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Will Pension Gaps Spur a Tax Revolt?

Submitted by Leo Kolivakis on 04/07/2010 20:53 -0400

Please read my latest entry and post your comments here:

http://pensionpulse.blogspot.com/2010/04/will-pension-gaps-spur-tax-revolt.html

Thank you,

Leo Kolivakis

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Thu, 04/08/2010 - 09:23 | 291373 RiffRaff

I wouldn't worry about it - if you read the last line of the NYT article, you'll see that Calpers pointed out that the research was, “out of sync with governmental accounting rules and actuarial standards of practice."

Governmental accounting rules - ah, yes. Apparently, fantasy and magical thinking don't bring in the investment returns like they used to.

Thu, 04/08/2010 - 08:32 | 291305 ZackAttack

Within one of the shortfall states, there's zero public support for state pensioners. Public employees are a reviled class in America. A strike or protest would be met with outright hostility and would accomplish nothing.

Absolutely no one from another state will accept higher taxation to make up the shortfall. Nor can it ever, ever come up for a vote. A representative who votes for anything that could be labelled 'bailout' will be political suicide for a generation. It will have to be done by totally covert means.

If one of the shortfall states increases taxes to a punitive degree, the tax protest will likely take the form of a diaspora.

The only real resolution is for public service employees to take enormous cramdowns, or else take their chances in bankruptcy court alongside the state's other creditors.

Thu, 04/08/2010 - 07:04 | 291281 stkboy

Leo: what do you think of this?

http://news.ca.msn.com/canada/cp-article.aspx?cp-documentid=23819203

Thu, 04/08/2010 - 08:35 | 291306 Leo Kolivakis

I think politicians aren't worried about the pension crisis because they're set for life (or so they think). But if they don't address this issue, they too will be affected.

Thu, 04/08/2010 - 07:00 | 291280 Ned Zeppelin

Here's the deal. Simple. The pension promise will not be kept. No revolt, because politicians are not suicidal and the taxes will never be imposed. There will never be enough money, since there are no real returns to be earned at a sufficient rate to self-fund the promises. There will be lots of shuffling around and changes to the promises, until finally they are a shadow of their original forms.

Thu, 04/08/2010 - 09:42 | 291394 Seer

Yeah, pretty simple. This pig doesn't fly in reverse!

Thu, 04/08/2010 - 06:51 | 291277 exportbank

Leo - our conservative estimate is that the public sector pension deficit (that must be made good by the private sector) in the US, Canada and EU increases by over a billion dollars a day.

Pensions are the Killer App and (unfortunately) can only be resolved by bankruptcy or repudiation. The only plans politicians of every stripe have is the bubble re-inflating - there are very few that have the gumption to tell the masses that we can only live within current available cash-flow.

Thu, 04/08/2010 - 05:05 | 291252 hambone

This is bound to generate generational warfare as politicians try to pin the shortfalls on the young (they don't vote). Higher taxes, later benefits, etc. on the working to pay for promises already made. But I'm guessing this is what will start to spur younger folks toward activism and social acrimony.

Thu, 04/08/2010 - 05:17 | 291255 Seer

Exactly! And, this would have happened even IF we had NO government and we had FREE MARKETS; growth would have eventually peaked, leaving subsequent generations with less (OK, less iPads, large-screen TVs, SUVs and McMansions).

Find me ANY civilization that this basic scenario didn't happen to. No, it's not the fault of the Dems or the GOP, it's the fault of failed thinking, thinking that growth can go on forever (it's the pitch made by the rulers to keep themselves aloft).

Thu, 04/08/2010 - 06:31 | 291270 BS Inc.

I'm not quite sure you can use the pension point to make your broader point about growth, which, in fact, is a hypothesis that seems attractive on the surface (how can anything grow forever?), but is actually not something you can prove analytically, because the components of growth are moving parts and their interactions are quite complex.

Let's not forget that the head of the US patent office at the turn of the 19th to the 20th century famously declared that everything of importance had already been invented back in the early 1900's. By saying "growth can't go on forever", you're just drawing an arbitrary line in the sand and saying "From this point on, we won't strive for growth". Well, you can do that on a personal basis if you choose, but I'm pressing forward. I don't like people telling me how much or how little I can expect out of life.

The main problem with the government sector was that they wanted growth that was a multiple of private sector growth. Of course that's unsustainable.

Thu, 04/08/2010 - 09:48 | 291407 Seer

Next you'll be saying that gravity doesn't really exist...

Good god man, pull your head out. Are you smoking crack? Any Biology 101 class/lab student can tell you about growth. The issue is that the rulers supress this FACT from being applied to anything outside the lab, lest their pensions (and salaries) get yanked out from underneath them for being the lying jackasses that they are.

Here, get a clue: http://www.guba.com/watch/3000053112/Arithmetic-Population-Energy

Thu, 04/08/2010 - 03:54 | 291226 Sudden Debt

The old people should have save money for their rainy day. Shit happens.

Thu, 04/08/2010 - 10:44 | 291483 JR

Well, that pretty much solves it, doesn't it? Why bother to dig up the facts and go through a long, detailed litany of what's wrong when someone can walk up and with a quick comment, solve the entire problem? Thanks.

Thu, 04/08/2010 - 02:54 | 291217 JR

California bureaucrats have been living high on the hog for decades and they just ate the hog.

Two married teachers retiring on $200,000 and up can maintain a Pebble Beach, California, mansion.

In my area of Santa Clara, California, there were 108 county public defenders in 2007 earning above $230,000 after 4 years on the job and retiring in 30 years at age 52 or 53 at 75% of salary (raised to 80% in January of 2009, I believe) with full family health benefits and annual 3% cost of living raises. In 2007, there were 236 district attorneys, ie. lawyers in the District Attorney office, with salaries ranging up to $248,020 on a similar time scale. The District Attorney’s salary was unavailable, but exceeds $350,000.

The top ten earners in 2007 at the Valley Medical Center earned, bottom up, $392,163 to $439,561—all physicians.

In the 2007 calendar year, Santa Clara County had 3,300 employees with total pay of over $100,000.

None of these figures, of course, include the number of retirees in these categories. http://www.sfgate.com/webdb/santaclaracountypay/?appSession=81661898599986&RecordID=&PageID=2&PrevPageID=1&cpipage=1&CPISortType=&CPIorderBy=

As for San Jose police officer salary and benefits, base pay rose 49.19% from 2000-2001 to 2007-2008; health benefits increased 59.59%; and average cost per full time employee rose from $91,248 to $153,648 or 68.39% over the period for 1368 employees.

http://www.sanjoseca.gov/employeerelations/poa.asp

Currently, San Jose Police Officers, and firemen, are eligible to receive a pension of 90% of their salary after 30 years of service. Every year, the current amount of the pension is increased by 3% as a cost-of-living adjustment.

In addition, San Jose Police Officers are eligible for lifetime retiree healthcare benefits that pay 100% of the Kaiser premium for single or family coverage.

http://www.retiredsjpoff.org/

The average annual pay for California Corrections officers was $103,000 in 2008, according to a SJ Mercury 9/14/08 article.

Million dollar salaries going to university presidents were led by David Sargent of Suffolk University in Boston 2006-07, who received $2.8 million; and $1.35 million to Ohio State University President E. Gordon Gee's in 2007-08, while tuition at private schools increased an average 6.3 percent that school year and tuition at public universities rose 7.6 percent.

The question is, how can the dwindling private sector pay for the nation’s growing public sector, as well as for the nation’s mushrooming retired public sector? The answer: it can’t. Will pension gaps spur a tax revolt? The answer is yes.

Thu, 04/08/2010 - 05:11 | 291253 Seer

Well, what else does everyone expect when the economy is all based on exponential growth?

Find me ANY leader who doesn't promote growth. ALL leaders are and have been operating the machinery just as intended. Problem is that everyone wanted just a bit more, and then a bit more... But let us not fool ourselves, the direction was ALWAYS toward the cliff.

Thu, 04/08/2010 - 01:28 | 291194 Arthur

The Dems in Illinois actual did something and modified pensions for new hires. A start. The problem is the Illinois Dems are too fearful, at the moment of the public labor unions political power. The situation may change if the Republicans gain power. Unfortunately the R. contender for governor is a light weight, right winger. He is a bit much for those of us in the middle to take. The current dem is a wimpy gadfly. Unless the economy takes a turn for the better I think we will have a Republican governor and a democratic legislature in Illinois. Gridlock? Maybe but the dems here are pragmatic and will do what is necessary for their own survival, they may sellout the public unions and tell the unions it was the governor.