Are Collapsing Pensions "About To Bring Hell To America"?

Tyler Durden's picture

Authored by Mac Slavo via SHTFplan.com,

The toxic dollar is bringing hell in a handbasket.

Along with the student loan debt bubble and other major financial factors, the looming pensions crisis is bound to be the death of us all.

Because it’s based on a future promise to pay, it has long been a benefit dangled to solve strikes and union disputes – because, in the end, it is just more debt, whether private or public.

With tens of trillions in unfunded liabilities, the weight of an avalanche remains dangling over our heads. An aging population is cashing in on needed retirement benefits while the younger generations must support multiples that are unsustainable financially.

Somewhere between the retiree that needs clothing, food and lodging, and the bankruptcy of cities and state governments is the makings of the next economic crisis.

via AgainstCronyCapitalism.org:

This is one of those things that few will pay attention to until it’s a 5 alarm fire. Then the policymakers will run around with their hands in the air saying they didn’t see it coming.

 

Of course they did. But addressing the problem is hard and will make people unhappy in the short term.

This blog pointed out the sad, and quiet fact that entities like the government of South Carolina are deep in debt over pensions. Everywhere there are failing social systems.

And somewhere, the rubber is going to met the road, and people are going to get hurt.

As SHTF previously reported:

In 2014 a new Federal law made it possible for pension funds to cut benefits for their recipients.

 

[I]n October of [2015] the canary in the coal mine fell over and died when Illinois announced that the State was posting pension payments because it ran out of money.

 

Fast forward a few more months and things have been taken to the next level. The Central State pension fund in Kansas became the first such fund to take advantage of the 2014 law as 400,000 Americans who depend on their monthly pension income to pay for such things as their mortgage, groceries and medical expenses saw an average of $1,400 per month sliced of their monthly benefits.

Unfortunately, there may be no avoiding some very painful lapses in checks in the difficult years ahead.

As Market Watch reports:

But take a look South Carolina’s government pension plan, which covers roughly 550,000 people — one out of nine state residents — but is a staggering $24.1 billion in the red.

 

This is not a distant concern, but a system already in crisis.

 

Younger workers are being asked to do much more to support the pensions of retirees. An analysis by the The Post and Courier of Charleston noted recently that “Government workers and their employers have seen five hikes in their pension plan contributions since 2012, and there’s no end in sight.” (Most now contribute 8.66% of their pay, vs. 6.5% before the changes.) At the same time, the pension fund has been chasing more stocks and alternative investments instead of relying on stable investments like bonds that may be much less volatile but generate only meager returns.

 

And if that’s not troubling enough, South Carolina’s pension fund is far from alone.

Yeah.

California’s Calpers public retriree system is notoriously underfunded and doomed to implode. Chicago, Detroit and other urban wastelands are sagging under abysmal debt. Dallas, Texas pensions went insolvent. Puerto Rico is nothing but a propped up holding corp(se).

Something massive has been swept up just under the carpet.

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Spungo's picture

It's just easier to access information these days. It's very hard to sell managed mutual funds when a 2 second google search says index funds beat them while costing less. Bankers are still preying on the older people who don't use computers.

mary mary's picture

I believe you are correct.  In fact, I know older people who are doing exactly that, and even paying front-end loads for those funds that don't beat the index funds.  Thanks for the reminder.

DEMIZEN's picture

i am going to side with millenials. finance is mostly nothing but very basic math leaving human behavior out of it. no need to own anything or live trough it to undestand the returns.

Spungo's picture

The bad economy also forces people to look for answers. Young people want to know why housing is so expensive while their wages are so low. They want to know why the bank doesn't pay interest even though the same bank and the same account paid 6% just 10 years ago. People 30 years ago probably never heard of the fed or what they do. There are videos on youtube explaining the fed because it was not common knowledge until a few years ago.

William Dorritt's picture

"The bad economy also forces people to look for answers. Young people want to know why housing is so expensive while their wages are so low. They want to know why the bank doesn't pay interest even though the same bank and the same account paid 6% just 10 years ago"

Besides the Massive Govt Corruption...

They voted Obama twice, got worthless college degrees and massive debt, they fill themselves with guilt via  their $600 telephones, basically they are Pussified to quote Eastwood.

 

Now they want National Socialism

mary mary's picture

Okay, okay.  You're all correct.  I hope Millenials do become The Fourth Turning.  I absolutely agree that economics is dirt simple, as Benjamin Franklin said, and that the Inner Sanctum Keynesians are merely playing Wizard of Oz pretending that they are doing something complicated, when they are actually doing extremely simple: creating money out of thin air, and giving it to themselves.  The more money they create that way, the less everyone else's money is worth.  And that, in a nutshell, is why Americans have no savings, and their salaries are sh*t, and the worse those two get, the more of them have no option but to go along to get along, because when you are a slave, whether you admit you are a slave or not, you go along to get along, to survive.  It's like an avalanche, and at the bottom is either total slavery or total chaos.  And TPTB know it.

But please just don't say, "you Baby Boomers did this to us".  What, because we didn't descend on Washington D.C. with ten million AR15's?  Because, with all the MSM refusing to give air time to the likes of Ron Paul, that's what it would have taken.  If you have a plan for getting rid of these International Banker Vipers who infest us, I really would like to hear it.  I've been doing all I can for as long as I could, and all I have been able to accomplish is a retreating action.

My two biggest issues:

1. The FED, which silently enslaves the citizenry by stealing their money.

2. Overpopulation, which silently enslaves the citizenry by creating more people than the natural resources can provide jobs for.

BrigstockBoy's picture

Statement of Illinois Teachers' Retirement System November 1, 2016.

Issue: The Teachers’ Retirement System Board of Trustees in October, 2016 set state government’s funding contribution to TRS for fiscal year 2017 at $ 3.986 billion. The state’s pension contribution for the previous fiscal year was $3.742 billion
Discussion: The state contribution for FY 2017, however, falls short of the amount of money needed to fully fund TRS over the next 30 years. TRS faces the real risk of future insolvency because of an unfunded liability created by 75 years of insufficient state contributions.

TRS absolutely will be able to meet its benefit obligations to retired teachers in the near future, but we cannot guarantee retirement security for future generations of teachers unless the state’s future annual contributions meet an actuarial standard for full funding.
The FY 2016 state contribution falls $2.08 billion short of the amount of money that would be required to fully fund pension benefits in FY 2017 under standard actuarial calculations.
TRS earned a positive 0.69 percent, gross of fees, on its investments during FY 2016, compared with a positive 4.6 percent, gross of fees, in FY 2015.

OKUSA's picture

More retirees back to work, which means no job growth for the youngins' continues.

crossroaddemon's picture

Y'know, maybe sooner or later joblessness will start to equal learning to survive outside of the parasitical wage-slave economy. Although I am starting to be much less optimistic than I used to be regarding popular adaptations.

sinbad2's picture

Yep, people need to learn survival skills, and start eating the neighbours.

That's what I do, when her hubby is out of town.

Vilfredo Pareto's picture

We are trending European like that.   Low pay jobs and high youth unemployment.  The elders have the jobs with bennies and protections.

 

 

rejected's picture

That is BS today.

Just retired,,, no on hired to take my spot. Watched 20 others retire,,, no one hired for their place. In fact they layed off even more. My area had well over 50,,, now down to 6.

The retirees, if returning to work, are going mostly part time and doing lackluster jobs like Wally World greeter making perhaps 10-15,000 annually. My lackluster job paid 75-100,000. 

And they're laying off anywhere from 250 to 500 a quarter. No one hired to take their place. The sector of employment I worked, for some reason the layoffs are rarely in the media.

Elco the Constitutionalist's picture
Elco the Constitutionalist (not verified) Mar 16, 2017 2:08 PM

There are only a limited number of legitimate elections in the USA. Just enough to give the impression that there is accountability.

Most of the fucks in DC are not even accountable to voters. So, look for other motivations to avoid dealing with this, besides election politics.

TePikoElPozo's picture

well, at least my social security trust fund is safe

chosen's picture

The problem is the Fed kept rates low too long.  Pension funds were based on 8% returns.  Pension funds needed Treasuries to pay something.  The stock market is a house of cards, ready to collapse.  So is real estate.  When that happens, pension funds will collapse.  Workers will be contributing half their paychecks to pay existing pensioners.  Blame it on Yellen and the joo run Fed.

gdpetti's picture

engineered collapse, which is why the 'smart money' has been getting out for so long... they aren't staying on the 'Titanic' hoping for rescue... they know the game is rigged and the ship of state is set to have its rug pulled out.... as they've been part of the crew setting that up... so of course, these pensions funds are going broke, along with Mom and Pop savers etc.... they are all prey in the eyes of the predators.... same game as usual... prepare for collapse... it's coming no matter what... same as always.

sinbad2's picture

"The problem is the Fed kept rates low too long."

 

Not a problem, a plan, they basically got pension funds(the American people) to bail out the banks.

It was a great plan, next crash, the banks will be fine.

americanreality's picture

Someone say pension?

 

"Chicago is known for its L-train. But it’s the gravy train that White House senior adviser Valerie Jarrett prefers to ride.

In addition to the $173,922 Jarrett earns per annum as President Obama’s senior adviser, she is also paid an annual pension of $35,660 for the eight years she served as chairman of the Chicago Transit Authority, according to a Chicago Sun Times investigation.

Jarrett was appointed to chairman of the agency — a part-time position — in 1995 by then-mayor Richard Daley, whose brother, William Daley, served as Obama’s chief of staff. Jarrett served as the former mayor’s deputy chief of staff and was appointed to numerous other positions during his term.

Jarrett left CTA in 2003 and opted to dip into her pension at the earliest available opportunity. According to the Sun Times, retired city officials are allowed to begin receiving payments when they turn 50.

As of last summer, Jarrett has collected $306,080 in pension payments in total.

That hefty sum is 27 times the amount — $11,132 — that Jarrett contributed to her pension plan through deductions from her CTA paychecks, according to the Sun Times."

Atomizer's picture

The narrative is to blame Trump. This has been recycled from 2013. It's a important message. Thanks Les and Snordster. 

Bend over and wait. - YouTube

Nothing has been changed from 2013 video, retag and submit into the interweb fog machine. This seems to be a logical place to post. Held back, nothing was relavant in ZH threads. We found a home. Enjoy. 

ToSoft4Truth's picture

Have you noticed a theme?

 

Trumpbots, blame Obama.

 

Obamabots, blame Bush.

 

Bushbots, blame Clinton.

 

Meanwhile... 

Atomizer's picture

Bots can't engage in a debate. That's the difference. We all can bring down this AI bullshit. Fuzzy logic can be outwitted. Garbage in, garbage out. When posed a question not programed, they will stall. Enough time to pull a gun and disable it.

AI is only as smart as source code writers permit it to be. You have no idea how primative these robots are. The news is sensationalizing robots as brilliant. It's 20 years away. We also know how to trigger a lithium battery to explode. Thanks Samsung for your engineering mistakes. 

flea's picture

All State based pension plans should have been frozen some time ago, like their commercial cousins. freeze them now.

sinbad2's picture

You can't milk them if they are frozen, the Government will act to secure pension funds, after they have taken all of the money, and not a day before.

Hillarys Server's picture

I haven't bought any stocks or other risk assets for almost ten years.

I've just been sitting in a small room surrounded by canned goods, pepper spray, a ten year supply of Brain Force and rolls of silver dimes.

If I don't hear wailing and gnashing of teeth soon I'm going to be seriously pissed.

LeftandRightareWrong's picture

Listen carefully.  It is happening little-by-little, one-by-one, here and there.  Occassionally you hear a big bang like Detroit and some thunder from Illinois, a small bang from Dallas.

Hillarys Server's picture

It's not enough.

I want the living dead to be scratching on my door.

I want to flick a silver dime, or a saltine cracker, into a crowd of emaciated zombies and watch them scramble for it.

I want my time to come.

drewski1000's picture

That saltine is going to be your nightmare.  You can't kill a zombie.  They'll be there forever.

Lost in translation's picture

I'm surrounded by rolls of toilet paper, wishing I had silver dimes.

Sam Spayed's picture

I already overpay on real property tax, so don't think your gonna get anymore from me. You public employee types figure this shyyt out on your own. I suggest you make current public employees pay 50% of their salaries toward their retirement funds.

Vilfredo Pareto's picture

Uhh.  You are stuck, and outnumbered.

 

You gonna pick your house up and move it to a low tax area?

Sanity Bear's picture

more Mac "We're Doomed" Salvo

UNSUBSCRIBE

Montana Cowboy's picture

It will all become a real estate tax because you can't pick it up and move it away from the robber barrons. This is what will collapse real estate prices, not interest rates.

Presume real estate taxes go up $1200 per year. At 5% interest, $1200 per year ($100 per month) will support $24,000 in additional financing. So a buyer needs a $24,000 price reduction to balance the purchase price against the $1200 tax increase - and that's just the beginning. You can't solve the pension problem with $1200 per home. Its going to get much, much bigger. Remember, property taxes are actually rent you must pay to a robber barron to live in a home that you thought you owned. If you thought you could own a home in the US, you got fooled. You can't own any physical element of real estate. You can only own rights associated with that real estate. Your property taxes are taxes on rights, not on dirt and buildings. Now the government will use property taxes to extract the wealth from THEIR property.

I am a retired real estate broker and expert witness.

EternalAnusocracy's picture

California has Prop. 13.  Can't increase property taxes very much.  There are more property owners than pension benefits.  

The only way out of this is going to be importing millions of "working age tax PAYERS" from foreign countries (think Asia, Eastern Europe), NOT the illegal dead-weights from south of the border.  Either that or the entire social system collapses.  The worker to retiree ratio is a mathematical reality.  Oh, and it might be a good idea for solid middle/upper-middle class AMERICAN ladies to start popping out more kids with their HUSBANDS (not baby-daddies).

Vilfredo Pareto's picture

Yeah.  Even Greenspan recognized the reality of the pension ponzis facing a lack of growth in new contributors.  I remember about 20 years ago I think where he mentioned an aggressive expansion of immigration to solve it.   I thought that was a neat idea, until I saw the low wage and no wage refugees and  immigrants we are importing. 

 

Burrito rollers and chicken plant workers won't contribute enough net taxes to solve it.

Montana Cowboy's picture

My real estate career was in Los Angeles. I owned a well-known chain in the San Fernando Valley. I was part of the Howard Jarvis/Paul Gann movement that wrote Prop 13. I was on the ground floor hustling donations when very few even knew about this movement. Be careful with your confidence. Prop 13 can be set aside without a vote of the people by provisions built into it. Here is the scenario I have been predicting for almost a decade:

California files for bankruptcy over pension obligations. The federal courts tell California that they are not really bankrupt as long as they have the power to further tax real estate. The mere fact that Prop 13 can be killed without a vote of the people will get California tossed out of the bankruptcy court. California cannot voluntarily choose to disregard an income source while they cry bankruptcy.

So Prop 13 is not the factor that ultimately puts a ceiling on real estate tax. There is a balancing effect between the value of a property and the tax bill that encumbers that property. The tax bill can be increased until the property value goes to $0. That is your only ceiling - in California and other states.

What the US really needs is a property tax system like Puerto Rico. There is no tax on the first $175,000 of value. (it might have been increased from that figure.)

rejected's picture

There shouldn'r be ANY property taxes. It converts property from sacred to a privilege which can be revoked at any time, taxes raised at any time and they can take the property. No one in the US 'owns' property.

Ownership means it cannot be taken from you. In the US we are simply renting on a yearly basis. Your $175000 would cover most property today as even the cheesiest homes cost around that.

Montana Cowboy's picture

Yep. Home ownership in the US is a well-crafted illusion. It keeps people enslaved to the banks and the county tax collector. I often said that a landlord is more of a tenant than the tenant he rents to. He won't figure that out until he has a serious vacancy factor.

MoreFreedom's picture

Property taxes are good in that those who own property in a government jurisdiction are tied to that jurisdiction. It's capital that cannot flee. Thus it makes property owners take some responsibility in how the government is run.

The only problem is when there are a lot more voters than property owners in a jurisdiction. Still renters who think they don't pay property taxes and vote for more of them soon find out they pay it in their rent.

Thus property taxes are far better than income taxes. Poll taxes, much maligned, are also good, in that only those who pay the poll tax, may vote and thus give their input into how a jurisdiction is run.

Thus, IMHO, the best taxes are property, and poll taxes. Gas taxes are great provided they are used for roads and thus, are a use tax. Income taxes are redistribution taxes, which are immoral and why our founders prohibited them. So property, poll and other use taxes are the most moral taxes IMHO. Income taxes are redistribution taxes (and where prohibited by our founders for that reason), sales taxes less so in that there is some relationship between government spending (to protect us from those that pick our pocket or break our legs) and consumption.

Montana Cowboy's picture

That was known as allodial title. There was some spotted history of such title holdings in the US. The last I know of was in Texas. I knew a family in California that got their land on leather parchment from the Mexican government. They claim allodial status. Nevada tried to bring it back by charging a special one-time tax to get your property in allodial status. Problem was that it was only for that owner's lifetime. Next problem was that Nevada could not provide true allodial title because they couldn't provide the owner protection from the feds. So they scrapped the provision. All real estate in the US is owned under the Bundle of Rights theory. You can only own rights, not anything physical.

Lost in translation's picture

Some years ago the CTA was on a crusade to "repeal Prop. 13!"

I used to know a Bolshevik who was constantly caterwauling over Prop. 13.

SanJoseMutza's picture

There isn't any court in the land that can force people to pay higher taxes. In theory it may be true, but in practice there are limits to what people can and are willing to pay. If California decided to scrap Prop 13 per bankruptcy court advisement, and sharply increase property taxes, there would be serious consequences far more damaging than giving public pensions a haircut. Real estate development is one of the linchpins of California's economy. Housing affordability is already a huge problem in the urbanized parts of the state. The wisest course of action is to offically recognize that a pension funding problem exists, and then engage in negotiations with public employee unions to lower pension payouts to manageable levels. This may include sharper reductions for those receiving pensions in excess of $200K vs those receiving pensions below $100K. Unions have a vested interest in the state remaining solvent. A viable settlement ought to be able to be reached. 

Montana Cowboy's picture

The problem with real estate taxes is that it is a lien on the property. Its not the property owner that owes the tax. The debtor is the property itself. The recourse is against the property itself. No court needed. Just assess, bill, and hold a tax sale if the cash didn't roll in. Its that easy.

The notion that public pension programs can negotiate out of this mess is simply not realistic at this point. In California, CALPERS is so underfunded that it amounts to over $100,000 per household - and growing every day.

SanJoseMutza's picture

There isn't any court in the land that can force people to pay higher taxes. In theory it may be true, but in practice there are limits to what people can and are willing to pay. If California decided to scrap Prop 13 per bankruptcy court advisement, and sharply increase property taxes, there would be serious consequences far more damaging than giving public pensions a haircut. Real estate development is one of the linchpins of California's economy. Housing affordability is already a huge problem in the urbanized parts of the state. The wisest course of action is to offically recognize that a pension funding problem exists, and then engage in negotiations with public employee unions to lower pension payouts to manageable levels. This may include sharper reductions for those receiving pensions in excess of $200K vs those receiving pensions below $100K. Unions have a vested interest in the state remaining solvent. A viable settlement ought to be able to be reached. 

SanJoseMutza's picture

All an increasing population does is delay and worsen the inevitable. Pensions per se are not a problem. Excessive pensions are the problem. Many states have pension plans for their public employees that are far too generous. In California a cop can retire at age 50 with a pension exceeding $120K, along with a guaranteed 3% annual increase. Some cops double dip and get two paychecks from the taxpayers totalling more than $500K per year. 

dchang0's picture

They'll get around Prop 13 by calling the property taxes "fees."

The LA Times had a recent story about the City of El Monte, CA, using a large "fee" to pay for city pensions.

This Reason.com article links to the original LA Times story and summarizes it without mentioning the hidden fee. The original LA Times article talks about the fee.

http://reason.com/blog/2016/12/30/retired-city-manager-gets-216000-pension

 

Vilfredo Pareto's picture

I can't imagine how bad it will get in high tax areas.   Will every single person be bunking with a roommate in the same room to afford rent?  (Which also includes the real estate tax).

San Francisco may be a harbinger of things to come. Micro apartments at astronomical rates with multiple roomies in order to fund the taxes for pensions and other government services.

 

Something has to give, and at least for a while as taxes increase it will likely be square feet per person that gives way.

Lost in translation's picture

Agenda 21 is alive and well, in San Francisco ^