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Newt Gingrich Pushing Bill To Allow States To File Bankruptcy Allowing Them To Renege On Pension And Benefit Obligations
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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Do you have a point?
how fuckin many times are you going to spam the SAME message onto the forums here?
Gov't workers are paid OUT OF TAXES. They do not generate real taxable income.
And fuck teachers, firemen, and police officers
I guess the third time is not the charm
third? try sixth or seventh
Forecasing Texas seccession followed by Alaska and then Illinois if they don't get their piece of the Obama put.
Move to Texas. Bring your gold and guns. We welcome you.
If you are a smoker, I am sure NY will welcome you- I was in line this AM behind a chick that had to pay $9.64 for a pack of Marlboros
Bankruptcy is written into the Constitution. It was placed there to allow an entity, when personal or otherwise, to get a fresh start and to encourage the entrepreneurial spirit. Should a government entity then be included in that? I wonder!
+1
State workers will have to suck it up just like anyone at a private firm would have to. Ask any of the Pilots who worked for the airlines in the 60's or 70's. Even the autoworkers have had to accept adjustments to their pensions. why should having a state job insulate an entire class of workers from reality? Ridiculous.
This is an interesting point to consider. How about a state government can declare bankruptcy, but it means every single state employee has to be replaced?
You know. A fresh start.
In 2011 and 2012: GOP will be the party of 'Live and Let Die'
and they'll use Paul McCartney's song as a theme.
States and locals just need to issue a few $trillion in pension obligation bonds to the Fed--no problem!
I have no pension, No Mortgage, No debt, No health care and no life. I just sit here in my shack like the old woman did in the Twilight zone episode and wait for the inevitable presence of a young , Pre Jeremiah Johnson Robert Redford to take me by the hand.
there is a hidden agenda behind good ol' NEWT .......... nothing is as it seems, remember that. I learned this new line of thinking right here on ZEROHEDGE. it's the same old agenda since RONALD REAGAN ........... drive down everyone's wages to the lowest common denominator & privatise the hell out of everything including the air & the sunshine & make the average citizen dirt poor. ......... there's your hidden agenda.
Why don't they default on the bond holders? I tell you why, Wall street owns all the bonds. Fuck the little guy, right. When the Police stop Policing, we will see what happens. Since everybody here whats Gov't out of the way you'll be left to defend yourself with no guns from the coming gun bands. Good luck. Let stop those greedy little guys with those drop it the ocean pensions. And all those who love this idea, you well be next(401K,IRA,CD), so keep hoping. Here is all of us FUCKING our parents and we will be paying to support them.
We'll probably have to buy protection from the local gangs. What's the difference between between one group of thugs and the other?
Wake up. All this talk about how public employee unions and benefits are to blame for the states' issues is a curve ball aimed at deflecting the TRUE issue which is that the middle class public sector has to be destroyed by the elites also so that upcoming wages of $1.00 per hour for ALL Labor classes in US is concluded.
Will the State employees be able to awaken from their sweet dream without some jarring? Should everyone be quiet and let them sleep?
Will perpetuation of that dream ultimately be beneficial for anyone? I'm not saying they are to blame. Finger pointing has a relevant duty for exposing bullshittery but it's about to be used well beyond what's needed. Any trace of reasonability is about to exit stage left.
deleted
And Gingrich is elected to what fucking office again?
Would that be the office of cheating on your wife while she's dying of breast cancer in the hospital and serving her with divorce papers there?
I could be wrong, but I think your rant should be directed at John Edwards, not Newt Gingrich.
No. Gingrich.
http://www.cnn.com/2007/POLITICS/03/09/gingrich.schneider/index.html
He served her papers while she was recovering from breast cancer surgery. Fucking scumbag. But, of course, he confessed to God, so it's now all OK: Gingrich, who just published a book called "Rediscovering God in America," tapped a religious leader for his confession and expressed repentance."There are things in my own life that I have turned to God and have gotten on my knees and prayed about and sought God's forgiveness," he told Dobson.
Gingrich's first marriage ended after he discussed the details of the divorce with his wife while she was recovering from cancer surgery. He married again in 1981 and was divorced in 2000, when he married the young congressional aide with whom he had the affair.
He's a self-centered dick like all of them. Now exactly what does that have to do with this debate (beside the fact that public officials consider themselves outside the rules). ?
All:
Despite all the doom and kaboom alarmist comments (including here at ZH) suggesting imminent melt-down at the state level Illinois is about to successfully pass a 75% income tax increase that will, thank you very much, resolve things for the next 4 years apparently. I am reading with interest the editorials relating to this farce and, as the Sun-Times opines "After years of gridlock, a financial package is finally shaping up that could fix Illinois’ horrific fiscal mess. Let’s do it right."
http://www.suntimes.com/opinions/3206290-474/tax-illinois-think-borrowing-increase.html
You betcha! Let's do it right by increasing taxes on everyone. Benefits cuts will be on the table, well, NEVER???
But - begs the question - if it is that easy - why even worry about state bankruptcies, Newt? Seems to me this can go on indefinitely. Why even DISCUSS federal bailouts. In fact....I'm holding Gold and Silver why?????
woot, welcome to Illinois, whose population now consists entirely of government workers, welfare recipients and drug dealers.
As llong as buffett can buy up munis for pennies on the dollar and then sell them to the usa taxpayer at a huge profit I'll be happy. I love my alien lizard overlords.
I was looking at the mirror and suddenly saw an unusual dilation of the pupils, together with a strange and somewhat sexy extra eyelid...
So why aren't I a kleptocrat yet?
(alien gorn tears)
in their perfect world there would be no government workers, all services would be privatized. all this faith in the free market, don't these guys read the newspapers? all i see frankly is a huge shell game, where public liabilities and obligations, are passed off, or completely written off, and government negotiates with former employees, now private contractors, and outsourcing or granting contracts to the lowest bidder regardless of their ability to perform the service. a minimum wage police force, fire department. "drown government in a bathtub.." Grover Norquist, you need look no further to see what this is all about.
in a perfect world , there would be no public unions
Yeah, and flash forward to 2021+ - that Roth you love so much was a "giveaway." There was a much lower tax rate back in the early 2000's. [Your US congress]: Lets tax the crap out of roths now to make up deficits.
Many of those that are advocating circumventing contracts (pensions) that were negotiated, are the same people that go on and on about contractual law and fraud in the mortgage debacle.
Just remember in the not to distant future austerity measures will be aimed at your retirement funds. Will you feel the same then? Heck, who knows, maybe US law makers will just nationalize 401k's IRA's et al, Argentinian style.
The major point being, it is a slippery slope. Setting precidence in the public sector can and will be carried over into the private sector. You guys that are so for cutting pensions protect your wallet, but are fully willing to dip into someone elses. For example: Many people in the private sector have been trading wages for pension benifits repeadedly over the last couple of decades.
And for the record, i know we have to address the pension issue. It is just not as black and white a picture as many people paint here. I also find it amusing many people will post flippant remarks about how to address such a serious matter.
Spot on.
What was stopping governmental employees from putting their money into private retirements? Everyone wants to call speculation something else...
This is exactly what I mean by a knowledge deficit. In many states, government workers are forced to pay into the pension plan on top of Social Security. In PA, we're talking almost 14% of your salary gone before you see it. Then the 25% federal tax rate that hits people as low as $40K, plus 3% state tax and PA is on the low end there. I don't know what you do for a living, but some of the six-figure stock traders ranting here have no idea how damned hard it is to save when almost half of your paycheck is gone before it hits the bank. As much as the class warfare cheerleaders aren't going to like it, they have alot more room to save for retirement than, say, a lower-middle-class computer programmer who only has what's left after the mortgage is paid. We can take care of ourselves, but it would be alot easier if we weren't forced to fund bank/corporate bailouts with our stolen retirement money.
Right, but you're conveniently ignoring the obvious. Governmental workers have, as of yet, not been materially affected by the downturn in the economy. In other words, be thankful you have a job at all. Further, if you are incapacitated and cannot enter into a contract, then that is one thing... but, I'm guessing that you're perfectly capable of discerning the risks taken with your job, whether they be in the subject matter of what you're doing or the pay. Hence, the act of foregoing all other work for your job is a speculative endeavor.
Whether public or private employee, we will all lose from the money we have paid into the system (e.g. SSI), the only difference is the degree. This is one of the risks of public employment.
Seriously, the suspense is killing me.
Yes Newt here's to letting it "wither on the vine"
If a forward thinker like you (newt) realizes the only way to save his open border globalism is to allow the states to BK - that is amazing and we are closer to it than i thought!
If the states declare bk then they can loot the pensions and give it all to JPMorguemen. Sweet!
Agreed. Once again the banksters will get to look at the misery they helped create and get to shrug their shoulders and say "You fucked up...you trusted us".
Pension funds were allowed to make ridiculous projections on growth which allowed them them to dramatically underfund them in anticipation of 8-10% annual growth in perpetuity.
Banks provided states 'creative' funding ideas for projects that netted the banks millions if not billions in profits but fucked the taxpayers and broke cities and states. http://www.rollingstone.com/politics/news/looting-main-street-20100331?page=1
The MBS supported housing bubble inflated state coffers with via unrealistic housing prices that have now collapsed.
This is a clusterfuck of a magnificent magnitued.
Railroad Museum
when did cali get railroads?
Since government workers earn about twice what private sector workers earn (when we include these promised pension benefits), and since government workers are destroyers, not producers... taking away their pensions is the most appropriate first line of default. Second move: fire 90% ~ 100% of government workers.
Not to exagerate the value of government workers, but do you really want to open that can of worms? Consider the 29% of GDP that is "produced" by the FIRE economy. There are plenty of parasites who produce zero real value--including "investors" in this market.
You certainly don't need to convince me that government workers are NOT the only slackers in the economy of the USSA. Add most of Wall Street, the banking/financial/insurance system... and yes, they are probably more harmful on a per-person basis than government workers. To be sure, pretty much ALL the non-productive layers that have accumulated upon the economy need to go.
Please distinguish between GDP and production!!! Oh my are those different. GDP includes so much that is massively destructive, that eliminating the correct 50% from the GDP would massively improve the economy... and life in general.
GDP has become a totally fraudulant measure. This is like looking at your neighbor, who is constantly going on fancy vacations, buying huge fancy yachts, sports cars, vacation homes and so forth... and saying "Wow, he is doing great!!!". Only to find out a few years later that he produced nothing whatsoever, and had been borrowing $1,000,000 per year due to a accidental mistake at his bank. His "income" was not real income, and the GDP today is nothing even remotely similar to "product". In many cases they call borrowed money part of "gross income" and also "product". Just insane and pure corruption.
Well said.
Newt has always been a fascist....and a hypocrit....and a dipshit...and just about wrong everytime about everything.
The fact he has sway with anybody proves we live around fools.
Sadly too many fucked up minds will listen to him.
Probably a good idea insofar as it is a wake up call
It doesn't even have to pass for it to be effective
States, Munis will have room to scramble in the face of it
Doesn't it give them leverage with the unions and bondholders?
Work with us... or else?
Powerful item from Bernanke's talks.
He *CAN'T* come to the rescue. His counsel has told him he can't buy municipals with maturities past 6 months. He not only has no interest in doing so, he had legal constraints that prevent it.
This item in his testimony was not given enough attention. It guarantees massive slashing this year.
It would be better for the pension plans to use their last dying gasp to hit the banksters with putbacks.
+100. Pensioners or plan employees should bring suits against the plans to light fires under their asses to push them into motion . . . before it's too late.
Qui Tam suits make those who bring them BIG bucks:
http://en.wikipedia.org/wiki/Qui_tam
The ZH-I.Q. is fading fast.
The bankrupt states would simply shift pension liabilities to the PBGC -- to such an overwhelming extent, that the Guarantee Corporation itself would require a TARP-sized reconstitution. Simple to resolve -- the Frito-Lay Solution: "Got a dollar problem ? Just like Doritos -- we'll make more !"
They can live off tips for reporting suscpious people in the parking lot of walmart.
The first good idea Gingrich has had during his public life.
No taxation without representation.
Increase the public sector retirement age – period. Retirement age should mimic that of the private sector. I have no problem with public sector employees keeping their pensions, but it’s time those pensions were in line with social security benefits and the economic climate; not the current rate of double or more! If outrageous pensions can’t be reduced, then they need to be eliminated.
Wow but aren't we all so testy today. Ah, the Great Ponzi dawns on folks (more folks, like Watauga). At a macro level, I think both sides make salient points. I wouldn't want to pay into a pension for 30 years and then be told I get nothing because someone screwed the pooch. But, screwing the pooch is what politicians do, and have done, for several decades now. When times are good it's easy to get this over on the population. But when times are bad, really bad like in this here depression, things get very dicey when the money flow dries up. But in the end it's all the same. LISTEN UP FOLKS - THE MONEY DOESN'T EXIST! It is and has for a long long time been a giant ponzi scheme. All of it. Promises were made that will never be kept.
Wat,
You have a choice: reduce your vision of expected pay out and get something or never compromise and get nothing.
These things are commitments....not obligations of the taxpayer. SS isn't guaranteed, what makes you think your city airport pension is so sacred?
Also, it is widely known and accepted that govt employees are unemployable in mass in the private sector. Exceptions? a few but in mass, govt employees are a giant group of underachievers.
Those who rail against “public” sector as opposed to the “private” sector make the same kind of mistake as do those who rail against the Democrats or Republicans, either one falsely opposed to the other.
Just as the Democrats and Republicans serve but one interest in a political duopoly,
so too do the public and private sectors serve but one interest in an economic duopoly.
Does the private sector feed any less at the economic trough than the public sector?
Does the private sector not benefit from public contracts, public lands, a public military to secure resources and protect investments, from liability laws, tax concessions and subsidies, and a million other means?
Are the wages and pensions of the common public workers more ill-gotten than the payoffs to banksters and MIC contractors?
Just as the two parties are deceptively played one against the other, so also are the two economic sectors.
We are told to feed the public, we must starve the private, and to feed the private, we must starve the public.
Yet, they are but two intertwined parts of the same economy, serving the same plutocratic elite.
The entire economy, public and private, has been distorted and enervated for the same reasons, by the same elite few. The predations of war making and financial racketeering lie at the root of our political and financial malaise.
Very well articulated. It's a shame that it's so hard for folks to get their heads around, in spite of its obviousness.
Bob
thanks
One would think the ease by which the elite move between public government and private corporations to head them both would provide a clue to most people.
"Are the wages and pensions of the common public workers more ill-gotten than the payoffs to banksters and MIC contractors?"
Two wrongs don't make a right.
Besides, the "common" public workers (cue.. sad violin music) benefited from the payoffs to the banksters already. They collected taxes on the payoffs, the ordinary American doesn't.
Your reply makes little sense to me.
The wages of garbage collectors, firefighters, teachers, park rangers, etc. are fairly earned,
while the payoffs to financial racketeers are not.
You falsely presume that most common workers in the private sector are not underpaid, and most government warkers are therefore overpaid.
You also need to make a distinction between the yes, outrageous salaries and pensions some of the politically connected receive versus the median government worker wage.
Don't like "big" government? 60% of federal civil servants work for the Pentagon, Homeland Security, or the CIA.
There is no money.
Garbage may pile up, parks may be closed, teachers may stay at home
The world still turns.
Armed to the teeth republicans do not have any trouble taking Gov't bennies. A couple guys laid off (big repubs- never served in the military) were boasting about the food stamps, unemployment, welfare medical, etc. Their choices are going to bite them in the ass.
@ WATAUGA
Sir, your mental exercises are admirable. They truly are.
I've heard statements like yours all my life.
They never made sense then, they don't make sense now.
But that is besides the point.
THERE IS NO MONEY
That has been said ALL ALONG and it is OBVIOUS now!
Reasonable people always knew this fantasy couldn't last and it wasn't sustainable.
I for one consider myself reasonable and I presume there are alot of reasonable people that benefit directly from this scheme.
So, my question to you is this. Were you just ignorant about it or are you defending the scheme because you're a cheater and a liar? Which is it?
Money is not growing on trees and there is no money fairy that magically puts money into pension funds so your kind can collect forever.
He is a poster boy for UNreasonable.
I hit save once, sorry
d
@Watauga
That was the most intense repetitious drivel I've seen on this site.
You need to comprehend what the x^y function on a calculator represents.
Substitute interest rate for x, and run length for y.
Curling up in the fetal position pretending to be sick would be preferable to producing for you and your designated compatriots under 'ordered liberty'
Its all the unions fault.
I have never been a member of a union. However, i like to call it like i see it, so, a few facts on unions and some commentary:
What you are saying then is going after 7.9 million people is going to magically fix the budgets of the states and their pension wows? Because, in the end, I don't see them going after legacy costs of those already retired. That will just not fly, [remember this is the demographic that gets out and votes]
So, going forward we will address those currently employeed, that 7%.
All these attacks and energy spent on unions, yet 87.7% of this countries workforce isn't even in a union. Of the 12.3/13.6% union workforce about 1/2 of that is public sector. Median wage for those public sector employees is 900per week, or 46k a year.
http://www.bls.gov/news.release/union2.nr0.htm
http://www.bls.gov/news.release/union2.t01.htm
http://www.bls.gov/news.release/union2.t04.htm
I plan on writing an article for this site on what recently happened in my town, but a few points of issue, among others: (1) the old people in my town attempted to get out and vote down increases in sales taxes and property taxes, but the polling locations were purposefully and successfully shifted at the last minute to confuse them; and (2) regardless of whether unionized, it is practically impossible to combat teachers, police, or firemen publicly and expect to maintain a career or, at least, live in the fear of reprisal... e.g. if I write an editorial in the paper, will I be branded for increased tickets? Will my children get the same grades? Will governmental agents respond as quickly when my name flashes across the screen?
You have to ask yourself, how is it that states and municipalities are universally beholden to these groups? We can talk statistics all we want, but they will ultimately fail to lead to the discovery of what has transpired. Effectively, various political classes have emerged that are unknockoutable... and numerous rudimentary democratic principles have been usurped.
PS, we will be doing whatever is necessary domestically before defaulting internationally (presuming printing isn't default already)... if this means going after legacy costs of present retirees (many of whom are double dipping by accepting governmental jobs after retired), then it will be done.
The bill would give the states the freedom to file for bankruptcy as opposed to sucking on the Federal teet (or printing press). The fools opposed to this in the article cited claim it will increase their dependency on the Federal government. This is such BS. It frees them from being beholden to the Feds for cash. It allows them to wipe the slate clean from their prior misdeeds and chart a path forward. How can this NOT be a states rights issue?
I bought more silver today.
So little silver, so much money..
I would sponsor the bill if I could
If this bill lead to state worker retirement benefits being "adjusted", you better believe that everyone's retirement benefits, including 401K's, will be adjusted as well.
The states will reneg on what they can through bankruptcy and then means tests will be implemented for all private actors who have managed to squirrel away enough nuts for the winter.
Adopt Gingrich's plan; that is the best way to collapse the economy! The housing market will collapse, consumer spending will collapse, entitlement programs will go through the roof. Yep, let's get the party started.
I apologize that I can expend no more time or energy in enlightening you about your legal and moral responsibilities in this regard. I pray that you are given the opportunity to wake up and both see and accept these legal and moral obligations. The failure to do so, as a nation, would be the end of us, as a nation. Good luck in finding the truths I have offered you. Again, peace.
And I regret that your head is so firmly and deeply planted in your anus that you are completely unable to see your shrill and hysterical denial of reality for what it truly is.
Isn't this actually somewhat bullish for muni bonds, at least in the longer term?
If there are no mechanisms for the states to default on pension obligations, they will default on the bond markets. In theory, this should make it feasible for the states to become solvent again.