The “rich” are the ones who caused the financial crisis and the pension crisis. After giving them trillions of dollars (as thanks for destroying our economy, I guess), and then extending tax cuts so the speculators on Wall Street can use all their newfound money (courtesy of the taxpayers) to ramp up commodities prices around the world…yeah, public employees are going to fight when the bill for Wall Street’s party comes due, and it’s handed to them.[/quote]
CAR: Public employees are going to fight whom, exactly? The so-called “rich”? How does that work? They’re PUBLIC sector, not PRIVATE sector unions; they’re paid for by the taxpayers.
This isn’t the UAW, or IBEW, or AFL-CIO going up against GM or Ford or U.S. Steel for a larger share of the profits; this is SEIU, or CCPOA going for more taxpayer dollars.
The complete illogicality of this outdated and defunct “class warfare” argument seems to have escaped most people. This isn’t rich versus the middle-class, it is politicians rewarding union supporters for their voter with unaffordable benefits packages that will explode long after those same politicians are long gone.[/quote]
Just going to copy from another thread where this was addressed (I’m pretty sure you do understand this, Allan, but just copying over the post):
I was referring to the boom/bust cycles that the Fed creates, and the “guaranteed” inflation, as the Fed tries to maintain a ~2% inflation rate, which they call “price stability.” The Fed’s tendency to bail speculators out of their foolish mistakes (the Greenspan/Bernanke put) made investors think that “they” would never let deflation happen, so the investors had no choice but to go all in.
If not for the bubbles, our commitments would be significantly lower. During the bubbles, city and state managers/legislators offer up compensation packages that cannot be sustained in a “normal” economy.
The problem is that our bubble economy has been going on for so long (since the early 80s), that everyone (govt management AND pension fund managers and actuaries) thinks the bubble economy is “normal,” and they plan accordingly. Those who thought it was unsustainable were forced out, as the returns they made were consistently lower than those who chased the bubbles and got the bubble returns. Also, as asset prices rose, unions would (logically) demand compensation increases to keep up.
BTW, in the situations I’m aware of, it’s not the reduced TAX revenue that is causing a problem with the pension plans. It’s the losses they saw during the “financial crisis,” and the lower returns on investments. The large pension funds do not rely on taxpayer funding, and taxpayers have not spent a single cent on the “pension crisis” experienced by these large funds (CalPERS and CalSTRS*). The pension funds, at lest the large ones I’m most familiar with (I’m not as familiar with independent municipal pension funds) get their revenue from the pension contributions that are paid by the employees and their employers, as part of their compensation packages. Approximately 70% of the revenue is supposed to come from investments (the link below is from 2005, and it shows investment returns are 75% of projected revenue), and THAT is where the problem lies. It’s not about tax revenue, it’s about investment returns/losses.
The funds were super-funded in the late 90s (a bubble!), which is why they passed the pension boost for public safety personnel. The bubbles that resulted from the actions taken by the Federal Reserve and Wall Street are what have caused them to make such foolish mistakes, and this is why there is a “pension crisis.”
From the CalPERS link, who pays into the fund:
Member – $16.8
Employer – $17.0
Investments – $116.1
*The state pays ~2-3% of the employees’ (teachers’) wages to CalSTRS, from what I can tell. The rest comes from employees, the employers (as part of the compensation package), and investment returns.
There has been no large-scale bailout of these large funds. IMHO, any additional contribution requirements will end up being shifted to the employees; something I’ve been saying for a while, now.
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I think this is why I get so frustrated, and it’s not at all directed at you, BTW. It’s just that so few people actually understand how the system works, and why it’s in trouble right now, yet they are ranting and raving about things that aren’t even related to the cause of the problems. Again, it is NOT the unions who caused the problems, but the financial industry and the Federal Reserve (by creating bubbles, and then forcing negative rates on us when the funds need ~7-9% in order for the numbers to work out…which force the managers to move further out on the risk curve when rates are held so low for such an extended period of time).
This is why some of us are so infuriated. This is being labeled as “taxpayers vs. unions,” when that’s not the issue here. Why has Wall Street — the ones who caused the crisis — been getting bailouts, record bonuses and tax breaks, which cost taxpayers trillions of dollars…while public sector workers are being blamed in the media for causing the “pension crisis” and told they have to give up everything **they’ve worked for over the years** and were promised in good faith? IMHO, it’s an intentional diversion, and public workers are being made the scapegoats for the financial industry.
Sorry, but it’s B.S.
BTW, please check out the link to the Harvard presentation for CalPERS.
On page 22, you’ll see how the employer contribution dropped off. This was due to the internet bubble, and they (CalPERS) reduced employer contribution requirements at the same time they (public employers/legislators) increased benefits. The public workers BEGGED them to save this money for future contributions/a rainy day, but their employers — almost all of them — refused, and spent it instead.
One more thing…during negotiations over the past 2-3 years, union members **have been making concessions in pay and benefits** because they are aware of the problems. People seem to be under the impression that union members have been getting raises, or that they are getting the same pay/benefits as they were during the bubble, but that just isn’t true in most cases. As unions renegotiate their contracts going forward, they will be giving things up, as would be expected. It’s just maddening that people are trying to blame the union members for our financial crisis. They are being made the scapegoats for Wall Street, and it needs to stop.
