[SK in CV]

[quote=sdduuuude]The graph shows 7 years of money supply increase.
Inflation has, in that 7 years, been unremarkable.

Seems if the increase in money supply was going to cause major inflation, we would see some movement by now. Something else must be in effect.

I’m with Arraya and Econ Prof on this one.[/quote]

There are at least 2 kinds of inflation. Consumer price inflation, as most commonly measured (however flawed) in the US by the CPI. And monetary inflation, as measured by increases in money supply.

Austrian economics, which had a productive origin in the late 19th and early 20th century (and has pretty much stagnated in an idealogical circle-jerk since then) focused on monetary inflation and (theoretical) price deflation. It’s not incorrect. It’s just not always useful, and shy empirical evidence. From an academic standpoint, Austrian business cycle theory had value. Since then, it’s pretty much, from its subscribers view point, a classical heterodox. For others, it’s simply something to point at and laugh. It’s a joke. Ergo, Ron Paul.

[SK in CV]

Can I borrow your printer? I have a nasty letter I need to send to the IRS.

Anonymous

[SK in CV]

I guess it’s possible for a bankruptcy court to wipe out a 2nd that is far from having any equity. Can’t do it with a senior lien, so I can’t imagine what the upside is for the borrower. I suspect the only party that gains from this is the attorney. Borrower/debtor gets nothing more than a house that’s still underwater and ruined credit. Happy birthday.

[SK in CV]

[quote=pri_dk][quote=UCGal]SS is a defined benefit retirement program. Does everyone here who argues against defined benefit plans want to give up their SS?
[/quote]

Although SS has many things in common with a defined-benefit retirement plan, it is not really a retirement program. In reality, it is an insurance program.

It’s even called that: Old-Age, Survivors, and Disability Insurance (OASDI)

http://en.wikipedia.org/wiki/Social_Security_(United_States)

What SS is today, and what it is was originally meant to be are quite different. SS was meant to protect against poverty due to disability and old age. It was never meant to be a retirement program, although as people grew older and more of the population expected to receive it, it became more and more perceived as a supplement to retirement income.

Defined benefit pensions really haven’t been around that long, and I beleive it can be argued that they are an idea that has failed. Pensions are not really the “norm” – they’ve only been around for one, or perhaps two generations. Some have succeeded, some have failed. There are two reasons that the trend is moving away from the use of defined benefit plans. One, it turns out they are far more risky than many beleived they would be (just ask a retired Continental Airlines pilot) and second, it’s just not a good idea for employers to be in the investment business. Companies (and government agencies) should focus on their core business and not run a side business investing their employees’ compensation.

[quote=”SK in CV”]A DB plan isn’t just risk. There is, and has been, pretty substantial reward.[/quote]

Exactly. You may lose, you may win. Why are governments playing “casino” with someone else’s money? Sounds a lot like Wall Street, no?

But back to Social Security:

I am very much in favor of keeping the existing Social Security system in place, provided we make the necessary and very feasible tweaks to keep it sustainable. These “tweaks” include increasing retirement age and decreasing benefits (which will certainly impact me, btw.)

Why am I in favor of SS but not public-sector pensions? Because they serve very different purposes. Like I said above, SS is insurance – it protects against poverty and is part of the safety net that government should be providing.

Pensions, on the other hand, are a form of compensation. In particular, as deferred compensation, pension compensation is often used irresponsibly in such a way that the costs are hidden and big problems grow unseen (sound familiar?)

Government employee compensation should be equitable and transparent. The only way to ensure that it remains transparent is to avoid the use of deferred compensation. Pay employees at the time of service, just like anyone else receiving a paycheck with benefits and 401K. If people want a defined benefit, they can buy an annuity. There’s simply, no reason that public and private sector compensation cannot be “apples-to-apples.”[/quote]

I think you’re trying to play with words to get the outcome you want. Social Security was a retirement pension from the beginning. Some pensions are compensatory. Some are government retirements. Disability pensions are also pensions. And maybe they’ve been around longer than you thought. The teamsters pension funds have been around since at least the very early 50’s, probably longer.

You got me stumped on the last paragraph. Government pensions are transparent. They are deferred compensation (just like every employer retirement plan, INCLUDING 401Ks.) And the only reason it doesn’t seem like apples to apples is that the private sector moved away from defined benefit plans.

[SK in CV]

My office uses Mozy for our roughly 150 employees, almost all of whom work remotely. I set mine to back up twice a day, works seamlessly. Pay about $4 per month per employee, though I have no idea how much it would cost for a personal plan.

[SK in CV]

[quote=Arraya]Maybe some of the chickens might ask why the farmer is controlled by the fox? What is the motivation for the farmer lifting the fence? Let’s connect some dots.

[/quote]

Bingo. I think that’s exactly what this is about. It’s the evil fox AND the farmer who has more than just lifted the fence, he has served the chickens on a silver platter. While the farmer is telling the chickens to renew his contract, because he knows what’s best for them.

And some chickens, who believe they sit at the top of the roost and are safe, argue that letting the foxes have free reign of the hen house, and sacrificing the bottom rung of hens, cull them, so to speak, is the solution. Destroy their nests, evict them from their shelter, and somehow equilibrium will be restored. Gold feed. No more fiat feed. With carcasses everywhere. Problem solved.

Who wants wings?

[SK in CV]

[quote=sdrealtor]I couldnt resist. I emailed him and asked him how big the bedrooms were and what the condition of the roof was? Will let you know if he responds and how long it takes.[/quote]

The response i imagine:

The bedrooms are the right size. Not a size influenced by GOV intervention. They are large enough to do the things you need to do in a bedroom, without interference from FEDERAL government regulations. You will however be subject to STATE government interference, because that is the right kind. Though unfortunately, due to LEGISLATION FROM THE BENCH, sodomy is now legal in Texas If you have a uterus, it should also not be safe from STATE only invasion.

The roof was built in 1971. With REAL gold backed dollars. It is NOT a fiat roof. It may have to be replaced soon, and you can only replace it with new roof purchased with FIAT currency, so it will probably not last as long as my GOLD backed roof.

vty,

R. Paul

[SK in CV]

[quote=sdduuuude]For the state to choose to put taxpayer money at risk and imagine themselves to be capable of investing the money properly is a plan that will work perfectly up until the day when it doesn’t. Plus, they have to turn to a private investment contractor and have them do the investing for them – a cost that I’m sure CA Renter would like to avoid.

It isn’t the government’s place to take care of their employees for life or put our money at risk. The definition of “risk” is that there is both an upside and a downside, by the way.

Pay the employees now, let them manage their own retirement, avoid the risk, and avoid putting taxpayer money on the shoulders of the evil wall street people. I don’t see how that is a bad idea.[/quote]

I don’t necessarily disagree, but I’ll add a couple of points.

A DB plan isn’t just risk. There is, and has been, pretty substantial reward.

And the state doesn’t actually manage the money. It’s managed by a somewhat independent committee made up of representatives from the employees, appointees of the governor, and I think a couple ex-office holders (like former state treasurer, or something like that). Fees to the private contractors they hire to manage are paid by the fund itself, not directly by the state. Which means their fees are paid out of state monies, employee contributions and earnings.

And governments really do sometimes return savings to taxpayers in the form of tax reductions. It certainly happened at the federal level. And the top CA income tax rate has floated between 9-11% for many years. (may have been a rate slightly below 9%, i can’t remember.) So while the savings solely from pension cost reductions may not have been the reason rates went down, it was probably part of the reason.

On the taking care of employees for life thing…eh. Part of the comp package. I think there was a time when they weren’t covered by Social Security. Pretty sure teachers weren’t. I think SDPD for instance, still isn’t. DB pensions are/were a way to equalize.

[SK in CV]

[quote=urbanrealtor]
Defaulting might do it.[/quote]

Ya think?

[SK in CV]

[quote=bearishgurl]

Overall good and informative post, SK. Since retiree healthcare was provided older “Tier 1” retirees but never contracted with the unions, the way SDCERA solved the escalating costs of retiree healthcare was to charge the retirees 100% of their (group rate) premium. Tier I retirees plus the formerly Tier II (now added into Tier I) *newer* (pre March 2002) retirees are paid an allowance of $200 – $300 mo to offset monthly premiums (only if they subscribe to a plan) but the monthly premiums are nearly twice that and far beyond. Those retiring after 3/8/02 under an *enhanced* (Tier A) plan do not get the healthcare allowances. The entire monthly premium is/will be subtracted from their pensions.

The 06/07 Grand Jury Investigative Report on SDCERA stated that, at that time, only about 2/3 of (non-Medicare) retirees availed themselves of the County’s plans. This is understandable given the current competitive and choice-laden individual market out there (available to those without pre-existing conditions).

edit: The monthly healthcare allowance paid to SDCERA Tier I retirees (a finite amt of employees who have already left svc) is a fixed sum between $200 and $300 mo based upon years of service. As health plan rates continue to rise, this sum will continue to be fixed.

I note that nearly 100% of the older original “Tier 1” retirees are now eligible for Medicare or dead.[/quote]

Good information. I included the part about the spiraling health care costs only as it related to the auto industry, and that it wasn’t the monthly pension costs that almost killed them.

I really didn’t know exactly what the obligations for retireee health care costs for state and muni pensions in CA. Thanks for the info!

[SK in CV]

[quote=Rich Toscano]But this actually doesn’t really matter. Even if rates went up but home prices didn’t go down, I’d still be able to offer a lower-than-market rate, which would presumably increase the market price for the home from what it would have been with a non-assumable loan.

[/quote]

But, on the other hand, if rates went up and prices did fall, you’re upside down and the value of that assumable loan just disappeared. (Maybe. I have no idea if upside down loans are assumable. I’m guessing that an appraisal is part of the assumption process. Though I’m also assuming that reasonable standards are included in FHA rules. What am I thinking?)

[SK in CV]

[quote=sdduuuude]
Also, we are suggesting that putting new employees on a defined benefit plan only poses a risk for the future, give that we have seen this epic failure of the investments. Just put them on a 401K, negotiate a salary + employer 401K contribution, get out of the investment business and move on.[/quote]

Defined benefit plans used to be the model. Both private and public employers are moving towards defined contribution plans. Both may be short sighted. Big corporate entities moved away from defined benefit plans primarily because the cost of what they promised employees increased faster than the actuarial assumptions accounted for.

If you remember a few years ago when the auto industry was in massive trouble. The promised retirement benefits cost them more than they could afford. But it wasn’t monthly pensions. It was health care. More than once over the last 30 years, they had pension trusts that were actually over-funded, and they made deals with the unions to take that money back. Then the cost of health care spiraled up and out of control, and they were no longer over-funded.

The same thing has happened with many public retirement plans. We know that CalPERS was on target to be over-funded. And that was with very small contributions from both the state and the employees. So the earnings assumptions were actually smaller that actuals. Some plans had such outstanding investment performance than no contributions were required by either the state or the employees for many many years. Not even what is considered “normal costs”. Investment earnings covered both the projected future costs and the additional costs added each year. We didn’t hear any complaints those years about the high cost of public sector retirement benefits. Those savings weren’t set aside, they were spent elsewhere, or exactly like the tax cuts of almost a decade ago, returned to taxpayers in the form of lower tax rates.

My point is, in addition to risk, there is also a potentially huge benefit to defined benefit plans. (Ford, GM and Chrysler wouldn’t have had financial calamities they had, if the increase in the health care cost portion of the promised retirement benefits hadn’t far exceeded the outstanding investment performance of their retirement trusts) We had a once in 3 generations crash that the economy still hasn’t recovered from. Predictable? Maybe. But that was the cause of the problems with the public sector retirement pension shortfall. Not the overly generous pensions.

[SK in CV]

[quote=eavesdropper]
2. or if it’s because there’s a distinct possibility that he really believes it, and that, in his fertile mind, it makes absolute sense. Which would explain a lot of things about Mr. Ryan.[/quote]

Ryan is their best and their brightest. Sadly, and obviously, he is not near as smart as Republican leadership tells him he is.

[SK in CV]

wow eaves, beautiful.

[SK in CV]

[quote=pri_dk][quote]No offense, but why do so many people continue with the lies about public sector workers not taking a hit?[/quote]

Nobody said they aren’t “taking a hit.” We saying that they are offering only a token, insignificant amount.

[/quote]

Token, insignificant amount? Really? In addition to the mandatory furloughs which equate to a 4-7% pay cut, they’ve also increased their pension contributions by up to 5% of pay. So a 10% cut in take home pay is token? You can bitch all you want that too many government employees get way too much money. But the vast majority are paid fairly for their work. Average California civil servant makes around $65K a year. 10% cut from that is just a token? Really?

[Author]

Posts