may not care, but regardless, it's no longer their problem.

dalke 12y ago

Going back in time, when the person first started as an employee, the employer made a promise that the person would receive a pension upon retirement. That was part of the employment contract negotiation. People decided on a job based in part on the entire earnings, which includes both salary and pension. Some people are willing to take a lower salary in order to have a higher pension, while others prefer it the other way around. If the state and cities are going bankrupt then why did they enter the contract in the first place? What was the economic planning they did which let them conclude - apparently falsely - that they would be able to keep their side of the bargain, and how has it broken down? Personally, I believe it's a combination of continued pressure to lower taxes and continued pressure to outsource government work to more expensive private businesses, especially when tied to the philosophical idea that the government should be small enough to 'drown it in the bathtub.' In other words, another solution to not going bankrupt is to raise taxes, rather than breaking existing contracts.

cmdkeen 12y ago
It's because people live longer. When defined benefits were introduced many people died before retiring, or if they did retire lived a handful of years. Today it is perfectly possible to live longer post retirement than you spent working in these kind of jobs. Taken to its logical conclusion if there was a miracle pill that added 50 years to every lifespan the annuity system would implode. Yet people, being people, don't like to accept that things have changed. They stick to talk of contracts (where it is only accrued, previous years that are contractually earned) without seeing the upside. Basically you can have this pension and die at 70 or a less generous one and live until 80.
- dalke 12y ago
  Your argument is that the economic planners of 40 years ago didn't expect this increase in longevity. They knew of course that people were living longer. Do you have any evidence which might suggest that they significantly underestimated the increase? For example, http://en.wikipedia.org/wiki/File:Life_Expectancy_at_Birth_by_Region_1950-2050.png http://en.wikipedia.org/wiki/File:Life_Expectancy_at_Birth_b... shows a pretty linear growth. Assuming retirement at about age 60, http://www.infoplease.com/ipa/A0005140.html http://www.infoplease.com/ipa/A0005140.html says white males in the 1950s had 16 years of life expectancy, and it's 22 years now. Not only is the trend increasing at a relatively constant rate, but living "longer post retirement than you spent working in these kind of jobs" appears to be relatively uncommon. Most people spend about 40-45 years working, and about 1/2 that more on pension. Unless you can point to some really firm numbers, I think you are incorrectly underestimating the expertise of the actuaries of decades ago.
mtviewdave 12y ago
If the state and cities are going bankrupt then why did they enter the contract in the first place? What was the economic planning they did which let them conclude - apparently falsely - that they would be able to keep their side of the bargain, and how has it broken down? Keep in mind that the politicians who put these bargains in place are long gone. And the politicians who later didn't fund the pension funds adequately are also long gone. None of them have to deal with the aftermath of their choices (and indeed one of the side-effects of the push for term limits over the last 30 years is that it's now guaranteed that politicians will not have to deal with the long-term consequences of their actions). It's been my observation that many voters have strong opinions on what government expenditures should cost. Opinions that are driven by their gut, and not by any sort of market-based reality. But politicians have to satisfy both the market and the voters. If the market demands that the salary for a position be X, while voters think it should be X*0.85, then one way for politicians to deal with it is to defer the remaining 15%. They may convince themselves that it will work, or they may not care, but regardless, it's no longer their problem.