Excellent Economist Mag. article on CA’s Gov. retiree Pension problems

[ctr70]

http://www.economist.com/node/21538201

I like the Economist, very sober, objective reporting. Some highlights of the article:

1. California’s needs to phase out defined BENEFIT pension plans and replace then with defined CONTRIBUTION plans
2. CA’s unfunded pension liabilities are between $250 billion to $500 billion – paying for these “unfunded” pension liabilities will come from schools, parks, etc..
3. Upping retirement to 67 years old vs. 55 (or less) where it is for current
4. Brown wants to end “sneaky ways” those varmits in the legislature raise benefits ( I commend him for this)
5. Brown was elected largely with the help of “independent spending” by public sector unions (this should be outlawed as Arnold tried to do) – the democratic legislators are beholden to those unions

Let’s stop this nonsense and make Gov workers pay 100% for their own pensions. Defined benefit pension plans are near criminal IMO and are sucking the blood from our school systems and more!

[gandalf]

The financial industry caused pension insolvency by a wide margin.

How come the people who demonize public employees and pension insolvency aren’t protesting fraud on Wall Street with Occupy?

Was that whole Tea Party thing just for show?

Another Republican-run scheme?

What are you ‘selling’ next?

[gandalf]

I don’t like public employee unions or their benefit programs. They are a fraction of the problem.

[paramount]

[quote=gandalf]I don’t like public employee unions or their benefit programs. They are a fraction of the problem.[/quote]

Yah, about 9/10’s.

[Allan from Fallbrook]

[quote=gandalf]I don’t like public employee unions or their benefit programs.

I don’t like republicans either because they are full of shit.[/quote]

Gandalf: Well, shit, where does THAT put you on the political spectrum?

In all seriousness, everything we’re confronting right now is enough to make you weep. We’ve been sold down the river by both parties, and the candidates we’re given to choose from get worse and worse.

I look at Perry and Mittens and realize that the party of “fiscal prudence” has vanished. It probably vanished during the Reagan Administration for all I know. When I start looking back on Clinton with wistfulness, then I know shit is fucked up.

[gandalf]

Yeah, I saw you updated your status on Facebook:

“Pining for Clinton…”

Can’t believe it.

[gandalf]

[quote=paramount][quote=gandalf]I don’t like public employee unions or their benefit programs. They are a fraction of the problem.[/quote]

Yah, about 9/10’s.[/quote]

Some of the pressure is attributable to under-funding and benefit packages, healthcare costs, etc. Wall Street and their toxic-shit investment products are responsible for most of it though.

[Anonymous]

[quote=gandalf]Some of the pressure is attributable to under-funding and benefit packages, healthcare costs, etc. Wall Street and their toxic-shit investment products are responsible for most of it though.[/quote]

I had planned to have $3 million in my 401K when I turned 55. I did the math and realized I would need a 15% return to reach that goal. So I bought a bunch of toxic-shit investment products because they were promising that level of return.

Now I have a big shortfall. I might have to work until age 65 and I will only be able to go on one travel cruise each year instead of three.

I had certain expectations for my future. Some folks on Wall Street told me I could achieve those expectations and I believed them. They forced me to plan on retiring at 55 with a $3 million dollar nest egg. I had no choice.

Yeah, it’s all Wall Street’s fault.

I mean, what else could I have done?

[briansd1]

[quote=pri_dk]

I had planned to have $3 million in my 401K when I turned 55. I did the math and realized I would need a 15% return to reach that goal. So I bought a bunch of toxic-shit investment products because they were promising that level of return.

Now I have a big shortfall. I might have to work until age 65 and I will only be able to go on one travel cruise each year instead of three.

I had certain expectations for my future. Some folks on Wall Street told me I could achieve those expectations and I believed them. They forced me to plan on retiring at 55 with a $3 million dollar nest egg. I had no choice.

Yeah, it’s all Wall Street’s fault.

I mean, what else could I have done?[/quote]

Well said.

I also expected a nice retirement because my broker told me it was achievable with 15% annual return. So I contributed accordingly. And the rest of my income, I already spent.

Now I’m way short….. But it’s all Wall Street’s fault.

[gandalf]

That doesn’t make sense. The average employee contributing a portion of their paycheck to pension for 25 years had very little to do with the investing decisions between CitiBank and the State and County Employees of Wherever.

Investment bankers, investment officers on the pension side, rating agencies and the Fed, corrupt politicians bought by deregulating lobbies, the originators of fraudulent crap undocumented loans like Countrywide, the appraisers of crap loans — and don’t forget all the douchebag get-rich-quick in real estate millionaires from the past 15 years…

These parties are primarily responsible for the worst financial crash in our lifetime. The parties on Wall Street made the majority of the profits off what they knew to be a swindle. That is why my ire is directed at ‘Wall Street’. Because the sophisticated parties in this arrangement knew the system was ultimately a leveraged fraud. They should go to jail.

Hardly any of people whining about Joe Carpenter’s pension benefits are outraged about the primary cause of this debacle — Wall Street investment bankers, bank lobbies and GOP deregulation, fraudulent originator banks, rating agencies riddled with conflicts of interest, irresponsible federal reserve policies. These people were sophisticated parties and 99% of them knew it was a bubble and knew it going to crash at some point.

That’s why I think most of the outrage over penion benefits is just more GOP-sponsored outrage-of-the-week talking point crap.

Do I think public employee compensation needs reform? Yes.

AFTER financial industry executives go to jail for running a fraud scheme, gambling away money that wasn’t theirs and tanking the U.S. economy. Were it not for the Wall Street, there would be no pension insolvency. ‘Financial engineering’ (what the fuck is that?!) ENABLED pensions to underfund in the first place.

[briansd1]

[quote=gandalf]That doesn’t make sense. The average employee contributing a portion of their paycheck to pension for 25 years had very little to do with the investing decisions between CitiBank and the State and County Employees of Wherever.[/quote]

As people here know, I’m not crazy about Republicans.

But the public employees contributed too little as did the governments. They could all have assumed a lower rate of return and contributed more.

It’s not like governments didn’t benefit from Wall Street. The promised unsustainable returns of Wall Street enabled governments to overspend.

If there were no Wall Street, governments would have had to set aside larger portions of their annual budgets to pensions.

Now, the government retirees are not hurting. Citizens are suffering from higher taxes and cuts in services.

[Allan from Fallbrook]

[quote=briansd1][quote=gandalf]That doesn’t make sense. The average employee contributing a portion of their paycheck to pension for 25 years had very little to do with the investing decisions between CitiBank and the State and County Employees of Wherever.[/quote]

As people here know, I’m not crazy about Republicans.

But the public employees contributed too little as did the governments. They could all have assumed a lower rate of return and contributed more.

It’s not like governments didn’t benefit from Wall Street. The promised unsustainable returns of Wall Street enabled governments to overspend.

If there were no Wall Street, governments would have had to set aside larger portions of their annual budgets to pensions.

Now, the government retirees are not hurting. Citizens are suffering from higher taxes and cuts in services.[/quote]

Brian: As people here know, I’m not crazy about Democrats (especially the California variety). However, and I cannot believe I’m doing this, but my sympathies are more with the individual public sector workers than with Wall Street (I know, I can’t believe this, either).

I was working as a corporate controller in Orange County in 1994 when Robert Citron, OC Treasurer, blew it up after losing his ass on highly leveraged investments. Ironically enough, I’d had a visit earlier in the year from an investment banker looking to sell me on “low-risk, high-yield” repos (repurchase agreements) that were yielding anywhere from 18% to 25% and were underwritten by “big name firms” on Wall Street. I declined and six months later the shit hit the fan and Orange County went BK.

My point is that municipalities and states will always spend to their level of income and that these various Treasurers, Controllers and Comptrollers have NO business being in the business of investments that they don’t understand. The reason I gave the investment “opportunity” a miss, was that I didn’t understand a friggin’ word this guy was telling me (and I suspect he didn’t know fuck-all about the investments, either) and it seemed too good to be true. When you have CalPERS predicating pension payouts on an annualized 8% rate of return EVERY year, well, at some point the chickens come home to roost. And here we are.

[Anonymous]

The question moving forward really isn’t “Public sector employee or Wall Street?”

The question is “Public sector employee or Taxpayer or Public services?”

Some combination of the latter three are going to have to bear the cost of the generous promises that have been made.

[Shadowfax]

[quote=Allan from Fallbrook]
My point is that municipalities and states will always spend to their level of income and that these various Treasurers, Controllers and Comptrollers have NO business being in the business of investments that they don’t understand. The reason I gave the investment “opportunity” a miss, was that I didn’t understand a friggin’ word this guy was telling me (and I suspect he didn’t know fuck-all about the investments, either) and it seemed too good to be true. When you have CalPERS predicating pension payouts on an annualized 8% rate of return EVERY year, well, at some point the chickens come home to roost. And here we are.[/quote]

One thing future polititians should look at is how to incentivize savings within government. I surmise that there is not much incentive for a given department to not spend up to their level of income because then they have a surplus and they know that surplus will be cut or transferred away in the next budget cycle. The “saving for a rainy day” concept doesn’t seem to even enter the picture. There will always be other areas that need funding, so if education has a surplus one year and CalTrans doesn’t, then the education funds will be wiped out to pay for road fixes. I don’t have any answers but I think this is one idea that needs careful consideration.

[Shadowfax]

[quote=pri_dk]The question moving forward really isn’t “Public sector employee or Wall Street?”

The question is “Public sector employee or Taxpayer or Public services?”

Some combination of the latter three are going to have to bear the cost of the generous promises that have been made.[/quote]

I think some form of restitution from Wall Street would help with those last three areas. We speak of Wall Street like it’s an amorphous entity, but it’s ultimately a small group of individuals who have been highly compensated to oversee the great rip off of the rest of the country. I think the Goldman and Citigroup and other CEOs, for starters, should have their salaries garnished and their multiple homes auctioned off to pay back the tax payers whose savings were wiped out while Citi bet against its own investment vehicles, profiting off the failure and those who were lied to about the investment’s quality.

Yay!! Wealth redistribution!!

[Author]

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