More on public pensions and the economy

[briansd1]

[quote=CA renter]

Not just “white” people, brian. YOU are a perfect example of someone who “sides with the wrong side.”

Labor vs. capital…nothing else matters.[/quote]

CA renter, there are only 2 sides that matter: Democrats or Republicans.

Which side do you suggest I side with? I side with reality.

The only reason I mention White working class folks is because they are siding with the Republicans. They affect the outcomes in states like Wisconsin.

[CA renter]

I won’t disagree with that, sdduuuude.

The difference is that public employment is open to the general public, and ALL workers benefit by having these jobs out there because, even if they don’t personally take these jobs, private employers have to compete with the public sector for good workers, and this puts a floor under wages and benefits for ALL workers — public and private.

Not only that, but when local workers are paid fair wages/benefits, the surrounding community benefits because it keeps debt-free money flowing through the economy. So, we get the double benefit of recieving high-quality services and keeping debt-free money circulating in the local economy. With private corporations, the wealth is funnelled to the top, and that money can go anywhere — different cities, states, or countries. The workers will be more likely to need public services and subsidies because they will NOT be paid living wages…profits for the corporation/executives are all that matter there.

[CA renter]

[quote=briansd1][quote=CA renter]

Not just “white” people, brian. YOU are a perfect example of someone who “sides with the wrong side.”

Labor vs. capital…nothing else matters.[/quote]

CA renter, there are only 2 sides that matter: Democrats or Republicans.

Which side do you suggest I side with? I side with reality.

The only reason I mention White working class folks is because they are siding with the Republicans. They affect the outcomes in states like Wisconsin.[/quote]

Hogwash. The only time Democrat vs. Republican ever matters is when the Democrats represent labor and the Republicans represent capital. The Dems have been bailing on labor for too many years, now. The corporations/capital is where all the money is, and the party has turned its back on labor. Quite frankly, I hope the party shrivels up and dies. They deserve it.

[briansd1]

[quote=CA renter]

Labor vs. capital…nothing else matters.[/quote]

Not as simple as you think.

In reality you need money and capital to have an economy.

Pension funds such as CalPERS are capital. They make capital work for retirees. Imagine how much harder it would be to fund retirees if participating employers had to pay retirement benefits directly out of annual budgets, or had to set aside money that could not be invested and earn a return.

[The-Shoveler]

Guys I have to add this,
Whatever you do,
Do not let them put the SS money into the Stock Market,
It will evaporate faster than rubbing alcohol on a hot sidewalk,

[Allan from Fallbrook]

[quote=The-Shoveler]Guys I have to add this,
Whatever you do,
Do not let them put the SS money into the Stock Market,
It will evaporate faster than rubbing alcohol on a hot sidewalk,[/quote]

Shoveler: What SS money? Dude, politicians have been treating this like a massive cookie jar and replacing actual money with IOUs for years.

Plus, SS is rapidly heading towards insolvency: http://www.michigandaily.com/content/social-security-insolvent-2017-trustees-say

[Allan from Fallbrook]

[quote=briansd1]
I’m with Nancy Pelosi on a Citizens United constitutional amendment. Otherwise, the country will be owned by corporations. And remember, corporations are neither conservative, nor liberal. They are for more sales and revenues for themselves.

In the end, White working-class folks are screwed. They sided with the wrong side, and they’ll suffer the consequences. They would most benefit from programs such as training, education and health care. Programs that would help them and their kids remain in the middle-class.

It will be interesting watching it all unfold. Time will tell…[/quote]

Brian: Anything you say after “Pelosi” is automatically invalidated by simple logic. Quoting the San Francisco Sea Hag is a lot like quoting Harry Reid (or Boehner or Cantor, so that we’re non-partisan here): They’re partisan hacks and I don’t remember hearing a peep of protest when Obama outraised McCain by some $500MM in 2008. That massive sum seemed perfectly reasonable then, didn’t it?

Here’s an interesting article on Citizens United from Ira Glasser, former director of that arch-conversative, right-wing group, the ACLU: http://www.huffingtonpost.com/ira-glasser/understanding-the-emcitiz_b_447342.html

As far as the white working class screwing themselves: I call bullshit on that one, too. Brian, you cannot simultaneously argue for globalization and protectionism at the same time. The world has changed and our political class has not kept up. Period.

CAR is right regarding labor versus capital and capital is completely uncaring where it lands. The one thing missing from your observations, Brian, is the word REFORM. The solutions are right there in front of us, but our political class lacks the will to implement them and both Dems and Repubs are guilty of this. The idea that white working class voters are alone in this is nonsensical. We’re all fucked and we can thank our elected officials for the rogering.

[SK in CV]

[quote=Allan from Fallbrook]Shoveler: What SS money? Dude, politicians have been treating this like a massive cookie jar and replacing actual money with IOUs for years.

[/quote]

Irrespective of the fact that it’s the only allowed investment, what’s the better alternative to US debt in the SS trust fund? Stock market would be better? Gold? Cash?

[Allan from Fallbrook]

[quote=SK in CV][quote=Allan from Fallbrook]Shoveler: What SS money? Dude, politicians have been treating this like a massive cookie jar and replacing actual money with IOUs for years.

[/quote]

Irrespective of the fact that it’s the only allowed investment, what’s the better alternative to US debt in the SS trust fund? Stock market would be better? Gold? Cash?[/quote]

SK: Well, my post was simply pointing out the fact that the SS trust fund was essentially stuffed with IOUs and headed for insolvency.

Stock market? Nope. Still overvalued.
Gold? Nope. Definitely overvalued.
Cash? Nope. US currency is significantly debauched.

We’re basically hosed. As I pointed out in a previous post, this is a Balance Sheet recession and the debt overhang will have to be dealt with before any serious positive motion begins.

This is why all the various central banks moves have been smacked in the face with the Law of Diminishing Returns and repeated Keynesian “pump-priming” has proved ineffectual at best (we’ve “spent” trillions and barely moved the needle.) Our politicians not only lack the will, they lack the right answers, too.

[CA renter]

[quote=Allan from Fallbrook]This is why all the various central banks moves have been smacked in the face with the Law of Diminishing Returns and repeated Keynesian “pump-priming” has proved ineffectual at best (we’ve “spent” trillions and barely moved the needle.) Our politicians not only lack the will, they lack the right answers, too.[/quote]

Exactly right, Allan.

[CA renter]

[quote=briansd1][quote=CA renter]

Labor vs. capital…nothing else matters.[/quote]

Not as simple as you think.

In reality you need money and capital to have an economy.

Pension funds such as CalPERS are capital. They make capital work for retirees. Imagine how much harder it would be to fund retirees if participating employers had to pay retirement benefits directly out of annual budgets, or had to set aside money that could not be invested and earn a return.[/quote]

Imagine how much cheaper everything would be if “investors” weren’t able to leverage up and buy all the existing assets/commodities like land, housing, food, etc. (and regular buyers, like the idiotic FBs…if they couldn’t use credit to push prices up). Again, it’s one thing to buy up raw materials if you’re going to add value and sell finished goods on the open market; it’s another thing entirely if you simply hoard goods with the intention of selling later for a higher price.

You do realize that capital is created by labor, right? It is labor that creates, and capital comes about because of that labor, not the other way around. The only exception to this is ownership/control of raw land and untapped natural resources — both of which are pretty worthless unless you DO something with them, and that, once again, requires labor to give it value.

BTW, it used to be the case that CalPERS and other pension funds did indeed rely mostly on savings and very safe bonds to fund their retirement. I would love to go back to that system again.

More:

“Attorney General Jerry Brown, the Democratic candidate for governor, mentioned the change in CalPERS investment strategy twice as he announced a civil lawsuit filed in May against the former CalPERS officials, Villalobos and Buenrostro.

“CalPERS in former times operated on a more steady, slow-return, extremely safe investment,” he said, “and over the decades this has been changed to a more risk-tolerant environment. I think they are going to have to move it back to a more balanced portfolio.”

Brown attributed the change to the emergence of a “casino economy” and widespread pressure, not just on pension funds, to “earn more and more.” He later acknowledged that he had forgotten about the little-known ballot measure.

Proposition 21, approved in 1984 two years after Brown ended eight years as governor, lifted a lid that allowed only 25 percent of pension fund investments to be in blue-chip stocks.

Public pension funds like CalPERS, which began operating in 1932, were only allowed to invest in bonds in their early years. A ballot measure in 1966, Proposition 1, took the first step away from bonds.

The measure placed on the ballot, without a single “no” vote in the Legislature, was said to be needed to lift a 94-year-old prohibition against stock investments, which were being successfully used in 30 states.”

Pension ‘crisis’: Did Prop 21 pave the way?

[SK in CV]

[quote=Allan from Fallbrook]
SK: Well, my post was simply pointing out the fact that the SS trust fund was essentially stuffed with IOUs and headed for insolvency.

We’re basically hosed. As I pointed out in a previous post, this is a Balance Sheet recession and the debt overhang will have to be dealt with before any serious positive motion begins.

This is why all the various central banks moves have been smacked in the face with the Law of Diminishing Returns and repeated Keynesian “pump-priming” has proved ineffectual at best (we’ve “spent” trillions and barely moved the needle.) Our politicians not only lack the will, they lack the right answers, too.[/quote]

Couple things.

I just think the IOU issue is not material to the discussion of solvency. The solvency issue is fixable relatively easily. Whether there is the political will to do so, remains to be seen.

If you’re talking about stimulus being the pump priming…i’m reasonably sure that the fiscal stimulus didn’t meet what Keynes would have suggested. I’m going back pretty far, but i’m pretty sure that expansion of money supply isn’t a primary stimulus in keynesian economics, and suggests that it will be mostly ineffective during depression and deep recession. If I remember correctly, then it certainly hasn’t been proved wrong.

[Allan from Fallbrook]

[quote=SK in CV][quote=Allan from Fallbrook]
SK: Well, my post was simply pointing out the fact that the SS trust fund was essentially stuffed with IOUs and headed for insolvency.

We’re basically hosed. As I pointed out in a previous post, this is a Balance Sheet recession and the debt overhang will have to be dealt with before any serious positive motion begins.

This is why all the various central banks moves have been smacked in the face with the Law of Diminishing Returns and repeated Keynesian “pump-priming” has proved ineffectual at best (we’ve “spent” trillions and barely moved the needle.) Our politicians not only lack the will, they lack the right answers, too.[/quote]

Couple things.

I just think the IOU issue is not material to the discussion of solvency. The solvency issue is fixable relatively easily. Whether there is the political will to do so, remains to be seen.

If you’re talking about stimulus being the pump priming…i’m reasonably sure that the fiscal stimulus didn’t meet what Keynes would have suggested. I’m going back pretty far, but i’m pretty sure that expansion of money supply isn’t a primary stimulus in keynesian economics, and suggests that it will be mostly ineffective during depression and deep recession. If I remember correctly, then it certainly hasn’t been proved wrong.[/quote]

SK: Yup, agree on solvency versus IOUs being two separate issues. My point on the IOUs was simply that the government has been dipping into the SS trust fund for years and not “repaying” the money (quotes used to denote that the amounts represent an “intracompany payable” in accounting parlance.)

The solvency issue is more serious, and I used it to show that the government has been kicking the can down the road on SS, Medicare, Medicaid for years (decades) now, while fully realizing that they’re running out of road. Last CBO report I saw forecasted a tremendous crowding effect taking place by 2035: http://thehill.com/blogs/on-the-money/budget/230901-cbo-warns-of-grim-long-term-debt-outlook wherein entitlement spending would essentially swallow the US economy. There have been bi-partisan plans floated that contain excellent reform measures (same with reforming the US tax code), but the lack of political will has prevented any serious, substantive measures from taking place.

I’m not attempting to debunk Keynes, in that I don’t believe true Keynesian policies are at work here. Again, using accounting parlance, this is a Balance Sheet issue, in that we (the US, the Euro, China, etc) are choking on an excess of debt. Continued printing of money isn’t doing anything to truly alleviate the situation, it’s merely masking the problem and preventing a true solution from taking place. And we know why. No politician in his/her right mind is going to come forward and advocate necessary policy, because doing so is a sure-fire way to guarantee not getting re-elected.

And for politicians, that’s all that really matters. So, they keep kicking the can down the road and making up fanciful tales about “plans” and blaming the other guy/gal and hoping to hell no one is really paying attention.

[Allan from Fallbrook]

Speaking of politicians and bullshit, you gotta love the French: http://www.theworld.org/2012/07/french-president-hollandes-plan-to-tax-rich-touches-nerve/

It will be interesting to see how this plays out. At some point, you run out of people and companies to tax (into oblivion) and have to face the music.

[SK in CV]

[quote=Allan from Fallbrook]
SK: Yup, agree on solvency versus IOUs being two separate issues. My point on the IOUs was simply that the government has been dipping into the SS trust fund for years and not “repaying” the money (quotes used to denote that the amounts represent an “intracompany payable” in accounting parlance.)

[/quote]

Last time. The government has had no choice but to “dip into” the SS Trust Fund. The only legal investment the trust fund can make is in special issue US debt. Even if there was no other federal debt, the fund would still have to buy those bonds, the treasury would still have to sell them (essentially borrowing the funds). The debts have never been repaid before last year because the current year collections have always exceeded current year benefits. As a practical matter they couldn’t be repaid.

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