patrick.net

Right - cause it certainly has nothing to do with massive abuse like this - right?

http://www.bloomberg.com/news/2012-08-01/police-chief-s-204-000-pension-shows-how-cities-crashed.html

He lasted eight months and left the now-bankrupt city at age 52 with an annual pension that pays more than $204,000 -- the third of four chiefs who stayed in the position for less than three years and retired with an average of 92 percent of their final salaries.

He lasted 8 months a police chief, but presumably put in a few decades in before that, and would have deserved a pension anyway, but not nearly that big. But don't be deceived. This is like the professional athlete, that gets the big contract but then is injured.

Yeah, I would like it if they made the pension calculation more complex and nuanced. This example is not much different in appearance than spiking, accept for the fact that he might have actually deserved and earned that promotion.

You do seem awfully confused though. Those overpaid exorbitant pensions are paid out of calpers, which is like a big insurance fund. The fact that that guy got more than he deserved, might be related a little to the rates that Stockton has to pay in to calpers, but for the most part their problem was deferring their payments in, which should have been budgeted as part of their payroll expenses, and it should have never been deferred.

21

tatupu70 2014 Oct 5, 9:17pm

Sometimes I wish I could dislike a post more than once.

Disliking it doesn't make it any less true...

22 spydah_hh 2014 Oct 5, 10:30pm

spydah_hh says

Sometimes I wish I could dislike a post more than once.

Disliking it doesn't make it any less true...

I suppose you can say the same for liking it right?

23 spydah_hh 2014 Oct 5, 10:34pm

I bet Marcus, Bill, and Tat, don't even know where and how pension plans started and why the private sector dropped them.

The public sector is always late in making adjustments. Pension plans are crippling many of the cities revenues yet they don't want to admit it nor do they want to deal with the problem, because to fix the problem means your political career maybe over.

24

tatupu70 2014 Oct 5, 11:07pm

I bet Marcus, Bill, and Tat, don't even know where and how pension plans started and why the private sector dropped them.

It's pretty easy to determine why the private sector dropped them--they could. As organized labor's power has decreased, owners have taken advantage to reduce labor costs as much as they can.

Before you state the BS that companies HAD to in order to stay competitive, I'll remind you of this chart:

It's pretty clear that there has been a large shift from companies paying out wages to laborers to companies paying out capital gains to owners.

25

marcus 2014 Oct 5, 11:17pm

I bet Marcus, Bill, and Tat, don't even know where and how pension plans started and why the private sector dropped them.

Yes, I can see that it's quite complex. The way the corporate job market works looks great these days in the rear view mirror for someone who works for 14 different companies in 35 years as they climb the ladder. And I'm sure from the corporation's side 401ks look efficient in many ways and is less costly than the old way,...keeping a lot of "dead wood" on the job until retirement (not that they had to).

I think there are a lot of reasons for the decline of pensions in the corporate world, but the biggest are corporations lowering costs, and also going with retirement planning vehicles that better fit people when they change jobs.

That could have been accomplished in a way that preserved defined benefit plans, but that would have been more costly and complex.

Pension plans are crippling many of the cities revenues yet they don't want to admit it nor do they want to deal with the problem, because to fix the problem means your political career maybe over.

I frame the last part a little differently. I think that the alignment of labor with one political party, and some of the irrational worker pay or benefits that have occasionally, resulted from that relationship have ultimately been bad for the worker.

But public pensions didn't have to be that way. Whenever unsustainable benefits are bestowed on workers, that is ultimately bad for workers and good for those that wish to end tpublic pensions. But this is a relatively small part of the problem, and is used by folks such as yourself or Mish, to rationalize getting out of the consequences of deferring payments into pension plans for police and other city workers. And these cases of deferring payments into pensions is the FAR greater reason for the unfunded liabilities we here so much about.

26 spydah_hh 2014 Oct 5, 11:58pm

It's pretty easy to determine why the private sector dropped them--they could. As organized labor's power has decreased, owners have taken advantage to reduce labor costs as much as they can.

You can say that. But only because government made US labor expensive. Businesses have so many things to deal with when it comes to hiring workers. They have workers liabilities, various labor taxes, legal fees, mandatory health care and I can go on. So the fact that big businesses can outsource their labor for a much cheaper cost is part of the reason why they're capable of receiving more profits.

Another big culprit is the FED keeping interest rates low and QE.

27 spydah_hh 2014 Oct 6, 12:00am

It's pretty easy to determine why the private sector dropped them--they could. As organized labor's power has decreased, owners have taken advantage to reduce labor costs as much as they can.

Tell me why did the private sector start them?

28

tatupu70 2014 Oct 6, 12:11am

You can say that. But only because government made US labor expensive. Businesses have so many things to deal with when it comes to hiring workers. They have workers liabilities, various labor taxes, legal fees, mandatory health care and I can go on. So the fact that big businesses can outsource their labor for a much cheaper cost is part of the reason why they're capable of receiving more profits.

Another big culprit is the FED keeping interest rates low and QE.

That's all crap. Seriously--pure BS.

I'm glad you found a way to work the Fed into this discussion though. Because it's clearly the reason for all of society's ills.

29

tatupu70 2014 Oct 6, 12:14am

Tell me why did the private sector start them?

I don't think there's a definitive answer there, other than to say that they are a benefit and designed to attract workers.

30 spydah_hh 2014 Oct 6, 12:15am

http://www.zerohedge.com/news/2014-04-16/fed-policies-have-made-rich-much-richer-fed-president-admits

spydah_hh says

You can say that. But only because government made US labor expensive. Businesses have so many things to deal with when it comes to hiring workers. They have workers liabilities, various labor taxes, legal fees, mandatory health care and I can go on. So the fact that big businesses can outsource their labor for a much cheaper cost is part of the reason why they're capable of receiving more profits.

Another big culprit is the FED keeping interest rates low and QE.

That's all crap. Seriously--pure BS.

I'm glad you found a way to work the Fed into this discussion though. Because it's clearly the reason for all of society's ills.

Believe it or not it truly is. Hell even mainstream media and the congressional hearings are starting to questing Janet Yellen and the FEDs policies.

Hell even the Dallas FED chairman Richard Fisher has commented about the FED policies and how it makes the rich richer.

http://www.dallasfed.org/news/speeches/fisher/

31 spydah_hh 2014 Oct 6, 12:20am

spydah_hh says

Tell me why did the private sector start them?

I don't think there's a definitive answer there, other than to say that they are a benefit and designed to attract workers.

Pension plans became popular in the United States during World War II, when wage freezes prohibited outright increases in workers' pay. The defined benefit plan had been the most popular and common type of retirement plan in the United States through the 1980s; since that time, defined contribution plans have become the more common type of retirement plan in the United States and many other western countries.

It began thanks to FDR's price controls. Business couldn't pay their workers more wages so instead they gave them other benefits such as pensions and health insurance. However, these were unsustainable once the price controls were removed, thus leading to the private sector to slowly remove the benefits.

32

tatupu70 2014 Oct 6, 12:28am

It began thanks to FDR's price controls. Business couldn't pay their workers more wages so instead they gave them other benefits such as pensions and health insurance. However, these were unsustainable once the price controls were removed, thus leading to the private sector to slowly remove the benefits.

No--they became more popular during the war, but that wasn't the start of pensions.

And why did it take 30+ years before the private sector started slowly removing the benefits?? Because that's when the power of labor had eroded and Mr. Reagan certainly helped it along.

33

tatupu70 2014 Oct 6, 12:32am

Believe it or not it truly is. Hell even mainstream media and the congressional hearings are starting to questing Janet Yellen and the FEDs policies.

Hell even the Dallas FED chairman Richard Fisher has commented about the FED policies and how it makes the rich richer.

First--zerohedge is not mainstream.
Second--Others can certainly second guess the Fed's policies and decisions. But that doesn't mean that the Fed has anything at all to do with private businesses deciding to get rid of pensions.

How did you make that leap? Other than your bias against the Fed and all things remotely related to government?

34

JH 2014 Oct 6, 12:33am

, thus leading to the private sector to slowly remove the benefits.

Wait, the private sector can't afford to pay reasonable benefits and fund pensions? Bullshit! See Bill's chart. Your posts show you are blinded by foxnewslike rhetoric and not very good at math.

35

indigenous 2014 Oct 6, 12:42am

Believe it or not it truly is. Hell even mainstream media and the congressional hearings are starting to questing Janet Yellen and the FEDs policies.

Even Piketty who not to long ago said the reason was because the rich did not pay as many taxes, said in his latest book that the cause of inequality was inflation caused by the Fed.

36 mell 2014 Oct 6, 1:06am

JH says

spydah_hh says

, thus leading to the private sector to slowly remove the benefits.

Wait, the private sector can't afford to pay reasonable benefits and fund pensions? Bullshit! See Bill's chart. Your posts show you are blinded by foxnewslike rhetoric and not very good at math.

That chart is misleading though. Companies also have hired more people so their expenses are higher. Plus some have issued their own bonds. What you have to look at is how long they could go without layoffs after subtracting debt from cash in case of a downturn. Then you will find out that the whole system runs on cheap debt and that most would not even have a couple of months to react. And if you believe the meme that the majority of the profits gets absorbed by CEO and upper management, it's looking even worse. But the taxpayer doesn't have to bail them out if and when they fail. Well at least that was true until 2008. The Fed and the government's crony capitalist policies are the source of the problems. Once you abolish the rule of law and defer responsibility to future generations, everything goes to shit - that's why that ruling is correct and so important.

37

JH 2014 Oct 6, 1:10am

The ruling is correct that cities should receive full benefits while reducing their payments? Boy o boy, I can't wait to see how that plays out for a 401k!!

38 socal2 2014 Oct 6, 1:49am

marcus says

He lasted 8 months a police chief, but presumably put in a few decades in
before that, and would have deserved a pension anyway, but not nearly that big.
But don't be deceived. This is like the professional athlete, that gets the big
contract but then is injured.

Regardless - letting someone retire at the ripe old age of 52 at $200K+ pension for life is madness and mathematically impossible for virtually any municipality. With current rules, someone can work for a City for 30 years and literally get 40 more years of full pay......even if they bankrupt the City in the process.

And your professional athlete analogy fails because if a professional athlete gets injured, Cities don't need to go bankrupt and let their towns fall to shit to keep paying their pensions like they do with our ridiculous union pensions.

39 socal2 2014 Oct 6, 2:17am

Before you state the BS that companies HAD to in order to stay competitive,
I'll remind you of this chart:

Regarding Corporate profits, America already has the highest Corporate Tax Rate in the entire world!
http://www.politifact.com/punditfact/statements/2014/sep/09/eric-bolling/does-us-have-highest-corporate-tax-rate-free-world/

How much higher do the Progressive want to raise the Corporate Tax rate to keep Stockton's police chief making $204,000 for the rest of his natural life?

Again - it just amazes me how the discussion is NEVER about the quality, performance and efficiency of our massive government bureaucracy. When our government fails us in our schools, fails to maintain infrastructure, to the corruption at the VA - Progressives just say we need to raise taxes and give the government more money.

Even when cities like Stockton hit rock bottom due to their poor management and greed, Progressives want everyone else to pay up (tax payers, reduced servics, bond holders) - but wants to leave the unions and government worker's compensation untouched.

40

MisdemeanorRebel 2014 Oct 6, 2:21am

And why did it take 30+ years before the private sector started slowly removing the benefits?? Because that's when the power of labor had eroded and Mr. Reagan certainly helped it along.

Yep, and the track record of individually managed 401ks is terrible. Also, it was during the Reagan Administration that companies were allowed to reduce pension funding under certain market conditions. It was great while the stock market rush lasted, until it didn't. Then the pensions were underfunded, media seldom mentioned the legalized underfunding, and the workers got the blame for the companies and the politicians' bad policy.

All part of the excellent track record of the last 30 years of reducing worker power, pensions, job security, etc. -- and we end up with... Prosperity?!

41

tatupu70 2014 Oct 6, 2:26am

Regarding Corporate profits, America already has the highest Corporate Tax Rate in the entire world!

http://www.politifact.com/punditfact/statements/2014/sep/09/eric-bolling/does-us-have-highest-corporate-tax-rate-free-world/

How much higher do the Progressive want to raise the Corporate Tax rate to keep Stockton's police chief making $204,000 for the rest of his natural life?

Who's talking about corporate tax rates?? What does that matter? Regardless, the graph I posted is AFTER TAX.

Again - it just amazes me how the discussion is NEVER about the quality, performance and efficiency of our massive government bureaucracy. When our government fails us in our schools, fails to maintain infrastructure, to the corruption at the VA - Progressives just say we need to raise taxes and give the government more money.

Even when cities like Stockton hit rock bottom due to their poor management and greed, Progressives want everyone else to pay up (tax payers, reduced servics, bond holders) - but wants to leave the unions and government worker's compensation untouched.

Never? It seems like the discussion is quite often about quality of government. If you want to change it, elect people that will do as you wish...

As an aside--if those positions are so overpaid, why aren't there people falling over each other to apply to be cops or teachers?

42 socal2 2014 Oct 6, 2:39am

Who's talking about corporate tax rates?? What does that matter? Regardless,
the graph I posted is AFTER TAX.

Just pointing out that we already have the highest Corporate Tax rate in the entire world. Why else was that graph posted unless you want to argue we need to raise Corporate taxes even higher to fund millionaires working for our government who are bankrupting our cities?

http://blogs.reuters.com/muniland/2013/03/27/this-is-why-stockton-is-broke/

As an aside--if those positions are so overpaid, why aren't there people
falling over each other to apply to be cops or teachers?

Stockton pays their cops much higher than the State and National average ($150K year). They pay the Cops so much, they have to reduce the number of cops they employ because they can't afford more - which is resulting in more crime like we saw in Vallejo and Oakland. Basically the City and unions are choosing to pay Cop's massive pensions before paying for public safety.

43

tatupu70 2014 Oct 6, 2:53am

Just pointing out that we already have the highest Corporate Tax rate in the entire world. Why else was that graph posted unless you want to argue we need to raise Corporate taxes even higher to fund millionaires working for our government who are bankrupting our cities?

The graph was posted to rebut the usual argument that companies are cutting pay and benefits (read pensions) because they HAVE to in order to stay "competitive".

And, like I said, the tax rate doesn't seem to be eating into the after tax profits, does it? (hint--look at effective tax rate vs. stated tax rate).

44 socal2 2014 Oct 6, 3:09am

The graph was posted to rebut the usual argument that companies are cutting
pay and benefits (read pensions) because they HAVE to in order to stay
"competitive".

But we are talking about Municipalities.

You seem to be arguing that Corporations in New York or outside Modesto need to pay higher taxes to keep Stockton from going through bankruptcy. As if raising taxes will fix these pension Ponzi Schemes.

Stockton foolishly spiked their pensions and compensation packages when they saw all of the increased property tax revenue during the housing boom. CALPERS told all these cities that it was OK because we were in a new normal.

Instead of being careful and treating the increased property tax revenue as a short term windfall, both CALPERS and the cities thought the gravy was never going to dry up and gave everyone a big fat raise with an outrageous pension plan.

Well - it has dried up - and everyone has to give back some. Including city workers. If the citizens of Stockton now have to live in a total shit-hole of a city watching their property values sink even further due to the City's financial mismanagement and scourge of bankruptcy, all the while they are plagued with increased crime because Stockton can't afford more cops making $150K/year with fat pensions - it is only fair that the City reforms their pension system that is most responsible for the bankruptcy situation.

45

tatupu70 2014 Oct 6, 3:12am

But we are talking about Municipalities.

Who's we? I was responding to hh's post about private sector pensions.

46

tatupu70 2014 Oct 6, 3:19am

You seem to be arguing that Corporations in New York or outside Modesto need to pay higher taxes to keep Stockton from going through bankruptcy. As if raising taxes will fix these pension Ponzi Schemes.

Not sure how you could come to such a conclusion.

As another aside--when did the public forget what a Ponzi scheme is? Was it right wing propaganda that brainwashed the public to try to eliminate social security and pensions?

In any event, if you're arguing specifically about Stockton--I agree pension reform is needed. Illinois is the same.

47 socal2 2014 Oct 6, 3:30am

In any event, if you're arguing specifically about Stockton--I agree pension
reform is needed. Illinois is the same.

There you go. The thread is specifically about public sector pensions.

You can also add Vallejo, San Bernardino and Detroit to that list.

Basically, any city or state that is going bankrupt these days is likely due to outrageous pension committments the cities made during the housing bubble.

Was it "left wing progaganda" that convinced a buch of Progressives that a person could work only 30 years and expect their employer (either public or private) to support them for another 40-50 years at near full pay and think it was sustainable?

48

tatupu70 2014 Oct 6, 3:38am

Basically, any city or state that is going bankrupt these days is likely due to outrageous pension committments the cities made during the housing bubble.

See--this is where you run into trouble. Don't extrapolate. First--pensions aren't the only reason Stockton is in trouble. Second--you certainly can't generalize to any city or state.

Was it "left wing progaganda" that convinced a buch of Progressives that a person could work only 30 years and expect their employer (either public or private) to support them for another 40-50 years at near full pay and think it was sustainable?

Nope--it was (and is still) easily possible. What isn't sustainable is companies (or municipalities) underfunding pensions and assuming ridiculously high investment returns will make up the difference. Or companies raiding the pension plan to fund bonuses for the top executives. When you do those things, then the pension plan becomes unsustainable.

49 socal2 2014 Oct 6, 3:52am

See--this is where you run into trouble. Don't extrapolate. First--pensions
aren't the only reason Stockton is in trouble. Second--you certainly can't
generalize to any city or state.

Pensions are Stockton's largest liability - by far ($900 million and counting).
http://nation.time.com/2013/07/25/the-wages-of-bankruptcy-stocktons-cautionary-tale-for-detroit/

The fact that Vallejo is facing another bankruptcy after they raised taxes, cut services and left pensions untouched - suggests that pensions are a big problem for many cities and states.
tatupu70 says

Nope--it was (and is still) easily possible.

Huh? Where has it been possible to work 30 years and get 40 additional years of near full pay at retirement? Social Security and early pension plans were never designed this way to support people this long after they stopped working for the employer. Back then, people may have lived another 10 or 20 years after retirement - not 40 years after retiring in their early 50's!

Besides, didn't GM have these types of outrageous pensions and early retirements requiring the US tax payer to bail them out?

50

MisdemeanorRebel 2014 Oct 6, 3:54am

Besides, didn't GM have these types of outrageous pensions and early retirements requiring the US tax payer to bail them out?

GM was allowed to underfund the pensions during the boom stock market years in the 80s and 90s. The better the stock performance, the more they were - perversely - allowed to underfund.

51 socal2 2014 Oct 6, 4:01am

thunderlips11 says

GM was allowed to underfund the pensions during the boom stock market years
in the 80s and 90s. Had they contributed normally, they wouldn't have been
bailed out.

Right - and somehow GM would have stayed in business if it spent EVEN MORE of their money on their already high labor and pension liabilities instead of money to modernize their factories and better engineering to design better cars that people actually want to buy?

52

MisdemeanorRebel 2014 Oct 6, 4:05am