The third act in the triple-fucking of ordinary people by Wall Street
September 26, 2013 10:10 AM Subscribe
Sigh.
What is there really to say that isn't obvious...?
More light is good though.
posted by Windopaene at 10:21 AM on September 26, 2013
What is there really to say that isn't obvious...?
More light is good though.
posted by Windopaene at 10:21 AM on September 26, 2013
Well, it's only public workers. They're just leeches after all, I saw one guy leaning on a shovel once at a job site, all public workers are bums!
They're not your neighbor or your cousin or your buddy from high school, they don't do worthwhile things like repair streets or make sure your water is safe to drink (offer void near fracking sites) or teach your kids (offer void where charter schools exist) or make sure your poop doesn't back up into your house.
posted by entropicamericana at 10:24 AM on September 26, 2013 [25 favorites]
They're not your neighbor or your cousin or your buddy from high school, they don't do worthwhile things like repair streets or make sure your water is safe to drink (offer void near fracking sites) or teach your kids (offer void where charter schools exist) or make sure your poop doesn't back up into your house.
posted by entropicamericana at 10:24 AM on September 26, 2013 [25 favorites]
There are so so so so so many better ways to write the article he trying to write. I'm actually embarrassed for him.
In the name of making it sound more nefarious than it is he actually misses the big interesting points that are easily fixed.
He also massively overstates the current impact of the GFC on pensions. In fact that Dean Baker paper he cites is from Feb of 11 and the data used only runs through 3q10. So like just on that fact alone total return on the S&P since then is like 60%.
And I suspect his head would explode if someone tried to explain to him the issues surrounding the actuarial assumptions used in determining pension liabilities.
Its truly a shame - because there actually is a really really good article to write on how pension plans end up mismanaged and how pay-to-play manifests itself lots of different ways.
posted by JPD at 10:25 AM on September 26, 2013 [11 favorites]
In the name of making it sound more nefarious than it is he actually misses the big interesting points that are easily fixed.
He also massively overstates the current impact of the GFC on pensions. In fact that Dean Baker paper he cites is from Feb of 11 and the data used only runs through 3q10. So like just on that fact alone total return on the S&P since then is like 60%.
And I suspect his head would explode if someone tried to explain to him the issues surrounding the actuarial assumptions used in determining pension liabilities.
Its truly a shame - because there actually is a really really good article to write on how pension plans end up mismanaged and how pay-to-play manifests itself lots of different ways.
posted by JPD at 10:25 AM on September 26, 2013 [11 favorites]
If those slobs were smart, they'd have become Wall Street bankers instead of teachers and firefighters. What's the problem?
posted by Rykey at 10:27 AM on September 26, 2013
posted by Rykey at 10:27 AM on September 26, 2013
Ohmigod there are so many things wrong in this article. I. I. I just don't know where to begin.
And again what's really really disappointing is that I agree with his original thesis statement.
posted by JPD at 10:29 AM on September 26, 2013
And again what's really really disappointing is that I agree with his original thesis statement.
posted by JPD at 10:29 AM on September 26, 2013
This should be the lead of the article, IMO .... and yeah, JPD it is kind of scattered compared to his usual.
So even if Pew's numbers were right, the "unfunded liability" crisis had nothing to do with the systemic unsustainability of public pensions. Thanks to a deadly combination of unscrupulous states illegally borrowing from their pensioners, and unscrupulous banks whose mass sales of fraudulent toxic subprime products crashed the market, these funds were out some $930 billion. Yet the public was being told that the problem was state workers' benefits were simply too expensive.
posted by tilde at 10:30 AM on September 26, 2013 [1 favorite]
So even if Pew's numbers were right, the "unfunded liability" crisis had nothing to do with the systemic unsustainability of public pensions. Thanks to a deadly combination of unscrupulous states illegally borrowing from their pensioners, and unscrupulous banks whose mass sales of fraudulent toxic subprime products crashed the market, these funds were out some $930 billion. Yet the public was being told that the problem was state workers' benefits were simply too expensive.
posted by tilde at 10:30 AM on September 26, 2013 [1 favorite]
I suspect his head would explode if someone tried to explain to him the issues surrounding the actuarial assumptions used in determining pension liabilities.
Yeah, pretty much this. Taibbi isn't very good because he specializes in righteous indignation, not comprehension.
posted by dfriedman at 10:31 AM on September 26, 2013 [3 favorites]
Yeah, pretty much this. Taibbi isn't very good because he specializes in righteous indignation, not comprehension.
posted by dfriedman at 10:31 AM on September 26, 2013 [3 favorites]
Ohmigod there are so many things wrong in this article. I. I. I just don't know where to begin.
Hi. I'm a person who doesn't know enough about Wall Street to be able to delineate what is or is not wrong with this article. I'm sure I'm not the only one here, can you tell us what's wrong instead of just saying that it is wrong. That would be helpful!
posted by troika at 10:32 AM on September 26, 2013 [31 favorites]
Hi. I'm a person who doesn't know enough about Wall Street to be able to delineate what is or is not wrong with this article. I'm sure I'm not the only one here, can you tell us what's wrong instead of just saying that it is wrong. That would be helpful!
posted by troika at 10:32 AM on September 26, 2013 [31 favorites]
Well while that is completely true another part of the problem is that low interest rates inflate the present value of pension liabilities - and not only that - the further out those obligations are the more they get artificially inflated.
posted by JPD at 10:32 AM on September 26, 2013 [2 favorites]
posted by JPD at 10:32 AM on September 26, 2013 [2 favorites]
There's nothing new about pensions investing in hedge funds and private equity funds (or alternative assets, more generally).
It's been going on for years and years. I find Taibbi's articles too unfocused and lazy to really read them, so he may have addressed this, but: there's been a growing movement to cut back on investment fees, whether that be hedge funds, private equity, or traditional investment managers.
It sort of mirrors the movement out of mutual funds and into ETFs.
posted by jpe at 10:38 AM on September 26, 2013 [1 favorite]
It's been going on for years and years. I find Taibbi's articles too unfocused and lazy to really read them, so he may have addressed this, but: there's been a growing movement to cut back on investment fees, whether that be hedge funds, private equity, or traditional investment managers.
It sort of mirrors the movement out of mutual funds and into ETFs.
posted by jpe at 10:38 AM on September 26, 2013 [1 favorite]
All across America, Wall Street is grabbing money meant for public workers.
Apparently "privatizing Social Security" doesn't poll well -- with two stock market crashes since 2000, isn't hardly surprising -- and thus the term is verboten, but let's not forget that doing so has been a Republican Party goal since at least the 1990s.
posted by Gelatin at 10:43 AM on September 26, 2013 [1 favorite]
Apparently "privatizing Social Security" doesn't poll well -- with two stock market crashes since 2000, isn't hardly surprising -- and thus the term is verboten, but let's not forget that doing so has been a Republican Party goal since at least the 1990s.
posted by Gelatin at 10:43 AM on September 26, 2013 [1 favorite]
Stick to sports, Taibbi. Your lack of math comprehension is showing.
posted by Ardiril at 10:59 AM on September 26, 2013
posted by Ardiril at 10:59 AM on September 26, 2013
I for one, don't understand the lack of riotous outrage in the streets.
It's because employees in the private sector were already fucked out of their pensions years ago.
posted by Pogo_Fuzzybutt at 11:01 AM on September 26, 2013 [5 favorites]
It's because employees in the private sector were already fucked out of their pensions years ago.
posted by Pogo_Fuzzybutt at 11:01 AM on September 26, 2013 [5 favorites]
I don't understand why financial gurus advise all of us peons to invest only in index funds and highly rated bonds, and then government agencies go off and put money in crazy financially-engineered products that no one can understand.
I don't think my state's pension fund manager is a super financial genius who can beat the market... and if he were, then why the hell would he accept a relatively tiny government salary? And assuming he is a genius, how do I know he's not accepting kickbacks for picking certain investments?
As much as I hate the 401(k) system, at least it's more honest about your probabilities of actually having money in retirement.
posted by miyabo at 11:11 AM on September 26, 2013 [1 favorite]
I don't think my state's pension fund manager is a super financial genius who can beat the market... and if he were, then why the hell would he accept a relatively tiny government salary? And assuming he is a genius, how do I know he's not accepting kickbacks for picking certain investments?
As much as I hate the 401(k) system, at least it's more honest about your probabilities of actually having money in retirement.
posted by miyabo at 11:11 AM on September 26, 2013 [1 favorite]
Like Wayne LaPierre says, Nothing stops a hedge fund manager except a good guy with a gun.
posted by Naberius at 11:14 AM on September 26, 2013 [8 favorites]
posted by Naberius at 11:14 AM on September 26, 2013 [8 favorites]
I don't understand why financial gurus advise all of us peons to invest only in index funds and highly rated bonds, and then government agencies go off and put money in crazy financially-engineered products that no one can understand.
As a general matter, peons aren't allowed to invest in hedge funds. You have to be an accredited investor to do so (that's changing a touch w/ the JOBS Act, but I'm not sure what the relaxed definition has changed to).
IIRC, best practice for larger portfolios is to have 5%-ish in non-correlated alternatives.
posted by jpe at 11:29 AM on September 26, 2013
As a general matter, peons aren't allowed to invest in hedge funds. You have to be an accredited investor to do so (that's changing a touch w/ the JOBS Act, but I'm not sure what the relaxed definition has changed to).
IIRC, best practice for larger portfolios is to have 5%-ish in non-correlated alternatives.
posted by jpe at 11:29 AM on September 26, 2013
Remember when Republicans had that big plan to turn Social Security over to private investors?
posted by dances_with_sneetches at 11:33 AM on September 26, 2013
posted by dances_with_sneetches at 11:33 AM on September 26, 2013
That article in Rolling Stone Magazine is not a perfect criticism of the financial sector corruption!
posted by srboisvert at 11:36 AM on September 26, 2013 [12 favorites]
posted by srboisvert at 11:36 AM on September 26, 2013 [12 favorites]
It's because employees in the private sector were already fucked out of their pensions years ago.
True, but some of us are OK with it. I'd way rather have money from my employer now in the form of a 401(k) than count on them still being in existence and having money to pay my pension in 40 years when I retire.
posted by Aizkolari at 11:37 AM on September 26, 2013 [2 favorites]
True, but some of us are OK with it. I'd way rather have money from my employer now in the form of a 401(k) than count on them still being in existence and having money to pay my pension in 40 years when I retire.
posted by Aizkolari at 11:37 AM on September 26, 2013 [2 favorites]
Taibbi tends to get the big picture right and is less scrupulous with supporting claims.
- "AIG executives could be paid the huge bonuses they naturally deserved for having run one of the world's largest corporations into the ground." Well, these were actually retention bonuses, paid to keep AIG execs on board while the company tried to recover. They weren't performance bonuses. And, had the bonuses not been paid, the execs could've sued for 3x the value of the bonus.
- " Thanks to a deadly combination of unscrupulous states illegally borrowing from their pensioners." It wasn't illegal for the states to defer Annual Required Contributions provided they go through regular political processes (and there's no allegation they didn't), and the deferral isn't borrowing. It sort of is in one sense? But it isn't.
- "But Social Security wouldn't be "collapsing" at all had not three decades of presidents continually burgled the cash in the Social Security trust fund to pay for tax cuts." There was no "burgling," and Taibbi is just reiterating a stupid right wing talking point. Social security surpluses are required to be invested in treasury bonds. As with any bond issuance, the proceeds are used by the government. It's not like the Social Security Trust Fund trustees can just buy gold bars and put them in their basement. The funds were no more "stolen" than my money is when I buy a savings bond.
- "California passed a law in 2005 making hedge-fund investments secret.....[lots about how the underlying investments are kept confidential]......Hedge funds have good reason to want to keep their fees hidden." What? The investments are not the same as their fees, and the latter, at least in the aggregate, are disclosed. He provides no evidence that the fees are secret, and hopes people just forget that he's started talking about something totally different.
posted by jpe at 11:51 AM on September 26, 2013
- "AIG executives could be paid the huge bonuses they naturally deserved for having run one of the world's largest corporations into the ground." Well, these were actually retention bonuses, paid to keep AIG execs on board while the company tried to recover. They weren't performance bonuses. And, had the bonuses not been paid, the execs could've sued for 3x the value of the bonus.
- " Thanks to a deadly combination of unscrupulous states illegally borrowing from their pensioners." It wasn't illegal for the states to defer Annual Required Contributions provided they go through regular political processes (and there's no allegation they didn't), and the deferral isn't borrowing. It sort of is in one sense? But it isn't.
- "But Social Security wouldn't be "collapsing" at all had not three decades of presidents continually burgled the cash in the Social Security trust fund to pay for tax cuts." There was no "burgling," and Taibbi is just reiterating a stupid right wing talking point. Social security surpluses are required to be invested in treasury bonds. As with any bond issuance, the proceeds are used by the government. It's not like the Social Security Trust Fund trustees can just buy gold bars and put them in their basement. The funds were no more "stolen" than my money is when I buy a savings bond.
- "California passed a law in 2005 making hedge-fund investments secret.....[lots about how the underlying investments are kept confidential]......Hedge funds have good reason to want to keep their fees hidden." What? The investments are not the same as their fees, and the latter, at least in the aggregate, are disclosed. He provides no evidence that the fees are secret, and hopes people just forget that he's started talking about something totally different.
posted by jpe at 11:51 AM on September 26, 2013
I for one, don't understand the lack of riotous outrage in the streets.
It's because employees in the private sector were already fucked out of their pensions years ago.
Which accounts for the (distinctly American?) lament I often hear from private-sector workers. Not "Public-sector workers get X and Y good pensions and benefits; why can't we all?"
It's "If we in the private sector can't have X and Y good pensions and benefits, why should public-sector workers get them?"
posted by Rykey at 12:17 PM on September 26, 2013 [10 favorites]
It's because employees in the private sector were already fucked out of their pensions years ago.
Which accounts for the (distinctly American?) lament I often hear from private-sector workers. Not "Public-sector workers get X and Y good pensions and benefits; why can't we all?"
It's "If we in the private sector can't have X and Y good pensions and benefits, why should public-sector workers get them?"
posted by Rykey at 12:17 PM on September 26, 2013 [10 favorites]
paid to keep AIG execs on board while the company tried to recover.
Thank you for running our business into the ground, please accept this bonus so that you can stick around and finish that job.
posted by maxwelton at 12:24 PM on September 26, 2013 [3 favorites]
Thank you for running our business into the ground, please accept this bonus so that you can stick around and finish that job.
posted by maxwelton at 12:24 PM on September 26, 2013 [3 favorites]
As with any bond issuance, the proceeds are used by the government. It's not like the Social Security Trust Fund trustees can just buy gold bars and put them in their basement. The funds were no more "stolen" than my money is when I buy a savings bond.
Hmm. I've never really understood what purpose it serves to "invest" the SS surpluses in Treasury Bonds. Maybe someone can explain it to me better, but I really don't get how it makes sense. Any SS surpluses are effectively converted to public debt at the point they're invested in the trust fund, when moments before, they represented a revenue surplus for the government. How does that work exactly? Sure, it leaves the government with more general revenue it can spend (and does) in the short term, but in the long term, instead of having however much money it had in surplus SS dollars still on hand to pay for social security, the state now owes itself that much plus interest. At least on paper. Why shouldn't that money be invested in ways that guarantee a minimum return and that don't leave the state on the hook for new debt? It's a weird thing to me. What am I missing that makes the policy make sense?
posted by saulgoodman at 12:30 PM on September 26, 2013 [2 favorites]
Hmm. I've never really understood what purpose it serves to "invest" the SS surpluses in Treasury Bonds. Maybe someone can explain it to me better, but I really don't get how it makes sense. Any SS surpluses are effectively converted to public debt at the point they're invested in the trust fund, when moments before, they represented a revenue surplus for the government. How does that work exactly? Sure, it leaves the government with more general revenue it can spend (and does) in the short term, but in the long term, instead of having however much money it had in surplus SS dollars still on hand to pay for social security, the state now owes itself that much plus interest. At least on paper. Why shouldn't that money be invested in ways that guarantee a minimum return and that don't leave the state on the hook for new debt? It's a weird thing to me. What am I missing that makes the policy make sense?
posted by saulgoodman at 12:30 PM on September 26, 2013 [2 favorites]
Agreed. It makes no sense -- the entity doing the investment is controlled by the entity that receives the investment. It's exactly like old school private pension funds that mostly invested in company stock, and it should be illegal.
posted by miyabo at 1:03 PM on September 26, 2013
posted by miyabo at 1:03 PM on September 26, 2013
Thank you for running our business into the ground, please accept this bonus so that you can stick around and finish that job.
See, there are plenty of ways to address the issue in appropriately shallow manner while still getting the distinction between retention and performance bonuses.
posted by jpe at 1:04 PM on September 26, 2013 [1 favorite]
See, there are plenty of ways to address the issue in appropriately shallow manner while still getting the distinction between retention and performance bonuses.
posted by jpe at 1:04 PM on September 26, 2013 [1 favorite]
it's kind of interesting just to look at a quick report on CALPERS:
http://www.calpers.ca.gov/eip-docs/about/facts/facts-at-a-glance.pdf
the size of the fund tripled from 1985 -> 1995, and then doubled from 1995-2005, and looks on track to increase by 75% from 2005 -> 2015.... which seems like a trend, downwards. But then, modulo interest rates, who knows... and they didn't clearly state the growth of liabilities i.e. the growth in pensioners.
but then you can also see that while employee contributions have doubled since 2000, employer contributions have quadrupled: state employees have been deferring income and replacing it with increased pension contributions? you can see the scam in states raiding pension funds right there... if any raiding is going on outside of Detroit.
posted by ennui.bz at 1:06 PM on September 26, 2013
http://www.calpers.ca.gov/eip-docs/about/facts/facts-at-a-glance.pdf
the size of the fund tripled from 1985 -> 1995, and then doubled from 1995-2005, and looks on track to increase by 75% from 2005 -> 2015.... which seems like a trend, downwards. But then, modulo interest rates, who knows... and they didn't clearly state the growth of liabilities i.e. the growth in pensioners.
but then you can also see that while employee contributions have doubled since 2000, employer contributions have quadrupled: state employees have been deferring income and replacing it with increased pension contributions? you can see the scam in states raiding pension funds right there... if any raiding is going on outside of Detroit.
posted by ennui.bz at 1:06 PM on September 26, 2013
See, there are plenty of ways to address the issue in appropriately shallow manner while still getting the distinction between retention and performance bonuses.
Oh come on. Without the government AIG would have been liquidated, along with unknown swathes of counterparties, but once they decided to save it, the executives had the government over a barrel. You can say that all is fair in love and business but that doesn't make it any prettier.
posted by ennui.bz at 1:10 PM on September 26, 2013
Oh come on. Without the government AIG would have been liquidated, along with unknown swathes of counterparties, but once they decided to save it, the executives had the government over a barrel. You can say that all is fair in love and business but that doesn't make it any prettier.
posted by ennui.bz at 1:10 PM on September 26, 2013
I've never really understood what purpose it serves to "invest" the SS surpluses in Treasury Bonds.
The answer you get from the Dean Bakers etal of the world (who is cited approvingly on a separate point by Taibbi) is that Treasuries are the safest investments in the world. Investing it elsewhere could get ugly.
posted by jpe at 1:12 PM on September 26, 2013 [1 favorite]
The answer you get from the Dean Bakers etal of the world (who is cited approvingly on a separate point by Taibbi) is that Treasuries are the safest investments in the world. Investing it elsewhere could get ugly.
posted by jpe at 1:12 PM on September 26, 2013 [1 favorite]
I couldn't care less if Taibbi botches some "facts". I don't care if his hyperbole is offensive. I don't even fucking care if he outright lies now and then. His gist is correct: the system is obviously, demonstrably, unapologetically BROKEN. What's worse (and seriously, seriously shameful) is that it's willfully that way.
posted by Benny Andajetz at 1:18 PM on September 26, 2013 [5 favorites]
posted by Benny Andajetz at 1:18 PM on September 26, 2013 [5 favorites]
That's more or less what I said: his articles are chock full of truthiness.
posted by jpe at 1:32 PM on September 26, 2013 [1 favorite]
posted by jpe at 1:32 PM on September 26, 2013 [1 favorite]
Benny: But knowing the details of how the system is broken is really, really important. If we're going to try to exert public pressure to solve the brokenness of investment and benefits systems, we have to actually know what we're opposing, because otherwise it'll just get renamed and made even worse.
posted by thegears at 1:33 PM on September 26, 2013 [6 favorites]
posted by thegears at 1:33 PM on September 26, 2013 [6 favorites]
WHAT THE FUoh, it's matt taibbi
Yeah, he's basically correct. I think the scatological nature of his writing does a disservice to the topic though. You're essentially arming the opposition when you deal in inaccuracy unless you're willing to get confrontational.
And essentially, what this sort of thing does is eliminate the need to confront: "Hey, look, I'm all pissed off about it" and we feel better and go on our merry way.
Not that humans don't do this with 99% of the injustices we're confronted with every day. And perhaps we need the emotional enema.
But it's obvious there are some well motivated, if downright evil motherfuckers (to engage in Taibbism m'self), on the other side of this equation:
"In state after state, politicians are following the Rhode Island playbook, using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops – not bankers – as the budget-devouring boogeymen responsible for the mounting fiscal problems of America's states and cities."
Seen this myself. Amazing to watch really. I think a lot of people accept the teacher thing. Why I don't know, but they've gotten the shit end of the stick for years. The cop and firefighter thing isn't new. Nor is defunding them. The 70s was full of that. Fat, corrupt cops. Useless firefighters. Etc. etc.
But the hypocrisy is so transparently obvious in an age where you can get the real skinny so easily that it's stunning that people buy into this pro-wrestling version of politics. The guys charging into your home at 3 in the morning to save your kid are the bad guys? Really?
posted by Smedleyman at 1:36 PM on September 26, 2013 [1 favorite]
Yeah, he's basically correct. I think the scatological nature of his writing does a disservice to the topic though. You're essentially arming the opposition when you deal in inaccuracy unless you're willing to get confrontational.
And essentially, what this sort of thing does is eliminate the need to confront: "Hey, look, I'm all pissed off about it" and we feel better and go on our merry way.
Not that humans don't do this with 99% of the injustices we're confronted with every day. And perhaps we need the emotional enema.
But it's obvious there are some well motivated, if downright evil motherfuckers (to engage in Taibbism m'self), on the other side of this equation:
"In state after state, politicians are following the Rhode Island playbook, using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops – not bankers – as the budget-devouring boogeymen responsible for the mounting fiscal problems of America's states and cities."
Seen this myself. Amazing to watch really. I think a lot of people accept the teacher thing. Why I don't know, but they've gotten the shit end of the stick for years. The cop and firefighter thing isn't new. Nor is defunding them. The 70s was full of that. Fat, corrupt cops. Useless firefighters. Etc. etc.
But the hypocrisy is so transparently obvious in an age where you can get the real skinny so easily that it's stunning that people buy into this pro-wrestling version of politics. The guys charging into your home at 3 in the morning to save your kid are the bad guys? Really?
posted by Smedleyman at 1:36 PM on September 26, 2013 [1 favorite]
Taxes or Jail.
We decided on no jail for these guys, so bring on the taxes!
posted by bottlebrushtree at 1:56 PM on September 26, 2013
We decided on no jail for these guys, so bring on the taxes!
posted by bottlebrushtree at 1:56 PM on September 26, 2013
But the only way the investment pays in the case of treasury bonds is if the government figures out a way to cover the interest. I still don't get how it works to do anything other than ensure we don't end up with surpluses that actually get put back into SS. The government is on the hook to itself for the interest on those investments... That just seems... weird. The government can't possibly earn more than it's also on the hook for to itself when it buys its own bonds with these surpluses, can it?
posted by saulgoodman at 3:03 PM on September 26, 2013 [1 favorite]
posted by saulgoodman at 3:03 PM on September 26, 2013 [1 favorite]
the government pays interest from the general fund. think of the general fund and the SS Trust Fund as totally separate entities and it should make sense. well, the cash flows should make sense even if the overall structure is, overall, weird. and the teabaggers and Taibbi do have a point on that front.
posted by jpe at 3:25 PM on September 26, 2013
posted by jpe at 3:25 PM on September 26, 2013
Which accounts for the (distinctly American?) lament I often hear from private-sector workers. Not "Public-sector workers get X and Y good pensions and benefits; why can't we all?"
It's "If we in the private sector can't have X and Y good pensions and benefits, why should public-sector workers get them?"
For a lot of people, how much money/compensation everybody makes is a scorecard. They're not mad because they're getting fucked. They're mad because goddammit, they're hardworking and they made all the "right" choices, and HOW DARE SOMEBODY BE BEATING THEM OR EVEN COMPETING WITH THEM WHEN THAT OTHER PERSON MADE OTHER, WRONG CHOICES?!
posted by Pope Guilty at 3:39 PM on September 26, 2013 [1 favorite]
It's "If we in the private sector can't have X and Y good pensions and benefits, why should public-sector workers get them?"
For a lot of people, how much money/compensation everybody makes is a scorecard. They're not mad because they're getting fucked. They're mad because goddammit, they're hardworking and they made all the "right" choices, and HOW DARE SOMEBODY BE BEATING THEM OR EVEN COMPETING WITH THEM WHEN THAT OTHER PERSON MADE OTHER, WRONG CHOICES?!
posted by Pope Guilty at 3:39 PM on September 26, 2013 [1 favorite]
This cannot be discussed enough. I always like the part where financiers do risk analysis of the legal costs of stealing pensions before they start looting. That calculation comes from the same instinct that helps abusers inflict beatings without leaving obvious marks.
posted by Lesser Shrew at 3:46 PM on September 26, 2013
posted by Lesser Shrew at 3:46 PM on September 26, 2013
Which accounts for the (distinctly American?) lament I often hear from private-sector workers. Not "Public-sector workers get X and Y good pensions and benefits; why can't we all?"
It's "If we in the private sector can't have X and Y good pensions and benefits, why should public-sector workers get them?"
Okay, this reminds me of a thing I read somewhere, I don't remember where, and I'm butchering it I'm sure, but it goes something like this:
In a poor, desert society, a man sees his neighbor, by the grace of God, come into possession of a goat. His heart fills with envy, and so he prays to God for relief.
The first kind of man prays to God: "Please God, give me also a goat."
The second kind of man prays to God: "Please God, give me my neighbor's goat."
Ok.
The third kind of man prays to God: "Please God, kill my neighbor's goat."
So basically you can see the parallel there. People in America without pensions basically want to kill the goat of those who still, somehow, miraculously, have them.
And I say this as a public worker with a pension (presuming it (and myself) is still going to be there in 17 years, which frankly I doubt). But my contribution still costs me a serious chunk of change, every month. Sure, I can pull my portion out if I decide to leave that job forever, but still.
posted by marble at 6:15 PM on September 26, 2013 [5 favorites]
It's "If we in the private sector can't have X and Y good pensions and benefits, why should public-sector workers get them?"
Okay, this reminds me of a thing I read somewhere, I don't remember where, and I'm butchering it I'm sure, but it goes something like this:
In a poor, desert society, a man sees his neighbor, by the grace of God, come into possession of a goat. His heart fills with envy, and so he prays to God for relief.
The first kind of man prays to God: "Please God, give me also a goat."
The second kind of man prays to God: "Please God, give me my neighbor's goat."
Ok.
The third kind of man prays to God: "Please God, kill my neighbor's goat."
So basically you can see the parallel there. People in America without pensions basically want to kill the goat of those who still, somehow, miraculously, have them.
And I say this as a public worker with a pension (presuming it (and myself) is still going to be there in 17 years, which frankly I doubt). But my contribution still costs me a serious chunk of change, every month. Sure, I can pull my portion out if I decide to leave that job forever, but still.
posted by marble at 6:15 PM on September 26, 2013 [5 favorites]
The Taibbi piece is good, but subject to inane ad hominems and complaints about tone like we see upthread. This study by David Sirota (pdf) is far better and goes into great detail on the manufacture of the pension crisis and the players behind it.
States and cities have for years been failing to fully fund their annual pension obligations. They have used funds that were supposed to go to pensions to instead finance expensive tax cuts and corporate subsidies. That has helped create a real but manageable pension shortfall. Yet, instead of citing such a shortfall as reason to end expensive tax cuts and subsidies, conservative activists and lawmakers are citing it as a reason to slash retiree benefits.posted by Treeline at 6:49 PM on September 26, 2013 [5 favorites]
jpe: "- "But Social Security wouldn't be "collapsing" at all had not three decades of presidents continually burgled the cash in the Social Security trust fund to pay for tax cuts." There was no "burgling," and Taibbi is just reiterating a stupid right wing talking point. Social security surpluses are required to be invested in treasury bonds. As with any bond issuance, the proceeds are used by the government. It's not like the Social Security Trust Fund trustees can just buy gold bars and put them in their basement. The funds were no more "stolen" than my money is when I buy a savings bond."
It's Schroedinger's burglary. If the radical Republicans get their way, we won't repay the trust fund in full and the money will in effect have been stolen. If they do not, and we do in fact repay the trust fund in full, it will not have been. Who do you think will win? Taibbi clearly thinks that the Republicans will once again get their way. I can't find a lot wrong with the assumption, although I don't personally think it's inevitable or anything.
posted by wierdo at 11:39 PM on September 26, 2013
It's Schroedinger's burglary. If the radical Republicans get their way, we won't repay the trust fund in full and the money will in effect have been stolen. If they do not, and we do in fact repay the trust fund in full, it will not have been. Who do you think will win? Taibbi clearly thinks that the Republicans will once again get their way. I can't find a lot wrong with the assumption, although I don't personally think it's inevitable or anything.
posted by wierdo at 11:39 PM on September 26, 2013
The guys charging into your home at 3 in the morning to save your kid are the bad guys? Really?
They're in a union. Which collects dues. And gives them to Democrats. Q.E.D.
Firefighters are a bit trickier, but cops at least are THE GUMMINT and anathema to not just Tea Partiers but certain streaks of independent.
Teachers, of course, are socialist indoctrinators of children, who regularly invoke THE CHILDRUN when whining about their salaries, and should be replaced by appropriately cowed non-unionized workers who are less obsessed with elitist credentials like college degrees and will docilely regurgitate a curriculum cooked up at Liberty University, with the profits going to people who will give a small fraction of them back to the politicians who destroyed the public school monopoly.
It's really easy if you follow the money and a few other trails.
Why yes, I do live in Wisconsin. Why do you ask?
posted by dhartung at 2:13 AM on September 27, 2013 [3 favorites]
They're in a union. Which collects dues. And gives them to Democrats. Q.E.D.
Firefighters are a bit trickier, but cops at least are THE GUMMINT and anathema to not just Tea Partiers but certain streaks of independent.
Teachers, of course, are socialist indoctrinators of children, who regularly invoke THE CHILDRUN when whining about their salaries, and should be replaced by appropriately cowed non-unionized workers who are less obsessed with elitist credentials like college degrees and will docilely regurgitate a curriculum cooked up at Liberty University, with the profits going to people who will give a small fraction of them back to the politicians who destroyed the public school monopoly.
It's really easy if you follow the money and a few other trails.
Why yes, I do live in Wisconsin. Why do you ask?
posted by dhartung at 2:13 AM on September 27, 2013 [3 favorites]
NYT: Detroit Spent Billions Extra on Pensions
Detroit’s municipal pension fund made payments for decades to retirees, active workers and others above and beyond normal benefits, costing the struggling city billions of dollars and helping push it into bankruptcy, according to people who have reviewed the payments.posted by BobbyVan at 6:41 AM on September 27, 2013
The payments, which were not publicly disclosed, included bonuses to retirees, supplements to workers not yet retired and cash to the families of workers who died before becoming eligible to collect a pension, according to reports by an outside actuary and other people with knowledge of the matter.
How much each person received is not known. But available records suggest that the trustees approving the payments did not discriminate; nearly everybody in the plan received them. Most of the trustees on Detroit’s two pension boards represent organized labor, and for years they could outvote anyone who challenged the payments.
--
Detroit has nearly 12,000 retired general workers, who last year received pensions of $19,213 a year on average — hardly enough to drive a great American city into bankruptcy. But the total excess payments in some years ran to more than $100 million, a crushing expense for a city in steep decline. In some years, the outside actuary found, Detroit poured into the pension fund more than twice the amount it would have had to contribute had it paid only the specified benefits.
Yves Smith at Naked Capitalism has excellent commentary and expansion on Taibbi's piece here.
posted by Treeline at 8:05 AM on September 27, 2013 [2 favorites]
posted by Treeline at 8:05 AM on September 27, 2013 [2 favorites]
Surprisingly, I mostly agree with the sentiment of the article. But I dislike the way he hamfists the details and his habit of using loaded words to prime the reader. From the third last paragraph:
And it's not an US-centric issue either. The US' impact on the global economy, the fucked-up accounting practices around pension obligations and a general lack of social healthcare is what makes it idiosyncratic.
posted by tksh at 10:34 AM on September 27, 2013
The bottom line is that the "unfunded liability" crisis is, if not exactly fictional, certainly exaggerated to an outrageous degree. Yes, we live in a new economy and, yes, it may be time to have a discussion about whether certain kinds of public employees should be receiving sizable benefit checks until death. But the idea that these benefit packages are causing the fiscal crises in our states is almost entirely a fabrication crafted by the very people who actually caused the problem. It's like Voltaire's maxim about noses having evolved to fit spectacles, so therefore we wear spectacles. In this case, we have an unfunded-pension-liability problem because we've been ripping retirees off for decades – but the solution being offered is to rip them off even more.When your pension assets are less than your liability, it's very much not fictional and very much an issue when interest rates are so low. Having fixed value payouts drawing from a portfolio of volatile investments is a fundamental mismatch and a hard problem to manage.
And it's not an US-centric issue either. The US' impact on the global economy, the fucked-up accounting practices around pension obligations and a general lack of social healthcare is what makes it idiosyncratic.
posted by tksh at 10:34 AM on September 27, 2013
Hmm. I've never really understood what purpose it serves to "invest" the SS surpluses in Treasury Bonds. Maybe someone can explain it to me better, but I really don't get how it makes sense.
I'll take a crack at this and you can say if it helps or not.
The key to understanding this is that all lending has an element of time. A bond is just an instument that is used to transfer money from someone who temporarily has an excess of income and doesn't need to spend it, to someone who temporarily has a need to spend more than they have as current income, with the expectation they will have income later to repay. Note the time element (temporarily) above.
So the bond is just an accounting mechanism to match people who have needs now with people who have needs later. But you say the government is just borrowing from itself. Well, the government isn't just one entity. The needs of the army, and the timing, are different from the needs of retiring workers.
Let's say on the way out of the house on the way to work you borrow $20 for lunch from your spouse so you don't have to make a detour to the ATM. You have an immediate need for the $20. Your spouse, who isn't leaving the house has no immediate need for the $20 in their wallet. On the way home from work you have enough time to go to the ATM so you repay the $20 to your spouse who might need it for lunch tomorrow.
It's all in the same house. Your money is her money, etc. You are just borrowing from yourself. But the accounting still makes practical sense. Otherwise you might go without lunch today and your spouse might go without lunch tomorrow because of the absence of cash right when you needed it.
Okay, here's another way to look at it. What might be the alternatives to the current Social Security Trust fund? Start with the point of view of the Social Security trustees deciding where to invest their excess income. Instead of the trust fund buying U.S. Treasury bonds, it buys German government bonds. Does that really change anything? U.S. government bonds are actually considered to be slightly less risky than German bonds, so doesn't it make sense for the Trust fund to invest in the less risky bond? If I run a union pension fund, I might choose to invest in U.S. bonds for their safety. How is that any different from the Social Security pension fund?
Likewise from the point of view of the Treasury, they need to borrow money. They can borrow it from the Social Security fund, which has excess income or they could borrow it from China, which has excess income. Does it really make any difference? Either way, the government needs to borrow money, pay interest and eventually pay back the borrowed principal. Is it better to borrow from the trust fund or borrow from China, pay them interest and owe them money?
The bonds held by the Social Security trust fund are an accounting mechanism for the different temporal needs of different parts of the government. The army needs new tanks right now so borrows from the trust fund. This means that later the government needs to pay back the trust fund. The trust fund didn't create the debt. The army created the debt and the government is eventually going to have to pay someone back for that debt, whether they borrow from the trust fund or the Chinese.
So eventually the government must pay back the trust fund. It can do this by raising taxes or by simply rolling over their debt. In that case they sell bonds to the Chinese and pay back the trust fund with the proceeds. Effectively they have simply transferred the bonds from the trust fund to the Chinese. Does it make any difference whether they do that now or later? The important thing to remember is that the debt wasn't created by the trust fund. It was created by the army that needed money right away. The debt would be exactly the same whether they borrowed from the Chinese originally or the trust fund.
posted by JackFlash at 11:44 AM on September 27, 2013
I'll take a crack at this and you can say if it helps or not.
The key to understanding this is that all lending has an element of time. A bond is just an instument that is used to transfer money from someone who temporarily has an excess of income and doesn't need to spend it, to someone who temporarily has a need to spend more than they have as current income, with the expectation they will have income later to repay. Note the time element (temporarily) above.
So the bond is just an accounting mechanism to match people who have needs now with people who have needs later. But you say the government is just borrowing from itself. Well, the government isn't just one entity. The needs of the army, and the timing, are different from the needs of retiring workers.
Let's say on the way out of the house on the way to work you borrow $20 for lunch from your spouse so you don't have to make a detour to the ATM. You have an immediate need for the $20. Your spouse, who isn't leaving the house has no immediate need for the $20 in their wallet. On the way home from work you have enough time to go to the ATM so you repay the $20 to your spouse who might need it for lunch tomorrow.
It's all in the same house. Your money is her money, etc. You are just borrowing from yourself. But the accounting still makes practical sense. Otherwise you might go without lunch today and your spouse might go without lunch tomorrow because of the absence of cash right when you needed it.
Okay, here's another way to look at it. What might be the alternatives to the current Social Security Trust fund? Start with the point of view of the Social Security trustees deciding where to invest their excess income. Instead of the trust fund buying U.S. Treasury bonds, it buys German government bonds. Does that really change anything? U.S. government bonds are actually considered to be slightly less risky than German bonds, so doesn't it make sense for the Trust fund to invest in the less risky bond? If I run a union pension fund, I might choose to invest in U.S. bonds for their safety. How is that any different from the Social Security pension fund?
Likewise from the point of view of the Treasury, they need to borrow money. They can borrow it from the Social Security fund, which has excess income or they could borrow it from China, which has excess income. Does it really make any difference? Either way, the government needs to borrow money, pay interest and eventually pay back the borrowed principal. Is it better to borrow from the trust fund or borrow from China, pay them interest and owe them money?
The bonds held by the Social Security trust fund are an accounting mechanism for the different temporal needs of different parts of the government. The army needs new tanks right now so borrows from the trust fund. This means that later the government needs to pay back the trust fund. The trust fund didn't create the debt. The army created the debt and the government is eventually going to have to pay someone back for that debt, whether they borrow from the trust fund or the Chinese.
So eventually the government must pay back the trust fund. It can do this by raising taxes or by simply rolling over their debt. In that case they sell bonds to the Chinese and pay back the trust fund with the proceeds. Effectively they have simply transferred the bonds from the trust fund to the Chinese. Does it make any difference whether they do that now or later? The important thing to remember is that the debt wasn't created by the trust fund. It was created by the army that needed money right away. The debt would be exactly the same whether they borrowed from the Chinese originally or the trust fund.
posted by JackFlash at 11:44 AM on September 27, 2013
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But I'm terrified of losing my day job ... (again - laid off in spring 08, was expecting in summer 07)
I wonder if those two things are related?
posted by tilde at 10:21 AM on September 26, 2013 [11 favorites]