RE: [Mpls] Pensions and other Ponzi schemes........
ves 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 REMINDERS: 1. Think a member has violated the rules? Email the list manager at [EMAIL PROTECTED] before continuing it on the list. 2. Don't feed the troll! Ignore obvious flame-bait. Minneapolis Issues Forum - A City-focused Civic Discussion - Mn E-Democracy Post messages to: mailto:[EMAIL PROTECTED] Subscribe, Un-subscribe, etc. at: http://e-democracy.org/mpls REMINDERS: 1. Think a member has violated the rules? Email the list manager at [EMAIL PROTECTED] before continuing it on the list. 2. Don't feed the troll! Ignore obvious flame-bait. Minneapolis Issues Forum - A City-focused Civic Discussion - Mn E-Democracy Post messages to: mailto:[EMAIL PROTECTED] Subscribe, Un-subscribe, etc. at: http://e-democracy.org/mpls
Re: [Mpls] Pensions and other Ponzi schemes........
Victoria Heller wrote: 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? Nobody pays in $50,000 to social security and draws out $500,000 unless it's through disability or retiring early and then living past age 100. The only people I know with that kind of retirement plan are ex-CEOs like G.W. Bush's Secretary of the Treasury John Snow, whose retirment plan from CSX is paying him a benefit based on far more years of service than he actually worked there. I know I've contributed far more than I'll ever see in benefits, and I'm not nearly done paying yet. 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. Ideally contributions will be invested and pay for the benefits of those who contributed in the future. But the intent was never to guarantee such an outcome. Once it got started, however, politicians just couldn't keep from screwing around with it and thus we end up where we are today. The real questions should be do we support the idea of a minimum safety net for people, and if so, what level do we set it at? There are always going to be hills and valleys in the population and the economy. The policy has to take the long view and make decisions that can ride out those hills and valleys without causing unwarranted problems. However, in the case of Minneapolis's retirement liabilities, it appears that a number of mistakes have been made, continue to be made and/or have not been rectified. For example, the police and fire pension funds were historically mismanaged by people with conflicts of interest outside of the purview of the city (aka the taxpayer) which was nonetheless on the hook for paying them regardless of how those funds were managed. One fund (I don't recall which from memory) was so bad the state of Minnesota had to step in to try to clean it up. If memory serves, the city is still under some sort of state direction to fix those pension funds. The articles in the Southwest Journal should be a required primer on the subject. (http://makeashorterlink.com/?C6F023416) The city screwed up, 20, 30, 50 years ago by not managing those funds directly and pinching every penny. Instead, union members over-paid themselves at retirement, guaranteeing that the funds would go bankrupt some day. Incidentally, this same principle applies to the idea of building oneself out of a problem through continued growth. Every last rube who advocates that a city or county needs endless growth to survive needs to read the book "Limits to Growth" or at least learn some basic laws of physics and economics. 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. This appears to be true of most politicians, far and near. Given the power to vote themselves pay raises, comfortable retirements and first class healthcare at taxpayer expense, they rarely hesitate. 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. Chris Johnson Fulton REMINDERS: 1. Think a member has violated the rules? Email the list manager at [EMAIL PROTECTED] before continuing it on the list. 2. Don't feed the troll! Ignore obvious flame-bait. Minneapolis Issues Forum - A City-focused Civic Discussion - Mn E-Democracy Post messages to: mailto:[EMAIL PROTECTED] Subscribe, Un-subscribe, etc. at: http://e-democracy.org/mpls
Re: [Mpls] Pensions and other Ponzi schemes........
On Thu, 2 Oct 2003, Victoria Heller wrote: > 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? And what if you contribute $100,000 and draw $60,000 (and then die)? Your logic seems to suggest we should not POOL our money for mutual benefit. Say Al lives to 70, Bill to 75, Carl to 80. Average is 75. If they pool their money, each puts in for 75 years. If no pooling, each has to assume they may live to 80, and each will have to allocate more money for it. Why to we buy insutance? To take part in a very large pool. Why buy car insurance? Is it unfair if I pay $300 then collect $10,000 for auto injury? Should we all forego insurance (including health insurance) and *try* to have enuf cash to meet all eventualities? If you're rich you can do this. The rest of us are not so lucky. --David Shove Roseville REMINDERS: 1. Think a member has violated the rules? Email the list manager at [EMAIL PROTECTED] before continuing it on the list. 2. Don't feed the troll! Ignore obvious flame-bait. Minneapolis Issues Forum - A City-focused Civic Discussion - Mn E-Democracy Post messages to: mailto:[EMAIL PROTECTED] Subscribe, Un-subscribe, etc. at: http://e-democracy.org/mpls
[Mpls] Pensions and other Ponzi schemes........
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? 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 REMINDERS: 1. Think a member has violated the rules? Email the list manager at [EMAIL PROTECTED] before continuing it on the list. 2. Don't feed the troll! Ignore obvious flame-bait. Minneapolis Issues Forum - A City-focused Civic Discussion - Mn E-Democracy Post messages to: mailto:[EMAIL PROTECTED] Subscribe, Un-subscribe, etc. at: http://e-democracy.org/mpls
