The Public Pension Problem

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Erik Kain

Erik writes about video games at Forbes and politics at Mother Jones. He's the contributor of The League though he hasn't written much here lately. He can be found occasionally composing 140 character cultural analysis on Twitter.

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161 Responses

  1. Avatar Bob
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    says:

    Here in Kansas the state retirement system, KPERS, is definitely suffering large shortfalls owing to the current recession, amounting to a whopping 19.6 % in 2009,

    “But the losses in two of those years – 4.4 percent in 2008 and 19.6 percent in 2009 – following the financial market meltdown on Wall Street were large enough to pull growth in total investment profit averages below the 8 percent target for the last 15 years….”

    http://www.kansasreporter.org/70281.aspx

    Legislators are looking to scrap the system for new workers and go with 401k type programs. In other words, reducing benefits for those workers once they retire. Just the hell you describe E.D.Report

  2. Avatar Herb
    Ignored
    says:

    “We can look at this issue as one in which public sector workers are paid too much, or one in which private sector workers are paid too little.”

    Absolutely right. I’ve heard argument after argument about why corporate executives deserve their tens of millions. But no one has offered any explanation as to why everyone else deserves so much less.Report

  3. Avatar E.C. Gach
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    says:

    I could not agree more, great links and followup.Report

  4. Avatar greginak
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    says:

    More great stuff E. Apparently BJ is good for you…snicker.

    The increasing demonization of public sector workers shows how much they need unions. In some things i’ve read, and some comments i’m sure are coming on this post, state and local workers evil, incompetent and actively trying to hurt everybody else. The Wisc. example shows exactly how easy to target public workers are. The Wisc governor isn’t trying to strip collective bargaining rights so he keep treat the employees well.Report

  5. Avatar Mad Rocket Scientist
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    says:

    I honestly don’t see the problem with a 401K style pension plan for new workers. My 401K outperforms my pension plan regularly, mainly because I don’t just pick a few stocks & funds and let them ride unobserved (I check on them every quarter, and adjust contributions as necessary; takes about an hour).

    People just don’t want to have to think about retirement until they hit 60. My peers track and adjust their retirement funds consistently. We’ve all seen too many pensions destroyed by mis-management to trust those pensions.

    I may be subject to market fluctuations, but I don’t have to worry that my retirement will fall apart because some chuckleheads in the pension office, or the legislature, couldn’t be bothered to fully fund and manage the fund for political, or personal, reasons.Report

    • Avatar Bob in reply to Mad Rocket Scientist
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      says:

      The average yearly income for a full time state employee in Kansas is about $34,000.00, just under. The maximum contribution for a 401k is $16,500.00. I wonder how many dollars the average state employee could reasonably be expected to contribute to her 401k. I doubt very many of them would max-out.

      But, honestly, sounds like you will be fine with both your 401k and a pension. Really, I don’t begrudge your situation. Good-on-ya.Report

      • Avatar MadRocketScientist in reply to Bob
        Ignored
        says:

        Pay your workers more, & get out of the retirement game. The downside, some moron won’t contribute to his 401K & will wind up eating beans & franks through his retirement. The upside, states can start dealing with budgets on a yearly basis, instead of having to budget for pensions far into the future (not that they are doing that now, but they should be). Also, 401Ks are portable, allowing workers more freedom of movement in the job market.Report

      • Avatar Lyle in reply to Bob
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        says:

        So you change the benefit formula to be the average of the highest 3 out of the last 5 years, excluding any overtime. Also take away the payment for unused sick days which does not exist very much in private employment. (If your sick stay home).
        In CA its the highest 1 year including overtime. So the last year the worker piles on a lot of overtime, pension should not include overtime (perhaps allow up to 10% of salary)Report

  6. Avatar Freddie
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    says:

    I would young Will, he of the great antipathy to the people who make up unions– and let’s not pretend that isn’t what we’re talking about– whether he would be unhappy if an employer reached into his bank account and stole money that he earned from them, fairly and legally, according to a contract negotiated in good faith and fully carried out by him. What would Will do?

    But of course, that’s not happening to Will, so he doesn’t care. It’s purely philosophical.Report

  7. Avatar Will
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    says:

    Fair ball, but this is secondary to my first, and more fundamental, concern, which is that I don’t believe you should be forced to affiliate with or subsidize a union just because a majority of your coworkers choose union representation. This isn’t something that can be tweaked at the margins – it’s the fundamental model for union membership across the country. And I have no interest in reviving or expanding that model, be it in the public or private sectors of the economy.Report

    • Avatar E.C. Gach in reply to Will
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      says:

      …which is that I don’t believe you should be forced to affiliate with or subsidize a union just because a majority of your coworkers choose union representation.”

      The logic of that would seem to support regulating/restricting any large entity that is participated in en masse.

      If you don’t want to be forced by the majority of your co-workers, why wouldn’t you just change jobs?

      If I don’t like being forced to shop at a Walmart because most of my neighbors do, what recourse do I have but to move?

      A lot of anti union arguments seem at their core to rely on maintaining individual choice and liberty by denigrating the majority. Very anti free market in a way, at least in the traditional sense of a free market.Report

      • Avatar DensityDuck in reply to E.C. Gach
        Ignored
        says:

        “If you don’t want to be forced by the majority of your co-workers, why wouldn’t you just change jobs?”

        If you don’t like your employer’s compensation package, why wouldn’t you just change jobs?Report

        • Avatar Jaybird in reply to DensityDuck
          Ignored
          says:

          “Hey, if you don’t like the demands of the American Worker, why don’t you just open a factory in Somalia???”

          “That’s a good idea. Except, instead, I’ll put one in Singapore, Costa Rica, and the call center can be in India.”Report

    • Avatar Herb in reply to Will
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      says:

      Why can’t you just choose to get a different job then?Report

      • Avatar Will in reply to Herb
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        says:

        Good point. I think we should extend this logic to other areas. Think your job is too dangerous? Change occupations! Worried about unsafe working conditions? Get a job down the street!Report

        • Avatar E.C. Gach in reply to Will
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          says:

          That seems to be the idea. Of course if your job is dangerous but you don’t want to quit, solution tends to be unionization.Report

        • Avatar Herb in reply to Will
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          says:

          I don’t have a problem with that. Dangerous jobs often come with a little extra incentive, so I think they’re mostly filled by people who want to do them.

          If you really do think your job is too dangerous, you should get another job.Report

          • Avatar Will in reply to Herb
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            says:

            My comment referred to the idea of getting rid of workplace safety regulations because employees are always free to change jobs.Report

            • Avatar E.D. Kain in reply to Will
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              says:

              Is this common? People wanting to work somewhere but not wanting to be part of a union? Other than scabs…?Report

              • Avatar Will in reply to E.D. Kain
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                says:

                Unions rarely get voted in unanimously. So yes, I’d say it’s fairly common.Report

              • Avatar athenaios in reply to Will
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                says:

                But that standard, you might as well declare majority rule in a democracy a failure. It’s preposterous to simply assert that “it’s fairly common” without actually citing statistics, and offering something like a breakdown of what those statistics actually mean.Report

              • Avatar Will in reply to athenaios
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                says:

                Well, the NLRB doesn’t have a breakdown of how workers voted during unionization elections. All I can find is data on how many elections were won and how many were lost. The ratio seems to be about 2 to 1, which suggests that plenty of workers vote against unionization:

                http://www.nlrb.gov/chartsdata/petitions#chart9tagReport

              • Avatar athenaios in reply to Will
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                says:

                But without knowing precisely what they were asked to vote for, what the company threatened to do if they unionized, and how the vote was conducted, it’s pretty silly to draw conclusions about how the 1/3 you cite actually felt about the issue in question. More to the point, a 2/3 majority is pretty impressive in most democratic systems. Why undervalue it? Isn’t this just a case of your ideological prejudices overwhelming your analytic ability?Report

              • Avatar E.C. Gach in reply to Will
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                says:

                I remember working as a checkout boy for Giant Food Stores when I was in high school. Part of my orientation was watching a 20 minute video in a room by myself on why unions were evil.

                No one at Giant wanted to be unionized. At least that’s what they said, and they seemed to mean it, even if it didn’t seem like they’d really thought about it.

                Acme on the other hand was unionized. I remember always wishing I had worked there instead. Though my friend always complained about having to pay union dues, I think if you could have demonstrated to him what the benefits were for having access to that collective bargaining, he would have stopped reciting his talking points.

                For cutting fish at a grocery store, he is pretty well compensated. That said, there’s that whole seniority thing, though that need not be the case.Report

              • Avatar Freddie in reply to Will
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                says:

                You really do have one of the most Pollyanaish views of the world I can imagine, and it really does contribute to a political platform that has nothing to do with reality.Report

              • Avatar tom van dyke in reply to E.D. Kain
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                says:

                The question seems again to be on of worldview: whether we should gear to the average or the exceptional.

                “While I was an employee at Microsoft, I was once in a focus group that turned out to be SPEEA looking to expand beyond Boeing. The pitch was appalling: didn’t I want a guaranteed raise every year? My response: No. I want Microsoft’s meritocracy system to work as it does — if I do great work, I am greatly rewarded. If I don’t do great work, why should I be rewarded?

                My concern is that an “average” pay raise will ultimately result in average performance. If companies like Microsoft are unable to reward their top employees with exceptional rewards, due to union contracts, they will unable to hire the talent they need. That talent will go where their work will be rewarded.”

                http://www.techflash.com/seattle/2009/01/QA_Marcus_Courtney_the_guy_who_tried_to_unionize_Microsoft37066169.htmlReport

              • Avatar MadRocketScientist in reply to E.D. Kain
                Ignored
                says:

                When the IAM went on strike at my workplace a few years back, there were a lot of members who did not want to strike, mainly because they were too young to have built up the savings needed to ride out a strike, but the older members, who did have the savings, were happy to vote for a strike and go take a vacation that wouldn’t count against their vacation time.Report

            • Avatar Herb in reply to Will
              Ignored
              says:

              Sorry, Will, didn’t see the tag.

              I also didn’t realize that giving employees the right to change jobs also gives employers the right to host unsafe workplaces. But maybe I’m just not following your snarky, insincere logic trail…..

              At any rate, it seems strange to think that it’s worse to “force” people to join a union than it would be to prevent people form unionizing.Report

              • Avatar Will in reply to Herb
                Ignored
                says:

                Let me try to respond less snarkily:

                There’s a fundamental difference between accepting a job under certain conditions and losing your right to self-representation and being forced to pay union dues because a majority of your coworkers want union representation.Report

              • Avatar Herb in reply to Will
                Ignored
                says:

                I get that.

                It almost happened to me when I worked at the phone company and I wasn’t too happy about it, mostly because joining the union would force a pay cut.

                But then again, if the effort had succeeded and I found the environment too onerous, I would have quit. Such is the joy of an at-will employment arrangement.Report

              • Avatar athenaios in reply to Will
                Ignored
                says:

                Except that self-representation ain’t gonna get you very far with most companies. That’s kind of the whole point of unions, Will. Moreover, you still do get to represent yourself, but within the union, not on your lonesome before the boss.Report

              • Avatar MadRocketScientist in reply to athenaios
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                says:

                Self representations works fine for the thousands of professionals out there.Report

        • Avatar Barry in reply to Will
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          says:

          Well, Will, that is prescisely the right-wing argument (except when it gores *their* oxen, in which case massive government power and harsh laws are obviously called for).

          At this point, if you don’t like being a member of a union, STFU. We’ve tried your way for the past thirty years, and have gotten sh*t for it.Report

          • Avatar Jaybird in reply to Barry
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            says:

            Could Michigan be held up as an example of the sh*t we’ve gotten?

            If not, why not?Report

            • Avatar Jesse Ewiak in reply to Jaybird
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              says:

              No, the Big 3’s problems are because they had shitty management making shitty cars with shitty marketing, not because they paid their workers a middle-class living.

              After all, BMW, Toyota, and all the other companies kicking our ass pay their workers well and have strong unions that would make your average American CEO pee his pants.Report

              • Avatar DensityDuck in reply to Jesse Ewiak
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                says:

                Since when was Toyota unionized?Report

              • Avatar Jaybird in reply to DensityDuck
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                says:

                I googled that too. Cursory googling also told me that BMW was unionized in Germany but not here.

                (But I didn’t google long.)Report

              • Avatar Jesse Ewiak in reply to Jaybird
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                says:

                I meant in their home countries where the brunt of their workforce is. Obviously, they don’t unionize workers here for the same reason Nike doesn’t allow union shops in China.Report

              • Avatar Jaybird in reply to Jesse Ewiak
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                says:

                Oh! So maybe the union comparison between the big two-and-a-half and BMW/Toyota isn’t an apples to apples comparison, per se.Report

              • Avatar Kyle Mathews in reply to Jesse Ewiak
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                says:

                Yes, but BMW does have a sizeable workforce here and their new (and old) plants along with Toyotas and Nissans are almost all in right-to-work states. They good salaries but my understanding is that the benefits aren’t as “gold-plated”

                As for the big 3, yes management was a problem but IIRC a contributing factor was that rising labor costs meant the company cut in areas that were important to its viability – like car materials and construction. The decline in quality made them less competitive. There’s no saying that absent those costs management wouldn’t have made the same decisions and simply kept the profits but still…I’d say labor contributed but was not determinate.Report

  8. Avatar superdestroyer
    Ignored
    says:

    The difference in the public and private sectors is that the public sector unions are creating claims on future tax revenue that are independent of the state of the economy in the future, independent of future demographics, and independent of future government obligations. It is just not that the public pensions are underfunded but that the underfunding will continue into the future.

    One should also remember that public pensions are available at an early age and it gives the retired public employee the opportunity to work enough in the private sector to still get social security. No real savings to the government.

    If the state and local governments want to continue to have defined benefit pension programs, then those governments must set aside enough money in each budget years to fund all future obligations. Then let the voters decided if they want to pay the taxes to fund such a system.

    Passing the costs to future tax payers is wrong and must stop.

    The private sector had to get out of defined benefit programs because the private sector could not make claims on future revenues when the companies might not exist.Report

    • Avatar E.C. Gach in reply to superdestroyer
      Ignored
      says:

      “The private sector had to get out of defined benefit programs because the private sector could not make claims on future revenues when the companies might not exist.”

      You mean the companies should not grant benefit programs that make claims on future revenues. The company/government agrees to this. You make it sound as if the unions have guns to the heads of employers. In fact, many anti union arguments make this out to be the case. The very same people that usually (though this might not include you) argue that people can vote with there feet/pocket books.

      If the company can’t meet the union demands, find new workers. If it can’t find new workers, meet the union demands. If it can’t do either, perhaps the business should not be in business (or public service should not be provided).Report

    • Avatar MFarmer in reply to superdestroyer
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      says:

      Don’t bring economic reality into the discussion — it just pisses them off. By God, it can be done, because it’s the right thing to do, and reality be damned. They’re creating a new reality.Report

      • Avatar E.C. Gach in reply to MFarmer
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        says:

        MFarmer, would you support allowing courts to help administer the renegotiation of all home mortgages or student loans that are in default?Report

        • Avatar MFarmer in reply to E.C. Gach
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          says:

          If the banks want to renegotiate, yes.Report

          • Avatar E.C. Gach in reply to MFarmer
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            says:

            So by that same reasoning, pension contracts could only be renegotiated if the unions agreed, correct?Report

          • Avatar athenaios in reply to MFarmer
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            says:

            And what if the banks do not wish to renegotiate, having in the meantime gambled with those mortgages and student loans? Which is, by the way, what has happened in many cases in the current, ongoing crisis. The banks no longer negotiate, because it’s more profitable to them to play the casino, and because, in many cases, they no longer even have the paperwork for said mortgages. Are you happy with this outcome?Report

            • Avatar MFarmer in reply to athenaios
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              says:

              Am I happy with the outcome? See, this is why you can’t discuss the reality of situations, especially economic reality. It always comes back to some moral issue where one side takes what they think is a morally superior position, as if that is going to change the reality. It doesn’t matter if I’m happy or not, reality always wins in the long run. Looking at the economic situation objectively, it is what it is whether I’m crying or laughing. Plus the question itself is smugly righteous, but irrelevant to what we’re discussing, unless you believe your righteous position calls for government coercion to force banks to renegotiate all bad mortgages and student loans. That ought to fix the problem. Then nobody but the most wealthy with A+ credit will be buying homes, unless goverment forces banks to make loans according to government approval, then when they go bad force the banks to renegotiate again.Report

              • Avatar athenaios in reply to MFarmer
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                says:

                You are just bloviating, Farmer. This isn’t about your feelings – unless you make it that way. Real people have suffered loss of their homes and ruin of their credit because of the banks. Conjuring up ludicrous scenarios about how government intervention will ruin things is fatuous in the extreme. If you don’t really care about American citizens, or the American economy, both of which are directly affected by the corruption and the folly of the banks, be honest enough to say so, rather than engaging in verbal masturbation from the comfort of your parents’ living-room.Report

              • Avatar MFarmer in reply to athenaios
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                says:

                This is enough. This place has become Balloon Juice II — Adios. This is not a flounce — this is a final goodbye — I’ve had enough. I came back to particpate the last time I left because Erick asked me to, but this time I’m leaving because personally I don’t see any value in this type of propaganda and smearing.Report

              • Avatar Rufus F. in reply to MFarmer
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                says:

                Because of the commenters?Report

              • Avatar Jaybird in reply to Rufus F.
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                says:

                Because of the “parents’ living room”, I imagine. Though the whole “you don’t think what you think, you just have your position because you don’t care about people” was a nice touch.Report

              • Avatar Heidegger in reply to Rufus F.
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                says:

                Could it because of a particular psychotic crackpot who adds not a single useful word into an otherwise intelligent conversation? Who also uses a tasteless, Nazi (alleged) pseudonym? I hear ya and I feel your pain. Do I ever. So farewell, my friend. As the immortal words to that classic Beverly Hillbillies song go, “Y’all come back now, y’hear?”

                A bit more serious…

                Report

              • Avatar E.C. Gach in reply to MFarmer
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                says:

                I’m sorry to hear that MFarmer. I never much agreed with you on domestic matters like this, but you always had a refreshing take on foreign affairs and other issues. You will be missed.Report

              • Avatar RTod in reply to MFarmer
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                says:

                I hope this is a momentary emotion thing and you return Mike. I almost always disagree with you, but I think you add far more to the discussion than the trolls subtract.Report

              • Avatar Bob in reply to RTod
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                says:

                A song for MFarmer.

                Report

              • Avatar Rufus F. in reply to RTod
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                says:

                Also, I’d imagine they’ll get tired and leave before long.Report

              • Avatar Eric Cartman in reply to MFarmer
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                says:

                Screw you guys, I am going home!

                Sorry, couldn’t resist.Report

    • Avatar Barry in reply to superdestroyer
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      says:

      “The private sector had to get out of defined benefit programs because the private sector could not make claims on future revenues when the companies might not exist.”

      Lie. That’s why we had pension funds.

      What happened was that corporate elites found out that when they terminated such plans, they could take an alleged ‘surplus’ in the funds for themselves.Report

  9. Avatar Tom M
    Ignored
    says:

    The difference in the public and private sectors is that the public sector unions are creating claims on future tax revenue that are independent of the state of the economy in the future, independent of future demographics, and independent of future government obligations.

    That’s not the “difference”, that’s just an explication of how the system works, has worked and will work.

    One should also remember that public pensions are available at an early age and it gives the retired public employee the opportunity to work enough in the private sector to still get social security. No real savings to the government.

    Why do you hate the military? Oh, I see, it’s just the postal employees you find detestable.

    Passing the costs to future tax payers is wrong and must stop.

    Oh, where were you in 2001? Vote for Bush? Support the wars? Medicare Part D? Jiminy Christmas, super, who are you Mr. Obvious?

    The private sector had to get out of defined benefit programs because the private sector could not make claims on future revenues when the companies might not exist.

    PBGC. Look it up.Report

    • Avatar MadRocketScientist in reply to Tom M
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      says:

      Actually, I’m a vet & I’m all for making other vets wait until they are 65 to get their pensions, along with teachers, and cops, and firefighters, and any other state worker (excepting disability).

      The government sets a retirement age, and folks should not be able to touch any kind of tax sheltered/deferred pension until that age is reached. If you want to retire early, , you get to draw off of unsheltered funds.

      Pensions that can be tapped at about age 40 are unsustainable if the average person can easily expect live another 35 years.Report

      • Avatar Tom M in reply to MadRocketScientist
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        says:

        Um, okay but so what? It has to do with what actuarial assumptions you want to make in setting up the plan. Frankly, the military program was designed to do exactly what you find less than optimal. Fair enough, but serving isn’t the easiest life and when I was making $48 every 2 weeks, a pension at 40 didn’t look bad but it wasn’t going to make me rich.
        I don’t begrudge my uncle’s double dipping and if the plan doesn’t forbid it, then you have to live with it. Nobody makes you take it.

        As for private companies, go back and look at how the auto companies gamed their own pension systems back in the 80s. By assuming a higher reinvestment rate, the companies paid less per year. When long term rates were in the 5 or 6 range, GM used 9.5 so they had to put less into the plan in the current year thereby boosting current revenue. If the people, citizens, paid more attention when times were ordinary, they wouldn’t have to be up in arms (okay, not yet) during tough times.
        Ya snooze, ya lose.Report

    • Avatar superdestroyer in reply to Tom M
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      says:

      The military pays social security. The military also has a thrift savings plan that is aimed at those who get out before 20 years.

      Why did so many politicains hate the military so much that it took two decades to get them 401K plan instead of forcing them to stay in 20 years to get any form of retirement.Report

  10. Avatar Herb
    Ignored
    says:

    Also…

    “John also calls the prison guard union in California catastrophically strong. This raises another point: there are some public sector unions that have too much power. ”

    If the California prison unions are way too strong, I seriously doubt it’s because their union reps are super-aggressive. I suspect it might have something to do with the sheer size of California’s prison system, as well as the perennial urge to privatize everything.

    If you’re a guard about to be RIF’d and replaced by some GEOGroup contractor, I bet you’re going to be a little more receptive to any help you can get from your local union rep…Report

    • Avatar Barry in reply to Herb
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      says:

      I would also point out that the right has been pushing more criminalization of just about everything (except when done by the elites), longer sentences and harsher and nastier prisons.

      It’s far from surprising that groups connected with the prison-industrial complex gained power.

      Ever noticed how much power the military-industrial complxed has gained in the past several decades?Report

      • Avatar Pat Cahalan in reply to Barry
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        says:

        > I would also point out that the right has been pushing
        > more criminalization of just about everything

        I didn’t see decriminalization of much during the last 24 months… or even a push for such. And while it’s definitely true and fair to say that anti-crime folks have a tendency to skew right, if you look up the voting records on a lot of these criminalization bills you’ll see an awful lot of (D) “yay”s.

        > Ever noticed how much power the military-industrial
        > complxed has gained in the past several decades?

        Sure have. The fact that neither party has seriously engaged this problem when they’ve both been in power (in both cases, at least for a while with a majority in both houses) in the last two decades does not lead me to believe this is a right-facing problem, only.Report

  11. Avatar BSK
    Ignored
    says:

    What I wonder is how states are able to change the conditions of pensions after the fact. Even if public employees are granted seemingly absurd pensions, if it was a condition of the contract they signed, what right does the government (or anyone else) have to unilaterally change that down the road? My dad is a fire fighter on the verge of retirement and went from a guaranteed 110% of his final salary to 80%. Was the 110% salary a reasonable figure? Most likely not. But it is the contract he signed. All of the people saying that existing contracts should simply be ignored because they seem outlandish seem really out of place to me. We absolutely should be more prudent going forward, but it seems unfair to simply change the rules once they work against you.Report

    • Avatar Mike Schilling in reply to BSK
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      says:

      You need to learn to distinguish between contracts that are inviolable (golden parachutes for CEOs, performance bonuses for money managers, tax rates for the obscenely wealthy) and those that can be ignored (union workers’, payroll tax rates.)Report

      • Avatar BSK in reply to Mike Schilling
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        says:

        Thanks, Mike. But what legal justification does the government have for doing this? How do they roll over the unions in this way, when they are seemingly unable to stand up to them on anything else?

        Right now in NY, there is a move to cut a supposed $10,000 per year bonus from some retirees (not sure which industry they were in). The government’s argument is that they can’t afford these bonuses. The union’s argument is that they are not bonuses but are stipulations of the contract. Naturally, the government has the public support because they’re painting the retirees as greedy and stealing from public coffers. They very well may be greedy, but they have a signed contract, don’t they?Report

        • Avatar Barry in reply to BSK
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          says:

          “Thanks, Mike. But what legal justification does the government have for doing this? How do they roll over the unions in this way, when they are seemingly unable to stand up to them on anything else?”

          Their stated justification is ‘blah blah blah’; what gets heard by the judiciary is ‘we want to f*ck some non-elites”; what gets heard by the Republican base is ‘somebody who’s not you (or your masters) is getting something, and that’s Wrong’.Report

  12. Avatar Will H.
    Ignored
    says:

    The solution for public sector pensions should be the same as with private sector pensions.
    When they have to pay out more than they take in, the whole plan drops in value. Next year’s payout will be less, as payouts are made only from available funds.
    And there’s no need to feel sorry for the poor public employees then.
    The way it works for the private sector is that pension contributions are a part of the total package. You vote as to how much money you would like to see on your paycheck, and how much you would like to go to benefits, including insurance.
    And my insurance is paid entirely with my own money from the benefits part of my pay– the company does not pay one penny toward my insurance (or make matching contributions to a 401(k)). So I have no claim on anything other than the part that was voted on.

    Now, if public sector employees have voted to take more on the check at the risk of their pensions, then fine. No problem exists. Let the local deal with it.
    If they receive compensation– any manner of compensation– that isn’t paid up front, that has to be added in to the value of the total package.

    But I don’t understand what the problem is.

    It’s probably the same thing that I see with other failing unions.
    Older workers voted in lower wages for new hires, so that they could keep their current wage level.
    Once there were enough new hires at the lower wage level, they voted down the benefits for the older workers.
    When the membership divides against itself, it’s all downhill after that.

    Public pension problem?
    There is no problem.
    You pay out from available funds.Report

    • Avatar Will H. in reply to Will H.
      Ignored
      says:

      I took a look at this because I was curious.
      For my own union, an average of current compensation levels from a brief survey indicate that some 71.8% of the compensation package is realized in wages, while the remainder is in the form of benefits.
      In the chart in the post, it shows the figures of 28% and 6% respectively.
      That means that only 17.6% of the compensation package is in the form of benefits.
      Of course, that 17.6% figure does not reflect additional compensation; such as health insurance, sick leave and vacation time, and tax contributions to the pension program. So the numbers aren’t going to match up evenly.
      But it looks to me like they voted to take too much on the check.Report

  13. Avatar Sam MacDonald
    Ignored
    says:

    OK, dude. I get your new angle. But this is nonsense:

    “2) the anti-tax crusaders have made it very difficult to raise revenue for all sorts of things including”

    Where, exactly, is it hard to raise revenue? GO here and look at a place like pennsylvania, where there is now a terrible budget crunch.

    http://www.portal.state.pa.us/portal/server.pt?open=512&objID=4571&mode=2#2009-10

    Guess what the budget was in 1998-1999. It was about 35 billion.

    Guess what it was last year. Oh.. about 61 billion.

    And everyone here is talking about this budget CRUNCH. And gadzooks, there’s no money to pay for PENSIONS, or COPS, or LIBRARIES.

    Well, bullshit. I hate to put it in stark terms like that. But you are talking about folks like me like we are these stingy jerks who are just so, so ideological. And man, if we just stopped reading all that Weekly Standard and got rid of all that confounded epistemic closure, we would be able to see clearly, like you, and recognize that our stinginess is just so.. stingy.

    Well… bollocks. It was $35 billion. Now it’s $61 billion. How much is enough? When can I be comfortable that it’s not just the epistemic closure and, you know, people REALLY ARE spending too much money?

    Or wait. Am I just crusading again?Report

    • Avatar Will H. in reply to Sam MacDonald
      Ignored
      says:

      I had to take a look at that, and adjusted for inflation, $46 billion should cover the $35 billion from 1998-1999.
      So, there’s been over a 30% increase in revenue, but… it came with an attendant reduction in services?
      What’s up with that?Report

      • Avatar athenaios in reply to Will H.
        Ignored
        says:

        You assume that the cost of services tracked inflation. You also assume that the population remained static. You can’t just look at revenue figures and assume that they tell the whole story.Report

    • Avatar E.D. Kain in reply to Sam MacDonald
      Ignored
      says:

      Fine, Sam, the line was overly inflammatory. But look, taxes are down for most Americans. And people are still talking about bringing them down further. We’ve made really bad spending decisions, too, but I’m not sure public employee retirement packages can qualify as one of them, and yet here they are on the chopping block.

      Maybe if we cut spending on prison cells, foreign wars, and corporate subsidies we wouldn’t have to have conversations about closing down public libraries, public schools, and hacking away at the public pension system.

      I don’t think you’re a stingy jerk. I don’t think people who want smaller government and lower taxes are bad or greedy. A lot of them are honest, hard-working people. But a lot of them, I think, undervalue many of the public services that are provided for them, and a lot of them are only too willing to support a huge military budget.

      I’d have to look at the budget numbers in PA more closely. What accounts for the increase? Obviously the budget expanded as the economy bubbled up, and obviously that budget is going to have to go back down. Nobody’s disputing that. But before the bubble we weren’t talking about closing libraries, or huge unfunded pensions, or any of that. And now we are. What happened? It’s not just an inability to cut spending or raise taxes. Where did all that money get diverted to?Report

      • Avatar athenaios in reply to E.D. Kain
        Ignored
        says:

        Maybe we should cut out the corporate boondoggles, the agricultural and energy sector subsidies, and close the loopholes in the tax code?

        Maybe we might even hear so-called libertarians arguing for those things… once the people who subsidize them shuffle off to Buffalo.Report

      • Avatar MFarmer in reply to E.D. Kain
        Ignored
        says:

        “Where did all that money get diverted to?”

        From private sector productive activity to to State-managed non-productive activity. You don’t need to take more from the few who have it — there needs to be widespread creation of new wealth, which can only happen in a free market unburdened by government intervention. In a very real sense, government has created the concentration of wealth by favoring Big Business over small business and is in a downward spiralling loop doing the same things over and over again trying to milk the wealth from decreasing number of people who have wealth. The statist system is the problem.Report

      • Avatar BSK in reply to E.D. Kain
        Ignored
        says:

        This, this, this. It’s like the people who call for NASA cuts (which I believe are .5% of the budget or deficit) but don’t want to touch the military. Some institutions have become so untouchable that we are going after the ones we should be protecting. Maybe you’d genuinely prefer to see smaller government all around, which is an opinion I respect. But if we’re only going to cut bits and pieces, would you really rather see libraries and schools closed while corporate subsidies and our military industrial complex goes untouched? Would you really prefer that signed contracts be violated (in the case of pensions) while those still on the payroll take home 6-figure salaries for doing nothing?Report

        • Avatar Jaybird in reply to BSK
          Ignored
          says:

          It’s a Washington Monument gambit.

          People *LOVE* libraries, and the Washington Monument, and the like. When they want things cut, they want those payroll six-figure do-nothing jobs cut…

          But, for some reason, those are never on the table. If there is a $100,000 cut to the budget, the argument is that “anti-tax crusaders” want to make sure that the public library has to get rid of two full-time librarians and one part-time staffer (or maybe close on Sundays or provide fewer hours).

          No, no, no, it’s pointed out. Can’t we just get rid of the payroll six-figure do-nothing job? Just one? Or turn one of the ones making mid-six figures as a do-nothing job into one making low-six figures do nothing job?

          And the answer comes: What kind of monster would want the library to be open fewer hours? Don’t you understand that the libraries provide reading materials to poor children? It’s a safe haven for single mothers? It gives ESL courses to immigrants? Have you no decency, sir?Report

          • Avatar Mike Schilling in reply to Jaybird
            Ignored
            says:

            When they want things cut, they want those payroll six-figure do-nothing jobs cut

            You mean, they want the mythical cut that causes no harm? Of course they do.Report

          • Avatar BSK in reply to Jaybird
            Ignored
            says:

            This is disingenuous, at best. You are essentially saying anyone who opposes those in favor of tax cuts as inherently engaging in strawmen. As I stated, I know that there are much legitimate support of cutting taxes (or, more accurately, cutting spending). Unfortunately, most of the people I see/hear about/read about/speak to are attempting to bail out the ocean with thimbles. Why do the Republicans, the supposed fiscal conservatives, never mention cutting the military budget, which is the single biggest line item on the budget?

            There are certainly ways in which the library could run more efficiently. A few years back, the NYPL bought a $100,000 book, complete with marble covers. That is excessive and, unless it had Jesus Washington’s personal writing in it, is a gross misuse of funds. But even if they didn’t buy it, would we be in better shape? Sure, let’s be more responsible with the little things. BUT let’s REALLY be more responsible with the big things. Where does being penny wise and pound foolish get us? And why are we so quick to vilify pensioners, who want nothing more than their signed contracts honored, yet we don’t vilify those who are really robbing the coffers?

            I’m always surprised when supposed libertarians have no problem arguing in favor of ignoring signed contracts when it suits their larger aims.Report

            • Avatar Jaybird in reply to BSK
              Ignored
              says:

              Who’s talking about tax cuts?

              I’m talking about spending. The quickest and best way that I can think of to cut the military is to end our foreign adventures and end our foreign occupations… all of them. No more bases in Germany, Cuba, Canada (Canada? Yes. We have bases in Canada), the Philippines, and so on. By virtue of nothing more than moving those soldiers and families back home and having them spend money here rather than overseas would benefit us without us paying billions in rent to governments all over the world.

              Hey, if you wanted to talk about culling out our military and getting rid of the same number of soldiers that came back over from all those bases, that’d be cool too.

              As a bonus, such would provide a starting point for us to talk about all government spending and the ability to cut it back.Report

              • Avatar BSK in reply to Jaybird
                Ignored
                says:

                Here here!

                But let’s see this gain traction on the right, the so-called small government-ers, the self-proclaimed responsible spenders.

                Many people squawk about lowering taxes. Often, they fail to realize that lowering taxes means either A) lowering spending or B) simply shifting where those taxes are collected elsewhere. When pressed to suggest where they’d lower spending, they generally go after the simplest targets which, ultimately, mean very little (libraries) or targets that are unfair to attack (pensions). Ultimately, their squawking falls on deaf ears. At least when it is directed at me.

                It reminds me of the sports columnist whom, every year, complain about the All-Star snubs. They list 15 guys they think should be on the team, but never say who was selected that shouldn’t be on the team. They’re essentially advocating for a limitless roster. Every guy added must mean a guy taken off. Every dollar cut from tax collection must be cut from spending. But the latter is the hard part. So most people ignore it. Bah.Report

              • Avatar Jaybird in reply to BSK
                Ignored
                says:

                But let’s see this gain traction on the right, the so-called small government-ers, the self-proclaimed responsible spenders.

                You were watching between 2002 and 2006, I hope.

                The party of small government does not exist in Washington. You have to go to the crazy third parties.

                But even then, you’ll have folks ask you about the real world, and the art of the possible, and your parents’ basement, and so on.Report

              • Avatar Heidegger in reply to BSK
                Ignored
                says:

                BSK writes:

                “Many people squawk about lowering taxes”–

                Huh? Who? In my entire life, I’ve never heard another human being ever “squawk” about lowering taxes or that taxes are too low. Ever. If anyone is that concerned about their taxes being too low, there is no law forbidding them from paying higher taxes if they’d like. Try it sometime. If you want to start paying 50% of your income to Uncle Sam, feel free to do it. I doubt you’ll see Uncle Sam knocking at your door to return your overpayment of taxes.Report

              • Avatar Pat Cahalan in reply to Heidegger
                Ignored
                says:

                Some taxes are too low. Some taxes are too high. On net, overall taxation is too low, given our expenditures.

                And while I’m certainly willing to cut some expenditures, you’re not going to balance the budget without increasing revenue. That’s pretty much the definition of, “taxes are too low”.Report

              • Avatar Heidegger in reply to Pat Cahalan
                Ignored
                says:

                Pat, understood. But the point remains—Virtually, NO ONE is up in arms about taxes being too low. It’s been demonstrably proven over and over again that lower taxes produce jobs and generate more tax revenue. It never fails. I submitted my budget report a few weeks ago and completely eliminated the national debt in a matter of a couple years. It was actually the same budget used in 1804. I pulled a Houdini and made the debt disappear, forever. All these other milquetoast squishy nonsense solutions reminds me of Sisyphus trying to move that pebble up a mountain and when he finally at the summit, it falls down again–for eternity.Report

        • Avatar E.C. Gach in reply to BSK
          Ignored
          says:

          I think this is the main point when it comes to the retort, “but there’s no money!”

          There is money, it’s just a matter of where it goes. I’ve already been to the NY Times interactive budget game, as I’m sure many others have. It’s not exact, it’s a tad overly simple, but in the end, it’s the basic idea. There really is x amount of dollars, and y places to spend it. You can diminish or raise x to some degree. Taxes can’t be cut to much, because there is a certain baseline of what needs doing. x can’t be raised too much either, because there is a point of negative consequences for increasing rates (though as E.D. points out, where this point exists is in dispute). y (spending) can also be cut or increased to a certain degree. In both areas (changing revenues or changing spending) there is room to maneuver, but at least politically, not much.

          BUT in terms of changing where current revenues are spent, there is A LOT of room to maneuver. In that respect, when asked where will the money come from, the answer is other parts of the budget. And most libertarians despise government collusion with commerce, so if money is taken from those tax credits/subsidies, and used to fund libraries or meet pension obligations, wouldn’t most libertarians prefer that to the status quo, even if that is not ideal?Report

          • Avatar MadRocketScientist in reply to E.C. Gach
            Ignored
            says:

            Yes, we would.

            I’d rather see public funding for public works, instead of public funding for private business (tax breaks, subsidies, rent seeking, reg capture, etc.).

            As to tax breaks, etc. I’ll be happy to vote for a tax increase once I am confident that the state has leaned itself out. Verify that departments are not duplicating services, and if they are, consolidate and trim staff. Verify that resources are being used to help the public, and not to pay off private interests. Etc. Etc. Etc.

            When my sister in law calls for us to loan her more money so she can pay her bills & feed her kid, we ask her if she’s turned off the cable yet & stopped going out to eat everyday. I’m not gonna send her money until she’s shown some responsibility with it. Why should we be handing over more money to a government that may not be necessarily spending it responsibly. I’ll happily wait until they’ve learned how to not waste it just because they can.Report

      • Avatar Sam MacDonald in reply to E.D. Kain
        Ignored
        says:

        “taxes are down for most Americans.”

        Is this true? I look here:

        http://sunshinereview.org/index.php/Pennsylvania_state_budget

        In 2000, state expenditures in PA amounted to just over 19 percent of state GDP. Last year it was mor ethan 21 percent.

        I am not saying you are wrong. But spending is way, way up. So taxes have to be going up for somebody.

        You say: We need higher taxes to fund pensions and all the rest. I say: the financial history of people in charge is such that I do not trust them, even in good times, to spend the money wisely. So even if they DID manage to overhwelm the anti-tax crusaders (me, I guess) and get higher taxes passed, I have zero faith that the money would be spent on things it should be spent on.

        I think I have history on my side here. Throughout the 1990s and the early 200s, there was a huge boom, and that flooded state coffers with extra money. As far as I can tell, there is exactly nothing to show for it.

        Now that money is tight… you expect them to be better stewards of the money? Why?Report

        • Avatar E.D. Kain in reply to Sam MacDonald
          Ignored
          says:

          Perhaps revenues were up because of inflation, an expanded tax base, an inflated housing market, etc. etc. etc. Maybe voters asked for more services. My question remains: why do previously solid programs – libraries, employee pensions, schools, etc. – now face so many cuts? These were here back in 98/99. Now suddenly we need to privatize everything, cut taxes, and so forth. I don’t get it.Report

          • Avatar Sam MacDonald in reply to E.D. Kain
            Ignored
            says:

            Who says they were previously solid? Libraries and cops are always on the block. When is this golden era of full funding for libraries? And schools? Are you seriously arguing that the main problem facing schools compared to 1999 is a huge DECREASE in funding? The amount spent on such things has exploded?

            So I guess my response to your question is: we aren’t, actually, seeing the demise of previously solid programs. And my question in response is… what would have led you to believe that?Report

          • Avatar dexter in reply to E.D. Kain
            Ignored
            says:

            One of the reasons that libraries are hurting is because, according to taxfoundation.org, the tax rate for a single filer making 40,ooo in 1960 would be 56%. Adust that for inflation, a person making about 300, grand would pay about 20% more in taxes. Another reason might be, and this is a very big might, is the strain on blue collar wages that has occured over the last 50 years that has eroded their taxes. Adjusted for inflation, I was making the equivalent of around 45 an hour in the carpenter’s union in 1971. That is over twice what I make an hour today.Report

            • Avatar E.C. Gach in reply to dexter
              Ignored
              says:

              That’s an important point to note. Most people surround themselves with other people like them (similar background, education, tax bracket, etc.)

              Some libraries are probably doing golden right now. Others probably not so much. That’s what happens when income disparity grows.Report

  14. Avatar mclaren
    Ignored
    says:

    Several issues here no one has mentioned.

    To start off, the nostrums discussed in the Reason article don’t even begin to address California’s pension problem, nor the pension shortfalls of the other states. The problem isn’t that the states spend too much, it’s that their tax base is collapsing, and keeps imploding. In state after state, we see states frantically cutting their expenditures only to discover that the state deficit has gotten bigger next year. That’s a sure-fire indicator that we’re not dealing with an expenditure problem, but with a revenue problem.

    First, these generous pension benefits mainly ramped up during the go-go Ponziconomy 90s and early 2000s. Pension fund managers saw amazing returns on their portfolios during the 90s and early 2000s and thought those stellar returns were sustainable. Legislators, looking at those stellar returns, thought they’d continue indefinitely, and therefore that the generous pension benefits awarded during the 90s and early 2000s wouldn’t cut the states very much.

    Of course, in reality it turned out that those investment returns on public pension funds like CalPers in the 90s and early 2000s weren’t really returns at all — they were Ponzi-scheme bubbles inflated by the dot-com bubble and the REIT bubble. And when those Ponzi bubbles burst, the state pension funds returned to their average real returns, which couldn’t begin to cover the cost of pension benefits.

    Second, states around the U.S.A. have watched their local businesses deteriorate courtesy of massive offshoring and outsourcing. This is the root cause of the revenue implosion in states around the country. This made many states (California being a poster child) unwisely turn to a prison-industrial model to substitute for the eroding tax base of local businesses like small manufacturers, travel agencies, mom & pop hardware stores, etc., that were all wiped out by the offshoring/outsourcing fever. (If you want to buy some piece of cheap hardware, you can get it on ebay direct from a Chinese factor for about 1/10 of the cost a local mom ‘n pop store will sell it to you for. Case in point: you can pay $24.99 for a bicycle light at the local bike shop, or $4.99 for the exact same bicycle light on ebay direct from a Chinese factory — including shipping. Which will you buy? And how long do you think that local bike shop will stay in business under these conditions?)

    But it turns out that the prison-industrial model is not workable because it winds up costing taxpayers more money in the long run than it returns to the tax base. Felonizing non-violent behavior without limit sucks huge numbers of people into the prison system but once they get out, they’re destroyed as taxpaying members of society. They can never get a decent job again. Meanwhile, the cops and prison guards use fear to suck ever-increasing pay and benefits out of the public: 1 out of every 5 California prison guards now makes more than $100,000. At the same time, public education and universities and public services like medicare must constantly be cut to pay for the ever-increasing costs of cops and prisons, and this slashes future revenue. Prisons produce ex-felons who are largely unemployable, while universities and community colleges produce educated graduates who are highly employable. Reducing the highly employable human product while increasing the unemployable human product of the system winds up destroying wealth rather than creating it.

    This combination makes the prison-industrial complex a net sink of tax revenues instead of a net source.

    Third and perhaps most important, the entire process of offshoring and outsourcing every high-wage high-skill job in America puts the entire American economy into a death spiral. The more offshoring, the less demand there is in America for a highly-skilled workforce: therefore tuition rises exponentially in order to make up for the total revenues the colleges need because enrollments keep dropping. At the same time, America keeps producing more university graduates than it can employ, which constantly drives down the wages of college graduates. You can see the death spiral in these six graphs, which pretty much tell the story of America’s collapsing tax base:

    Median duration of unemployment, February 2010

    Note that after about 20 to 24 weeks, people become unemployable. Employers typically refuse to look at a resume from anyone who’s been out of work that long.

    Proportion of America’s durable goods manufacturing capacity now devoted to military hardware as opposed to consumer goods.

    Rise in college tuition costs over the last 35 years compared to the rise in housing prices and the CPI inflation index.

    Health care spending as a percentage of GDP

    U.S. Job growth by decade from the 1940s to the 2000s

    U.S. manufacturing capacity from the 1940s to the 2000s.

    Everyone keeps talking about catastrophic economic implosions like the collapse of Detroit or the disintegration of California as though these are bad decisions made by individuals. California politicians are too self-centered, California homeowners are too greedy, California public employees have unions that are too strong…etc. That’s a classic example of the fundamental attribution error. We can test whether the people in California or Detroit have suddenly become unwise or stupid by asking: are people in California behaving any differently than they did in the 1950s or 1960s, when the state’s economy was booming?

    And the answer is — no, legislators in California and Detroit and workers in California and Detroit and taxpayers in California and Detroit and public employees in California and Detroit aren’t doing anything significantly differently today than they did back in the 1950s. There’s no evidence that California legislators were Solons of peerless wisdom during the 1950s and 1960s. There’s no evidence that California were any less greedy or self-centered in the 1950s and 1960s than they are today. There’s no evidence that California public employees were any less strongly unionized in the 1950s and 1960s than they are today.

    This suggests that the problems in California are systemic. The system itself is breaking down for structural reasons — the problem isn’t the behavior of the individual prison guards or politicians or homeowners in California, it’s the entire system. The economic system in California no longer works.

    Moreover, we can see clearly why the economic system as a whole in states like California has broken down:

    …It is hard to envision computers…performing many of these workplace functions, and robots aren’t ready. The better solution then, according to a just-published IBM patent filing (US29228426A1), might be to find a way to suck knowledge out of the experts then inject it into younger, stronger, cheaper employees, possibly even in other countries.

    IBM’s proposed Platform for Capturing Knowledge describes how to use an imersive gaming environment to transfer expert knowledge held by employees “aged 50 and older” to 18-25 year-old trainees who find manuals “difficult to read and understand.”

    IBM also discusses how its invention could be made available for customers’ use in return for “payment from the customer(s) under a subscription and/or fee agreement.”

    What we’re talking about, then, is a possible revolution in workplace training, one where a lifetime of experience would ideally be sucked from the mind of an experienced worker to be injected into a trainee and then the older worker discarded.

    There are several thoughts that came to mind as I read this patent application. Could IBM really be serious about such a plan? Then I imagined how enthusiastically the idea must have been received at IBM intergalactic HQ in Armonk. What a great idea! Transfer knowledge from old to young, American to Argentinian, or even just hold it in machine storage for later use, disposing of the expert in the meantime.

    Source: “Logan’s Run,” Robert X. Cringely, September 2009.

    The result of this wholesale collapse of the American economic system is plainly evident:

    What Americans are spending their money on this recession.

    Harvard economist Umair Haque has this to say about that last chart:

    “Could there be a clearer—and perhaps more heart-rending—picture of an economy in deep, systemic, structural decline? Probably not.

    “What people are spending more on, in relative terms, as incomes dwindle—what they’re substituting spending for, as budgets decline in real terms—are the most basic of necessities.

    “Oh, and goods for which monopoly power allows incumbents to reap fat profits, sans meaningful innovation of any kind (hi, telcos).

    “Needless to say, consumption patterns like these bode (very) ill for the next decade—because they fail to support a single one of the structural changes (new industries, new institutions, new markets, the localization of capital flows, risk sharing, etc) necessary to spark the rebirth of prosperity. Instead, they point to a Ponziconomy—where people and societies run harder and harder, only to move backwards.

    “It’s a vicious circle, a bad equilibrium, a game of musical chairs—a masquerade of wealth creation. Except the masks are coming off.”

    America is now starting to outsource all its high-skill high-wage work overseas, from chip design to reading hospital x-rays to programming to robotics to basic research in genetics and computer science and materials science. If you thought the late 2007-early-2008 collapse was bad, you ain’t seen nothin’ yet. Wait till this next round of outsourcing kicks in and your high-skill high-wage job disappears…along with millions like it. You’ll see America’s tax base go off a cliff.

    Google the 30 May 2010 Newsweek international edition article “Europe: The Big Squeeze.”

    In the years ahead, sizable numbers of skilled, reasonably well-educated middle-income workers in service-sector jobs long considered safe from foreign trade—accounting, law, financial and risk management, health care and information technology, to name a few—could be facing layoffs or serious wage pressure as developing nations perform increasingly sophisticated offshore work.

    Source: Newsweek International Edition, “The Big Squeeze,” op. cit.

    This article sums it up:

    “The fact of the matter is that the US economy, on a structural basis, is BROKEN. Starting in the early ‘70s, we outsourced our manufacturing and began shifting to a services economy (particularly financial services). We also outsourced our wealth to Asia, OPEC, and Wall Street.

    “Because of this, the average American has seen his income dramatically in the last 30 years. This is obvious to anyone with a functioning brain. Forty years ago one parent worked and people got by. Today both parents work (if they can find jobs) and still can’t have a decent quality life.

    “THESE are the items that matter for economic growth: jobs and income. If you want people to have money for them to spend and consequently boost economic growth, they need to have decent jobs that pay them well.”

    Source: “The only things that matter…and no one talks about”, ZeroHedge, 12 August 2010.Report

    • Avatar E.D. Kain in reply to mclaren
      Ignored
      says:

      You should submit a guest post, mcclaren…Report

    • Avatar stillwater in reply to mclaren
      Ignored
      says:

      Awesome comment mclaren. I was looking for some of this data a few days ago and couldn’t find handy graphs and whatnot. Thanks for compiling this info. And I for one agree. All the cheerleading/apologetics aboout neo-liberal economic policy is nonsense. Our economic problems – including funding libraries! – begin and end with healthy markets for US labor.Report

    • Avatar Kolohe in reply to mclaren
      Ignored
      says:

      The prison-industrial complex is caused by the prison guard union and residual irrational crime fears in the population; it’s not a deliberate decision that was embarked on when the Tru-Valu hardware store closed down. (In any case the root cause of the revenue implosion in most places and esp California is not outsourcing and offshoring, it’s the anemic pace of the recovery in the consumer sector and the housing market – localities and states get the bulk of their revenue from sales & property taxes)

      the total revenues the colleges need because enrollments keep dropping

      This is just plain incorrect. http://nces.ed.gov/fastfacts/display.asp?id=98Report

      • Avatar stillwater in reply to Kolohe
        Ignored
        says:

        In any case the root cause of the revenue implosion in most places and esp California is not outsourcing and offshoring, it’s the anemic pace of the recovery in the consumer sector and the housing market

        This puts the cart before the horse. Consumer spending is based on two things: access to credit and disposable income. A real recovery – ie., one not based on the extension of credit – requires real incomes/employment to rise, which in turn requires the creation of jobs.

        Another way of saying this is that it seems to me you’ve skipped right over the primary causes of the current recession, confused the description of a recession for what constitutes its solution, and then offer that as a justification for why outsourcing can be discounted as playing a role.Report

    • Avatar Kolohe in reply to mclaren
      Ignored
      says:

      What we’re talking about, then, is a possible revolution in workplace training, one where a lifetime of experience would ideally be sucked from the mind of an experienced worker to be injected into a trainee and then the older worker discarded.

      yes, this is called ‘apprenticeship’ and has been going on since the middle ages, or more properly, when we were all just hunters and gatherers in the rift valley. Although I would use the word ‘retired’ for discarded these days.Report

      • Avatar Kolohe in reply to Kolohe
        Ignored
        says:

        “Oh, and goods for which monopoly power allows incumbents to reap fat profits, sans meaningful innovation of any kind (hi, telcos).”

        I didn’t go to no Ivy League school like Umair Haque’s but I learned to read in public school, and the text that accompanied the chart said the 17% rise in ‘telephone equipment’ was all about mobile devices. As in Iphones & Blackberrys and stuff. Not non-innovative monopoly telcos.

        “What people are spending more on, in relative terms, as incomes dwindle—what they’re substituting spending for, as budgets decline in real terms—are the most basic of necessities

        I also noticed that pace Economist Haque, they spent *less* on some of the most basic of necessities like gasoline, which had a change for the negative that exceeded in magnitude the increases of all but one category. They also spent less on clothes. And shoes. And furniture. But like I said, I only have an undergraduate degree from a public school.Report

        • Avatar Pat Cahalan in reply to Kolohe
          Ignored
          says:

          > Not non-innovative monopoly telcos.

          You know who now owns what used to be Cingular, right?

          Allow me to let you into a little industry secret: the wireless carriers are all running the same style business plans that AT&T ran in 1979. Right down to the, “We own the phone, we just let you lease it” philosophy.Report

          • Avatar Jesse Ewiak in reply to Pat Cahalan
            Ignored
            says:

            To be fair, it’s more like “we let you have cheap phones because we subsidize the price of the phone.” If you want, you can outright buy a phone without a contract at full price.Report

            • Avatar Pat Cahalan in reply to Jesse Ewiak
              Ignored
              says:

              You can buy a phone? Not according to the wireless companies, who have sued to prevent people from unlocking their phones.

              You’ve jailbroken your iPhone? Voided the warranty. Rooted your Droid? Ditto.

              You don’t own your phone, dude. You own the plastic. The “phone” is all the utility that the object represents, and you own abzolutzley zerrah of that. At least, according to the phone companies.Report

              • Avatar Jesse Ewiak in reply to Pat Cahalan
                Ignored
                says:

                First, of course companies want to avoid you unlocking the phones they’re subsidizing and walking away to another company. That’s basic business practice. If you want to use the phone on another carrier, buy it unlocked.

                Second, f’ing with your phone by jailbreaking it voids your warranty just like f’ing with your vacuum cleaner or fridge. Shocker. You ‘own’ you fridge and vacuum cleaner, but don’t expect Maytag to pick up the bill for fixing it if you mess with it.

                Third, you can buy plenty of no-contract phones, even at the companies websites. I know for sure you can with Verizon and AT&T.Report

              • Avatar Pat Cahalan in reply to Jesse Ewiak
                Ignored
                says:

                > First, of course companies want to
                > avoid you unlocking the phones
                > they’re subsidizing and walking
                > away to another company. That’s
                > basic business practice.

                Just like AT&T leasing you your land line phone in 1977. Which was sort of my point. The business philosophy is precisely the same.

                And wait, if they’re subsidizing the phone, and customers are buying the phones and walking away from them, isn’t that just boneheaded business practice?

                > Second, f’ing with your phone by
                > jailbreaking it voids your warranty
                > just like f’ing with your vacuum
                > cleaner or fridge. Shocker. You
                > ‘own’ you fridge and vacuum
                > cleaner, but don’t expect Maytag
                > to pick up the bill for fixing it if
                > you mess with it.

                Check me on this: what do you define as, “the phone”? The plastic bits, or the operating system and the applications and the electronics, altogether (tangent: I can certainly work on my washing machine without voiding the warranty).

                If you agree that jailbreaking your phone is voiding the warranty, then you must agree that “the phone”, as a purchased entity, includes the operating system.

                If you agree that the phone includes the OS, please go read your EULA that came with your phone. Then come back here and explain to me how this isn’t isomorphic to “non-innovate monopoly telcos”.

                If you think that wireless devices are running under a new paradigm of service from traditional telecommunications companies, you’re not thinking it through clearly. That’s all I’m saying. I’m neither defending or attacking the business model itself.Report

              • Avatar DensityDuck in reply to Pat Cahalan
                Ignored
                says:

                “…if they’re subsidizing the phone, and customers are buying the phones and walking away from them, isn’t that just boneheaded business practice?”

                If you buy a “contract phone” you get a discount, but you’re also required to maintain the contract (and abide by its no-voiding-warranty and early-termination-fee terms.)

                If you buy the phone but don’t sign a contract, it’s typically a lot more expensive (i.e. $500 for an iPhone instead of $200.)

                “tangent: I can certainly work on my washing machine without voiding the warranty”

                You are permitted to conduct certain service and maintenance activities. You aren’t permitted to rewire the motor to double the spin speed or agitator torque, or rejigger the logic to change the length of cycles, or change the proportions of hot and cold water to get better wash performance. (Or, rather, if you do any of these things then you’re no longer eligible for warranty coverage on service–just like what happens if you jailbreak your phone.)

                PS make sure you understand the distinction between “jailbreak” and “unlock”, because they aren’t the same thing in the context of smartphones.Report

      • Avatar stillwater in reply to Kolohe
        Ignored
        says:

        this is called ‘apprenticeship’ and has been going on since the middle ages

        This is confused. The apprenticeship/master relation is mutually beneficial relationship which preserves the long-term economic prospects for the master as well as the apprentice, (even tho it may be an outdated institution in some ways). IBM, on the other hand, is seeking to promote its own interests by replacing older, higher paid employees with younger cheaper employees.Report

    • Avatar Dave in reply to mclaren
      Ignored
      says:

      Mclaren,

      What REIT bubble are you referring to and why is it being referred to as a Ponzi scheme?

      I remember when REIT stocks in the 1990’s soared but I would hardly call what happened there a bubble. REIT shares still were somewhat anchored by the underlying net asset values of the portfolios. Yes, those could and did trade at a premium to the NAV, but I don’t remember a bubble being anything even close to what we experienced with the dot-com stocks.

      If there was a bubble in REIT shares, it would have occured prior to the financial crisis, and that was because of the underlying bubble in commercial real estate prices.

      I work in commercial real estate and have 15 years of experience, mostly in the capital markets. I don’t recall anything that you’re describing.

      Do you have any links to support your assertions? It’s possible I may have forgotten a few things along the way but I first started in the business in 1996 right before the flurry of REIT IPOs. Even if those shares ended up getting overvalued and investors did lose money, not many got completely wiped out like they did with the dot-com share given that the real estate portfolios had value.Report

    • Avatar Mark Thompson in reply to mclaren
      Ignored
      says:

      This paragraph doesn’t add for me at all, or at least one specific claim in it doesn’t:

      Third and perhaps most important, the entire process of offshoring and outsourcing every high-wage high-skill job in America puts the entire American economy into a death spiral. The more offshoring, the less demand there is in America for a highly-skilled workforce: therefore tuition rises exponentially in order to make up for the total revenues the colleges need because enrollments keep dropping. At the same time, America keeps producing more university graduates than it can employ, which constantly drives down the wages of college graduates.

      Specifically, the claim that “tuition rises exponentially in order to make up for the total revenues the colleges need because enrollments keep dropping” doesn’t seem to line up much with facts on the ground, to wit: http://nces.ed.gov/fastfacts/display.asp?id=98

      The opening quote in that link says a lot:

      “Enrollment in degree-granting institutions increased by 14 percent between 1987 and 1997. Between 1997 and 2007, enrollment increased at a faster rate (26 percent), from 14.5 million to 18.2 million. Much of the growth between 1997 and 2007 was in full-time enrollment; the number of full-time students rose 34 percent, while the number of part-time students rose 15 percent. During the same time period, the number of females rose 29 percent, compared to an increase of 22 percent in the number of males. Enrollment increases can be affected both by population growth and by rising rates of enrollment. Between 1997 and 2007, the number of 18- to 24-year-olds increased from 25.5 million to 29.5 million, an increase of 16 percent, and the percentage of 18- to 24-year-olds enrolled in college remained relatively stable (37 percent in 1997 and 39 percent in 2007). In addition to the enrollment in accredited 2-year colleges, 4-year colleges, and universities, about 447,000 students attended non-degree-granting, Title IV eligible, postsecondary institutions in fall 2006.”

      No doubt tuition is increasing but I don’t think the finger can be pointed at decreasing enrollment.Report

  15. Avatar Lyle
    Ignored
    says:

    Actually if you look at it federal pensions for those hired since 1986 are not that good. You could at the state level do what the feds did then, set up a 401k equivalent program, and a base pension (feds is 1% times years of service times highest wage over some period).
    Note that despite all the wailing over 401ks if you had stayed the course in an s&p 500 fund, you would now be down only 12% from the high in 2007 not counting dividends paid out. Perhaps the options should be s&P 500 and total market index funds, and both a total bond market fund and investment grade fund for bonds. You decide you can’t beat the market and do not even try. (The 4 funds above sort of let you build your own target retirement fund)Report

  16. Avatar tom van dyke
    Ignored
    says:

    EDK, I’m fine with you becoming a Democrat. But Lefty Newspeak? “Anti-tax crusaders?” Ouch, dude. That’s sooo wrong.

    That you write they “have made it very difficult to raise revenue for all sorts of things including” etc. is such a proper Democrat thing to say. Congratulations on your views “evolving.” It happens to the best of us.Report

    • Avatar E.D. Kain in reply to tom van dyke
      Ignored
      says:

      Tom – tax rates are at their lowest ever, and still we see clamoring for further cuts. Still we see supply-side nonsense that further cuts will generate higher revenue. Anti-tax crusaders may be dramatic rhetoric, but it isn’t that far from the truth in today’s political climate.Report

    • Avatar Heidegger in reply to tom van dyke
      Ignored
      says:

      Tom, sorry to see so many flip-flops among the truth-seekers. Quite disappointing. Of course, one must ask why. And please tell me you are not among them.Report

      • Avatar tom van dyke in reply to Heidegger
        Ignored
        says:

        Oh, Mr. H, I was onto the mugwumpage and pseudo-centrism early on. That’s why I’m singled out as “annoying,” even though I’m so soft and indirect. Hand grenades are easy to dodge, not x-rays. 😉

        Me, I just like people saying what they think, not clouding it behind word fog. BlaiseP and Guatemala, that I understand and respect.

        Me, I’m a conservative, and I don’t mind. I take man as we find him. I seldom disagree with the Left about What’s Wrong with the World. The problem with the world is that man is man, and he’s imperfect. The only way to get a Better World is to make a Better Man, and that ain’t gonna happen.

        Especially by manipulating the words and terms he uses. Man is dumber, but also wiser, than he looks.Report

        • Avatar athenaios in reply to tom van dyke
          Ignored
          says:

          Tommy, if you dodge an x-ray, you just don’t get a useful visual. That’s all, literally. This isn’t something people in the real world are unaware of, by the way.

          More work on the feeble analogies, tortured metaphors, and strained antitheses please. But presumably your luxurious (and self-indulgent) despair doesn’t allow you to improve your prose or analysis. After all, it is your argument, such as it is, that man cannot be improved, no?Report

          • Avatar Jaybird in reply to athenaios
            Ignored
            says:

            After all, it is your argument, such as it is, that man cannot be improved, no?

            The whole man improvement project has been a mixed bag, to say the least.

            I’m not much of a fan of “oh, we can totally do it this time” zany schemes.Report

        • Avatar E.C. Gach in reply to tom van dyke
          Ignored
          says:

          And yet you would champion economic growth correct?Report

    • Avatar Bob in reply to tom van dyke
      Ignored
      says:

      If E. D. had written anti-tax crusade would you have found it less offensive? Crusade -“a remedial enterprise undertaken with zeal and enthusiasm.” http://www.merriam-webster.com/dictionary/crusade Considering the everyday malarkey of blackboard wielding Beck and spittle drenched pronouncements of Mark Levin Erik’s perceived bombast is slight indeed.

      It seems undeniable that conservatives are engaged in a crusade, a “remedial enterprise.” Is that really an insult or somehow beyond the bounds of civil discourse? I see no foul. Your objection is silly. (I’m being shrill.)

      E.D. makes a factual point about taxes being at 1950 levels that you ignore. Well, brush away with jargon.

      Charles Blow has an interesting overview of Republican/Tea Party dominated state legislatures in the Saturday NYT. Talk about crusades. (Being shrill, again.) Social issues are on the front burner. Blow, “Republican state lawmakers, emboldened by their swollen ranks, have a message for minorities, women, immigrants and the poor: It’s on!” He lists several measures being considered. It’s difficult, for me, to pick a winner here but this one is has real potential, “A Republican state representative in Utah has even gone so far as to introduce a bill that would bar same-sex couples from drafting wills.” I’d like to see a constitutional justification for that legislation. Probably the Tenth Amendment. Waddaya think?

      http://www.nytimes.com/2011/02/12/opinion/12blow.html?scp=1&sq=charles%20bllow&st=cse

      Come on Tom, put on your “man pants.” If it looks like a duck, sounds like a duck, walks like a duck it’s probably a crusader.

      Onward, Christian solider!Report

  17. Avatar Kyle Mathews
    Ignored
    says:

    I’m so used to the California perspective but I read this last year from NY and found it interesting maybe some of you will:

    http://www.nytimes.com/2010/05/21/business/economy/21pension.html?pagewanted=1&_r=1&ref=business&src=meReport

    • Avatar Kyle Mathews in reply to Kyle Mathews
      Ignored
      says:

      I think something touched on in the article – and I don’t mean to over-generalize the applicability to other communities – is the idea that at some point, even if we increase revenues, legacy costs will critically undermine our investment in the future.

      IIRC this was one of the better arguments for HCR, the drag health care spending was and is on the economy.

      In any case, the thing I wonder about is for all the people who fervently argue for tax increases why there isn’t a commiserate push for voluntary giving to the government(s)? I don’t want this to be confused as crying hypocrisy or some kind of faux “gotcha.” But charitable giving to the government (especially for the national debt, here’s looking at you “tea party”) is significantly outmatched by charitable giving to private organizations. It’s even significantly outmatched by less than charitable giving to political fund-raising.

      If people vote with their feet then they express confidence in their spending and the comparatively lackluster performance of the government seems to be a vote of no or little confidence in the government to use additional funds as effectively or well as other outlets of giving.

      So, without getting into whosits and whatsits of politics, does the reticence of people to give in significantly large numbers/amounts reflect misgivings about the efficacy of increased public spending and revenue that also has an effect on the public views towards tax policy?Report

      • Avatar Pat Cahalan in reply to Kyle Mathews
        Ignored
        says:

        > In any case, the thing I wonder about is for all the
        > people who fervently argue for tax increases why
        > there isn’t a commiserate push for voluntary
        > giving to the government(s)?

        Philosophically, that’s an interesting question. Practically, I’m not convinced that this is unusual human behavior.

        It’s the flip side to the comment thread on Texas and whether or not Republican states “ought” to turn down federal assistance. Some people believe that certain problems are best tackled by government, some don’t. I don’t see anything particularly unusual about people wanting to have equitable contributions to government funding any more than I see anything unusual about people wanting to take justifiable withdrawals from government revenue sources, in either case.

        > Does the reticence of people to give in significantly
        > large numbers/amounts reflect misgivings

        I think this behavior set is outside the norm enough that its utility for measuring faith in government is very low. Still, it’s a question that state-supporters ought to ask themselves more often, just like the small government people ought to ask themselves why they cheer for the farm bill.Report

        • Avatar Kyle Mathews in reply to Pat Cahalan
          Ignored
          says:

          I completely agree on the applicability to small government supporters.

          They may be two sides of the same coin but it’s the coin I have a problem with. On side A, a group of people who think we should all pay higher taxes to accomplish particular goals and on side B a group of people who think we should all deal with spending cuts to accomplish similar but different goals. However, the fact that group A could just pay extra taxes and group B could make payments on the debt to the amount that they receive money from the government (a debt offset?) and neither do speaks to something else.

          Specifically, both sides demonstrate an all too eager willingness to support policies that members of both groups believe are good but just as importantly believe won’t really affect them. I can’t think of anything that seems more antithetical to an egalitarian, rule of law civil society.

          IOW, I don’t think it’s that people want to have equitable contributions to government funding, it’s that they think the someone else ought to pay more and that a different group of people think others’ withdrawals aren’t justifiable.Report

          • Avatar greginak in reply to Kyle Mathews
            Ignored
            says:

            “Specifically, both sides demonstrate an all too eager willingness to support policies that members of both groups believe are good but just as importantly believe won’t really affect them”

            I think you are getting into strawman territory here. What qualifications do i need to both want HCR and also be affected by it. Is it appropriately egalitarian and appropriate if i had many years of contact with the health care system with my son, my work and my gf?

            It sounds like you are suggesting some peoples views are valid because one don’t judge them to have enough skin in the game. It would be effortless to apply that same rule to libertarians or any group for that matter.Report

            • Avatar Kyle Mathews in reply to greginak
              Ignored
              says:

              First off it’s a suspicion more than ‘J’accuse.’ I think the disconnect between statement and action leads me there but I’m also not talking about left/right or D/R at large, nor new programs like PPACA.

              I’m talking about people who say taxes are too low but aren’t talking about across the board tax levies. Or people who say cut pensions but primarily because their pensions aren’t the ones being cut.

              Finally there’s a difference between suggesting their views are invalid and suggesting their views undermine a civil society that is for the most part equal but is still aspirationally so. I’m doing the latter not the former.

              It’s perfectly fair for people to have opinions about aspects of life and government, some of which only affect them as taxpayers or indirect association. What I suggest is problematic is a growing propensity to use we when discussing obligations with little intention of actually being included in that we. (see also, militarism & Joe Lieberman)Report

  18. Avatar Kolohe
    Ignored
    says:

    2) the anti-tax crusaders have made it very difficult to raise revenue for all sorts of things including – but certainly not limited to – pension funds;

    “I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes…you will not see any of your taxes increase one single dime.”
    –Barack Obama
    Dover NH, Sept 12, 2008

    Stupid teabaggin’ anti-tax crusader.

    But yeah, he was going to raise taxes on the greater than 250K crowd – which he didn’t actually do when he had the chance (and his overwhelming congressional majorities). Say he did though.
    The over 250K crowd is per the irs webpage and wikipedia is about 1.5% of the population 15% of the national income subject to income tax (around 8.5 trillion) . So around 1.3 trillion of income subject to higher taxes per the Obama campaign plan. Considering the CBO just projected a 1.5 trillion dollar deficit, Obama wouldn’t have been able to cover the deficit if the top marginal tax rate were raised to Ike era 90%.

    So like I said, stupid tea-baggin’ anti-tax crusader that Candidate Obama was.Report

  19. Avatar Jaybird
    Ignored
    says:

    Can’t we solve this by taxing the pensions at higher rates? We can use the extra revenues to pay more people higher pensions.Report

    • Avatar DensityDuck in reply to Jaybird
      Ignored
      says:

      Well, no, because the people getting pensions are poor. It’s the duty of the wage-earngers to pay for the poor, even if the poor are actually getting more income than the earners who are paying them. (It’s always funny to see people arguing that a retail clerk making $50,000 a year has a moral obligation to contribute to the $120,000-a-year pension of a retired police chief.)Report

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