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An Irrevocable Right to Benefits?
Lisa Fleisher of the WSJ reports, New Jersey Pension Gap Grows:
New
Jersey's pension gap grew to $53.9 billion in the last fiscal year, up
from $45.8 billion, thanks to market losses and a lack of state
funding, according to figures released Thursday by the state.
The
looming pension burden, largely ignored by the state for the past
decade, has ballooned into a nearly unmanageable problem that will push
state and local finances into a corner in coming years, dropping large
bills in the laps of already strained taxpayers.
Gov. Chris
Christie's administration said the gap, which reflected the state's
investment positions as of June 30, highlighted the need for proposed
cuts to current public workers' pensions.
The new calculations
mean the state has 62% of the money it needs to pay retirement benefits
promised to roughly 720,000 state and local workers over the next
decade, down from 66% a year earlier. But the state is using an annual
8.25% rate of return, which critics say masks the problem by being
overly optimistic
"As all states,
they're getting it wrong," said Eileen Norcross, a George Mason
University researcher who has studied New Jersey's budget and pensions.
Using a 3.5% rate of return, she had estimated the previous liability
at $173 billion.
For most of the past decade, New Jersey
politicians from both parties have skipped required payments to the
pension fund while giving increases in benefits to workers. Faced with a
tight budget, Mr. Christie skipped a $3.1 billion payment this year,
which experts said all but guaranteed a higher gap next year.
Mr.
Christie, a Republican, wants to reverse a 9% pension bump workers
received in 2001 under a Republican administration. A spokesman for
Senate President Stephen Sweeney said he would work on changes that
would "ensure workers who have been promised a pension get one," adding
the governor needed to fund the pensions.
Unions
argue their members have an irrevocable right to benefits they have
earned, and the governor has said he will meet the unions in court.
Public workers pay into their pensions at various rates—8.5% of salary
for police officers and firefighters; 5.5% for teachers, state and
municipal workers; and 3% for most judges.
"Once again, the
Christie administration wants to make middle-class retirees pay the
price for the disastrous consequences of reckless speculation and
financial malfeasance on Wall Street, and for the legislature's
continuing failure to fund the pension," said Bob Master, political
director for the New York-area Communications Workers of America.
Mr.
Christie in March signed a slew of pension and benefits changes pushed
by Democrats but said they didn't go far enough. In September, Mr.
Christie unveiled further proposals targeting current workers,
including raising the retirement age to 65, requiring all workers to
contribute 8.5% of their salaries to pensions, and eliminating
cost-of-living increases.
In a statement, state Treasurer Andrew
Sidamon-Eristoff said Thursday, "Unchecked, the cost of this
impossible burden will fall not just on the taxpayers of today, but on
future generations of New Jerseyans."
Average annual pensions
for new retirees as of July 2009 were roughly $39,500 for state
workers, $46,400 for teachers, $73,500 for police officers and
firefighters, and $105,600 for judges.
So who
is right, unions or the Christie administration? At this point, it
doesn't matter. Yes, Wall Street's elite made off like bandits,
squeezing the middle class once again. But Governor Christie, who spoke
with 60 Minutes this past Sunday,
is right when he says public sector workers and retirees will get
little sympathy from private sector workers who saw their 401K plans
implode in 2008. Moreover, with state budgets deep in the red, there is
no money left to pay for public works projects, let alone generous
public pension benefits. All stakeholders need to make concessions or
risk deeper cuts down the road.
If I were the unions, I would
use this as an opportunity to push for better governance at the large state public plans. And by better governance, I mean make sure that
alignment of interests are there. As for state governments, they have
little choice but to raise the retirement age, cut benefits, and
partially or fully remove inflation protection on public sector
pensions. They should also revise their rosy investment assumptions for
state plans.
This may seem unfair and unreasonable to public
sector workers, but to quote a strategist who I spoke with yesterday,
"deleveraging sucks". You can't have pensions apartheid between the
private and public sector. And there are no "irrevocable rights to
benefits". Just look at the mess Greece and Ireland are in right now.
When the money runs out, cuts are guaranteed.
That's one of the reasons why I was disappointed with the meetings at Kananaskis.
A lot of people are looking at politicians with gold plated pensions
asking themselves why couldn't they expand CPP and provide Canadians
with a more secure retirement? I know, the critics will holler:
"it's just another payroll tax". They're wrong and shortsighted and
I'm embarrassed to say this is the best Canada could come up with --
another giveaway to banks and insurance companies. And who's going to
end up bailing out PRPPs when they flop? Who else but Canadian
taxpayers!
There was a time when Canada led the way in terms
of health, education and social economic policy. Our leaders need to
rethink expanding CPP. If you do it right, you'll bolster the private
and public sector. But if you do it wrong, or introduce half-baked
measures, you're better off not doing anything at all. I'm serious, I'd
rather see no change than reforms that are doomed to fail.
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And endless plague of REMFs.
John, fellow screwed citizen by political plutocrat enablers, the odds are large and long as having royal ancestors, that you would have gotten the big bucks you 'traded' for security. In fact, the very person who grabbed for security was least likely to make more than the mean screwee in the private sector. The game is won by the risk-takers, not the traders for lifetime benefits in other than at least the sovereign, not state who cannot debase the currency so guaranteed in the sky-pie. I'm no gypsy, but the future arrives by all your steps in the past.
No so. I made three times as much in private (self-employed) business. I did both, in fact. I, and 90% of other folks who chose to spend their professional lives working for the taxpayer, chose government work because (1) its intangible reward of doing something good for the United States and the people of the United States; (2) being part of something outside oneself; (3) long term financial benefits (that were the result of deferred wages). Had I stayed in my private business, I would have made almost exactly three times what I made when I entered the military. And, in my profession, the rewards as I established myself would have been greater each and every year. But the life felt empty, as I worked solely for myself and my profit. Additionally, I was uncomfortable with the lack of medical/retirement options available to me at the time as someone who was self-employed. I also revolted against the ridiculous burdens and risks of maintaining the overhead, from employees pay and benefits to regulations to downturns in business. SO I CHOSE TO GO ANOTHER ROUTE, ENTERED INTO MY FREELY MADE BARGAIN WITH THE GOVERNMENT, TOOK A HUGE CUT IN PAY TO SECURE MY MEDICAL AND RETIREMENT BENEFITS, ASSUMED THE RISK OF DEATH, LONG DEPLOYMENTS, FAMILY SEPARATIONS, MISSING TIMMY PLAY BALL, AND SO FORTH. But I secured my future. That is, I did until weasels work their way out of the obligation.
John is going really be pissed once he figures out he got played.
John knows that there are people in his own government who would try to deprive him of what is rightfully his. John also used his 30 years of military training to learn a thing or two about how to function in a world that others may find difficult. John will be fine, I am sure.
Morally, however, how does an American taxpayer live with himself if he is part of the move to take from John that which rightfully is John's?
Most Tax payers are gonna be too busy trying to find food for their children to worry about what happens to John and his feelings of injustice -- your beef lies with our so-called leaders in Govt.
What kind of person joins the military when there is a good chance you will get your ass shot off? Is this common sense? Is this his only choice in life? If it is, then that is a sad commentary on this country, a country that is built upon the war. Choices to join the miltary should be the last, and I do mean the last , choice to anyone seeking employment. John's failure was to trust in the system, a system built upon lies and a system that will devour its own when it has to. This is the nature of the beast. John should have prepared himself for any eventuality. As Guny Sargent Tom Highway said in the movie, Heartbreak Bridge, one must prepare oneself, improvise, and adapt.
Remus/HPD:
THAT is part of the bargain! That is the risk one assumes. He does so by choice in the all-volunteer force, and he knows what the payback is--his pension and his lifetime medical care.
And yes, as I said in another post, John will be fine.
But here is the larger point. I just figured out why all of these pensioner-haters are so wrong--it is because THEY REJECT THE FREELY ENTERED BARGAIN AND ITS RISKS/REWARDS. They pretend they are free enterprisers and that they respect liberty. But if they did, they would honor the freely-entered bargain of the pensioner and, as the taxpayer who elected the government who entered that bargain, would hold that government's feet to fire to meet its obligations. No, they don't want that free enterprise. They now want, after milking the labor of the pensioner for 30 years, to renege on the bargain. They reject the freely-entered bargain in favor of their own greed and resentment (usually because the bargain they made did not pay off). They talk of free enterprise and risk/reward, but in the end, they, like the Wall Street whores, want to bailed out. The pensioner is not asking for bailout. He is asking for what is rightfully his. Don't be whores and whiners, boys. Buck up and pay the pensioner what you owe him. If not, at least stop masquerading as one who believes in liberty and free enterprise.
What about all the workers in the private sector who freely entered into bargains to work for others, on the understanding they would be treated fairly, paid a living wage and would always be able to find a job if they were willing to work? Who paid into a pension fund that somehow vanished along with their job? Whose 401K is a shambles? Whose life savings draw interest of 2% when inflation is double that? Whose house is now worth less than they paid for it 10 years ago?
In other words what makes you so special? Do you think you are the only person in the world who worked hard, did the right thing and expected the system to keeps its promises? Have you not clued in yet that the people you are fighting are YOUR FELLOW VICTIMS and the people driving you to attack them are your EXPLOITERS?
I have met old men who worked for a company all of their lives and the company is either bought out or goes bankrupt and all of a sudden their company retirement checks quit coming and they are forced to live on SS alone. What about them? They had a contract and the company had a duty to pay them for the rest of their lives ,but the company reneged. Stuff happens all the time and yet this whiner get on her crying about his beloved taxpayer funded retirement benefits, benefits i might add are so much better than most of us could ever hope for, yet there he is thinking that somehow he is owed them. What planet are these people living on and what are they thinking? Good grief. He needs to look around and smell the coffee. The days of wine and roses are over and if you get screwed , well guess what, so has a lot of other people. So what?
It is fucking terrible is what it is and the people responsible should be punished severely.
Lying and stealing are wrong. I don't know where you got the idea that public workers condone that you were lied to and stolen from. But with all due respect, it sounds like and awful lot of people think it's OK to lie to and steal from public workers. Many have no concept of what day-to-day public work entails, as if the public sector magically never does accounting or uses IT services, as if we all sit in a room writing rules and decrees all day in between snorting lines of coke off the backs of hookers.
At any rate, John is right about one very salient point. TPTB are using class warfare to turn middle class private workers against middle class public workers. Instead of examining the serious crimes committed against each and every one of us, we're bickering amongst ourselves over imagined slights and the most contrived forms of envy.
F.O.A.D. Publick employees and you bloodlust mercenaries!
You sold-out your country, and your families' futures, for fraudulent promises of a share from the booty, even if you were too stoopid to realize it...
Whoa there, Clint. Are you incapable of making the distinction between private companies/private pension plans and government sector employment/public pension plans? They are apples and oranges, grasshopper. In both cases, the worker makes a bargain and, if he fulfills his end, he gets the benefit of the bargain. The the private sector case, he assumed the risk of the failed pension and if that private pension fails, he has no recourse unless he can find a deep pocket through the courts. In the public sector case, he did not, and the government (i.e., the taxpayer) is obligated to pay the pension.
A public sector pension plan can 'fail' just as a private sector plan can. The crux of the problem is that governments have not fully funded their plans and are unlikely to ever have enough money to fully fund them. That puts public employees in the same problem space as the rest of us.
Just out of curiosity, where do you think New Jersey or Illinois can get the money to pay the pensions? From higher taxes? Continued borrowing? The federal government?
The pensioner can, and likely will, ask 'til he is blue in the face. The pensioners final act, it appears, will be scorched earth.
Fair enough.
Morally, how does a retiree put food in his mouth knowing the hardship he has placed on others? How does a retiree look at himself in the mirror or sleep at night knowing that his comfort, his shelter comes at the expense of others? And since John is a military retiree, let's discuss his oath to protect the Constitution.
Blood from a stone...
We can pay everybody all they want using the new USC $ funny money described below. It is issued by congress and is not debt. Banking with depositors money is by law not fractional reserve but 100% reserve lending. No lending with depositors money:
Washington, Dec 17 -
"As the nation struggles with long-term unemployment at rates not seen in generations, contracted credit and the hoarding of public dollars by the banks, Congressman Kucinich (D-OH) today introduced a dramatic new proposal to establish fiscal integrity, reassert Congressional sovereignty and regain control of monetary policy from private banks. The National Emergency Employment Defense Act of 2010 would allow the federal government to directly fund badly-needed infrastructure repairs and fund education systems nationwide by spending money into circulation without increasing the national debt. The bill would end the current practice of fractional reserve lending, whereby the economy depends upon private financial institutions to lend money into circulation."
Congressman Kucinich stated, "The staggeringly bad employment and economic numbers represent a massive problem which cries out for bold action. Rather than crossing our fingers and hoping that banks will finally lend some of the billions of public dollars they haven't thus far seen fit to lend, we can take action. My bill would replace the Federal Reserve System's dependence on private banks to create credit. In its place, a Monetary Authority under the Treasury Department would directly inject liquidity into the economy by purchasing much needed public infrastructure repair. Today, we have idle capital, millions of able-bodied but unemployed workers, unused equipment, and record low interest rates. These conditions are the best possible time to make a long-term investment in our nation's infrastructure. My bill would do exactly that."
http://kucinich.house.gov/News/DocumentSingle.aspx?DocumentID=217846
Austerity, bitchez. These 'Gubment benefits', hell Ive been trying to tell people for years its all BS and will never work. You cant pay in a tiny amount, and actually expect to get paid enough return to live comfortably on 'guaranteed'...all just socialism and a scheme from the beginning to get POWER! Promise something to people, in return the put you in power...well Ive never expected it to be there at all so Im not shocked the pension and welfare benefits systems are collapsing under their own weight.
What the assholes fail to take into account is that the public employee calculated the risks and benefits of their options many years ago, and chose to forego a chance to earn higher yearly salaries and financial glories in the private sector for the security of the public sector. That was their bargain with the State/Fed government. Those governments GUARANTEED the return on this investment--that is, they guaranteed that public retirees would have lifetime pensions. Private companies and private pensions are wholly different entities. They can go bust and the workers/investors can lose everything, just as with any private investment. The people who lose in those circumstances need to seek recourse against the companies and pension plan managers. They have no recourse against the public sector workers who took less pay to secure these retirements.
Ultimately, the only solution to this government debt obligation is the complete collapse of the U.S. dollar. Pay off all debt in worthless dollars and start over. Everyone is going to get cheated out of their benefits, private and public alike. The burning questions have to do with how much chaos, death, and destruction ensue, and what are we left with at the end of it all? The collapse is coming, and it likely will be more rapid than any of us can fathom.
Those governments GUARANTEED the return on this investment--that is, they guaranteed that public retirees would have lifetime pensions.
Bernie Madoff GUARANTEED a return on investment too. So what? Reality rearing its ugly head and has a way of changing situations. You can run, hide, scream bribe and bargain but eventually the laws of the universe have their day.
You seem to be at of two minds in your posts. So which is it, we all have no choice but to pay or we are going to collapse in screaming bloody horror as we destroy ourselves trying to pay? That social workers, kindergarten teachers and DMV workers are going to roam the landscape like some S&M biker gang from a mad max movie? There's not alot of room for a middle ground in your thinking. Life is more then just a choice between to binary opposite choices.
You just keep telling yourself that.
I get the feeling that Federalist45 is a public employee beginning to
grasp personal danger.
Here is the deal. I KNOW I AM SCREWED, and I have accepted it as fact. Does not matter if I am the stupid private citizen who worked hard and lost everything to a stolen pension plan or a government employee whose bargain of 30 years ago to forego about 75% of what my labor was worth to secure my retirement. Either way, I AM SCREWED. So no, I see no personal danger--for me.
That I have accepted it as fact, does not mean I will tolerate it, IN FACT. You see, whether private or public, I owned my first shotgun at age 10. Killed rabbits and birds with it. Got a .22 at 12 and used it, without scope, to kill squirrels. I have taken whitetail deer with a bow and a gun. I have killed boar. I have land, guns, ammo, food, and fuel. AND I HAVE VERY CLEAR FIELDS OF FIRE. I am not worried. But those who would deprive me of my life, liberty, and property, may want to be.
And I am like millions of other Americans, trained by the U.S. military, brought up in the ideals of liberty, and secure in the idea that I am obligated to defend those ideals.
Hell, I am not that far from the grave, regardless. There are a lot of thieves out there--young ones with greed in their hearts--who believe they have a lot to lose in all of this. I don't have that much to lose at this point. So standing up for ideals is pretty easy.
Well...it doesn't sound like you're too bad off.
"I have land, guns, ammo, food, and fuel."
Here I was thinkin you "chose" to be a clerk somewhere laboring away in the bowels of government...forgoing all those "risky" enticements of private enterprise you were speaking about above...LOL.
Veiled threats won't work...you're not the only one who can shoot straight and using force to take your countrymen's property is not a defense of liberty...it's the opposite.
It's just plain ole theft.
Just because a few disgruntled sheep get fire in their eyes, spray paint a red "V" on the wall and hold a group of .GOV parasites at gunpoint you believe that somehow means the huddled masses will join in violent revolt?
Hell, half of the effeminate "men" in 'MeRiKa wouldn't even know how to handle/clean/load a firearm, no less "shoot straight"!
Being an expert fantasy football participant isn't gonna aid your quest either..lol
P.S. This country could be taken back from the con artists, parasites and fascists/socialists without firing a shot, but I believe culturally the last chance of that was Ross Perot in 92', but hey don't let me get in the way of your lil' revolt.
"Being an expert fantasy football participant isn't gonna aid you quest either..lol"
No it doesn't, in fact it probably inhibits it.
The teachers husband (who spray painted the red V) was standing about ten feet away by my reckoning and hit no one...got himself killed for absolutely nothing.
What's up with government workers/teachers (and hangers on) going postal?...maybe time for another urban saying to come about...instead of going postal it will be going scholastic.
"The shooter, identified as Amy Bishop, a Harvard-educated neuroscientist, pulled the gun and started firing gun shots after she learned that she had been denied biology tenure."
http://www.themoneytimes.com/featured/20100213/biology-professor-shoots-colleagues-uahuntsville-3-killed-id-10100362.html
This one had a rather high opinion of herself as well...Harvard educated...I guess being turned down for tenure in Alabama was more than this snob could handle.
Seriously. If you are going to go postal, make your target worthwhile.
Good morning, great article and comments. Anyone read The Coming Generational Storm....old book and well worth it. Shocking and sad that this persists, look out private IRA cash. Merry Christmass everyone.
It is clever the way they promise benefits at the back end of a person's life, then endlessly stall and reduce them through incremental 'reforms' and inflation until death at which point there are no complaints. Spare me the false promises please. Let's deal with today and the tomorrows will take care of themselves.
Mish wrote an excellent comment on NJ and other states' pension liabilities:
http://globaleconomicanalysis.blogspot.com/2010/12/wsj-reports-new-jersey-pension-deficit.html
Hmmm... so, a $54b pension gap. And with a couple of mouse clicks, I learn that there is approximately $40b in outstanding muni debt as of 12/10/2010.
If only there was some way all that deflationary pain could be spread among all the parties involved. I wonder how?...
Expansion of the CPP? They should disband it and move the money into private pension plans which are specifically for the individuals that invested in it. A pooled pension run by government will be run by politics. Everyone knows that this will eventually lead to payments based on your other income and claw-backs. That is not a pension plan it is just another wealth redistribution plan.
If people feel entitled to their benefits it is probably because they were forced to pay into a program their entire working lives and told by politicians that they don't need to worry they will get what they paid for. Suckers.
Please get your facts straight. Private pensions have been an abysmal failure. They can't compete with CPP. And please read from CPPIB FAQ:
Is the CPP Investment Board really independent of government?
Yes. We were created to operate at arm's length from governments and to make independent investment decisions. As enshrined in the Canada Pension Plan Investment Board Act, the board of directors approves our investment policies and management makes investment decisions consistent with the approved policies. Management is accountable to the board of directors of the CPP Investment Board.
However, as a Crown corporation, we are accountable to the federal and provincial finance ministers, who are responsible for the Canada Pension Plan.
In the event a politician were to try to influence our investment decision making, we would remind the individual, in writing, of the CPP Investment Board's arm's length relationship to government and the political process. Further, the incident would be reported to our board of directors for review and action if warranted.
Leo I am well aware that they think they are independant. I also know that they were created by government mandate and can be changed by government mandate. In a crisis the power of government expands to include everything. If they are above the whim of government then how is it that the government can propose expanding it? If it can be expanded can it also be contracted?
"If they are above the whim of government then how is it that the government can propose expanding it? If it can be expanded can it also be contracted?"
Crickets ;-)
Ah, the thugocracy of New Jersey.
The sooner that the head thug Christie is replaced with an actual governor, the better.
See, this is a problem (you). My sister-in-law hates Christie too. He's going to take her pension. She's a social worker. Like her, you are blaming the messenger. People can't seem to be able to correctly apportion blame. I think of Governor Christie as a really competent mechanic who is facing the pension/union problems head on and he is being blamed, as if he somehow caused this mess.
Just what do you see an "actual governor" doing?
I know some folks in NJ who pay property taxes that are north of $20,000/year. About 10 years ago they were saying they were going to have to retire someplace else because they couldn't pay those kind of taxes on their projected pension incomes. Well, here we are 10 years later, taxes have gone up, property values have gone down, they are about to retire and it looks like their pensions will be reduced. Stuck in NJ. If they borrowed against their "equity" (which I understand they did), they are both stuck and f&%$#d.
you mean a governor who will raise my property taxes to 15k a year to pay off some union member who retired at 55? no fucking way. i'll stop escrowing my prop taxes and just forget to pay a few quarters as will many others
Whoa, Koag. Your responsibility is to vote and work to get out the vote and work to campaign for your candidate. . . If your elected representatives and your governor do something you don't like, chase them out of office. Don't blame the guy who reitred at 55 after 35 years in the fire department, risking his life for you and your kids.
And, if you don't like that, then move to a State you like better. But don't sit there and act like the guy who made his bargain with the government 35 years ago shoudl be shortchanged in that bargain just because you and your neighbors don't like paying taxes. He never elected to fight a fire because the guy who owned the house did not like the idea of pensions.
"Don't blame the guy who reitred at 55..."
LOL.
LOL, you think our vote counts? You forget my friend, we have the best government money can buy, doesn't matter which party or how many times we "vote em out of office"...
I Diebold that!
Hey, do I see Julian Assange in that picture?
If you want to reduce entropy you have to do work. And life is all about reducing entropy. That's why there are no "jobs" taking apart functions engines, destroying functional bridges, burning down forests etc. So we all need to work to reduce disorder so as to put off that inevitable heat death thingy.
I think the military tends to be pro-entropy, at least in certain activities.
What are you talking about? Entropy cannot be reduced. The bridge was built by humans powered by chemical entropy. The bridge is a work of entropy. Life is not about 'reducing entropy'. Life is the product of entropy. One could conceivably argue that life is entropy in action.
The 'jobs' to which you refer are called 'soldiers'.
Everything becomes chaos if not managed poperly.
A good example of this is Washington.
Not true. In a closed system, the input will reduce entropy for that closed system for the period that energy is put into the system to reduce entropy. Work (in most instances) constitutes the opposite of entropy (but see the military exception, described below).
Those of the Boomer cohort depending solely on the profligracy (Uncle Scam) for pensions and health care better get ready for dog food and Band-Aids®.