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Guest Post: The Endgame Of State/Local Government Pensions

Tyler Durden's picture





 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

There is no way the pensions and benefits promised in an era of financialized abundance can be paid once the wheels of financialization fall off.

Yesterday I described the destructive effect of abundance on decision-making: An Abundance of Bad Decisions. One aspect of this dynamic is the tendency to extrapolate prosperity into the future as a permanent state of affairs.
 
One example of this is state/local government pensions: during the past 30 years of financialized abundance, the benefits and pensions promised to public employees were increased substantially. Public unions are a powerful political force in many states, and in eras of rising tax revenues, it's an easy political decision to increase public employee benefits and pension payouts.
 
The rising stock and bond markets generated huge profits for the public-employee pension funds, enabling them to grow without taxpayer contributions. The effortlessness and persistence of this growth encouraged the mindset that pensions would be paid for via the magic of ever-rising markets; if tax revenues weren't even needed to fund the pension plans, then no hard political choices would ever have to be made.
 
Alas, the 8+% annual growth rate of the boom era is now structurally unrealistic.The New Normal is bond yields of 2% or 3% at best, and equities markets that are increasingly at risk of significant sell-offs.
 
The illusion that the pension funds can pay the promised benefits is maintained by plugging wildly unrealistic 7% or 8% returns into projections of future pension fund earnings. Now those unrealistic projections are being questioned: California, Illinois on Brink of Pension Crisis (Mish).
 
This means tax revenues will have to be diverted from other government expenses to fund the pension plans.
 
A key dynamic in the pension crisis is called the the ratchet effect: it was effortless to increase the benefits and pensions of public employees, but it is effectively politically impossible to trim those promises.
 
The Ratchet Effect is one reason why the nation's political machinery has become sclerotic and ineffective: Dislocations Ahead: The Ratchet Effect, Stick-Slip and QE3(February 14, 2011).
 
As correspondent Mark G. explains, the public pension crisis has been 20 years in the making, and cannot be resolved without massive, sustained political and fiscal pain:
 

1. Long term interest rates began a secular decline in 1981. This continued until at least early this year. 

2. In the early 1990s state and local politicians and their nominees began awarding management contracts to RIAs (Registered Investment Advisor) who promised higher rates of return. These promises were eagerly accepted at face value since it allowed them to reduce their annual contribution for defined benefit pension plans and spend the money elsewhere.
#1 plus the Reagan bull market made it possible to present this as fiscally responsible, or at least as progressive. Over the same period of time private corporations tended to shift to defined contribution plans for new hires. iow they ceased underwriting market risk for their pension funds. State and local governments will eventually be forced to follow this example. 

Where Mish writes: "Pension plans typically assume 7.5% returns. That's not going to happen on a sustained basis with 10-year treasuries yielding close to 2%. Yet, any significant rise in bond yields will crush existing bondholders as well as wreak havoc in equities," he's underestimating the return assumption for a great many pension plans. CALPERS & CALSTRS (California public employee pension plans) are functionally at 8% or higher. 

3. As a consequence of 1 & 2 defined benefit pension plans (along with charitable endowments) began a long-term movement out of bonds. The portfolio percentage allocations to stocks, followed by other forms of equity, began shooting up. Why would they not? The last time 30-year Treasuries saw 8% was in late 1994. It was already crystal clear by 1996 that investing in bonds was just a way to slowly sink into insolvency.
We're not on any "brink." It took two decades to get into this systemically insolvent condition. And I don't think this situation will produce further market instability. It's already been the main catalyst of market volatility since the mid 1990s in my second hand educated opinion. The dot.com and subprime housing bubbles could never have gotten so big without the participation of public and non-profit funds heaving hundreds of billions around in a chase for investment grade high yield.
In other words, the real casino action started at the precise moment that planning IRRs exceeded the 30-year US Treasury Bond rate. 

What happens next? Probably a lot of things will happen. This particular crisis will revolve around defined benefit state and local government employee pension funds. It was created in the political arena and that's where it will be resolved.
I think the Democratic Party will be the most affected. The public employee unions are a core constituency and produce most of the ground troops for the Democrats. Broadly speaking there are two approaches. These are; 1) obtain more money and 2) reduce benefit payouts. 

1. Obtain More Money.
a. Raising taxes (primarily targeting Republicans) will be the attempted default of Democrat single party states. But the crisis is most acute in precisely those single party Democratic states with the highest taxes already. It is therefore not clear this approach will really raise more money. It could equally create a large refugee movement of targeted taxpayers fleeing these jurisdictions, thus producing lower net revenues overall. The available demographic data says this process is well underway in California.
b. Shift appropriations between budget lines. This means reducing money for schools, police, highway maintenance, welfare et al and transferring it to pension funds. This will create conflict inside the Democratic party between key constituency groups.
c. Get the Federal government (or Federal Reserve) to undertake direct bailouts. This is going to create conflict between Democratic and Republican states over issues of federalism and "transfer payments". 

2. Reduce Benefit Payouts.
Recent events in Wisconsin show the potential for this action to create extreme political unrest.
I have long been watching this situation as a potential vector for political collapse.

Thank you, Mark, for this primer on the unsustainability of public pension promises.Raising taxes is the default solution to state/local government shortfalls, but there's a structural problem with raising taxes:
 
1. Fulltime jobs--the kind that pay the bulk of state/local taxes--are stagnant.
 
2. Real income is down for the vast majority of workers.
 
If state and local governments think low-income part-time workers can pay more taxes and survive, they are engaged in magical thinking:
 
The percentage of the population with a job is back to the levels of the 1970s:
 
Real (adjusted for inflation) household income has declined by almost 8%; exactly how are households supposed to pay higher state and local taxes as their income steadily declines?
 
State and local governments planning on a Federal bailout should ponder this chart, which clearly shows a structural gap of monumental proportions between Federal tax revenues and Federal spending.
 
The endgame of promises made in an era of illusory, financialized abundance will be hurried along by a collapse in the equities and bond markets. I addressed the likelihood that all three primary investment markets would decline together in What If Stocks, Bonds and Housing All Go Down Together? (May 24, 2013): in a nutshell, if yields rise, mortgage rates rise and that sinks the housing market. Rising yields also sink stocks, as higher yields pull money out of risky equities. And rising yields also collapse the value of existing bonds, wiping out much of the wealth that is currently considered safe.
 

In sum: there is no way the pensions and benefits promised in an era of financialized abundance can be paid once the wheels of financialization fall off.

 


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Fri, 06/14/2013 - 15:04 | Link to Comment Whatta
Whatta's picture

State and Local government pensions nothing...WHAT ABOUT US PLAIN FOLK TRYING TO LIVE OFF SAVINGS?

Asshat Bernank and Company chase us out of "safe" investments and then fleece us in risk assets.

Fuck each and every one of them and may they get their justice served cold.

Fri, 06/14/2013 - 15:14 | Link to Comment Momauguin Joe
Momauguin Joe's picture

Pensions are I.O.U's. I.O.U's are for S.U.C.K.E.R.S.

Fri, 06/14/2013 - 15:23 | Link to Comment max2205
max2205's picture

there is always a way...print MOAR

Fri, 06/14/2013 - 15:48 | Link to Comment King_of_simpletons
King_of_simpletons's picture

Pensions will get paid at the expense of future taxpayers, no matter how small a base that is. A combination of ultra high taxes and monopoly money printing from Yellen and other lose screws at the Fed will make sure that happens. State and Local Government / Federal Government Unions vote Democrat. There is no way in heckloon pensions are not going to get paid - What i am saying is Republicans can't win anymore. There will not be a republican president for some time to come. Welfare State will prevail until everyone is broke and lost their will to survive. There is no way out.

Fri, 06/14/2013 - 15:52 | Link to Comment jbvtme
jbvtme's picture

my only fear is that when the time comes to watch bureaucrats standing in line at the soup kitchen, the tickets will be sold out.

Fri, 06/14/2013 - 17:42 | Link to Comment MisterMousePotato
MisterMousePotato's picture

Question ... does that first chart (Full-Tme emplyment as a % of U.S. Population) include teachers, firemen, cops, city administrators and their minions (in other words, the 20-30 million parasites that are responsible for having this discussion at all? If so, the problem is far, far, far worse than indicated by the article.

Fri, 06/14/2013 - 15:55 | Link to Comment MagicHandPuppet
MagicHandPuppet's picture

Without responding to the previous poster's "simpleton" view of the democrat vs. repulican false dichotomy...

I will seriously celebrate when these gubment assfuck jokers' pensions dry up.  I know at the federal level they can always print to keep the payments going.  But, the local leeches may very well hit a point before hyperinflation where the well of blood that they draw from dries up.  For those of us remaining, this day will be bitter sweet.

Fri, 06/14/2013 - 16:29 | Link to Comment gorillaonyourback
gorillaonyourback's picture

The well is dry allright. Its only when the blood suckers realize the host is dead is when all hell breaks looae. Think about this average gov employee makes about 100k/yr and average household (2 people) make 50k/yr. Almost 48% of all gdp is funded by gov spending. Makes u go hmmmm right

Fri, 06/14/2013 - 18:18 | Link to Comment Meat Hammer
Meat Hammer's picture

I will seriously celebrate when these gubment assfuck jokers' pensions dry up.  

Watching the free-shit brigade battle for the crumbs will be must-see tv.

Sat, 06/15/2013 - 06:10 | Link to Comment StychoKiller
StychoKiller's picture

Grab some popcorn and lessee what happens in Detroit, Mich...

Fri, 06/14/2013 - 19:20 | Link to Comment americanreality
americanreality's picture

Minnesota is trying to institute a 5 dollar tax on all home and auto insurance policies for the purpose of restoring public pensions.  So every non-public employee who lost money in their 401k is now responsible for making the retirement accounts for public workers whole while eating the loss on their own accounts. What's not to like? 

Fri, 06/14/2013 - 22:05 | Link to Comment kchrisc
kchrisc's picture

One has to admire the shit: steal another dollar to replace the stolen dollar that you stole in the first place.

And I would bet you $5 that the pols and crats will find a way to steal this "fix" as well. Mark my words.

Fri, 06/14/2013 - 15:49 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

I would expand the available options:

1.  Move to 401K plans 2.  Cap or decrease pension payouts 3.  Increase employee contributions 4.  Increase taxes #1 is what I think is going to be likely, particularly if there were to be a Fedgov sponsored plan.  States would for the most part gladly offload this liability, and converting those pension funds to 401K would help resolve the D vs. R, as they would not technically become a Fedgov liability (it would in the off-balance sheet sense, via "guarantees).   I could also envision a scenario in which this Fedgov plan were to be the only 401K still tax deductible.  Further, this plan be run by a sponsor, say, the corporation that currently run food stamps.   I know, such nonsense, crazy theories going on in my brain.  This could never happen, right?
Fri, 06/14/2013 - 18:20 | Link to Comment NoDebt
NoDebt's picture

The recipients of those promised pensions are, at this point, largely Democratic/Union.  They will NEVER give one inch they don't have to.  They KNOW they got a sweetheart deal and they're going to fight against ANY attempt to decrease benefits or increase their contribution to it.  If they have to bankrupt the entire nation to pay for it, then so be it.  Multiply Wisconsin by a million and that's the fight you have on your hands, although states are starting to nip around the edges here and there.

Fri, 06/14/2013 - 18:56 | Link to Comment MisterMousePotato
MisterMousePotato's picture

Remember that scene from the Terminator? When Kyle was trying to explain the implacable nature of the beast? ("It can't be bargained with. It can't be reasoned with. It doesn't feel pity, or remorse, or fear. And it absolutely will not stop, ever, until you are dead.") The good news is that at least we're living in a pretty good B movie.

Example: Detroit. Did they change? Did they do anything differently, at all, before the money simply ran out? No. And they won't anywhere else either. They absolutely will not stop, ever, until you are dead.

Fri, 06/14/2013 - 20:14 | Link to Comment Totentänzerlied
Totentänzerlied's picture

Once more, but this time, don't sugarcoat it.

/s

Sat, 06/15/2013 - 05:42 | Link to Comment BidnessMan
BidnessMan's picture

Actually they are dead.  The parasites have finally killed the host. It is remarkable the host lived as long as it did.  Would have died decades ago without financialization.

The leading edge of many, many promises that will not be kept.

Fri, 06/14/2013 - 18:59 | Link to Comment Blankenstein
Blankenstein's picture

This is Illinois right now.  The state can't pay its bills, yet the unions block ANY attempt to contain the penions, which are spiralling exponentially out of control.

Fri, 06/14/2013 - 18:35 | Link to Comment g'kar
g'kar's picture

The pension money doesn't even include the unsustainable health care costs for retirees.

 

The tipping point will be the 50 to 100 million immigrants that will result from the amnesty bill through chain migration, with the bulk of them going on to government services.

Fri, 06/14/2013 - 18:47 | Link to Comment MisterMousePotato
MisterMousePotato's picture

The best estimate of the number of illegal immigrants in the country was done by Bear Stearns several years ago. (Maybe five or six or more at this point.) Anyway, they calculated that there were, in fact, 30 million, far different than the gub's estimate of 8 million then and 10 million now. Might even be more now.

Now that, by itself, is a big difference and a much, much bigger problem than we're being told.

Even more to the point, though, is the chain migration thing. Historically, every single such immigrant brings in nine more. Always. No exceptions. (So, whatever number you hear or wanna use, multiply it by ten to get a true understanding of the medium- and long-term consequences.)

Anyway. let's do the math, shall we?:  9 x 30,000,000 + 30,000,000= 300,000,000.

That's right. 300 million illiterate (in their own language, mind you), unskilled, uneducated, third world democrats.

Twenty years hence, the architects of all this will be saying, "Who coulda foreseen that?"

Kiss America good-bye, my friends.

Fri, 06/14/2013 - 18:48 | Link to Comment g'kar
g'kar's picture

Unfortnately, very few people out there understand this.

Fri, 06/14/2013 - 19:15 | Link to Comment americanreality
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I agree with what you are saying however illegal immigration is generally a Mexican/Latin issue.  Mexico's entire population is 112 million. I suppose we could empty mexico and find another 200 million in Latin america.  But I doubt it.  Its bad enough without the hyperbolic numbers.

Mon, 06/17/2013 - 16:07 | Link to Comment aerojet
aerojet's picture

A much more pliant group of slaves than the current ones.

Fri, 06/14/2013 - 15:06 | Link to Comment dontgoforit
dontgoforit's picture

Notice how 9-11 shook the line?  How much trouble has been spawned by that horrendous event?  bin laden and his ilk have really screwed things up.  Set the stage for the really bad one to emerge.

Fri, 06/14/2013 - 15:33 | Link to Comment Terminus C
Terminus C's picture

yea, Bin Laden...

You sir, are deluded, moronic, or both.

Ask, cui bono? 

Fri, 06/14/2013 - 15:05 | Link to Comment km4
km4's picture

"In sum: there is no way the pensions and benefits promised in an era of financialized abundance can be paid once the wheels of financialization fall off."

Yup !

Fri, 06/14/2013 - 15:07 | Link to Comment foodstampbarry
foodstampbarry's picture

That which cannot be sustained, won't be.

Fri, 06/14/2013 - 15:13 | Link to Comment El Viejo
El Viejo's picture

Not all states are in the same boat.  Some actually have laws that prevent the raising of taxes to balance the pension books.

Fri, 06/14/2013 - 15:19 | Link to Comment reTARD
reTARD's picture

Laws can be changed easily.

Fri, 06/14/2013 - 15:21 | Link to Comment El Viejo
El Viejo's picture

When private sector workers out number government workers that would be difficult. If they succeed anyway that would be tyranny.

Fri, 06/14/2013 - 15:24 | Link to Comment reTARD
reTARD's picture

Are there any private sector workers remaining in this economy? ;-) Those who work at Starbucks, temp working and needing more than one job don't count. They simply don't have the time to see the big picture.

Fri, 06/14/2013 - 17:23 | Link to Comment El Viejo
El Viejo's picture

I repeat my statement, hopefully with clarity.  There are no guarantees in life. We certainly in the private sector had no guarantees with our pension plans. If governments lied to government workers and said they had a guaranteed good life then maybe the government workers don't see the big picture. Here is the big picture:  Government workers used to be paid less than private sector workers. They had more holidays and rarely worked more than 8 hours a day. They also had better job security. Then shortly after Reagan in congress they cried that they needed to attract the best and the brightest and government salaries started climbing until they had the best salaries along with job security and in some cases like Wisconsin "Guaranteed" pensions. We in the private sector found ourselves making less than government workers. This is nothing less than an oligarchy or Mob Rule. Thankfully, in most states the private sector still out numbers government workers and can "if they see the big picture" will out vote them on any referendum to fund government pensions with higher taxes (probably fraudulently labelled for education) If government employees want moar money then maybe they should take the same risk the rest of us take. If by some subtrifuge they manage to get their pensions funded by raising our taxes after we have lost our good jobs and are making less now then that is nothing short of tyranny. For decades the Democrats were criticized for raising taxes during the great depression and blamed for sending the slowly recovering economy into another tailspin. If the idiots do it again well I think it speaks for itself. And most people however blind of the big picture know when their taxes have been raised expecially if they are making less than they used to.

Fri, 06/14/2013 - 17:50 | Link to Comment reTARD
reTARD's picture

I agree there are no guarantees in life. Guarantees are illusions sold by snake oil salesmen. The government also sells the promise of taking care of what should be your own responsibilities. As a result, people of today generally shun self-ownership of their own responsibilities and consequences of their own actions.

However, government (together with the banks) really does not need to raise taxes in order to "generate moar revenue." They simply can steal another, more obscure way. Just have the Fed "expand their balance sheet" or counterfeit moar currency. Theft by inflation is much more devastating.

Sat, 06/15/2013 - 11:30 | Link to Comment Oliver Face
Oliver Face's picture

All government workers, huh? What about the ones that guarantee your safety and security, more than "8 hours per day"? Without security and safety, there is no economy or private sector. Your points are taken, but a bit naive and narrow-sighted.

Fri, 06/14/2013 - 18:34 | Link to Comment BidnessMan
BidnessMan's picture

And the problem with Socialism is eventually you run out of other people's money. We are just about there.

Fri, 06/14/2013 - 15:07 | Link to Comment bluskyes
bluskyes's picture

Here's a new campaign slogan: "Let Them Strike!"

Fri, 06/14/2013 - 15:09 | Link to Comment RSloane
RSloane's picture

This article is false. Every single patriotic American is willing to pay more and more tax dollars to ensure that old public pensioners are free to make pirate hats out of their Depends and frolic without a care on beaches in Florida.

Fri, 06/14/2013 - 15:15 | Link to Comment El Viejo
El Viejo's picture

MDB is that you??

Fri, 06/14/2013 - 15:58 | Link to Comment insanelysane
insanelysane's picture

We wouldn't want the public "worker" to put off retirement any later than age 59.  The private sector workers won't mind working till age 79 to pay for it.

Sat, 06/15/2013 - 05:36 | Link to Comment BidnessMan
BidnessMan's picture

They are sitting in front of a slot machine - not at the beach.

Fri, 06/14/2013 - 15:13 | Link to Comment 10mm
10mm's picture

Here we go againn,painting the 2 party fraud that is one.

Fri, 06/14/2013 - 15:20 | Link to Comment Jumbotron
Jumbotron's picture

However....don't forget...even though these pensions should indeed be cut if not eliminated in order for at least a part of the government behemoth to be downsized.....that will be less money going back into the economy when these guys finally retire...if they ever do.  And if they don't that means less jobs for the younger generation coming up.

Should have never allowed them to grow like they did.....cutting it out will have all sorts of negative consequences.  An analogy would be the amputation of a grangenous limb and the loss of mobility and freedom that brings.....but the life is saved in doing it.

Fri, 06/14/2013 - 15:50 | Link to Comment lasvegaspersona
lasvegaspersona's picture

Issues like this cannot and will not be resolved. They will continue until something breaks. There is no such thing as political will. There is only the effects of reality coming to getcha.

Fri, 06/14/2013 - 20:07 | Link to Comment mjcOH1
mjcOH1's picture

"However....don't forget...even though these pensions should indeed be cut if not eliminated in order for at least a part of the government behemoth to be downsized.....that will be less money going back into the economy when these guys finally retire...if they ever do."

Luckily, the money to pay them isn't being removed from the private sector economy through taxes and inflation. Because that would make paying off the public sector pensioner a zero sum on the economy, and merely a redistribution scheme.

Fri, 06/14/2013 - 15:20 | Link to Comment insanelysane
insanelysane's picture

Don't tell this to half the state of Rhode Island and the Providence Plantations.

Fri, 06/14/2013 - 15:23 | Link to Comment lolmao500
lolmao500's picture

Time for some Syrian news??

  • Reports #Aleppo says big battles underway as #syria government tries to push back opposition forces. A push was expected post #Qusayr
  • President Assad's cousin Ribal al-Assad tells us US weapons for rebels will start an 'arms race' in #Syria. #FSA
  • BBC's Paul Wood tells us #Syrian #FSA rebels "want mortars, artillery + 'quality' weapons that can bring down an aircraft or helicopter".
  • BBC's Paul Wood says #FSA not as short of ammo as it used to be. Saudis and Qataris have been supplying small arms and ammo. #Syria
  • Desperate times for the rebels in #Syria: "We are in trouble, we are in a lot of trouble now", #FSA commander Gen. Idriss tells us.
  • #FSA commander Gen. Idriss says he fears what happened in Qusair will be repeated in #Aleppo if deliveries of weapons are delayed. #Syria
  • Fierce fighting has been going on for 4 hours around the palace of justice in Aleppo
  • Satellites track 20,000+ Assad & Hezbollah forces converging on Aleppo supported by 100s of tanks and bmp and silka fighting cars
  • Nasrallah says Hezbollah will maintain fight in Syria
  • A senior cleric in Islam's holy city #Mecca has exhorted followers to support Syrian rebels by "all means"
  • Ban Ki-moon, UN Secretary-General, has said there is no military solution to the conflict in #Syria
  • U.S. studying Syria no-fly zone near Jordan border, two senior Western diplomats (Reuters)
  • NATO: chemical arms use in Syria breaks international law (Reuters)
  • #German Chancellor Angela #Merkel has said the UN Security Council should meet urgently to reach a joint position on #Syria
  • SYRIAN REBEL COMMANDER IDRISS TO TRAVEL TO WASHINGTON TOMORROW
  • LAVROV WARNS KERRY THAT ARMING SYRIA REBELS FRAUGHT WITH CONFLICT ESCALATION - MINISTRY
  • NATO data: Assad winning the war for Syrians’ hearts and minds

http://www.worldtribune.com/2013/05/31/nato-data-assad-winning-the-war-f...

  • German Intelligence: 95 % Of Free Syrian Army Non-Syrian Extremist Groups

The biggest danger lies in the Arab countries’ help releasing Islamic detainees and sending them to Syria with the aim of Jihad against the Syrian state violating the standards of anti-terrorism Conventions.
http://stratrisks.com/geostrat/13310

  • Naharnet: Saudi King Cuts Short Morocco Vacation amid Unusual Military Measures in Kingdom

The information come amid media reports that the Saudi military command has ordered measures that resemble a state of alert.
According to the reports, the army has suspended the vacations of soldiers amid unusual military moves in the bases that are close to the border with Jordan, especially the Tabuk military base.

http://www.naharnet.com/stories/en/86842-naharnet-saudi-king-cuts-short-...

  • Here's a map of the 23 places the US will bomb if there's a Syria no fly zone

http://killerapps.foreignpolicy.com/posts/2013/06/14/heres_a_map_of_the_...

  • Assad plans to open ‘resistance’ front in Golan, says report

http://www.timesofisrael.com/assad-plans-to-open-resistance-front-in-gol...

Fri, 06/14/2013 - 16:02 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture
  • Here's a map of the 23 places the US will bomb if there's a Syria no fly zone

That map was pretty interesting.  Note the Syrian bases located in the Damascus burbs.  Yeah, that won't cause any blowback at all.  

Fri, 06/14/2013 - 20:20 | Link to Comment Totentänzerlied
Totentänzerlied's picture

"Saudis and Qataris have been supplying small arms and ammo"

I'm sure the UN is looking into this absolutely incendiary claim.

/megasarc

Fri, 06/14/2013 - 20:25 | Link to Comment Totentänzerlied
Totentänzerlied's picture

"The good news is it probably won't be too hard to pull off, given the battered state of Assad's air defenses. The bad news is it could drag the U.S. into a wider war."

The second sentence is pure sarcasm, coming from the person who wrote the first. Zionist warmongers know exactly how this game is played.

Fri, 06/14/2013 - 15:25 | Link to Comment wcvarones
wcvarones's picture

Please explain "CALPERS & CALSTRS are functionally at 8% or higher." Calpers is at 7.5%, I think Calstrs is too.

Fri, 06/14/2013 - 15:25 | Link to Comment toady
toady's picture

The only way out of this, morally, financially, or any other way you can think of, is the complete renunciation of the elites and financial houses that caused / allowed this to happen.

I can't picture how it will happen, or what it will look like on the other side, but I hope it's not 'meet the new boss, same as the old boss.'

Fri, 06/14/2013 - 15:27 | Link to Comment JJ McApe
JJ McApe's picture

1970ies levels but with much more population

DIS SHIT IS CRAY

Fri, 06/14/2013 - 15:27 | Link to Comment Praetorian Guard
Praetorian Guard's picture

Thats why Obama is giving refugee status to 1.6 MILLION Syrians into the US. WTF?!?!?!?!?!?!?!? Looks like this shit hole country will be bringing in new flesh to pay these "public" debts... yea... and just think, all these people will get free housing, food, job, and education... must be fucking nice...

Fri, 06/14/2013 - 16:51 | Link to Comment Cloud9.5
Cloud9.5's picture

Would that be 1.6 million Muslims? God can anyone imagine how the ethnic cleansing will play out once this sucker goes down?

Fri, 06/14/2013 - 19:23 | Link to Comment g'kar
g'kar's picture

If it keeps going the way it is in the Middle East, we may be importing all of Israel shortly. Not a problem though, after Mexico empties out into the US we will have lots of open land down south of the border to put the Syrians and the Israeli's.

Fri, 06/14/2013 - 15:32 | Link to Comment Seasmoke
Seasmoke's picture

Don't worry about us here in NJ. Fat fuck Christie says he fixed and saved it. All his double and triple dipping cronies are happy.

Fri, 06/14/2013 - 17:38 | Link to Comment therover
therover's picture

Sea...the fat fuck didn't fix shit.

It's an election year. Expect more lies and propaganda from the fat fuck and the bitch who is running against him.

They should all rot in hell. 

Fri, 06/14/2013 - 20:22 | Link to Comment Totentänzerlied
Totentänzerlied's picture

Did you see the ads last year blaming Bob Menendez for high gas prices? High gas prices in the entire world are the fault of one NJ politician!

Fri, 06/14/2013 - 15:32 | Link to Comment HowardBeale
HowardBeale's picture

This article has turned the Black Swan White, as we all know that the fascist oligarch class wishes to eviscerate the remaining labor unions in America, and all they need to make that happen is to destroy the pensions. How? Just crash the stock and/or bond market and the pensions are history, the unions will fold, and they have achieved their goal. 

And that, boys and girls, is why the stock market will see new lows in the near term.

Fri, 06/14/2013 - 15:43 | Link to Comment B2u
B2u's picture

This is too funny !!!  Not only did I retire at age 54, I moved out of the United States.  No state pension is receiving any money from me. 

Fri, 06/14/2013 - 15:51 | Link to Comment Vidar
Vidar's picture

I hope these systems collapse and these leaches get nothing. "Public employees" is just a pretty word for the overpaid and overfed government thugs that are busy stepping on the necks of the average American.

Fri, 06/14/2013 - 17:08 | Link to Comment Cloud9.5
Cloud9.5's picture

I’ve been an American History teacher for 32 years; I pretty well thugged it up. It’s been great. So many young minds to corrupt in such a short time; when they walk out of my class they know that we live in a Constitution free zone and that the President can have any one of us disappeared on a whim. My wife and I have put in thousands of hours off the clock making, thunder games happen, home coming and prom happen for the last several decades. I’m not asking for sympathy, I’m simply stating a fact. All public employees are not equal. Some are good public servants, others are opportunists. If the pension fund goes flat and social security implodes like we all expect it will, expect the rest of the restaurants and small businesses to collapse here in central Florida. We won’t starve alone.

Fri, 06/14/2013 - 18:29 | Link to Comment Meat Hammer
Meat Hammer's picture

It's even funnier when they call themselves civil servants.  

Fri, 06/14/2013 - 18:55 | Link to Comment NoDebt
NoDebt's picture

They serve you and you pay them.  When they stop serving you, you still pay them.  It's all very..... civil.

Sat, 06/15/2013 - 05:34 | Link to Comment BidnessMan
BidnessMan's picture

"devoting their life to public service" - what every two bit Congressman who had a zero net worth when elected and retires a couple of terms later as a multi-millionare with a fat pension always claims.

Fri, 06/14/2013 - 16:05 | Link to Comment Oreilly
Oreilly's picture

While the end game may seem clear given the lack of funding and abundance of those claiming a share, what happens will differ state by state and municipality by municipality.  The Pension Benefit Corp doesn't enter into this because it only deals with private pensions (and it's far past broke anyway), so it comes down to whether or not your state deals with pensions in state constitution as contractual or not.  Here's an interesting link that provides summary info on U.S. states:

 http://www.ncpers.org/Files/News/03152007RetireBenefitProtections.pdf

If it's contractual, expect the state unions to try and get blood out of a turnip.  If the public pension is city or county, then it's likely that there'll be lawsuits but pensions won't be treated as contractual and may be negotiated (that's fire, police, local maintenance, etc.).  In any case, if there is no money in the system (recession or depression or debt armagedon or just stagnation) then what will happen is still dependent on where you are.  If you live in a state/county/city that favors labour over private enterprise, then you lose.

It'll be interesting to see how the now declared bancrupt Detroit deals with pension strife, as a large portion of the city depends/will depend on the city's savaged pension funds to survive. 

Fri, 06/14/2013 - 18:29 | Link to Comment BidnessMan
BidnessMan's picture

Looks like Detroit wants to pay Pension Funds 10 cents on the Dollar.

Fri, 06/14/2013 - 18:48 | Link to Comment Meat Hammer
Meat Hammer's picture

Damn, it looks like there might be some 55 y/o retirees putting away the fishin' gear and headin' back to work.

Fri, 06/14/2013 - 20:28 | Link to Comment mjcOH1
mjcOH1's picture

It will all be rolled up to Uncle Sugar, who will be the last debtor to roll....

Sat, 06/15/2013 - 05:30 | Link to Comment BidnessMan
BidnessMan's picture

Short Casino stocks.  They won't survive without all the retirees sitting at slot machines dribbling away your Social Security dollars

Fri, 06/14/2013 - 16:11 | Link to Comment waterhorse
waterhorse's picture

I don't have a problem with rank and file workers' pensions (under 40K).  I do have a BIG problem with the bloated safety worker, "executive" and politician pensions.  None of them are worth 100K+ a year.  Not a SINGLE one.  If they want more than 40K, they can figure out on their own how to make up the difference.  That is what the REST of us have to do.

Fri, 06/14/2013 - 16:40 | Link to Comment Snoopy the Economist
Snoopy the Economist's picture

I thought the part time employment chart as a % of pop would be much higher - though it is at all time highs and the number of people with jobs is low so I guess they offset.

Fri, 06/14/2013 - 16:50 | Link to Comment FormerTurbineGuy
FormerTurbineGuy's picture

Interesting... Not investment advice, but with their Defined Contribution Plan ( not available to new employees ) for those still in it, Ford Motor Company did something totally converse what CALPER's did.. They esentially went long on Treasuries if my memory is correct in a very high percentage of the total portfolio and stated a change in mindset from the we are going to get 7% bla bla bla. Their was another reason for it via some legislation, but do your own research on this. The Question begs, is their model a model for other businesses going forward...

Fri, 06/14/2013 - 16:59 | Link to Comment Sutton
Sutton's picture

Nassau County police will finally get to use their guns- on the law abiding taxpayers, many of whom pay 25K property tax  a year on small,80 year old houses.

Fri, 06/14/2013 - 17:15 | Link to Comment supafuckinmingster
supafuckinmingster's picture

yum, yum said  quibble pop. why said bloop. ( bloop is an ice-cream ) because you taste nice!

 

the hamster went to the market on his tricicle made of trees!

 

who lives in a pineapple under the sea? patrick! no poopoo does! oh :(

Fri, 06/14/2013 - 17:18 | Link to Comment supafuckinmingster
supafuckinmingster's picture
 
  • IMF: It Ain’t Over Till The Fat Lady Sings Posted by: Pivotfarm Post date: 06/14/2013 - 12:56 The International Monetary Fund analysts believe that if budgetary cuts are taken away, then it could trim a substantial slice off economic growth in the US. Forecasts could be lower by as much as...
Zero Hedge Reads

Home Guest Post: The Endgame Of State/Local Government Pensions


Submitted by Charles Hugh-Smith of OfTwoMinds blog,

There is no way the pensions and benefits promised in an era of financialized abundance can be paid once the wheels of financialization fall off.

Yesterday I described the destructive effect of abundance on decision-making: An Abundance of Bad Decisions. One aspect of this dynamic is the tendency to extrapolate prosperity into the future as a permanent state of affairs. One example of this is state/local government pensions: during the past 30 years of financialized abundance, the benefits and pensions promised to public employees were increased substantially. Public unions are a powerful political force in many states, and in eras of rising tax revenues, it's an easy political decision to increase public employee benefits and pension payouts. The rising stock and bond markets generated huge profits for the public-employee pension funds, enabling them to grow without taxpayer contributions. The effortlessness and persistence of this growth encouraged the mindset that pensions would be paid for via the magic of ever-rising markets; if tax revenues weren't even needed to fund the pension plans, then no hard political choices would ever have to be made. Alas, the 8+% annual growth rate of the boom era is now structurally unrealistic.The New Normal is bond yields of 2% or 3% at best, and equities markets that are increasingly at risk of significant sell-offs. The illusion that the pension funds can pay the promised benefits is maintained by plugging wildly unrealistic 7% or 8% returns into projections of future pension fund earnings. Now those unrealistic projections are being questioned: California, Illinois on Brink of Pension Crisis (Mish). This means tax revenues will have to be diverted from other government expenses to fund the pension plans. A key dynamic in the pension crisis is called the the ratchet effect: it was effortless to increase the benefits and pensions of public employees, but it is effectively politically impossible to trim those promises. The Ratchet Effect is one reason why the nation's political machinery has become sclerotic and ineffective: Dislocations Ahead: The Ratchet Effect, Stick-Slip and QE3(February 14, 2011). As correspondent Mark G. explains, the public pension crisis has been 20 years in the making, and cannot be resolved without massive, sustained political and fiscal pain:  

1. Long term interest rates began a secular decline in 1981. This continued until at least early this year. 

2. In the early 1990s state and local politicians and their nominees began awarding management contracts to RIAs (Registered Investment Advisor) who promised higher rates of return. These promises were eagerly accepted at face value since it allowed them to reduce their annual contribution for defined benefit pension plans and spend the money elsewhere.
#1 plus the Reagan bull market made it possible to present this as fiscally responsible, or at least as progressive. Over the same period of time private corporations tended to shift to defined contribution plans for new hires. iow they ceased underwriting market risk for their pension funds. State and local governments will eventually be forced to follow this example. 

Where Mish writes: "Pension plans typically assume 7.5% returns. That's not going to happen on a sustained basis with 10-year treasuries yielding close to 2%. Yet, any significant rise in bond yields will crush existing bondholders as well as wreak havoc in equities," he's underestimating the return assumption for a great many pension plans. CALPERS & CALSTRS (California public employee pension plans) are functionally at 8% or higher. 

3. As a consequence of 1 & 2 defined benefit pension plans (along with charitable endowments) began a long-term movement out of bonds. The portfolio percentage allocations to stocks, followed by other forms of equity, began shooting up. Why would they not? The last time 30-year Treasuries saw 8% was in late 1994. It was already crystal clear by 1996 that investing in bonds was just a way to slowly sink into insolvency.
We're not on any "brink." It took two decades to get into this systemically insolvent condition. And I don't think this situation will produce further market instability. It's already been the main catalyst of market volatility since the mid 1990s in my second hand educated opinion. The dot.com and subprime housing bubbles could never have gotten so big without the participation of public and non-profit funds heaving hundreds of billions around in a chase for investment grade high yield.
In other words, the real casino action started at the precise moment that planning IRRs exceeded the 30-year US Treasury Bond rate. 

What happens next? Probably a lot of things will happen. This particular crisis will revolve around defined benefit state and local government employee pension funds. It was created in the political arena and that's where it will be resolved.
I think the Democratic Party will be the most affected. The public employee unions are a core constituency and produce most of the ground troops for the Democrats. Broadly speaking there are two approaches. These are; 1) obtain more money and 2) reduce benefit payouts. 

1. Obtain More Money.
a. Raising taxes (primarily targeting Republicans) will be the attempted default of Democrat single party states. But the crisis is most acute in precisely those single party Democratic states with the highest taxes already. It is therefore not clear this approach will really raise more money. It could equally create a large refugee movement of targeted taxpayers fleeing these jurisdictions, thus producing lower net revenues overall. The available demographic data says this process is well underway in California.
b. Shift appropriations between budget lines. This means reducing money for schools, police, highway maintenance, welfare et al and transferring it to pension funds. This will create conflict inside the Democratic party between key constituency groups.
c. Get the Federal government (or Federal Reserve) to undertake direct bailouts. This is going to create conflict between Democratic and Republican states over issues of federalism and "transfer payments". 

2. Reduce Benefit Payouts.
Recent events in Wisconsin show the potential for this action to create extreme political unrest.
I have long been watching this situation as a potential vector for political collapse.

Thank you, Mark, for this primer on the unsustainability of public pension promises.Raising taxes is the default solution to state/local government shortfalls, but there's a structural problem with raising taxes: 1. Fulltime jobs--the kind that pay the bulk of state/local taxes--are stagnant. 2. Real income is down for the vast majority of workers. If state and local governments think low-income part-time workers can pay more taxes and survive, they are engaged in magical thinking: The percentage of the population with a job is back to the levels of the 1970s: Real (adjusted for inflation) household income has declined by almost 8%; exactly how are households supposed to pay higher state and local taxes as their income steadily declines? State and local governments planning on a Federal bailout should ponder this chart, which clearly shows a structural gap of monumental proportions between Federal tax revenues and Federal spending. The endgame of promises made in an era of illusory, financialized abundance will be hurried along by a collapse in the equities and bond markets. I addressed the likelihood that all three primary investment markets would decline together in What If Stocks, Bonds and Housing All Go Down Together? (May 24, 2013): in a nutshell, if yields rise, mortgage rates rise and that sinks the housing market. Rising yields also sink stocks, as higher yields pull money out of risky equities. And rising yields also collapse the value of existing bonds, wiping out much of the wealth that is currently considered safe.

In sum: there is no way the pensions and benefits promised in an era of financialized abundance can be paid once the wheels of financialization fall off.

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Fri, 06/14/2013 - 15:04 | 3659076Whatta
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State and Local government pensions nothing...WHAT ABOUT US PLAIN FOLK TRYING TO LIVE OFF SAVINGS?

Asshat Bernank and Company chase us out of "safe" investments and then fleece us in risk assets.

Fuck each and every one of them and may they get their justice served cold.


Fri, 06/14/2013 - 15:06 | 3659083dontgoforit
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Notice how 9-11 shook the line?  How much trouble has been spawned by that horrendous event?  bin laden and his ilk have really screwed things up.  Set the stage for the really bad one to emerge.


Fri, 06/14/2013 - 15:05 | 3659084km4
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"In sum: there is no way the pensions and benefits promised in an era of financialized abundance can be paid once the wheels of financialization fall off."

Yup !


Fri, 06/14/2013 - 15:07 | 3659091foodstampbarry
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That which cannot be sustained, won't be.


Fri, 06/14/2013 - 15:07 | 3659092bluskyes
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Here's a new campaign slogan: "Let Them Strike!"


Fri, 06/14/2013 - 15:09 | 3659093RSloane
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This article is false. Every single patriotic American is willing to pay more and more tax dollars to ensure that old public pensioners are free to make pirate hats out of their Depends and frolic without a care on beaches in Florida.


Fri, 06/14/2013 - 15:13 | 3659106El Viejo
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Not all states are in the same boat.  Some actually have laws that prevent the raising of taxes to balance the pension books.


Fri, 06/14/2013 - 15:13 | 365910810mm
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Here we go againn,painting the 2 party fraud that is one.


Fri, 06/14/2013 - 15:14 | 3659111Momauguin Joe
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Pensions are I.O.U's. I.O.U's are for S.U.C.K.E.R.S.


Fri, 06/14/2013 - 15:15 | 3659115El Viejo
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MDB is that you??


Fri, 06/14/2013 - 15:19 | 3659130reTARD
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Laws can be changed easily.


Fri, 06/14/2013 - 15:20 | 3659134Jumbotron
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However....don't forget...even though these pensions should indeed be cut if not eliminated in order for at least a part of the government behemoth to be downsized.....that will be less money going back into the economy when these guys finally retire...if they ever do.  And if they don't that means less jobs for the younger generation coming up.

Should have never allowed them to grow like they did.....cutting it out will have all sorts of negative consequences.  An analogy would be the amputation of a grangenous limb and the loss of mobility and freedom that brings.....but the life is saved in doing it.


Fri, 06/14/2013 - 15:20 | 3659136insanelysane
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Don't tell this to half the state of Rhode Island and the Providence Plantations.


Fri, 06/14/2013 - 15:21 | 3659137El Viejo
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When private sector workers out number government workers that would be difficult. If they succeed anyway that would be tyranny.


Fri, 06/14/2013 - 15:23 | 3659138lolmao500
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Time for some Syrian news??

  • Reports #Aleppo says big battles underway as #syria government tries to push back opposition forces. A push was expected post #Qusayr
  • President Assad's cousin Ribal al-Assad tells us US weapons for rebels will start an 'arms race' in #Syria. #FSA
  • BBC's Paul Wood tells us #Syrian #FSA rebels "want mortars, artillery + 'quality' weapons that can bring down an aircraft or helicopter".
  • BBC's Paul Wood says #FSA not as short of ammo as it used to be. Saudis and Qataris have been supplying small arms and ammo. #Syria
  • Desperate times for the rebels in #Syria: "We are in trouble, we are in a lot of trouble now", #FSA commander Gen. Idriss tells us.
  • #FSA commander Gen. Idriss says he fears what happened in Qusair will be repeated in #Aleppo if deliveries of weapons are delayed. #Syria
  • Fierce fighting has been going on for 4 hours around the palace of justice in Aleppo
  • Satellites track 20,000+ Assad & Hezbollah forces converging on Aleppo supported by 100s of tanks and bmp and silka fighting cars
  • Nasrallah says Hezbollah will maintain fight in Syria
  • A senior cleric in Islam's holy city #Mecca has exhorted followers to support Syrian rebels by "all means"
  • Ban Ki-moon, UN Secretary-General, has said there is no military solution to the conflict in #Syria
  • U.S. studying Syria no-fly zone near Jordan border, two senior Western diplomats (Reuters)
  • NATO: chemical arms use in Syria breaks international law (Reuters)
  • #German Chancellor Angela #Merkel has said the UN Security Council should meet urgently to reach a joint position on #Syria
  • SYRIAN REBEL COMMANDER IDRISS TO TRAVEL TO WASHINGTON TOMORROW
  • LAVROV WARNS KERRY THAT ARMING SYRIA REBELS FRAUGHT WITH CONFLICT ESCALATION - MINISTRY
  • NATO data: Assad winning the war for Syrians’ hearts and minds

http://www.worldtribune.com/2013/05/31/nato-data-assad-winning-the-war-f...

  • German Intelligence: 95 % Of Free Syrian Army Non-Syrian Extremist Groups

The biggest danger lies in the Arab countries’ help releasing Islamic detainees and sending them to Syria with the aim of Jihad against the Syrian state violating the standards of anti-terrorism Conventions.
http://stratrisks.com/geostrat/13310

  • Naharnet: Saudi King Cuts Short Morocco Vacation amid Unusual Military Measures in Kingdom

The information come amid media reports that the Saudi military command has ordered measures that resemble a state of alert.
According to the reports, the army has suspended the vacations of soldiers amid unusual military moves in the bases that are close to the border with Jordan, especially the Tabuk military base.

http://www.naharnet.com/stories/en/86842-naharnet-saudi-king-cuts-short-...

  • Here's a map of the 23 places the US will bomb if there's a Syria no fly zone

http://killerapps.foreignpolicy.com/posts/2013/06/14/heres_a_map_of_the_...

  • Assad plans to open ‘resistance’ front in Golan, says report

http://www.timesofisrael.com/assad-plans-to-open-resistance-front-in-gol...


Fri, 06/14/2013 - 15:23 | 3659141max2205
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there is always a way...print MOAR


Fri, 06/14/2013 - 15:25 | 3659145wcvarones
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Please explain "CALPERS & CALSTRS are functionally at 8% or higher." Calpers is at 7.5%, I think Calstrs is too.


Fri, 06/14/2013 - 15:24 | 3659146reTARD
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Are there any private sector workers remaining in this economy? ;-) Those who work at Starbucks, temp working and needing more than one job don't count. They simply don't have the time to see the big picture.


Fri, 06/14/2013 - 15:25 | 3659149toady
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The only way out of this, morally, financially, or any other way you can think of, is the complete renunciation of the elites and financial houses that caused / allowed this to happen.

I can't picture how it will happen, or what it will look like on the other side, but I hope it's not 'meet the new boss, same as the old boss.'


Fri, 06/14/2013 - 15:27 | 3659160JJ McApe
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1970ies levels but with much more population

DIS SHIT IS CRAY


Fri, 06/14/2013 - 15:27 | 3659165Praetorian Guard
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Thats why Obama is giving refugee status to 1.6 MILLION Syrians into the US. WTF?!?!?!?!?!?!?!? Looks like this shit hole country will be bringing in new flesh to pay these "public" debts... yea... and just think, all these people will get free housing, food, job, and education... must be fucking nice...


Fri, 06/14/2013 - 15:32 | 3659183Seasmoke
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Don't worry about us here in NJ. Fat fuck Christie says he fixed and saved it. All his double and triple dipping cronies are happy.


Fri, 06/14/2013 - 15:32 | 3659184HowardBeale
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This article has turned the Black Swan White, as we all know that the fascist oligarch class wishes to eviscerate the remaining labor unions in America, and all they need to make that happen is to destroy the pensions. How? Just crash the stock and/or bond market and the pensions are history, the unions will fold, and they have achieved their goal. 

And that, boys and girls, is why the stock market will see new lows in the near term.


Fri, 06/14/2013 - 15:33 | 3659185Terminus C
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yea, Bin Laden...

You sir, are deluded, moronic, or both.

Ask, cui bono? 


Fri, 06/14/2013 - 15:43 | 3659211B2u
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This is too funny !!!  Not only did I retire at age 54, I moved out of the United States.  No state pension is receiving any money from me. 


Fri, 06/14/2013 - 15:48 | 3659216King_of_simpletons
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Pensions will get paid at the expense of future taxpayers, no matter how small a base that is. A combination of ultra high taxes and monopoly money printing from Yellen and other lose screws at the Fed will make sure that happens. State and Local Government / Federal Government Unions vote Democrat. There is no way in heckloon pensions are not going to get paid - What i am saying is Republicans can't win anymore. There will not be a republican president for some time to come. Welfare State will prevail until everyone is broke and lost their will to survive. There is no way out.


Fri, 06/14/2013 - 15:49 | 3659223Panafrican Funk...
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I would expand the available options:

1.  Move to 401K plans 2.  Cap or decrease pension payouts 3.  Increase employee contributions 4.  Increase taxes #1 is what I think is going to be likely, particularly if there were to be a Fedgov sponsored plan.  States would for the most part gladly offload this liability, and converting those pension funds to 401K would help resolve the D vs. R, as they would not technically become a Fedgov liability (it would in the off-balance sheet sense, via "guarantees).   I could also envision a scenario in which this Fedgov plan were to be the only 401K still tax deductible.  Further, this plan be run by a sponsor, say, the corporation that currently run food stamps.   I know, such nonsense, crazy theories going on in my brain.  This could never happen, right?


Fri, 06/14/2013 - 15:50 | 3659226lasvegaspersona
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Issues like this cannot and will not be resolved. They will continue until something breaks. There is no such thing as political will. There is only the effects of reality coming to getcha.


Fri, 06/14/2013 - 15:51 | 3659229Vidar
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I hope these systems collapse and these leaches get nothing. "Public employees" is just a pretty word for the overpaid and overfed government thugs that are busy stepping on the necks of the average American.


Fri, 06/14/2013 - 15:52 | 3659230jbvtme
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my only fear is that when the time comes to watch bureaucrats standing in line at the soup kitchen, the tickets will be sold out.


Fri, 06/14/2013 - 15:55 | 3659236MagicHandPuppet
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Without responding to the previous poster's "simpleton" view of the democrat vs. repulican false dichotomy...

I will seriously celebrate when these gubment assfuck jokers' pensions dry up.  I know at the federal level they can always print to keep the payments going.  But, the local leeches may very well hit a point before hyperinflation where the well of blood that they draw from dries up.  For those of us remaining, this day will be bitter sweet.


Fri, 06/14/2013 - 15:58 | 3659241insanelysane
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We wouldn't want the public "worker" to put off retirement any later than age 59.  The private sector workers won't mind working till age 79 to pay for it.


Fri, 06/14/2013 - 16:02 | 3659255Panafrican Funk...
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  • Here's a map of the 23 places the US will bomb if there's a Syria no fly zone

That map was pretty interesting.  Note the Syrian bases located in the Damascus burbs.  Yeah, that won't cause any blowback at all.  


Fri, 06/14/2013 - 16:05 | 3659265Oreilly
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While the end game may seem clear given the lack of funding and abundance of those claiming a share, what happens will differ state by state and municipality by municipality.  The Pension Benefit Corp doesn't enter into this because it only deals with private pensions (and it's far past broke anyway), so it comes down to whether or not your state deals with pensions in state constitution as contractual or not.  Here's an interesting link that provides summary info on U.S. states:

 http://www.ncpers.org/Files/News/03152007RetireBenefitProtections.pdf

If it's contractual, expect the state unions to try and get blood out of a turnip.  If the public pension is city or county, then it's likely that there'll be lawsuits but pensions won't be treated as contractual and may be negotiated (that's fire, police, local maintenance, etc.).  In any case, if there is no money in the system (recession or depression or debt armagedon or just stagnation) then what will happen is still dependent on where you are.  If you live in a state/county/city that favors labour over private enterprise, then you lose.

It'll be interesting to see how the now declared bancrupt Detroit deals with pension strife, as a large portion of the city depends/will depend on the city's savaged pension funds to survive. 


Fri, 06/14/2013 - 16:11 | 3659278waterhorse
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I don't have a problem with rank and file workers' pensions (under 40K).  I do have a BIG problem with the bloated safety worker, "executive" and politician pensions.  None of them are worth 100K+ a year.  Not a SINGLE one.  If they want more than 40K, they can figure out on their own how to make up the difference.  That is what the REST of us have to do.


Fri, 06/14/2013 - 16:29 | 3659324gorillaonyourback
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The well is dry allright. Its only when the blood suckers realize the host is dead is when all hell breaks looae. Think about this average gov employee makes about 100k/yr and average household (2 people) make 50k/yr. Almost 48% of all gdp is funded by gov spending. Makes u go hmmmm right


Fri, 06/14/2013 - 16:40 | 3659344Snoopy the Economist
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I thought the part time employment chart as a % of pop would be much higher - though it is at all time highs and the number of people with jobs is low so I guess they offset.


Fri, 06/14/2013 - 16:50 | 3659364FormerTurbineGuy
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Interesting... Not investment advice, but with their Defined Contribution Plan ( not available to new employees ) for those still in it, Ford Motor Company did something totally converse what CALPER's did.. They esentially went long on Treasuries if my memory is correct in a very high percentage of the total portfolio and stated a change in mindset from the we are going to get 7% bla bla bla. Their was another reason for it via some legislation, but do your own research on this. The Question begs, is their model a model for other businesses going forward...


Fri, 06/14/2013 - 16:51 | 3659366Cloud9.5
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Would that be 1.6 million Muslims? God can anyone imagine how the ethnic cleansing will play out once this sucker goes down?


Fri, 06/14/2013 - 16:59 | 3659380Sutton
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Nassau County police will finally get to use their guns- on the law abiding taxpayers, many of whom pay 25K property tax  a year on small,80 year old houses.


Fri, 06/14/2013 - 17:08 | 3659395new Cloud9.5
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I’ve been an American History teacher for 32 years; I pretty well thugged it up. It’s been great. So many young minds to corrupt in such a short time; when they walk out of my class they know that we live in a Constitution free zone and that the President can have any one of us disappeared on a whim. My wife and I have put in thousands of hours off the clock making, thunder games happen, home coming and prom happen for the last several decades. I’m not asking for sympathy, I’m simply stating a fact. All public employees are not equal. Some are good public servants, others are opportunists. If the pension fund goes flat and social security implodes like we all expect it will, expect the rest of the restaurants and small businesses to collapse here in central Florida. We won’t starve alone.


Fri, 06/14/2013 - 17:15 | 3659412new El Viejo
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I repeat my statement, hopefully with clarity.  There are no guarantees in life. We certainly in the private sector had no guarantees with our pension plans. If governments lied to government workers and said they had a guaranteed good life then maybe the government workers don't see the big picture. Here is the big picture:  Government workers used to be paid less than private sector workers. They had more holidays and rarely worked more than 8 hours a day. They also had better job security. Then shortly after Reagan in congress they cried that they needed to attract the best and the brightest and government salaries started climbing until they had the best salaries along with job security and in some cases like Wisconsin "Guaranteed" pensions. We in the private sector found ourselves making less than government workers. This is nothing less than an oligarchy or Mob Rule. Thankfully, in most states the private sector still out numbers government workers and can "if they see the big picture" will out vote them on any referendum to fund government pensions with higher taxes (probably fraudulently labelled for education) If government employees want moar money then maybe they should take the same risk the rest of us take. If by some subtrifuge they manage to get their pensions funded by raising our taxes after we have lost our good jobs and are making less now then that is nothing short of tyranny. For decades the Democrats were criticized for raising taxes during the great depression and blamed for sending the slowly recovering economy into another tailspin. If the idiots do it again well I think it speaks for itself.


Fri, 06/14/2013 - 17:15 | 3659415new supafuckinmingster Vote up!

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yum, yum said  quibble pop. why said bloop. ( bloop is an ice-cream ) because you taste nice!

 

the hamster went to the market on his tricicle made of trees!

 

who lives in a pineapple under the sea? patrick! no poopoo does! oh :(

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Fri, 06/14/2013 - 17:20 | Link to Comment supafuckinmingster
supafuckinmingster's picture

Apologies for the above lunacy..........my computer was briefly commandeered by a crazy person.

Fri, 06/14/2013 - 18:41 | Link to Comment GubbermintWorker
GubbermintWorker's picture

You are aware that not all state and municipal workers are unionized, right? I work for such a municipality and our wages are not higher than the private sector. Our pensions, yes, we have defined pensions, but they are not gold plated.  No health plan, we get to wait for Medicare like the rest ouf you suckers.  We are eligible for early retirement at 60 but at 33% of your salary and no health plan that would be unaffordable.

But, I knew years ago that the pension wasn't going to be enough and had a separate 401K. That sucker took big hits back in 2000 and a few years ago again. I cashed it out and invested it all in gold and silver. I've got five acres with a garden, fruit trees, a diesel generator, well, stockpiles of food, guns, and ammo.

I'm retiring in a year and a half. You want my job? You're welcome to it. I'm a sewage plant operator and 36 years of taking shit off of people is enough for me!

Fri, 06/14/2013 - 21:20 | Link to Comment Colonel Walter ...
Colonel Walter E Kurtz's picture

Sounds like you live in a sane locality but we can not say the same about so many others (We are not complaing about you). But I/we ask that you please speak up to your brethren, when they seek far too much in compensation, because what can not last, will not last. Uncle Ben has given the pension funds an inflated market to make them all feel okay for now, but the day of reckoning is coming and it will not be pleasant. The private sector has been eviscerated over the past 5 years and you will not be able to get tax money from them going forward. There is no way out, except for haircuts and they will be coming (see Detroit which is just the first of many).

Merry Cyprus to you, and me unfortunately! 

Sat, 06/15/2013 - 10:08 | Link to Comment andrewp111
andrewp111's picture

Then why don't you EDIT that lunacy and get rid of it.

Fri, 06/14/2013 - 17:24 | Link to Comment Pairadimes
Pairadimes's picture

Nothing to worry about. We will replace real growth with nominal growth. Problem solved.

Fri, 06/14/2013 - 17:41 | Link to Comment are we there yet
are we there yet's picture

Congressional pensions, and their cpi adjustments are safe.

Fri, 06/14/2013 - 19:00 | Link to Comment bugs_
bugs_'s picture

already stolen.  already gone.  already poof.  only thing left to do is announce it.

Fri, 06/14/2013 - 19:49 | Link to Comment yomama
yomama's picture

If Califronia's math skills are as good as 'Mish's', I may have found part of the problem---- "nearly double the unfunded liabilities for state and local pension plans in California to $328.6 billion from $128.3 billion."  Double??

Fri, 06/14/2013 - 21:50 | Link to Comment kchrisc
kchrisc's picture

Funniest two words in the English language, and tragic too:

Pension and retirement.

Sat, 06/15/2013 - 16:53 | Link to Comment sethstorm
sethstorm's picture

Fulltime jobs--the kind that pay the bulk of state/local taxes--are stagnant

 

That can be solved if the private sector has less ability to use non-fulltime/full benefit work as a benefits dodge and otherwise could not avoid hiring US citizens - regardless of employment status or possession of any postsecondary education.

 

Mon, 06/17/2013 - 16:01 | Link to Comment aerojet
aerojet's picture

The ratchet effect is what is behind the amnesty bill--they hope in vain to keep the tax base high so all the obligations can be paid off. Meanwhile, more and more bad precedents are being set.  We're losing this country fast now.

Wed, 07/03/2013 - 14:42 | Link to Comment Aurora Ex Machina
Aurora Ex Machina's picture

SWFs are the end game, I believe the pensions are the entree.

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