Thread snips are below.
Vicky suggests: "Tell your local government to stop breaking the law. A
lot of time and money could be saved this way." She left out "stop doing
what is legal yet stupid." There was no rule against the Titantic racing
full speed ahead. But it was stupid. She correctly states: "We must stop
pretending that money comes from Heaven. All of It comes from someone
else's pocket." Our pension funds are current day Titantics racing full
speed ahead in ice berg filled waters.
This is where I came in when I joined the list earlier in the year. It is
still a "rant" topic for me. Senator Daniel Patrick Moynihan tried to get
the SS deduction reduced a couple decades ago as it was all going to the
General Fund and not being invested (much of the 1990s surplus was SS "over"
payments). That never found traction in either party ("3d rail of American
politic," remember?). When SS was started there was an investment part in
the Senate version that FDR had taken out in conference, starting a
dependency cycle. Al Gore's father, in the last year of his life, had a
pension that was 3 times what he earned his last year as a senator. Some
reports show that congressionals will get $3 million each in pension
payouts. A report on the floor last year showed that if current retirees
had invested, prudently, not in risk stuff, today, 40 years later, they
would be earning $6,200/month each. That is the power of investment. But
invested people are financially independent and less easy to boss around.
Today, if you die before getting SS your estate gets nothing. That's like
paying for insurance with so many "act of God" clauses that you could never
collect. Guys I know in their 40s have done the math and say if they could
invest what is deducted themselves, starting from scratch today, they would
still make more in retirement than staying with the program.
Vicky mentions GM: this is not just a government thing. The private sector
is also affected. Since that article came out, current analysis suggests
that the GM pension problem may well be a major facto in GM's bankruptcy.
That will distress everyone, liberal and conservative alike. This is
serious stuff. In Oregon we have a PERS (public employees retirement
system). Here is the deal: they figured the fund needed to make 8%
annually to meet payout expectations. They passed a law that said it would
be "unfair" if it didn't and so the taxpayer would have to make up any
difference if it doesn't return 8%. But "fairness" rules: it wouldn't be
fair for the stock market to make 15% and they just get 8% so the tax payer,
law passed, has to make up that differnce too. It was established to pay
55% but, with pers recipients on the board, rose to, in some cases, 125% of
last year of salary. White collar "entitlements." So where is the
accountability for the money managers? None. They take trips uttering the
Alfred E. Newman mantra, "what, me worry?" Now they have a $14 billion
shortfall. The only picture that comes to mind is tuxedoed pigs at the
trough with bibs around their necks, sun glasses on, burbing with great
smiles. Congressionals have this all figured out. The whole purpose of
redistricting (done by which ever state party is in power) is to prevent
unelection. Thus, 95% of the House is virtually defeat proof except in
those states that don't allow gerrymandering redistricting (hence the
phenomenon of companies in "blue states" leaving for "red states"). So,
between governments, unions, and corporations (did I leave anyone out?)
mismanagement, misallocation, or just plain ol raids, some pension funds
(private or public sector) are in great jeapordy. Those in jeaporday have
turned their back on the one engine, capitalism (gasp) that has brought more
people out of poverty than any other for the ponzi scheme of "tommorrow".
The bulge Vicky talks about is like the Python that swallowed a pig. As the
pig travels through the digestive track, it creates a giant bulge. Recall
that the 15 year baby boomer period resulted in twice as many births than in
any other 15 year period. Do the math. The swallowed pig will in turn
swallow the system unless major changes are made at both the allocation and
investment ends. The worst approach is do nothing until systems collapse
with nothing to salvage (our current course). The best answer is to
establish pension rules that prevent governments, unions, and corporations
from raiding them AND establish private sector low risk investment options.
Currently, corporations are acting more swiftly to clean up their acts than
unions or governments (the latter two can "tax"). The reality is that some
governments and corporations will wait until the first wave of defaults
start, and then act. Like WWI. Waves from the trenches will have to be
sacrificed before it is figured out that killing off your Army of citizens
and employees is self-defeating. We have two choices: we can learn from
the mistakes history teaches us or believe we are somehow different from our
predecessors, that it can't happen to us, and we'll be smarter and avoid the
mistakes. It all depends on whether or not we see the emperor wearing any
clothes.
Peter Jessen, Portland
-----Original Message-----
From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] Behalf Of
Victoria Heller
Sent: Thursday, October 02, 2003 7:14 AM
To: Minneapolis Forum
Cc: [EMAIL PROTECTED]
Subject: [Mpls] Pensions and other Ponzi schemes........
Vicky Heller writes
Our Listmanager posted a link about union contract negotiations at
Border's which reminded me of an important issue that I have
previously written about: The ticking time bomb of pension
shortfalls - both public and private.
Minneapolis taxpayers have the right to know how much we pay annually
for pensions and healthcare, and what promises have been made for the
future.
A related article from today's Briefing.com.....
Rising pension costs have taken a significant chunk out of Detroit's
cash flow, and industry analysts expect this to remain a drag on
profitability going forward.
Jim Bernstein states:
"Pensions are earned. They are not welfare."
Vicky replies:
We need some arithmetic here.
If you contribute $50,000 to your retirement plan, and draw $500,000
of benefits after you retire, who pays the difference?
David Shove says:
Why to we buy insurance? To take part in a very large pool.
Chris Johnson writes:
Nobody pays in $50,000 to social security and draws out $500,000 unless....
The Social Security system was orginally set up to provide a safety net
for people, without regard for how much they paid in. It was never a
Ponzi scheme and only recently have the current contributions been used
to pay current benefits.
We could
solve a lot problems simply by requiring politicians to live by the same
rules and limitations that the rest of us do. And they wonder why the
electorate is digusted and angry.
David Brauer writes:
Light not heat department...
Apropos the current pension discussion, some readers may want to check out
the big pension story Scott Russell of the Southwest Journal did last year.
It's a good primer on the ins and outs of Minneapolis pension financing.
http://makeashorterlink.com/?C6F023416
Vicky replies:
We need some arithmetic here.
If you contribute $50,000 to your retirement plan, and draw $500,000
of benefits after you retire, who pays the difference?
In the case of public pensions (including social security), the
taxpayers pay - as long as they are willing and able to do so. Some
call it welfare, but I call it a Ponzi scheme that is destined to
fail. The only way for it to work would be to find millions and
millions of new taxpayers who are willing to support those who
preceded them. Keep in mind the boomer population bulge (pun
intended.)
Minneapolis specific: How much is a former City Council person
expecting to receive? At what age? I remember reading that he or she
can expect a monthly income equal to 75% of his or her highest salary.
Who knows what they include as "salary" for the calculation, but let's
assume $60,000 per year.
If these numbers are correct, a former Council Member would receive
$45,000 per year, plus first class healthcare for 10, 20, 30 years.
That kind of annuity is worth a lot -- in the millions. How much did
he or she pay for the annuity? Not much.
It would be nice if someone from the City would give us the correct
numbers so that we can do these calculations accurately.
We must stop pretending that money comes from Heaven. All of It comes
from someone else's pocket.
Vicky Heller
North Oaks
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