The Retirement Heist

[ziggy29]

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Originally Posted by MichaelB These are actually two different issues. One is the past promise made toward pensions. Should it be respected? It wasn't for people in the private sector, so why should public sector employees be treated any differently? The other is the average wage. It has been sharply reduced in the private sector. Why should the public sector employee earn so much more? Throwing in unions is a diversion that shifts the discussion away from the real questions and offers a bogeyman that serves to rally support for actions that otherwise might be unacceptable. In my view the real issues are: - Should public sector employees be paid the pensions they were promised? - Should public sector employees be paid a living wage?

Agreed that unions are a side issue here. It's easy to use some people's negative views of unions to gain support for letting these "promises" become worthless.

I think the important thing here isn't that people want to see the "race to the bottom" accelerated by pulling the rug out from the public sector employees. To me, it's more a matter of drawing attention to the BS that we private sector stiffs have endured for *many* years and ask, why was it okay for us to get the middle finger from our employers for many years, and as soon as someone with a government employer has to sample a very small taste of what we've endured since the 1990s, it's an outrage that promises are being broken?

I don't want to see other people get screwed just because I did -- I hope I've made that abundantly clear in the past. But I do sometimes feel like a second class citizen when we endure years of frozen pay, eliminated retirement benefits, watered down health insurance and layoffs galore -- and almost no one seemed to be motivated into action. But let a tiny fraction of that "employee abuse" occur in the public sector, and the workers must be protected. I'm all for protecting them, but what about the rest of us? I can't watch my real wages decline by more than 10% over the last 6 years and watch the amount of taxes needed to fund public sector compensation continue to rise.

[GregLee]

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Originally Posted by ziggy29 ... some people's negative views of unions ... the BS that we private sector stiffs have endured for *many* years and ask, why was it okay for us to get the middle finger from our employers for many years, ...

Maybe there's a connection. The purpose of unions is to prevent employees from getting shafted by their employers. It sounds like you private sector stiffs got softened up by anti-union propaganda as a preliminary to getting that middle finger. The historical experience in America, as elsewhere, has been that working people need unions to protect their interests.

[ziggy29]

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Originally Posted by GregLee Maybe there's a connection. The purpose of unions is to prevent employees from getting shafted by their employers. It sounds like you private sector stiffs got softened up by anti-union propaganda as a preliminary to getting that middle finger. The historical experience in America, as elsewhere, has been that working people need unions to protect their interests.

Maybe, maybe not. My remarks weren't intended to become a referendum on unions per se (again, I think it's a side issue for the core subject of this thread) -- but I do think those who are in unions, and those who work in the public sector whether unionized or not, ignore the declining fates of the non-union private sector middle class at their own peril. In the long run, I think our interests are linked and aligned because we simply can't sustain the divergence in fortunes we've seen since the 1990s. So maybe one way for the public sphere to keep what it has is to support the interests of the rest of us who have fallen behind in our ability to keep funding it. An "us versus them" attitude creates a "divide and conquer" mentality that serves neither of us well. I think the middle class has been divided and conquered enough already.

[HFWR]

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Originally Posted by 52andout Also don't forget to be thankful for what you have, even if it is not exactly what was promised. Most of us who post here are among the best provided for in the world. Most of us live in nice houses, full of possessions, can attend university regardless of race, religion or gender, can heat our houses in winter and cool them in the summer, have children that can attend local schools and have more than enough food to eat. we are very lucky.

+1

[MichaelB]

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Originally Posted by ziggy29 I don't want to see other people get screwed just because I did -- I hope I've made that abundantly clear in the past. But I do sometimes feel like a second class citizen when we endure years of frozen pay, eliminated retirement benefits, watered down health insurance and layoffs galore -- and almost no one seemed to be motivated into action. But let a tiny fraction of that "employee abuse" occur in the public sector, and the workers must be protected. I'm all for protecting them, but what about the rest of us? I can't watch my real wages decline by more than 10% over the last 6 years and watch the amount of taxes needed to fund public sector compensation continue to rise.

Your final comment is the fundamental question of our time, for individuals here and the US economy.

[GregLee]

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Originally Posted by ziggy29 An "us versus them" attitude creates a "divide and conquer" mentality that serves neither of us well.

Gee whiz -- you should talk. Do you hear me attacking and insulting private sector workers?

[JP.mpls]

Clifp,
(FYI: Off topic from the pension discussion)
I have my 401K with Vanguard, and my allocation is similar to what you described. (50% Wellington, and the remaining 50% is divided into 4 other mutual funds.)

I just looked at the 5 year performance. I'm averaging 3% return through that time period. That is actually better than I thought, because I was down quite a bit at one point during that time.

Still not close to 6%, but we could blame that on my mostly uneducated allocation selection.



JP

[eytonxav]

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Originally Posted by MichaelB Your final comment is the fundamental question of our time, for individuals here and the US economy.

And I would think the answer to that is rather obvious, unless we want to end up as a socialist society.

[MichaelB]

I agree with Ziggy.

The race to the bottom works, but for an every decreasing few, and only until we reach bottom, when it goes bad for everyone. Even if pensions are backstopped the public sector pays by losing jobs, which is happening now at the rate of about 2% per year. Many new jobs in the private sector are at or below a living wage, insufficient to provide food and shelter, health care and retirement.

One option would be to relieve the worker of healthcare and retirement worries by fully funding both. That is, SS, Medicare and healthcare for working age people. Maybe subsidized or low cost housing as well. That would make the wage level more tolerable and relieve some of the greatest social stress factors society faces. If not this, we need to find some way to allow more of society to benefit from productivity improvements that have fueled profit levels to historic highs. We need to acknowledge that paying people less than is needed to live in good health is not a moral issue but (also) an unsustainable economic model.

[ziggy29]

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Originally Posted by GregLee Gee whiz -- you should talk. Do you hear me attacking and insulting private sector workers?

Show me where I have ever attacked or insulted a public sector worker. Until then, Greg, this is hysteria and blatant misrepresentation and I'll be waiting for your apology. But not holding my breath in doing so because I don't expect one from you.

There are times I've said I believe that the status quo for some plans is unsustainable, but I don't believe I've ever attacked government employees or advocated that those already working or retired in public service should have their benefits taken away or reduced. But have fun looking for evidence!

Seriously, knee-jerk defensiveness isn't much better than the misplaced attacks on public servants I see. Both are fueling the divisiveness. And I don't think we can "lift all boats" with the rising tides if we continue down that road. Pitting "public sector middle class" against "private sector middle class" serves the purposes of those who want us to race each other to the bottom.

[ziggy29]

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Originally Posted by DFW_M5 And I would think the answer to that is rather obvious, unless we want to end up as a socialist society.

I'd like to think that there isn't an all-or-nothing choice between socialism and plutocracy.

[ERD50]

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Originally Posted by kyounge1956 I don't think there is necessarily much to be gained by trying to figure out who is to blame. Even if it's possible to figure out where the blame lies, it may not be possible to get the money back from the guilty party or parties. It's more useful, IMO, to determine how to fix the problem and prevent it from recurring, and that solution is going to vary from system to system.

(I'll take this second part first...)

Unfortunately, there's a lot of truth to that. If we were somehow to determine that certain politicians and/or labor leaders were 'to blame', it's not like they have enough money in their pockets to make a dent in the damage they have done (and this makes the wild assumption that we could get our hands on what they have). But one benefit of analyzing the 'blame' is to help prevent it going forward.

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Given the woeful financial ignorance of a large percentage of Americans, how can you be sure that union leaders were "fully aware" the funding was inadequate? They aren't actuaries. ...

I'm not so willing to let them off the hook so easily. They don't have to be actuaries - they have the reports from the actuaries, and they are not that hard to evaluate. If they can't, they need to get someone to walk them through it, or they are not doing their job. It's not rocket science.

I think the scenario that clifp played out earlier is closer to what has happened in many cases:

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Originally Posted by clifp So when public employee union head is sitting across from the mayor and says we want 5% increase next year and the mayor say, "Joe you know I'd love to help you but the budget only allows 2%.". At which point Joe will start asking for allowing unlimited accumulation for sick leave and letting it count for pension calculations, letting workers buy 5 years of service, eyeglass and dental coverage for retirees etc. Now individually these perks aren't that expensive, especially if you make lowball assumptions about usage. However, collectively they add up to ton of money. But the big money is almost always well in the future. So do we really expect a politician to risk a strike from his public employees, they endorsing an opponent, all this reduce the future budget problems of some future successor?. Lets get real.

:

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Deliberate misdeeds are not required to reduce a pension system's funding level from 100% to the mid-sixties in three years—all it takes is loss of about a quarter of the fund's assets in a stock market crash. I know, because that's what happened to the City of Seattle retirement system. There were no union demands for increased pensions, no employee abuses like spiking (which isn't allowed under our system) and no skipping of contributions by the employer.

OK, each case is different - but what to do in the case you describe? Ideally, we would want that fund to get back to 100% funding. Offhand, I have to wonder if they were too aggressive with their AA to have a 45% drop for a market drop of 25%. I assume the rest is draw down from pension payments, but that seems like a lot of draw down if it was really 100% funded, but one would need some numbers and do the math. I wonder if the 100% number was based on too optimistic assumptions - maybe we would say it was not really 100%?

For most private employees now, not earning pensions, they are largely relying on their 401K. If it drops due to the market, nobody does anything for them.

So are they discussing ways to increase the funding level? That could be increases in employee contributions, employer contributions (from taxpayers) or cuts to benefits. Or, one could assume the market will come back and everything will be fine. Have they considered an insurance program - similar to what private pensions do (the PBGC). With that insurance program, a collapsed pension plan does not go to taxpayers for help, they tap into the insurance plan that they have been paying into.

I won't re-hash the details, and I would not want to see promises to the workers altered, but it isn't reasonable to think there would not be push-back from taxpayers if the biggest part of the answer is raise taxes to fix it. They have their own problems to deal with, and they're not getting help.

-ERD50

[kat]

In NY several years ago, before the meltdown, it was discovered that an independent accounting -- an expert who does this for a living -- had cooked the books, giving people what they wanted to hear about the long term feasibility of state worker benefits. His independent analysis had been used by all the major unions and accepted by the state.

[Chuckanut]

I know may private sector workers who are not suffering these days. One of my neighbors just got a bonus from the company he works for. Another is waiting for the company to go public and exercise her stock options At which time she will get at least $150,000 and, if the market improves closer to $250,000.

They fact that Mr. A got cheated does not justify cheating Mr. B. Thhat thinking makes fools of us all as we fight for what is left over after the big boys and girls have feasted at our expense.

Wake up folks! If you have been laid off, had your salary and benefits cut, it has not been because some clerk at the motor vehicle office or some teacher has taken aim at you. It is because many greedy and powerful people drove our economy into the ground for their own benefit.

[Chuckanut]

For the record, in my state the pension systems for public employees had been getting less genorous for over 30 years. it is now a hybrid of defined benefit and defined contribution. There are no medical benefits after retirement (unlike a number of people I know who retired from private industry) and the COLA's are capped. And we public employees have seen our wages cut. Sure, we did get furlough days, but we did not get a reduction in what we are expected to do. So like people in private business, we work unpaid overtime to get our jobs done.

[ziggy29]

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Originally Posted by Chuckanut They fact that Mr. A got cheated does not justify cheating Mr. B. Thhat thinking makes fools of us all as we fight for what is left over after the big boys and girls have feasted at our expense. Wake up folks! If you have been laid off, had your salary and benefits cut, it has not been because some clerk at the motor vehicle office or some teacher has taken aim at you. It is because many greedy and powerful people drove our economy into the ground for their own benefit.

That was pretty much my point, but some obviously chose to view it as an attack on public servants. My thought was one of "we should all hang together lest we all hang separately." But it is a two-way street. Neither side should *expect* the support of the "other side" unless the support is reciprocated. I think the moneyed interests want us fighting each other so we won't turn on them. That was the point I was getting across when someone here thought it was a good excuse to take a swipe at me.

[eytonxav]

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Originally Posted by ziggy29 I'd like to think that there isn't an all-or-nothing choice between socialism and plutocracy.

Its never all or nothing, but if you extrapolate what you noted and it becomes an ongoing trend, whereby the gov't becomes the only source for good paying jobs with benefits, we are all doomed. America was founded on the principles of capitalism and democracy, and as a parent who hopes for a future for my kids that is better than what I had, I am very concerned at the present state of affairs and am certainly willing to feel some pain to make it better for the next generation.

While I am not trying to pick on gov't workers per se, one other big chasim that I see between jobs in the commercial sector and gov't is in the area of productivity. On-going productivity improvements has enabled the private sector to do much more with less; can we really say the same is true for gov't being more efficient and productive? It seems like the only answer has been to add more govt workers and additional govt functions. My wife works for the city as a part time worker, $13/hr, no vacation or medical benefits. I am appauled at how little the full time workers do, and all the vacation/sick time that they get and their inability to drive continuous improvement. If they worked in corporate america, most would have been riffed long ago. I am not blaming the workers themselves, but this system and those in charge are out of control and as a tax payer, I don't feel a desire to continue to feed this system unabated. As a shareholder, I could say the same thing in terms of how top execs have bilked both the workers and shareholders alike. Sorry for the rant.

[ChrisC]

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Originally Posted by ziggy29 I'm all for protecting them, but what about the rest of us? I can't watch my real wages decline by more than 10% over the last 6 years and watch the amount of taxes needed to fund public sector compensation continue to rise.

Right, and as soon as you think someone else is getting a better break than you, we get the sense that someone is unfairly benefiting from governmental policy. On the other hand, there is a tendency to ignore the rather unfair benefits that lots of us get (the mortgage interest deduction for homeowners comes to mind).

Do you really believe that public sector compensation, even including decent retirement and health benefits, has appreciably increased over the last 6 years to the extent that taxes need to be increased to meet compensation commitments? The pension underfunding issue appears to me to be a reflection of political gamemanship and poor planning.

I believe that the public sector employment is taking on the chin as well as you've been taking it. I hope that makes you feel better.

[Chuckanut]

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Originally Posted by ziggy29 Seriously, knee-jerk defensiveness isn't much better than the misplaced attacks on public servants I see. Both are fueling the divisiveness. And I don't think we can "lift all boats" with the rising tides if we continue down that road. Pitting "public sector middle class" against "private sector middle class" serves the purposes of those who want us to race each other to the bottom.

Well said.

[ziggy29]

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Originally Posted by ChrisC I believe that the public sector employment is taking on the chin as well as you've been taking it. I hope that makes you feel better.

If you read anything else I wrote, you'd know it doesn't make me feel better. But acknowledging that doesn't allow the expression of overly defensive indignation.