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Newt Gingrich Pushing Bill To Allow States To File Bankruptcy Allowing Them To Renege On Pension And Benefit Obligations

Tyler Durden's picture




 

Some unpleasant news for pensioned workers who believe that their insolvent state will be able to afford ridiculous legacy pensions in perpetuity. According to Pensions and Investment magazines, Newt Gingrich is pushing for legislation that will allow insolvent states to be taken off bailout support and file bankruptcy, in the process allowing them to renege on pension and other benefit obligations promises to state workers. And if there is anything that will get government workers' blood pressure to critical levels, it is the threat that money they had taken for granted is about to be lifted, courtesy of living in an insolvent state (pretty much all of them). And obviously what this means for equity investors in assorted muni investments is that a complete wipe out is becoming a possibility, as Meredith Whitney's prediction, which everyone was quick to mock and ridicule, is about to come back with a vengeance.

From P&I:

Proponents of the measure — which include Americans for Tax Reform, a Washington lobby group that fights tax increases — said the legislation is desperately needed to clear the way for struggling states to slash costs before they go belly up, and should be regarded as a preemptive move that could preclude the need for massive federal bailouts.

“It's in the short-term and long-term interests of government workers and taxpayers to start those reforms now, rather than having to pick up the pieces after a crash landing,” ATR President Grover Nor-quist said in an interview.

“We are working with people inside and outside of Congress on this issue,” said Joe DeSantis, a spokes-man for Mr. Gingrich, whom Mr. DeSantis said is considering a bid to be the Republican presidential candidate in 2012.

Sur enough, the response has been fast, furious, and very vocal:

State and union officials vow to fight the bankruptcy initiative, which they fear would undermine state autonomy and be used to reduce promised benefits to government workers.

“I am unaware of any public pension plan that is requesting federal assistance,” said Keith Brainard, NASRA research director.

“Exaggerated reports on the financial condition of public pension plans are being used as a scare tactic to justify federal intervention,” Mr. Brainard added.

Said Mark McCullough, a spokesman for the Service Employees International Union, Washington: “This is another right-wing attack on behalf of their (the GOP's) anti-middle class, big-business donor base.

“It would amount to not just another attack on working families, but an attack on everyone from investors to retirees who would see the economy reel from the ripple effects of state bankruptcy as they pursue the goal of making American workers expect no better pay or benefits than workers in the developing world.”

So far, proponents of the legislation said they have not yet recruited a congressional sponsor for the proposed measure. “We're still shopping for the guy who is going to carry it,” Mr. Norquist said.

Nonetheless, union executives are concerned that the proposal — which has been promoted on conservative websites recently — is part of a well-orchestrated and hitherto underground campaign now surfacing as Republicans settle into leadership positions in the new Congress.

“This idea carries major negative financial implications for the states, their creditors and the companies that do business with them,” said Charles Loveless, director of legislation for the American Federation of State, County and Municipal Employees, Washington. “A state going into bankruptcy would send shock waves through the states and could very well undermine our fragile national economic recovery,” he said.

“It is incredible to me that proponents of this portray themselves as advocates of state rights when what they're really doing is driving states into the ground,” Mr. Loveless added. “It's clearly in an effort to renege on public employee collective bargaining contracts.”

The good news: not all states will file for bankruptcy if this proposal becomes law. Just most.

But Mr. Norquist said that, assuming the proposal becomes law, not every state would file for bankruptcy — a right that municipal governments already have under Chapter 9 of the U.S. Bankruptcy Code.

“If you don't have this (a state bankruptcy process), you have New York, Illinois and California running off the rails because there's no way to fix their problems ... They've got these contracts with government workers that you can't alter,” Mr. Norquist said.

He said restructuring benefit obligations doesn't necessarily mean cutting the amount of money a retiree gets; it could involve freezing a public defined benefit plan and enrolling new employees in a defined contribution plan.

Look for some more serious outflows from muni funds, and notable volatility in muni bonds, as this latest challenge to the state bailout "certainty" is digested.

courtesy of @Biz_Reporter

 

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Mon, 01/10/2011 - 10:52 | 863530 Vashta Nerada
Vashta Nerada's picture

I'd really like to see this implemented.  The US can't borrow enough to cover the hundreds of trillions in unfunded pension obigations.

Mon, 01/10/2011 - 11:09 | 863573 cocoablini
cocoablini's picture

Illinois' governor wants to raise the income tax 70% and no theres a recall effort.
Basically we have a huge game of chicken with pension giveaways and 80% lifetime benefits that the taxpayer doesn't get but the government intelligentsia and minions get.
So, obviously, Mother Nature is going to take care of this- by civil war or by flatout declaring bankruptcy.
The Soviet Union government class operated in the same way. Favored workers would get special shopping malls, Zils and fur coats. Government corruption and confiscation of wealth is a time old problem...until its not

Mon, 01/10/2011 - 11:17 | 863608 papaswamp
Mon, 01/10/2011 - 16:58 | 864982 Fish Gone Bad
Fish Gone Bad's picture

I am trying to see if there is any terrible news here, and there is.  Terribly good news that is!  Its about time someone looked up from the pig trough and realized the free meal was coming to an end.

Mon, 01/10/2011 - 17:02 | 864985 Fish Gone Bad
Fish Gone Bad's picture

duplicate

Mon, 01/10/2011 - 11:27 | 863630 TheGreatPonzi
TheGreatPonzi's picture

"Civil war"?

Considering the reactions to the Arizona shooting I've seen on this website, the probability of a war - or even violent riots - in America is less than 0.

95% of the posters were denouncing the very idea of firearms and violence, not the real problem, which was the actions of a schizophrenic madman.

Please, stop talking about civil war when yourself you would not be able to shoot on someone.

Mon, 01/10/2011 - 11:35 | 863682 Gully Foyle
Gully Foyle's picture

TheGreatPonzi

"Considering the reactions to the Arizona shooting I've seen on this website, the possibility of a war - or even violent riots - in America is less than remote."

Yes indeedy.

But there is a great potential for riots when services get cut (check out my California post below).

But the real question is Balkanization. Will we see a breakup

http://online.wsj.com/article/SB123051100709638419.html

As if Things Weren't Bad Enough, Russian Professor Predicts End of U.S. In Moscow, Igor Panarin's Forecasts Are All the Rage; America 'Disintegrates' in 2010

(Oops wrong on the date, then again everything has been artificially propped up for the last few years. That does tend to jinx some forecasts)

Or Jesusland

http://www.buzzflash.com/contributors/04/11/images/04new_map.jpg

https://secure.wikimedia.org/wikipedia/en/wiki/Jesusland_map

The meme is in the form of a map of the U.S. and Canada which depicts a new hypothetical national border between the two countries. The "blue states" from the 2004 election, New England, the Mid Atlantic, the Pacific coast, Illinois, Michigan, Minnesota, and Wisconsin have been merged with Canada to form a single contiguous nation, which is labeled the "United States of Canada." The remaining "red states" are labeled as "Jesusland". The Freakonomics blog opined that the map reflected the "despair, division, and bitterness" of the 2004 election.[3]

Mon, 01/10/2011 - 11:57 | 863749 Vashta Nerada
Vashta Nerada's picture

If the map were redrawn, I'd bet that Alberta and Saskatchewan would join the US.

Mon, 01/10/2011 - 12:26 | 863842 hewhohesit8s
hewhohesit8s's picture

The birthplace of single payer health care join the for profit camp?  You have no idea how central our health care system is to the national identity.

Mon, 01/10/2011 - 13:22 | 864029 57-71
57-71's picture

Not a fucking chance!
From Alberta with best wishes for the outcome of your major financial and social meltdown.

Mon, 01/10/2011 - 13:32 | 864068 minus dog
minus dog's picture

You're not making it out of this any better than we are, buddy.

Mon, 01/10/2011 - 15:20 | 864535 57-71
57-71's picture

Exactly!
So we don't need to add any more problems to our own mess.
Spreading the grief does not console us.

Mon, 01/10/2011 - 11:52 | 863739 tmosley
tmosley's picture

Most here are intellectuals.  People like that don't need to pick up guns to win the fight.  You think Ben Franklin and Thomas Jefferson were out shooting Redcoats?

Mon, 01/10/2011 - 12:28 | 863849 Terminus C
Terminus C's picture

Are you suggesting that "intellectuals" are smart enough to get other people to go and do their killing for them or are you suggesting "intellectuals are too cowardly to stand up for their beliefs?

Mon, 01/10/2011 - 13:20 | 864020 DosZap
DosZap's picture

 "You think Ben Franklin and Thomas Jefferson were out shooting Redcoats?"

 

Nah, Just dumb asses like George Washington.He was leading his troops and getting his ass shot at, and freezing it off at the same time.

Buckle up boyeeez, if this passes, as likely it will,the SWHTF.

Clandestinely, or on the streets.How do these people expect retirees to lose their likely only source of income, and keep quiet?.

Uhmmm, do we starve, and lose all we worked for, or do we sit on our asses, or do we start some shit.

I know what I would do.What if you wealthy intellectuals could take off your hats, and think how this plays out, if YOU were the one losing it all?.

My money says not likely.

Mon, 01/10/2011 - 13:23 | 864035 goldfish1
goldfish1's picture

Had to go retrieve the old dog from wandering in the snow and getting too disabled to walk back. Went barefoot. Friggin cold. Made me think about the Washington and the men at Valley Forge. They were incredible.  Do we have those kind today in our midst, or the evolutionary version?

Mon, 01/10/2011 - 14:24 | 864250 RockyRacoon
RockyRacoon's picture

Most here are intellectuals.

The people "here" don't matter all that much.  Wait til them good ole beer swillin', NASCAR watchin', deer and duck huntin', bass fishin' boys get a load of their retirement funds being zeroed out.

Ha!  Then we'll have some fireworks.

Mon, 01/10/2011 - 12:19 | 863826 LFMayor
LFMayor's picture

Ponzi, I'd counter that your sample cross section is limited here.  Not a lot of meat eaters...

Mon, 01/10/2011 - 12:07 | 863781 pemdas
pemdas's picture

If we recall our governor, we would just have to pay him a pension.  Sigh.

Mon, 01/10/2011 - 13:25 | 864041 Freddie
Freddie's picture

Illinois is so broke it is not funny.  Gingrich is not a conservative but he is right here.  The fantasy of "bailouts" is a joke.

Mon, 01/10/2011 - 14:42 | 864323 RKDS
RKDS's picture

I love how we have plenty of new money to bail out banks and international corporations, but somehow it's such a burden to pay obligations we committed to long ago.  When these states decide to steal pensions from retired public sector workers, I hope they take every last cent of your 401Ks with them.

Mon, 01/10/2011 - 17:36 | 865117 Sean7k
Sean7k's picture

Nah, we'll pull 'em out, pay the taxes and put them in assets that are off limits to the government. See, we do our due diligence.

Mon, 01/10/2011 - 11:25 | 863629 Gully Foyle
Gully Foyle's picture

Let me repost this.

http://www.sacbee.com/2011/01/09/3310523/anatomy-of-browns-budget-plan.html

Anatomy of Brown's budget plan

The budget Jerry Brown will propose Monday includes deep program cuts, a June election to extend tax increases and a broad reordering of state and local government to close a deficit estimated at $25 billion to $28 billion, according to sources familiar with the plan. Here are some of the elements:

PROGRAM CUTS

Brown's proposed cuts would be felt throughout state government.

• Education: Provide K-12 schools with Proposition 98 minimum guaranteed funding. If June tax extensions fail, the guarantee would be suspended to allow deeper cuts.

• Higher education: Make deep cuts to both UC and CSU systems, in ways targeted to minimize fee hikes and enrollment reductions.

• State employees: Reduce spending in the six bargaining units that have not reached contract agreements, with savings similar to the 8 percent to 10 percent to which other units agreed.

• State organization: Consolidate some state departments and agencies.

• Governor's Office: Reduce budget by 25 percent ($7 million), including elimination of education secretary, Cabinet secretaries and first lady's staff.

• Parks: Shut state parks with lowest attendance.

• Libraries: Cut state funding for local libraries.

• Medi-Cal: Require patients to provide co-payments for services, limit doctor visits and reduce rates paid to health providers.

• Healthy Families: Increase participant premiums and co-pays, eliminate vision care.

• Welfare: Cut grants, impose stricter time limits on recipients getting grants, eliminate child care for 11- and 12-year-olds.

• SSI-SSP: Cut grants to the federal minimum for low-income elderly, blind and disabled individuals in the program.

• In-home care: Reduce the number of hours In-Home Supportive Services workers could care for elderly and disabled residents, cut domestic services like cleaning and laundry in cases in which caregivers live in the same home as recipients, typically family members.

• Developmental services: Make deep cuts to the system of 21 regional centers that oversee care for the developmentally disabled.

• Mental health: Use voter-approved Proposition 63 money to replace general fund money now spent on mental health.

• Children's programs: Ask voters to amend Proposition 10 to allow the state to use tobacco tax money now reserved for use by "First 5" commissions.

• Foster care: Eliminate transitional housing aid for 18- and 19-year-olds.

• Cal Fire: Reduce staffing on wildfires.

• Courts: Deep unallocated reduction to trial courts.

• Fairs: Cut all state funding for county fairs.

• AIDS: Require higher co-payments for AIDS drugs.

REVENUE

Brown will propose a variety of measures to increase revenue, in some cases directing the money to local governments.

Taxes: Ask voters in June to extend 2009 increases to sales, vehicle and income taxes, raising $8 billion to $10 billion over 18 months. If approved by voters, the revenue from extensions of the vehicle and sales taxes would flow to local governments to help finance government realignment.

• Dependents: Indefinitely extend the $99-per-dependent tax credit. The credit was lowered from $309 per dependent in 2008.

• Enterprise zones: Eliminate business tax relief in depressed areas that have been designated as enterprise zones, saving the general fund hundreds of millions of dollars.

• Redevelopment: Eliminate hundreds of local redevelopment agencies, eventually redirecting property tax revenue they receive to cities, counties and schools.

• Borrowing: Continue borrowing from special funds and take a portion of Indian gambling revenue to general fund.

• Corporations: Require all multistate businesses to calculate their tax liability solely on their sales in California. Businesses could no longer use an old formula that accounted for property and payroll size.

• Transportation: Use truck weight fees for debt service on state transportation bonds, circumventing Proposition 22's restrictions on taking local transportation dollars.

REALIGNMENT

Brown will propose several plans to shift programs to local governments.

• Juveniles: Eliminate the state Division of Juvenile Justice, instead sending money to local governments to house juvenile offenders.

• Adult prisoners: Low-level, nonviolent, non-sex offenders without serious prior convictions would be housed in county jails. Money would be sent to local governments to increase jail capacity and bolster rehabilitation programs.

• Mandates: Reduce the number of services local governments are required to provide and perhaps give them greater latitude to raise revenue to pay for them.

 

And this

http://globaleconomicanalysis.blogspot.com/2011/01/california-budget-bal...

California Budget Balancer Interactive Map from LA Times Misses the Mark

I just took the interactive LA Times California Budget Balancer exercise.

I vehemently protest.

This was a blatant effort to force people into accepting a need to raise taxes. To balance the budget I made every possible program cut offered. It was not enough. To balance the budget I had to raise sin taxes and gas taxes.

There are worse solutions of course, like hiking income taxes or corporate income taxes.

Exercise Misses the Mark

  • Where was a proposal to privatize the prison system using non-union labor?
  • Where was the proposal to eliminate prevailing wage laws?
  • Where was the proposal to eliminate defined benefit plans for all government workers?
  • Where was the proposal to virtually privatize every conceivable government job to the private sector?
  • What about programs that could be eliminated entirely?

California Agencies

Look at this disgusting list of California Agencies.

I sorted out some but not all of the more ridiculous ones.

Does the state need a ....

  • Acupuncture Department
  • Office of AIDs
  • Air Research Board
  • 3 different agencies for alcohol and beverages
  • 2 Apprenticeship Councils
  • Art Council
  • Asian Pacific Islander Legislative Caucus
  • Bureau of Automotive repair
  • Barbering board
  • Biodiversity council
  • Calvet Loan program
  • Climate Change Portal
  • Coastal Commission
  • Cool California
  • 4 Delta agencies
  • Digital Library
  • Bureau of Electronic and Appliance Repair
  • Employment Training Panel
  • Energy Commission
  • Equalization Board
  • 2 Fair Employment agencies
  • Film Commission
  • Flex Your Power
  • Healthy Family Program
  • Hearing Aid Dispensers Bureau
  • Home Furnishings Bureau
  • Humanities Council
  • Independent Living Council
  • Indoor Air Quality Program
  • Economic Development Bank
  • Interagency Ecological Program
  • Labor and Workforce Development
  • Latino Legislative Caucus
  • Learn California
  • Little Hoover Commission
  • Maritime Academy
  • Managed Risk Board
  • Museum for History
  • MyCali Youth Portal
  • Native Heritage Association
  • Natural Community Planning Program
  • Naturopathic Medicine Community
  • Outreach
  • Peace Officer Standards Board
  • Postsecondary Education Commission
  • Prison Industry Authority
  • Privacy Protection Office
  • Psychology Board
  • Railroad Museum
  • Recovery Task Force
  • Refugee Branch
  • Regents of the U of C
  • Save Our Water commission
  • Smart Growth Caucus
  • Status of Women Commission
  • Take Charge California
  • We Connect
  • Wetlands Information System
  • Workforce Investment Board

California does not need ANY of those. Moreover I assure you I missed dozens more that could be cut back if not eliminated entirely. What the heck do those cost? And how much can be saved by my suggestions above.

I propose the LA Times re-do their preposterous exercise meant to convey the idea that taxes have to be raised. They don't. In fact, I bet they could be lowered.

Here is the LA Times Discussion Thread on California Budget Balancer

For more ideas on how to Fight California Tax Hikes please visit the Howard Jarvis Taxpayers Association

Mike "Mish" Shedlock

 

And this

http://www.latimes.com/news/local/la-me-chowchilla-20110107,0,4007963.story

San Joaquin Valley's Chowchilla defaults on a bond

And finally this

http://www.huffingtonpost.com/2011/01/07/in-black-america-the-depression...

In Black America, The Depression Rolls On ...

A deeper dive past the headline numbers reveals a reality that ought to trigger national alarm but hasn't for the simple reason that it is already embedded in the country we have unfortunately become: the Divided States of America.

Among white people, the unemployment rate dropped in December to 8.5 percent -- hardly acceptable, but manageable were the government spending more to expand a fraying social safety net and generate jobs. For black Americans, the unemployment rate was 15.8 percent.

Professional economists will not pause for an instant at those figures. It is a truism that the black unemployment rate generally runs double the white one, and yet when did that become acceptable? How can there be so little discussion about a full-blown epidemic of joblessness in the African-American community, as if the commonplace incidence of despair -- and, more recently, reversed progress -- somehow amounts to old news?

"Can you imagine any other group at that level of unemployment and the media dismissing it as not important?" the Rev. Jesse Jackson asked during an interview this week.

He described deteriorating inner-city, predominantly-black communities in Chicago and Detroit. In New York, a recent study found that more than one-third of African-American men aged 16 to 24 were unemployed between early 2009 and the middle of last year.

"These are the same areas that were targeted for foreclosure by the banks, through reverse redlining," Jackson said, referring to the way subprime lending operations preyed with particular dispatch on minority communities. "These are the same areas that have less access to transportation, which makes it nearly impossible to get to where the jobs are. You are structurally locked out of economic participation and growth." blockquote .mid_article_ad_label { border: 1px solid rgb(221, 221, 221); }
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The picture becomes more vivid still using a broader Labor Department measure known as underemployment, which counts jobless people along with those who are working part-time for lack of full-time work, or who have given up looking for work but are eager for jobs. Among African-Americans, the underemployment rate was running just under 25 percent late last year, according to an analysis of government data by the Economic Policy Institute in Washington. That compared to a rate of about 15 percent for white Americans.

( I know someone is going to bitch about linking instead of posting the whole fucking thing. So I saved you the trouble, now just comment on the fucking trends you see in the stories.)

Mon, 01/10/2011 - 11:35 | 863674 walküre
walküre's picture

You know, in my book about 50% of the entire State of California bureaucrats are obsolete.

There is no need for ANY of the departments you list above and the cuts could go much deeper.

Do away with the Nanny state concept and push the people that depend on services into ice cold water. See who can stay afloat. The rest, well they can either move or drown. Simple.

Swim or sink.

Mon, 01/10/2011 - 11:44 | 863704 Gully Foyle
Gully Foyle's picture

walküre

"Do away with the Nanny state concept and push the people that depend on services into ice cold water. See who can stay afloat. The rest, well they can either move or drown. Simple.

Swim or sink."

So your mentally ill or physically disabled niece or nephew should "sink or swim"? Your elderly parents or grandparents who slaved for a mere daily pittance and live by scrounging and food stamps should "sink or swim"? Cancer patients who would REALLY like to work but can't and are forced to rely on the state should "sink or swim"?

It breaks down like this, in an Economic crisis the poor, sick, and elderly are the first to suffer. These are people who did not CHOOSE how they live. They are victims of the times, victims of genetics, they tend to be victims in general.

Keep in mind that when it is your turn to suffer because of things you can't control will you choose to live without those benefits you decry now?

 

( Don't get me wrong there are a lot of areas that should be cut, but NONE of those will be to the disadvantage of WEALTHY POLITICALLY CONNECTED contributers)

Mon, 01/10/2011 - 11:52 | 863740 malikai
malikai's picture

So your mentally ill or physically disabled niece or nephew should "sink or swim"? Your elderly parents or grandparents who slaved for a mere daily pittance and live by scrounging and food stamps should "sink or swim"? Cancer patients who would REALLY like to work but can't and are forced to rely on the state should "sink or swim"?

What, pray tell, are any of the agencies listed above doing for poor, sick, granny? Apart from handing her out a free hearing aid?

Mon, 01/10/2011 - 12:02 | 863766 Rodent Freikorps
Rodent Freikorps's picture

I thought that was what families were for. Taking care of each other.

Mon, 01/10/2011 - 12:12 | 863806 walküre
walküre's picture

+1

Mon, 01/10/2011 - 12:17 | 863809 malikai
malikai's picture

In this modern day of the post-nuclear family, caring for anyone, parents or children, is obsolete. That's why we pay taxes right?

Correction: That's what the government is for, right?

Correction: They get foodstamps, so it is ok.

Correction: Instead of having a proper family and letting our children benefit from the knowledge and caring of their grandparents, let's just euthanize them instead, so we don't have to pay for their expenses.

Mon, 01/10/2011 - 12:38 | 863883 Gully Foyle
Gully Foyle's picture

malikai

Obviously you misunderstood what I was responding to, which was the various specific idea of pushing those who need the services into a sink or swim situation.

 

Mon, 01/10/2011 - 13:19 | 864015 dark pools of soros
dark pools of soros's picture

so boiled down you want slave wages (if any wages at all), but pampered retards and old fucks

basically you just want america to turn into another china and let china become the consumer

 

hey we can get rid of unemployment, just pay everyone a dollar an hour!!! wooot!!!

Mon, 01/10/2011 - 12:10 | 863795 walküre
walküre's picture

Never a shortage of victims to be exploited by the bleeding hearts.

Birds in Arkansas were victims. Start a club for them as well.

Leave it alone and see what happens. World will still turn.

Mon, 01/10/2011 - 15:34 | 864612 RockyRacoon
RockyRacoon's picture

Not a problem.  We like blackbird stew.  This makes harvesting easier.

Mon, 01/10/2011 - 12:14 | 863814 PierreLegrand
PierreLegrand's picture

Victims? How are they victims? Who victimized them? Or did they make bad choices early on?

 

Mon, 01/10/2011 - 12:23 | 863834 iDealMeat
iDealMeat's picture

exactly..  But who cares??  Cut all you're own personal consumption by 50%.. All that lost tax revenue will increase the possibility of CH. 9 locally..

Insolvent states are going to get a Bernank bailout. perpetually..

 

Mon, 01/10/2011 - 14:36 | 864302 JLee2027
JLee2027's picture

Insolvent states are going to get a Bernank bailout. perpetually..

Nah.  The taxpayers aren't going to put with this shit anymore.

Mon, 01/10/2011 - 12:07 | 863782 DaveyJones
DaveyJones's picture

do you really think the state can survive without a first lady staff?

Mon, 01/10/2011 - 12:24 | 863837 StychoKiller
StychoKiller's picture

Next thing ya know, dogs and cats start living together! :>D

Mon, 01/10/2011 - 13:18 | 863921 DaveyJones
DaveyJones's picture

as long as the dog is a boy and the cat is a girl otherwise, they can't have a joint license

Mon, 01/10/2011 - 13:29 | 864053 DosZap
DosZap's picture

GF,

Since the legislation is really not controlled by the legislature,but by Constitutional Amendments,(therefore must be changed by Amending it) how does Mr.Green Jeans propose to get around this?.

Ahnnnnold couldn't.

Tue, 01/11/2011 - 14:54 | 867655 rlouis
rlouis's picture

I was amazed to read Gov. Brown's budget recommendations - your observations below are spot on,  and although I don't agree with all of them, they have to be on the table.  The state has 1/2 trillion dollars in unfunded public employee pension liabilities and gov. Moonbeam wouldn't even consider the unrealistic costs of his main supporters, not even for the state's future?  It's pure BS - time for me to to re-read Orwell's Animal Farm, see who the pigs are. I'm also going to send a 'letter to the editor' of the local paper with your observations.  I don't agree with Gingrich about much, but with union pigs, BK is the only way to make some bacon.  

 

This was a blatant effort to force people into accepting a need to raise taxes. To balance the budget I made every possible program cut offered. It was not enough. To balance the budget I had to raise sin taxes and gas taxes.

There are worse solutions of course, like hiking income taxes or corporate income taxes.

Exercise Misses the Mark

· Where was a proposal to privatize the prison system using non-union labor?

· Where was the proposal to eliminate prevailing wage laws?

· Where was the proposal to eliminate defined benefit plans for all government workers?

· Where was the proposal to virtually privatize every conceivable government job to the private sector?

· What about programs that could be eliminated entirely?

 

Mon, 01/10/2011 - 12:32 | 863858 TruthInSunshine
TruthInSunshine's picture

Police Chief Raymond O'Hare, had barely clipped on his retirement watch when he accepted a job as the Jersey shore town's borough manager.  He’ll be collecting a pension of $121,000 while simultaneously taking home a salary of $120,000.

In some states, that's called double-dipping.  In New Jersey, it's par for the course. One former county official managed to string together eight part-time jobs to earn himself a $150,000 pension.

The tale of former Newark Mayor Sharpe James, who this year completed a 27-month prison sentence for federal corruption charges, strings together many of these themes.  According to the Newark Star-Ledger, he stockpiled a $124,000 annual pension from the city of Newark as well as a nearly $1 million 401(k) account during his prior career as a teacher at the aforementioned Essex County College.  Before he was convicted, he was also earning a $150,000 annual salary as head of an urban studies institute at the college and a $50,000 annual salary as a state senator.

The secret sauce behind bloated state pensions
Mon, 01/10/2011 - 13:32 | 864064 DosZap
DosZap's picture

I vote the RED states separate, and let the Blue ones fend for themselves.

After all, the VAST majority of corruption is,and always has been in them.

Mon, 01/10/2011 - 12:34 | 863866 TruthInSunshine
TruthInSunshine's picture

Police Chief Raymond O'Hare, had barely clipped on his retirement watch when he accepted a job as the Jersey shore town's borough manager.  He’ll be collecting a pension of $121,000 while simultaneously taking home a salary of $120,000.

In some states, that's called double-dipping.  In New Jersey, it's par for the course. One former county official managed to string together eight part-time jobs to earn himself a $150,000 pension.

The tale of former Newark Mayor Sharpe James, who this year completed a 27-month prison sentence for federal corruption charges, strings together many of these themes.  According to the Newark Star-Ledger, he stockpiled a $124,000 annual pension from the city of Newark as well as a nearly $1 million 401(k) account during his prior career as a teacher at the aforementioned Essex County College.  Before he was convicted, he was also earning a $150,000 annual salary as head of an urban studies institute at the college and a $50,000 annual salary as a state senator.

The secret sauce behind bloated state pensions

Plenty of public employees can retire under age 50
Mon, 01/10/2011 - 13:21 | 864024 dark pools of soros
dark pools of soros's picture

why do you think the mob went away so easily??  they just took government jobs

Mon, 01/10/2011 - 12:37 | 863877 Michael
Michael's picture

75% of working Americans are not eligible to receive a pension . Who cares about those 25% parasites. Scalp the bond holders.

Mon, 01/10/2011 - 14:53 | 864373 RKDS
RKDS's picture

If America could just harness its rich deposits of stupidity for export, why we'd be back on top yesterday.  There was an article a couple weeks back about Cuba laying off 500K government employees or 10% of the workforce.  Simple math extrapolates that 44% of Cubans work for the government.  In PA, with an equivalent number of citizens, the percentage is a whopping one half of one percent.  You wouldn't know it with all the howls of being overgoverned and opressed by millions of state employees that don't even exist though.

Mon, 01/10/2011 - 15:20 | 864536 midtowng
midtowng's picture

It has nothing to do with deficits. It's all about breaking unions and forcing wages in America down to China levels.

Tue, 01/11/2011 - 00:44 | 866303 cranky-old-geezer
cranky-old-geezer's picture

It's not about unions.  It's about state / county / city governments promising more than they can deliver, and now they can't deliver. 

It doesn't matter if state / county / city pensions are law.  If the money isn't there to pay them they don't get paid, end of story. 

The legislature can create promises but it can't create the money to fulfill those promises. 

Bankruptcy dissolves all those promises, end of story.  Just like when a business declares bankruptcy.  Those promises simply vanish.

I don't believe states will go bankrupt though.  The Fed has set a clear trend of bailing out "systemically important" institutions, and I suspect state governments would be considered "systemically important".  I believe those pensions will be paid.

But they'll be paid in dollars worth far less.  That's the real story.  As the Fed floods the economy with endless amounts of money to keep every "systemically important" institution going, the dollar continues losing value.  State / county / city pensioners might survive a bit longer than people who get no pension. 

Eventually the dollar will be worthless and it won't matter how big your state / county / city pension is.  It will be paid in worthless dollars.

 

Mon, 01/10/2011 - 16:20 | 864824 Panafrican Funk...
Panafrican Funktron Robot's picture

The Fed will by necessity buy the muni debt.  Bankruptcy doesn't happen if the finances are secure via additional debt issuance and/or purchase of existing debt.  The Fed has way, way too much incentive to keep the states afloat.  Reason:  the members o' the Fed have a lot of this garbage on their books and/or are currently servicing the debt as an intermediary. 

Bond haircuts.  I'll believe it when I see it. 

Mon, 01/10/2011 - 16:40 | 864905 Panafrican Funk...
Panafrican Funktron Robot's picture

Since I also like to offer solutions (as implausible as they may be in reality), what I'd suggest with pension funds is a conversion of said funds into a simple mutual fund with the pensioners as shareholders of that fund.  For example, with the TRS (Illinois Teachers), they have holdings of about $33 billion with roughly 170K total members, for an average share value holding of $194K.  Obviously that would be staggered depending on years paid in, so those closer to or already in retirement would have a greater share quantity.  Main point, people would be free to invest or divest as they see fit, and more importantly, it would move the state away from deciding the retirement fate of their employees based on an underlying budget that's way out of touch with reality.

   

Mon, 01/10/2011 - 10:52 | 863531 SCW
SCW's picture

I'm sure that won't cause any problems at all.

Mon, 01/10/2011 - 10:57 | 863540 hedgeless_horseman
hedgeless_horseman's picture

So, to do nothing is your choice?

The easy way is seldom the right way.

Mon, 01/10/2011 - 11:01 | 863549 threefingerscam
threefingerscam's picture

SCW forgot the /sarcasm at the end of post  ;-)

Mon, 01/10/2011 - 11:25 | 863637 SCW
SCW's picture

You need to adjust your sarcasm meter.

 

Clearly the states are broke and need to act like they are broke.  On the other side you have a bunch of people who were promised a certain compensation for their job.  I think the compensation was unresonable, but after the work is done and the worker retired is not the time to negotiate the terms, that horse has left the barn.  These agreements should never have been made as they were never sustainable- but screwing workers out of promised (and contractual)compensation won't go over very well either, and it shouldn't.

 

In short, states need to act like they are broke.  People who won't get their contractual (and overpriced) compensation will (rightfully) throw a fit.  The 'economy' of the US has a lot of pain yet to inflict on the poor serfs including those who thought they were past the pain because they had already exited the workplace.

 

The right way is seldom easy.  The easy way is seldom right, and in this case no matter what happens contracts won't be met and people will rightfully be very, very upset with events.

Mon, 01/10/2011 - 11:37 | 863654 hedgeless_horseman
hedgeless_horseman's picture

....after the work is done and the worker retired is not the time to negotiate the terms, that horse has left the barn.

 

So, they got away with it, fair and square?

Public-Employees Union Now Leads All Groups in Independent Election Outlays... The American Federation of State, County and Municipal Employees is now the biggest outside spender of the 2010 elections, thanks to an 11th-hour effort to boost Democrats that has vaulted the public-sector union ahead of the U.S. Chamber of Commerce, the AFL-CIO and a flock of new Republican groups in campaign spending. http://online.wsj.com/article/SB10001424052702303339504575566481761790288.html?mod=rss_Politics_And_Policy

When a horse gets out of my barn, I go catch it and bring it back in.

Mon, 01/10/2011 - 11:39 | 863696 SCW
SCW's picture

Clearly they did not 'get away with it', the state are going bankrupt.  The problem is if we find ways to ignore contracts 'for the greater good' so to speak, where does it stop?  Is it OK to ignore the law/contracts for GM bondholders but not for teachers? 

 

At some point a contract will have to be treated like a binding agreement, even the clearly corrupt contracts like pension packages.  I see no reason for a city garbage man to make $170K/yr, but as an engineer I'd quit my job and become a garbage man for that kind of compensation plus pension.  Take away half of my compensation after the work is done is fraud, it seems like we have plenty of that.

 

You are right, the right way is not easy, but getting into the habit of ignoring contracts is getting eaiser all the time in the US.  That's a bigger problem.

Mon, 01/10/2011 - 11:42 | 863706 hedgeless_horseman
hedgeless_horseman's picture

Clearly they did not 'get away with it', the state are going bankrupt. 

Not yet, which is the point of the article and the Bill, no?

Mon, 01/10/2011 - 12:43 | 863897 MachoMan
MachoMan's picture

Your ability to honor a contract goes only so far as your reserve and solvency...  the concept of ignoring contracts has a trump card, solvency.  Slavery has been abolished and there is no debtor's prison...  Every business (or person for that matter) must contemplate and assess the risks of their environment...  arguably (and I think this is a reasonable argument), governmental employees were paid for this risk premium...  and I say this as someone whose immediate family stands to be substantially (completely) affected by this legislation.

Further, a lot of this presumes the full functionality of the democratic process.  In reality, state educators and law enforcement, et al, hold the citizenry over a barrel.  Given the nature of their involvement, among other things, I really do not think there is a proper check on their expansion.  Ask yourself how this problem is virtually universal across the states...  it's because democracy broke down...  (or, rather, as the comedian said about the american dream, "it came true").

Mon, 01/10/2011 - 12:53 | 863933 Terminus C
Terminus C's picture

Contracts are sacred or they are not.  If they are not then we are one step closer to total meltdown.  "Interesting" that contracts of the wealthy (bankers in particular) are sacred but not those of teachers and other state employees. 

Who knew that this would be the case?

Mon, 01/10/2011 - 13:11 | 863962 hedgeless_horseman
hedgeless_horseman's picture

Contracts, today, are not treated as sacred.  If you disagree, then spend a day or two in civil court, or family court.

Neither do many in our society even treat sacred items as sacred. 

Mon, 01/10/2011 - 13:16 | 864004 MachoMan
MachoMan's picture

Everyone tries to play lawyer...  the right to breach or break a contract has existed since inception...  what no one wants to talk about is the right of the state to file for bankruptcy...  if municipalities can reneg on their obligations, why can't states?  Makes no sense...

If you enter into a contract, you are speculating that the other side will live up to their side of the bargain.  Hedge accordingly.

Mon, 01/10/2011 - 13:06 | 863969 Thoreau
Thoreau's picture

+1

Unfortunately, the masses and MSM simply hate such B&W truths.

Tue, 01/11/2011 - 01:00 | 866354 cranky-old-geezer
cranky-old-geezer's picture

"Contracts are sacred or they are not."

This is typical government worker thinking.  Whatever is promised to them is an edict from God so to speak, unrescindable, unbreakable, etc.

Those people live in a fantasyland.  They don't have a clue about the real world, where bankruptcy eliminates those contracts and promises.  They just vanish.

Mon, 01/10/2011 - 13:10 | 863982 Things that go bump
Things that go bump's picture

Circumstances change.  Things get renegotiated all the time.  Sometimes by force.  The age you can start collecting social security is going to be raised.  There might be a means test so you might not get social security at all, even though you were promised it and have paid into it all your working life and will continue to do so.  Your 401K might get nationalized, I'm sure they are eying them.  Nobody is going to get what was promised to them.  I'm sorry if the ladies who were gossiping behind the counter and talking on the phone while I waited to renew my driver's license are going to be disappointed.  Life is tough.

Mon, 01/10/2011 - 14:55 | 864393 RKDS
RKDS's picture

Ah, so you enjoyed the benefits of labor but now it's inconvenient to pay for them so you want a way out...so much for personal responsibility, eh?

Mon, 01/10/2011 - 15:43 | 864562 hedgeless_horseman
hedgeless_horseman's picture

Please, will you explain my personal responsibility in this matter?

And, in your opinion, would it be more responsible for our elected representatives to ignore the problem of unfunded pension liabilities?

Mon, 01/10/2011 - 11:03 | 863552 Thomas
Thomas's picture

Let's see if I have this right: Prichard bitchez.

Mon, 01/10/2011 - 14:48 | 864355 mick_richfield
mick_richfield's picture

Not bad, but a little too quiet.   Try bold face, or exclamation points.  You'll get it.   The key is practice.  Constant practice.

 

 

Oh, and ... Fed delenda est.

Mon, 01/10/2011 - 11:12 | 863588 Sudden Debt
Sudden Debt's picture

Just move to another state before it blows :)

MASS MIGRATION BITCHEZ!!!!

Mon, 01/10/2011 - 11:25 | 863639 Rodent Freikorps
Rodent Freikorps's picture

Texas has no income tax. And we have lots of good food and hot women.

Mon, 01/10/2011 - 11:34 | 863668 Sudden Debt
Sudden Debt's picture

what's the catch?

Mon, 01/10/2011 - 11:38 | 863693 goldmiddelfinger
goldmiddelfinger's picture

Landscape is boring and bars close at 12

Mon, 01/10/2011 - 13:32 | 864063 SilverRhino
SilverRhino's picture

Bars close at 0200 in the right places.  

Mon, 01/10/2011 - 12:25 | 863833 Widowmaker
Widowmaker's picture

Chlamydia.

You can always tell a Texan   ... not much.

 

P.S.  Booze not sold on Sundays (REAL booze).

Mon, 01/10/2011 - 13:08 | 863977 ZackAttack
ZackAttack's picture

It's filled with Texans, unfortunately.

Mon, 01/10/2011 - 13:30 | 864059 SilverRhino
SilverRhino's picture

So then dont come down here.

Mon, 01/10/2011 - 15:42 | 864643 RockyRacoon
RockyRacoon's picture

Yeah, Zack, and while you're passing through Arkansas -- don't stop.  We are a bit too much like them thar Texans you seem to dislike.

Mon, 01/10/2011 - 13:12 | 863986 Things that go bump
Things that go bump's picture

Its full of Texans.

Mon, 01/10/2011 - 15:29 | 864586 Watauga
Watauga's picture

It's bankrupt.

Mon, 01/10/2011 - 11:35 | 863680 Vashta Nerada
Vashta Nerada's picture

Sssssshh!  We already got 4 million extra yankees in the past decade, just how crowded do you want it to become?

Mon, 01/10/2011 - 12:03 | 863769 Rodent Freikorps
Rodent Freikorps's picture

I live in Austin. All I see are hippies. We need better immigrants.

Mon, 01/10/2011 - 12:40 | 863887 NotApplicable
NotApplicable's picture

Seems they always gravitate to those tax-dollar, black-hole towns that have a state university, the local wealth transfer mechanism.

Mon, 01/10/2011 - 14:12 | 864137 DosZap
DosZap's picture

As a Texan, screw that.

We already got a hefty 5 million pop increase from 2000.

We do not need another 20-40 million broke folks.

These states Newt is speaking of, my $ says the pensions were thru UNION contracts.

Our garbage men, certainly have no contracts for anywhere near that kind of coin.

City Managers either.

Maybe $25-30k a year, if that.

Why should ANY one retire and make more than when they were busting their ass 40 hrs a week?.

Thats insane, but just as insane is to leave them with nothing.

Thats inhuman.

Mon, 01/10/2011 - 10:54 | 863533 Arius
Arius's picture

"And if there is anything that will get government workers' blood pressure to critical levels, it is the threat that money they had taken for granted is about to be lifted,"

Welcome to the real world where the rest of us live - Gingrich is right!

Mon, 01/10/2011 - 13:02 | 863959 Terminus C
Terminus C's picture

Gingrich is right to steal directly from the American citizen?  I don't know about other pension funds but I am forced to pay into mine.  I would much rather not but I have no choice.  It takes ~15% of my gross pay each month. 

You are suggesting that because the states robbed those funds, and now have no ability to pay back their theft from people who were forced to "buy in", these people are over privileged and state theft is ok?

You are right that governments are bloated and inefficient, you are right that they need to be cut back, but straight theft from people because the governments are incompetent should never be ok.

Mon, 01/10/2011 - 13:36 | 864080 Things that go bump
Things that go bump's picture

Its not okay, it just is.  The money is gone.  Partied away like the paycheck of a sailor on shore leave.  Good grief man, a couple of years ago Minnesota reconfigured a major road to put in overpasses and remove streetlights that were causing traffic tie ups during rush hour.  They used brick on the overpasses that went though a working class town of 900 square foot 1950s ramblers.  Its as ostentatious and ridiculous as a McMansion.  The money is gone, as gone as your mortgage payment if your spouse went and put it all into a slot machine at the casino.  Realistically, the prospects for replacing it are poor to quite poor.  How much more are you willing to pare down your standard of living to pay so that they don't have to take a haircut?  Didn't you ever read "The Necklace," by de Maupassant?

Mon, 01/10/2011 - 15:32 | 864600 Watauga
Watauga's picture

It is not gone; it is not spent.  It has not even come in as revenue yet.  The government, at least the federal government, will meet its obligations to pay federal pensions through future revenue.  Please stop trying to promote the big lie that there is no money for pension payments.  It is really simply a matter of the taxpayer meeting his obligations, which he is legally and morally bound to do.

Mon, 01/10/2011 - 18:02 | 865220 Things that go bump
Things that go bump's picture

I cashed in my 401Ks and closed all my bank accounts.  I bought PMs and other hard assets and placed them out of reach.  I've merged households with my daughter and her family.  I'm in statistically my highest earning years and I no longer make enough on paper to really pay taxes and I'm living as well as I ever did.  I am doing my part to starve the beast.  You won't be retiring on my dime.  I refuse to meet those obligations.  

Mon, 01/10/2011 - 13:46 | 864097 goldfish1
goldfish1's picture

Honor the pension obligations due those who have retired. Gubmint layoffs to balance the budget. Reduce current pensions and benefits to a much lesser amount. Simple.

But not easy.

Mon, 01/10/2011 - 15:37 | 864628 Watauga
Watauga's picture

Yes, honor all pension obligations due all of those currently in the system.  We could draw an arbitrary line at, say, those with 15 years + of government service who currently serve in the government, but I think that is dishonest and the obligation should cover anyone who chose to enter government service and currently is in government service. 

Now, that does not mean you cannot drastically shrink government, lay off employees (or buy them out), and reduce wages.  And, for all future employees, eliminate all government sponsored pension plans and go to straight IRAs and 401Ks with no government participation. 

But you must meet all current obligations (without reductions; those bargains were made long ago).  The key is to eliminate the government pension for all future employees.

That leaves military personnel.  Do we eliminate their retirement plan?  Certainly we would pay all current retirees and those currently in the military if they go on to retirement.  But should the military pension be eliminated altogether for all future personnel?

Mon, 01/10/2011 - 14:17 | 864218 DosZap
DosZap's picture

Terminus,

Now you can relate to the SS crew huh?,same damn principle, hell of a lot less coin.

Go ahead, I dare ya,steal the pensions from Blue collar Northern union members...........see where that road takes us.

How about we OFFER the same deal to Congress?,and all Federal workers......ALL of them.

Tue, 01/11/2011 - 01:14 | 866370 cranky-old-geezer
cranky-old-geezer's picture

"... but straight theft from people because the governments are incompetent should never be ok."

ITS NOT THEFT MORON.  It's failure to deliver  on a promise. That's not theft.

And YES, bankruptcy TERMINATES those promises.

I hope a few states declare bankruptcy and show you idiot government workers what the real world is like.

Mon, 01/10/2011 - 10:54 | 863534 101 years and c...
101 years and counting's picture

get this thru and the "drastic events" on Sat will become a daily occurrence.

Mon, 01/10/2011 - 11:02 | 863551 kaiserhoff
kaiserhoff's picture

Yes.  People only think they have seen violence.  Wait until the union thugs get involved.

Mon, 01/10/2011 - 11:35 | 863681 Eternal Student
Eternal Student's picture

Nah, not at all. Look to Gerald Celente and what he's been saying for years:

"When people lose everything, they have nothing left to lose, and they lose it".

Look out for your average person here.

Mon, 01/10/2011 - 12:22 | 863831 PierreLegrand
PierreLegrand's picture

Fact of the matter is that people have a very hard time killing others. Only lunatics and those in the military (who have had their inhibitions broken down by vigorous training) can actually kill someone.

A fantastic book for those of you waiting for the apocalypse is On Combat http://killology.com/books.htm by Lt Col Grossman. In it he describes how studies found that even in WW2 with death all around them most soldiers would not kill. They would not even shoot if their lives were at risk...the military found a way around that by intensive training using lifelike targets.

Ironically so did our video game industry...they found the perfect simulator for breaking down barriers to killing http://www.waldorflibrary.org/Journal_Articles/RB6201.pdf. So when the next civil war starts that 15 year old with an attitude will be a very dangerous person. Weeeeeee...luckily for me I have been playing FPS for the last 16 years. I am ready...hehe

Mon, 01/10/2011 - 13:11 | 863985 Thoreau
Thoreau's picture

Yes, but hunger is the mother of lunacy. Celente's quote is historically accurate.

Mon, 01/10/2011 - 14:27 | 864266 DosZap
DosZap's picture

Pierre Sir,

True, but.....then we were dealing with an entire generation of moral,mostly dual parented soldiers,with mores and likely christian values.Plus they were not getting screwed out of a lifetime of savings.(because their Gvt, state, was corrupt,while they were not).

Things have changed dramatically, the people by and large do not trust LE (maybe local to a degree), and they hate their Gvt.

And that hatred grows by the day.

Add that to the mix, and you have a really nasty recipe.

Mon, 01/10/2011 - 14:47 | 864349 Rhodin
Rhodin's picture

"Fact of the matter is that people have a very hard time killing others. Only lunatics and those in the military (who have had their inhibitions broken down by vigorous training) can actually kill someone".

This is still true for many, and their logical choice will be to band together and try to live from the land.  Not that it will work out too well.  Few have the knowledge to minimize the labor.   Hard to switch from 8 hours in a cubicle to 8 hrs+ of hard labor, and probably a 4 hour guard watch as well, for a highly variable return that can be below subsistence in a bad year.

 

"So when the next civil war starts that 15 year old with an attitude will be a very dangerous person. Weeeeeee...luckily for me I have been playing FPS for the last 16 years. I am ready...hehe"

If it devolves into "civil war" or general violence, most everyone surviving a year or so (outside of bunkers) in uncontrolled areas will be dangerous.  FPS, paintball, combat pistol and related experience only helps in the first year or so.  Consequently most "veterans" will avoid combat when possible. Surviving farmer types will form local militias and governments will be fragmenting.  Some local areas, having sustainable food sources and a volunteer defense, force might do relatively well, if not invaded by military.

 

 

 

Mon, 01/10/2011 - 10:55 | 863538 TheGreatPonzi
TheGreatPonzi's picture

Talking about that, my 20-YR Detroit muni bonds are doing fine.

States and cities can't default. There would be too much implications. Bernanke will come to the rescue.

Mon, 01/10/2011 - 11:38 | 863695 kaiserhoff
kaiserhoff's picture

You've got to know when to hold 'em,

Know when to fold 'em,

Know when to walk away, and know when to run.

Mon, 01/10/2011 - 13:04 | 863963 Arius
Arius's picture

too many "know" - we want just only one, or even better "give me"

from the land of OZ or aka instant gratification

Mon, 01/10/2011 - 10:56 | 863539 lynnybee
lynnybee's picture

this sounds like the old "switcheroo" !   i thought states DEFAULTED, not filed bankruptcy !  there is a difference, right ?  ....... someone correct me, please, if i am wrong.... not as smart as most of the commentors here on ZEROHEDGE, but just as interested.

Mon, 01/10/2011 - 11:18 | 863612 Shameful
Shameful's picture

Under current laws there is no way for a state to declare bankruptcy or to otherwise default on their obligations.  The process would be the state tries to default, the damaged party takes them to court, the judge orders the state to sell assets or raise taxes to make the damaged party whole.

Now having said that I think there is a loophole that I've been trying to look into, but it would only work for one state and probably lead to 5-6 years of litigation but it might work to clear their debt...

Mon, 01/10/2011 - 11:32 | 863660 kaiserhoff
kaiserhoff's picture

Generalizations are always dangerous.  This is simply untested as a modern issue, and every bond has its own terms and conditions, especially munis where the bulk of the problem is. 

Texas has a right to secede.  Illinois may yet throw Cook County out of the state.  We are living in interesting times.

When did Ben or Barry ever give a rat's ass about the law?

Mon, 01/10/2011 - 12:44 | 863902 -Michelle-
-Michelle-'s picture

Texas does not have the right to secede, but they can break into 5 states and affect the fed legislature in that manner.

Mon, 01/10/2011 - 13:16 | 864001 Thoreau
Thoreau's picture

Texas, and all other states do have the right to implode. All paper laws, as fiat money, become obsolete at some juncture.

Mon, 01/10/2011 - 13:18 | 864007 Thoreau
Thoreau's picture

.

Mon, 01/10/2011 - 11:50 | 863707 Eternal Student
Eternal Student's picture

I'm not a Bond law expert by any means. But, yes, States can default. Or could. Mississippi did back in the early 1800's, and the Bond holders have literally been pursuing it since then:

 

http://www.highbeam.com/doc/1G1-19448076.html

Of course, that still leaves the original promises, although unfunded. Still, people often overlook this.

 

Mon, 01/10/2011 - 13:15 | 863996 Life of Illusion
Life of Illusion's picture

yes Ponzi, Ben will secure bond holders.

Shameful, "judge orders the state to sell assets or raise taxes to "

Dodd-Frank bill ,,FED has liquidation powers.

 

Ben says he can lend to states!!!!

Jan 7 2011

regarding state debt.
start 1:37:00
and 2:00:00

http://www.c-spanvideo.org/program/USEconomicOutlook16

 

Mon, 01/10/2011 - 14:30 | 864281 DosZap
DosZap's picture

and probably lead to 5-6 years of litigation but it might work to clear their debt...

And in the meantime?,you lose it all.

Mon, 01/10/2011 - 15:48 | 864670 RockyRacoon
RockyRacoon's picture

The process would be the state tries to default, the damaged party takes them to court, the judge orders the state to sell assets or raise taxes to make the damaged party whole.

And if the State says "FU" to the judge?  Who forecloses on the State's assets?  Just wondering how that would work.

Mon, 01/10/2011 - 11:58 | 863756 papaswamp
papaswamp's picture

States don't default...they 'delay payment'. California has 'delayed payment' several times.

Mon, 01/10/2011 - 10:57 | 863543 Nikao7
Nikao7's picture

The lines are being drawn in the sand.  State/Fed Gov workers and their fantasy land pensions verses those who would be taxed to death to support them. 

"This sucker could go down";)

Mon, 01/10/2011 - 11:26 | 863641 Watauga
Watauga's picture

Do you think that federal and state employees pay taxes on income?

Do you think that federal and state employees contribute to their own pension plans?

Do you honestly think that the lines, if any, should be drawn between those who work in the public sector and those who work in the private sector?

Do you believe that active duty military personnel are employees of the federal government?

Do you believe that those who served on active duty, and retired under an explicit, legal retirement plan, should now be deprived of the benefits of that plan?

Do you think that veterans who are retired due to disability, including those wounded in combat, should be deprived of veteran's disability retirement pay?

Do you think state employees, such as teachers, firemen, and policemen, should, after 30 years of work for the state that was possible only because of great personal sacrifice, should now be deprived of the pension payments to which they are entitled, by law?

Do you know what is meant by the term, "rule of law"?

Do you care what is meant by the term, "rule of law"?

Do you know what a Jacobin is?

Do you know what happened in France during the Reign of Terror?

Are you familiar with the U.S. Constitution?  If so, do you support that Constitution?

 

Mon, 01/10/2011 - 11:37 | 863667 oddjob
oddjob's picture

If you have sapped a living at taxpayers exspense for your entire working life,especially teachers,firemen and policemen,you deserve to rot in hell pennyless.

Mon, 01/10/2011 - 12:28 | 863848 Watauga
Watauga's picture

Why?  Can you explain?

Mon, 01/10/2011 - 12:54 | 863934 oddjob
oddjob's picture

What gives someone the right to sponge a living out of the public purse for their entire working life and another 35 years after? It cant happen anymore,it wont happen anymore...to think differently is delusional.

 

Mon, 01/10/2011 - 13:10 | 863984 Terminus C
Terminus C's picture

It would be interesting to see if you would live in a place with no teachers, police or firemen.  You have very little understanding of the world, obviously, are totally unaware of the privledges you have/had.  You also, though you demonstrate it well, have little understanding of human nature.

Mon, 01/10/2011 - 13:26 | 864046 MachoMan
MachoMan's picture

So what about the existence of teachers, police or firemen requires unsustainable benefits?

Tue, 01/11/2011 - 01:31 | 866411 cranky-old-geezer
cranky-old-geezer's picture

What the HELL are you talking about MORON?  There ARE teachers and police and firemen, and they get PAID a wage for their work.

NO, it is NOT right for those people to continue being paid at taxpayer expense for WORK THEY NO LONGER DO.

You wana talk about "fairness"?   THERE'S your fairness.

Mon, 01/10/2011 - 13:38 | 864084 Watauga
Watauga's picture

Okay, let's say Captain Smith served in the U.S. Navy for 30 years.  He served most of that time wearing on his left breast his SEAL pin.  He killed "bad guys" in Kuwait, Iraq, Kosovo, Somalia, and Afghanistan.  He has two bronze stars with "V" for valor, and three purple hearts.  He deployed regularly for those 30 years, and it is fair to say he was away from his home more than he was at his home.  So, Captain Smith retires.  He expects to receive what, 67% of BASE pay for the rest of his life. 

Keep in mind that this is the kind of guy who had "the juice" to be a major corporate CEO.  Smart, full of energy and vision, and, mosly, a great leader of men in the toughest of circumstances.  As a college student, he played football and had an idea he might go into coaching.  He is the kind of guy who would have had a real shot at the big time--you know, a $4M per year kind of guy.

He decided NOT to do those things.  He chose, instead, to serve his country--to serve YOU!  he took those three bullets, he did those deployments, he killed those "bad guys," because YOU asked him to.  He gave up his $4M per year opportunity, which would have set him up for life, taking a small fraction of that pay in order to serve YOU. 

And now you, you gutless, ungrateful, selfish jackass, want to steal from him the retirement pay that YOU owe him.  That is not delusional.  That is reality.  That is truth.

I truly hope you find a Captain Smith, Navy SEAL, so you can tell him he sponged off the public purse and that he does not deserve the retirement pay he earned.  Have fun with that. 

Mon, 01/10/2011 - 13:56 | 864142 Almost Solvent
Almost Solvent's picture

This, in a nutshell, is why the entire system is unsustainable.

 

Gov't workers & retirees (state, federal & local) vs. everyone else.

 

Not sayin' the SEAL doesn't deserve his pension, just that there is no money left to fund it without keeping the status quo (0% FED $$ and the path that leads to)

Mon, 01/10/2011 - 13:59 | 864152 Sean7k
Sean7k's picture

If Captain Smith was capable of being a CEO, then he would have understood that a pension plan involves risk. You are putting off payment today so that you may receive something better tomorrow. This is best illustrated by Wimpy from Popeye fame when he states, "I will gladly pay you tuesday, for a hamburger today".

The question is, Is Wimpy a good credit risk?

Pensions are like a loan or bond, they are as good as the person paying for them. What happens when that entity defaults? You take a haircut- possibly to zero.

Your failure to assign and manage risk is YOUR failure. Countries, Governments, Corporations or small businesses do not last forever. Usually, their longevity is brief in the history of time. 

You have assumed that the US will never default. This is bad risk management. When the country creates mountains of debt it is incapable or willing to pay, some investments will fail. Pensions are one of those investments that are possible failures.

Mon, 01/10/2011 - 14:36 | 864300 Watauga
Watauga's picture

If you believe that, and if the large majority of Americans believes that, and if you can persuade your government to agree with that, then you certainly can steal the pensions you owe the federal retiree, but in doing so you destroy the rule of law and ordered liberty.  That is all I am saying.  It is certainly possible, even probable, that you will steal these pensions.  It does not make it lawful, and it does not make it right.  You may save a few bucks for your new flat screen, but you lose both America's and your soul.

Mon, 01/10/2011 - 15:07 | 864444 redarrow
redarrow's picture

Your example assumes that they guy could habe been a CEO. Well he should have been one, he knew that his chances of being one are slim, and he probably calculated that hey this is an easy way to a great risk free retirement and he wasted no time in picking a .gov job. Look there are not many private sector CEO's, how many in all exist today perhaps 250K people? Well how many .gov employees are there who take a CEO's income in retirement pay? millions! The fact is they knew how to game they system and they did, it is too bad that the system is falling apart from its own weight.

Mon, 01/10/2011 - 15:43 | 864649 Watauga
Watauga's picture

Trust me, a Navy SEAL O-6 as I described would have been capable of doing anything he wanted in the world that relied upon leadership.  And you make my point nicely--he looked at the risks and CHOSE to bargain with YOU, the taxpayer, to serve in the military.  YOU hired him to do it, YOU trained and equipped him, and YOU sent him to fight and get shot and to kill IN YOUR BEHALF.  So don't now say that YOU don't owe him what YOU promised him.  Honestly, don't be a stinking coward.  Grow a pair and meet your obligations.

Mon, 01/10/2011 - 15:52 | 864690 redarrow
redarrow's picture

Well not all Navy seals can be what they think they will be. Its just your ego, reality is different. The underlying economy should support you organisation as a profit making entity regardless of the size of your nads. What do you think? You need a special award for just being a Navy seal? hell...there are many in the popluation who would have made a great navy seal and are not CEO's.

There are no guarantees in life. Thats the way the world works, you as a Seal should know that. The facts are...we are out of money. Not every person who joins the armed services is a CEO in disguise, no matter how proud you are of the service and its men,....many do all kinds of work and are ill equipped to deal with the world when out of the services.

Side arguments aside, what part of there is *no money* you do not get.

 

Mon, 01/10/2011 - 15:29 | 864587 Sean7k
Sean7k's picture

Are you capable of learning? Do you understand anything about finance? 

I realize you don't want to be deprived of your pension, but what bearing does that have on the economic facts?

Mon, 01/10/2011 - 15:48 | 864672 Watauga
Watauga's picture

If you have read the posts on this thread, you will know that I have argued in favor of:

--The rule of law

--Ordered liberty

--Free enterprise

--Private property

These are the very foundations of sound economic principles and policy.  There is only anarchy or tyranny without them.  Clearly, my position is the only position on this ZH thread, with one or two exceptions, that understands economics, history, finance, law, and moral obligation.  There are many who have tried to label me a statist when, in fact, I am the anti-statist, arguing that the state meet its obligations, and they are the statists, arguing that state tyranny grow its power by refusing to meet its obligations.  I suspect that I am dealing with mostly 20 somethings who have not lived long enough to understand liberty, private property, and free enterprise, and who have never known tyranny or anarchy.  What they advocate, what I suspect that you advocate, is the way to Hell on Earth.  I want no part of it.

Mon, 01/10/2011 - 17:45 | 865151 Sean7k
Sean7k's picture

The rule of law has no special value, it must be examined to see the costs and benefits. It can be an engine of liberty or an engine of tyranny.

Ordered liberty does not exist. All government or law is an infringement upon liberty. I think you may be talking about minimum government, but even that requires definition.

Free Enterprise requires zero government intervention- we don't have that.

Private property doesn't exist in any system that taxes property.

You seem to be standing on a foundation of sand in a undertow.

 

 

Mon, 01/10/2011 - 16:01 | 864722 Rotwang
Rotwang's picture

You really don't get it, do you?

The pensions are not owed by the recipient of the services rendered.

They are owed by his children or grand-children, through the non-extinguishing of debt through death, by rolling it through the perpetual state.

 

Mon, 01/10/2011 - 16:17 | 864800 psychobilly
psychobilly's picture

Destroy the rule of law?  Did you just wake up from a century-long coma?  You are living in the world's largest banana republic. The federal government is little more than a legalized gang of murderers, grifters and parasites.

 

 

 

Mon, 01/10/2011 - 15:36 | 864621 Kegfreak
Kegfreak's picture

So am I responsible for every decision a stranger makes in his life?

 

Are you responsible for the choices I have made?  If I chose to work hard, study hard, and focus my energy on becoming a CEO I may have accomplished that, but I chose a different path and have been happy with my choices for the most part.  You can't take a hypothetical situation like this one and attempt to apply your skewed logic to it.  Hopefully he paid into the TSP.  He will get a job with a Defense contractor making more than he ever has, and contribute to a 401k.  I'm not saying he should get nothing, but THERE IS NO MONEY!

Mon, 01/10/2011 - 15:58 | 864707 Watauga
Watauga's picture

Clearly, that is where you go wrong.  I am advocating basic existential tenets--freedom and responsibility.  They are inseparable.  You cannot have one without the other.  If I chose, at age 24, to enter public service because I wanted to take less pay now in order to secure my future in 30 years, then I made a particular bargain based upon all the circumstances at the time.  I alone am responsible for that decision.  I did not get to take advantage of the high-flying 80s, the tech growth of the 90s, or the investment opportunities of the 2000s.  I took my meager federal salary, saved some, paid my mortgage with some, and put some away for college for the kids.  I am responsible for not making $1M per year for those 30 years.  I am responsible for not having a $20M bank account. 

My friend who, at 24, entered the private sector, made a bunch of money in the high flying 80s, lost most of it in 1987, made most of it back in the tech rise of the 90s, lost most of that in 2000, made a bunch in real estate and stocks in the early 2000s, and lost most of that in 2007, and is now making good money again investing in U.S. stocks with each QE announcement.  He does not have a retirement in place.  He made well over $20M during those years.  HE IS SOLELY responsible for the choices HE made.  He assumed those risks because he wanted those big rewards.

THAT is freedom and responsibility, and anyone who comes onto this thread and whines that the government worker is feeding from the trough and does not deserve his hard-earned pension does not understand freedeom and responsibility, liberty, private property, or free enterprise.  He does not understand the law, history, or philosophy.  He certainly does not understand moral obligation. 

Finally, if you think the federal employee should have his pension stolen by a tyrannical government, then you are in bed with the whore, and you should expect that while you are out in the street lynching me for my federal service of 30 years, that same whore is stealing your precious TSP, IRA, 401K, and bank accounts.  At least I did not sleep with the bitch.

Mon, 01/10/2011 - 16:24 | 864844 psychobilly
psychobilly's picture

The federal employee not only slept with the bitch, he married her.  He chose... poorly.

Mon, 01/10/2011 - 17:53 | 865186 Sean7k
Sean7k's picture

Do you even listen to what you are saying? Nothing kept you from investing your savings in a way that made money. You hold your imaginary friend responsible for his poor investments, but feel you deserve a pass? 

YOU made a decision and now that it might not payoff, you want to be bailed out? Did your friend get his bad investments bailed out? 

If the "tyrannical government" steals your pension, why is your anger directed at others? Did we write the budgets? Did we spend the appropriations? 

You are the one in bed with a whore- your government. Your angry because the whore's johns have decided to use a different whore. Most whores are subject to declining incomes over time- you should have taken that into account.

Mon, 01/10/2011 - 20:07 | 865618 Kegfreak
Kegfreak's picture

HE IS SOLELY responsible for the choices HE made.  He assumed those risks because he wanted those big rewards.

So every tax payer is to be held responsible for the government workers choices?  He chose a path and it didn't work out (the .gov worker).  It happens.  Nobody is propping up the private industry worker but we should prop up the government worker.  Is the work produced more valuable?  Why the special treatment?

Not everybody in the private sector makes millions, hell six figures alludes most of the population.  Federal workers get paid more than private sector employees in corresponding jobs.  You can not compare someone who has made 20 million over their lifetime and consider it the norm.  I'm also not saying that pensions should be zeroed out.  Social Security recipients have not got a cost of living raise for two years even though inflation is 3%(.gov numbers).  Why are they taking a cut?  They paid in all their lives.  What about their freedom?

Mon, 01/10/2011 - 15:53 | 864694 RockyRacoon
RockyRacoon's picture

...Captain Smith served in the U.S. Navy for 30 years.

Some jobs are more deserving than others according to your logic.

A job is taken on while knowing the risk... and the compensation.  I see your point, but the mere nature of the job is not valid in determining the value of the person to society.  A contractual arrangement is another matter, disconnected from the job issue.

Mon, 01/10/2011 - 16:00 | 864715 Watauga
Watauga's picture

I don't care if it's Captain Smith, Navy SEAL, or Norma Jones, GS-9 file clerk.  If they did what they were hired to do by YOU, the taxpayer, then YOU, the taxpayer, OWE them what you obligated yourself, 30 years ago, to pay them.  That is your legal and moral obligation.

Mon, 01/10/2011 - 16:53 | 864963 BigJim
BigJim's picture

Please remind me when I agreed to hire "Captain Smith, Navy SEAL, or Norma Jones, GS-9 file clerk."

I really can't remember.

Mon, 01/10/2011 - 17:23 | 865066 BigJim
BigJim's picture

Oh, yeah, now I remember. They were hired by our beloved government, at the behest of the military-industrial-banking-zionist-kitchen-sink complex.

That means I have to pay their pensions, does it?

But don't worry, they'll get paid... nominally, in worthless, QEn FRNs.

Tue, 01/11/2011 - 01:10 | 866364 RockyRacoon
RockyRacoon's picture

If ya ain't got no money, ya can't pay.  Simple as that.  Who should have their money taken at gunpoint to pay them?   Oh, and I didn't hire them.

Mon, 01/10/2011 - 16:50 | 864947 BigJim
BigJim's picture

Captain Smith may tell himself he was 'serving' his country. And, if the US had been invaded, he no doubt would have courageously risked his life to defend his homeland.

But to say he 'served' his country while he was out killing 'bad guys' (I see you use quotes around that phrase - well done!) in a long list of countries he had absolutely no right to be in, suggests you need to read up a bit more about our Military Industrial Banking complex. As for Captain Smith - he joined the army knowing full well that if he ever saw action, it would almost certainly be overseas killing people who had legitimate grievances arising from US foriegn policy. Or at least, he would have known this if he had applied any of his major corporate CEO level mind to reading up on the subject.

The real irony is - he was an active part of one of the major reasons why the US is going broke - its unsustainable empire.

In fact, the more I think about it, the more I realise: if anyone deserves to lose his pension, it's our hypothetical Captain Smith, enabler of empire and squanderer of his nation's wealth.

Mon, 01/10/2011 - 19:22 | 865493 akak
akak's picture

In fact, the more I think about it, the more I realise: if anyone deserves to lose his pension, it's our hypothetical Captain Smith, enabler of empire and squanderer of his nation's wealth.

Nicely said!

Mon, 01/10/2011 - 17:46 | 865156 NumberNone
NumberNone's picture

The public sector employees in the US are now facing what private sector employees have been facing since Day 1...if you work for an POS employer that goes broke you either stay with the employer and face the cuts that are coming or you quit and find another job.  It's that simple. 

Get used to the concept...it's a fucking job.  It's about time they get away from "The Man" Uncle Sam that's been holding them down and underpaying them for years and get into the Private sector where they can shine and make all the money their incredible skills should be receiving. They should be rejoicing at the opportunity to finally get paid what they are worth.  <sarc/off>

Tue, 01/11/2011 - 05:15 | 866617 cranky-old-geezer
cranky-old-geezer's picture

Sorry, we're not buying your lame ass guilt trip attempts.   If your ficticious "Capt Smith" chose a military career rather than corporate, it was his choice and he bears the consequences of that choice.  If he takes a bullet from those "bad guys", so be it, it was his choice to take that risk, and his choice to put faith in a promised pension that may or may not be fulfilled.

And HELL NO, it's NOT taxpayers who renig on that pension, taxpayers have NO VOICE in his pension, it's HIS CRIMINAL BOSSES who squandered away his pension funds, THEY'RE the ones to blame, not taxpayers.

Mon, 01/10/2011 - 11:57 | 863751 Nikao7
Nikao7's picture

I perceive that you are driven harder by emotion than a mixture of emotion and reasonability.

What I'm getting at is "perception".  What do you think dictates peoples feelings and actions?  Is it not perception?  In the present and coming chaos perceptions will vary greatly and put many people at odds with their neighbor. 

Your passionate defense is a glaring example of what I'm talking about.

 

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