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Public Pensions, Under The Gun

Bankrupt Detroit has cutting pensions on the table. Plans across the country are underfunded by a trillion-plus. We ask what’s coming.

Protesters carry a sign outside the Levin Federal Courthouse in Detroit, Wednesday, July 24, 2013. Detroit's bankruptcy is hitting a courtroom for the first time as a judge considers what to do with challenges from retirees who claim their pensions are protected by the Michigan Constitution.(Paul Sancya/AP)

Protesters carry a sign outside the Levin Federal Courthouse in Detroit, Wednesday, July 24, 2013. Detroit’s bankruptcy is hitting a courtroom for the first time as a judge considers what to do with challenges from retirees who claim their pensions are protected by the Michigan Constitution. (Paul Sancya/AP)

Detroit is in crisis, and the city’s emergency administrator says Detroit’s public pensions have to be on the table as the city faces bankruptcy. On the table as in “on the chopping block.” We’ll see what happens.

The average public pension in Detroit is $19,000. For pensioners, there’s not a lot to cut.

But across the country, coast to coast, many cities, states and towns are looking at pension numbers that do not add up.  And a political environment that may say “bring in the axe.”

This hour, On Point: Solemn promises and red ink.  Public pensions, under the gun.

– Tom Ashbrook

Guests

Kil Huh, director of state and local fiscal health at The Pew Charitable Trusts. Former director of policy and consulting at the Fannie Mae Foundation and previous manager of the foundation’s state and local initiatives. (@KilHuh)

Monique Morrissey, economist at the Economic Policy Institute, focusing on retirement security.

Robert Pozen, senior lecturer at Harvard Business School and senior fellow at the Brookings Institution. (@Pozen)

John Day, retired police detective for the Detroit Police Department.

Interview Highlights

Kil Huh explains how Detroit got to the point of bankruptcy:

Detroit has, in the past, borrowed to cover its pension obligations. In 2005, it issued what’s called a pension obligation bond, essentially money that they borrowed to put back into the financial markets to cover their bills but then to also earn some return so they could be in a better funding position going forward. Part of what Detroit needed to do is put aside their annual contribution that their actuaries recommend, and that’s something Detroit has consistently failed to do. So the combination of borrowing to pay for promises that already been made and benefits that have already been earned, along with a persistent underfunding year after year is really what drove Detroit to where it is now.

Cutting back on pension benefits, a promise they’ve already earned, as well as not fully paying back their investors are just two choices that Kevin Orr as well as the bankruptcy judge will have to make. They also have to worry about putting police officers on the streets, picking up trash, cleaning streets, as well as turning on the lights, which is a real problem for Detroit.

Monique Morrissey on the two unique qualities of Detroit’s banrkuptcy:

What’s happening that’s brand new is this attempt by some places to try to actually get at the pensions of people who are already retired, which is really rather shocking. Somebody’s that already collecting a pension, who’s already done the work, and — I would like to emphasize — who accepted lower pay, much lower pay and often made significant contributions to this pension out of pocket. So typically public sector employees pay a good share of their pensions out of pocket, and they also typically are paid less than equivalently educated people in the private sector. So they’ve already done the work, they took lower pay, they contributed to these pensions, and then we’re saying, “Oh, well, sorry. We’re just going to take some of this back.” That and the fact that it’s a large city declaring bankruptcy — those are the two things that make Detroit big news.

Robert Pozen on how to prevent a situation like Detroit’s:

When you get to a point like Detroit, there are no good choices. The key is to start working on this in advance. We have lots of pension funds that could go either way in states and cities, so they need to get their expected returns down a little, they need to meet their contribution requirements, they need to look at their cost of living — they need to do all these things and get it into order. Unfortunately, once you get to the point where Detroit is, there are no good choices left.

Pozen on retiree health care costs:

Retiree health care obligations are actually larger than public pension funds. If we look at the Pew statistics, they say that for the 50 largest cities, it’s about $25 billion larger, retiree health care. And retiree health care does not require any funding; there’s no advance funding in almost any city or state government. So that’s another thing we need to change. We need to get everyone on Medicare or Obamacare or alternatively we need to start funding it. We haven’t funded that at all. The average funding is 0 to 5 percent.

From Tom’s Reading List

Bloomberg: To Save Pensions, Get Government Out: “While it is too late to save Detroit, it may still be possible to prevent similar disasters from unfolding elsewhere by ending our long-standing practice of putting state and local governments in charge of pensions.”

The Wall Street Journal, MarketWatch: Will Your Pension Disappear, Post-Detroit?: “Experts say that now would be a good time for public-sector workers and retirees—especially those whose employers have underfunded pensions — to revisit their retirement plan, crunch out a few what-if scenarios, and adjust their current or planned lifestyle accordingly.”

Boston College’s Center for Retirement Research: State and Local Pension Costs: Pre-Crisis, Post-Crisis, and Post-Reform: “States have begun to respond to their pension challenge by enacting a mix of revenue increases and benefit cuts. These changes will, over time, improve the financial outlook for plans and help ease their impact on other budget priorities. But, to date, the specific nature and magnitude of these effects on plan finances and overall state budgets has received little attention.”

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  • thequietkid10

    I’m sympathetic to people who planned their life based on the expectation that they would get a pension, but public sector employees in this country are living in la la land.  Don’t know about anywhere else, but here in Buffalo the Water Authority is notorious for corruption.  A woman here just lost her Civil Service job at the Water Authority when she flunked the test.  The Water Authority responded by moving her to a job that can basically be described as “Mail Clerk” and paying her $37,000 a year.

    • jefe68

      $37,000 a year is not a lot. Would you rather she be on public assistance? At least she’s paying taxes and contributing to the financial health of the community.
      What happened in Detroit is not the fault of public employees. It was a perfect storm of a city being tied to one industry and when a lion share of those jobs disappeared people left who could afford it and those who could not became poorer. Population drop coupled which will cause a revenue drop will eventually cause a city to fail.

      Would you would be happy is this person was made destitute and homeless?

      • thequietkid10

        So much wrong with your post…

        1. $37,000.00 might not be a lot in New York City or San Francisco, but in a smaller city like Buffalo it’s not exactly spare change, especially when you consider the benefits that usually come public sector jobs.
        2. I would not be happy if this person was made destitute and homeless.  Don’t patronize me with your false choices and moral snobbery.  This person’s options aren’t the Water Authority or the poor house.  I would be happy if she made $12.00 an hour as a mail clerk (which is closer to what most mail clerks get paid) and is still more then then what I’m making, even though I’m writing 10 page legal briefs.

        • Don_B1

          I am with Jeffe!

          Failing a test is not always a sign of incompetence but reactions differ depending on the politics of the situation.

          Consider the case (where incompetence should be considered) of Federal Reserve Bank President Naryana Kocherlakota (Minneapolis) who made a speech where he made an assertion about macroeconomics that an Econ101 student would know was false. He has had no diminishment of his income and has not left his position. He continues to advocate for policies that hurt the economic growth of this country, making Detroit’s and Buffalo’s economics worse.

        • jefe68

          Wow, lets quibble over 10k.

          • thequietkid10

            It’s not a dumb ass comment, it’s one of many examples about how government spending is completely out of control.  

    • http://www.facebook.com/futo.buddy Futo Buddy

      cheaper than prison

  • Yar

    Work all your life only to have a company or local Government declare bankruptcy.  Paying off a student loan off when bankruptcy steals your pension, the student loan isn’t forgiven by bankruptcy!  Privatize the profit and make debt public.
    Detroit still has assets, literately give the keys to the city to pensioners. All public pensions should demand collateral, real property instead of empty promises, State Parks, roads, even downtown parking spaces.     
     Quote of the day, “it is unwise to steal the pension of a trained sniper”, a well organized militia, pensioners of Patriot Coal and Detroit police officers, something to consider? 

    • Wm_James_from_Missouri

      Yar, I am due two partial pensions (total 33 years ) from two different unions. Both pensions plans are in jeopardy, or as the administrators tend to call it, “ in the red zone”. Why should public sector employees have anymore claim to assents than anyone else. Both of these companies that I worked for were part of an industry group and not sole contributors to the plans. Both companies are now out of business. Both companies had owners that made off with millions and billions of dollars, that is to say, the upper management did. This DISEASE, of theft and corruption is everywhere. Yar, in the past I have tried to “sell” the idea of forced stock dividend payments to be payed out by profitable companies. THIS IS THE ANSWER to so, so many of our economic ills! I know that this is very hard to see for those who do not own stock in publicly traded companies. I am confident that such a change, along with some other system wide changes would ignite our country’s economic engine in a very big way. There is nothing like cash on the barrelhead ! It make deals come to life and makes everything transparent !

      • Yar

        I agree, private companies should not be able to steal pensions either. But just because they do doesn’t mean public pensions should be stolen as well.  Cash isn’t transparent when it comes to pensions, inflation will make cash worth less, if not worthless.  Trading work over time, it is a concept that few understand. It is a component of a stable society, not found through political partisanship.

        • John Cedar

          But when Obama took over GM, it was fine for him to give pennies on the dollar to the first position bond holders. I safely assume none of those bond holders worked for the money they bought those bonds with.

          • Yar

            Your statement seems to equate investment risk and wage theft.  They are not the same.  A pension is a wage promise. Not paying a worker for their work is a crime.

  • Fiscally_Responsible

    The stinking unions still don’t get it!  Detroit does not have the population or the tax base to continue paying these absurd pension benefits.  Unless they take all of the police and fire dept employees off of the streets and free that money up to pay pensions.  When companies declare bankruptcy and shift their pension obligations to the PGBC, the retired employees must then settle for significantly less of a pension than they are “entitled” to.  That is the situation that Detroit and many other cities, states, and our nation faces.  Stinking unions!

    • Yar

      The union that gets my goat is the Chamber of Commerce!

      • John Cedar

        Agreed.
        But the worst, most corrupt, is the Bar Association

        • Yar

          Worse than the AMA?  We can argue all day who is bad and who is worse. It does little to solve the problem of the retirement bubble facing every community. We need an immigration policy, education system, and fair wage, to survive as one nation indivisible.  Maybe we aren’t one nation any more and we will devolve into private fiefdoms.  Weak government with no safety-net leads to mob rule.  I am told the “war on poverty” was in response to information on an armed group preparing to take over a grocery store in Eastern Kentucky.  A war over food by hungry people was going to happen one way or another.  The same is true when retired workers don’t have anything to live for or any way to live.  The Bible calls it wailing and gnashing of teeth.

    • CabH

      Do interlocking boards of directors qualify as a union?

    • Bluejay2fly

      Moving our own factories to the South where labor costs were cheaper and buying cars from Europe, Japan, and Korea were the largest factors in killing Detroit. Imagine the trillions of dollars over the last 50 years that has gone into the hands of foreigners because of our trade policies. The largest factor in carbon emissions is the worlds mercantile fleet burning bunker oil as it hauls products from Asia that should have been made here in the USA. I love these “God Bless America” conservatives who think speaking out against US interventionism is treason but buying crap (thereby moving billions of dollars to) made in China, Japan, South Korea, Mexico, Vietnam, etc is acceptable.

    • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

      First, you’ve got some background history to learn do about Detroit.

      Second, sounds like they get it to me:

      Capitalism is about taking what you can while you can. “Creative destruction” and all that is invoked whenever an uberlord runs something into the ground. But when working schmoes want a contract obligated? That’s when we get a show like today’s.

      PS: Can! You! Really  Be! This! Excited!?

  • Fiscally_Responsible

    The unions bankrupted the industrial base of Detroit, namely the auto industry, through their anti-productive work rules and pay/benefit scale.  Then the public sector unions bankrupted the city itself through their absurd wage/benefit/retirement scale.  Not being satisfied with that, now that the city has finally acquiesced to its state of bankruptcy, the unions now want to continue to drain every last cent from the city rather than own up to the tremendous damage that they did and face the current economic reality.  The government’s (local, state, federal) ability to spend money that it doesn’t have and run the printing presses to print more money and kick the fiscal can down the road is the only reason why public sector unions are able to avoid facing economic reality.  Stinking unions!

    • Ray in VT

      If you hate unions so much, then you probably shouldn’t take advantage of any of the following, which were fought for and won with the aid of the labor movement:

      Weekends ; All Breaks at Work, including Lunch Breaks ; Paid Vacation ; FMLA ; Sick Leave ;Social Security ; Minimum Wage ; Civil Rights Act/Title VII (Prohibits Employer Discrimination) ; 8-Hour Work Day ; Overtime Pay ; Child Labor Laws ; Occupational Safety & Health Act (OSHA) ; 40 Hour Work Week ; Worker’s Compensation (Worker’s Comp) ; Unemployment Insurance ; Pensions ; Workplace Safety Standards and Regulations ; Employer Health Care Insurance ; Collective Bargaining Rights for Employees ; Wrongful Termination Laws ; Age Discrimination in Employment Act of 1967Whistleblower Protection Laws ; Employee Polygraph Protect Act (Prohibits Employer from using a lie detector test on an employee) ; Veteran’s Employment and Training Services (VETS) ; Compensation increases and Evaluations (Raises) ; Sexual Harassment Laws ; Americans With Disabilities Act (ADA) ; Holiday Pay ; Employer Dental, Life, and Vision Insurance ; Privacy Rights ; Pregnancy and Parental Leave ; Military Leave ; The Right to Strike ; Public Education for Children ; Equal Pay Acts of 1963 & 2011 (Requires employers pay men and women equally for the same amount of work) ; Laws Ending Sweatshops in the United States.

      • Bluejay2fly

        Great one Ray always glad to here from you.

        • Ray in VT

          Thank you very much.

      • Fiscally_Responsible

        You’re right.  All of the good things of life are only here because of unions.  Come to think of it, they have provided so much good in the world that we should double their pensions.  It’s the least that we can do.

        • Shag_Wevera

          Not much of a response to a rational argument.

        • Ray in VT

          Well, they haven’t stopped Beyoncé from tempting me into adultery with her sexy outfits, so they can’t be that great.

          • http://www.facebook.com/futo.buddy Futo Buddy

            and they had better not

          • Ray in VT

            Damned straight!  Along with Victorian Era worker rights conditions, we certainly don’t need Victorian fashion sensibilities.  Catching a glimpse of a wool sock clad ankle doesn’t do anything for me.

          • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

            And way back when men who used better words nowadays use four letter words writing prose.

            Hell in a handbasket, I tells ya.

          • Ray in VT

            Darn it all to heck!  What the fudge is wrong with people these days.  Obama’s fault probably.

          • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

            Hey, I was waiting for someone to blame Cole Porter on Obama.

          • Ray in VT

            I’ve never seen them together, so I assume that they are the same person.

          • http://www.facebook.com/futo.buddy Futo Buddy

            you just never paid that much attention to beyonces ankles for some reason

          • Ray in VT

            I assume that she has ankles, but I’ve always looked a bit higher.  She has some great talents and assets.

      • hennorama

        I believe the above is known as a Technical Knockout.

        • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

          Except we’re waiting for a ten-count from a Bulgarian Libertarian referee.

  • StilllHere

    Public “worker” unions fund candidates with whom they are then going to negotiate their contract.  This is the cause of the current disaster.  Qualifying for pensions after minimal “service” allows for rampant double-dipping.  This certainly doesn’t help.  The system is broken, more bankruptcies are coming.

    • John Cedar

      In our state, the cop pensions are  costing twice as much per employee as the teacher pensions, and the career we get out of them is half as long. But the teachers are the ones being attacked and asked to be subject to new evaluations. No evaluations for cops have been proposed yet.

      • Bluejay2fly

        Seeing I was a teacher and have been a NYS “cop” for 15 years I can tell you they are about equal.

      • Don_B1

        For once you have a point. But it is not the basic pension structure that is the prime problem; it is the way that police officers can use huge amounts of overtime inn the last years of their career to inflate their pensions. Many jurisdictions are changing those rules to prevent that.

    • Shag_Wevera

      Voters are still free to vote for whom they wish.  You want to subjugate the political process to accomodate a lazy electorate.  Pro union candidates can’t win if no one votes for them.

    • Bluejay2fly

      Most people who decry union pensions do so without know the fine print. Let’s take the minimum qualifying standard. In most case a an employee who does not serve the full 25-30 years gets a reduced pension but almost always the age to collect that pension would normally be 55, 62, etc. Same goes for congress who should not get a pension after 5 years, that’s absurd. The congressional pension pays over 30K a year starting around SS age. Let’s say I work from age 22-32 and collect a ten year pension. The rate in my job is 20% so at 40K a year that would be 8K a year sounds like a scam! However, I cannot collect for another 30 years and that pension rate stays frozen so what do you think the future value of 8K would be 30 years from now. Even in full pension for those who get a second career the same rules apply I retire out of the some state job after 20 years at 38 inflation usually destroys the hell out of the value. Also survivor benefits are expensive in NYSDOCS where I work if I want my spouse to collect my pension it costs 6,000 dollars a year and medical would be another 4-5 K easy. 

  • John Cedar

    NY is one of the few public pensions that is/are funded. But that didn’t stop baby Cuomo from raiding our pension fund in this years budget. The MSN has a tingle up their leg for him, so they largely repeated his misappropriate neologism, “pension smoothing”.

    Fortunately, even some democrats can’t always hold their noses for every democrat pile of garbage. So Mayor Miner called Cuomo out for his pension raiding scheme, in the NY times. To which Cuomo responded by telling her to bring him a sammich. But when male state comptroller Dinapoli criticized Cuomo’s pension raid plan, Cuomo did not call his competence into question like he did Mayor Miner’s. In the end Cuomo got everyone on board his fiscal calamity train, but in a scaled down version of the pension raid scheme.

  • John Cedar

    Public pensions are one of the biggest reasons public unions should be illegal. Or the better option to that is that all public employees should have no right to vote.

    Even the great Scott Walker had to abandon any idea of protecting the public tax payer from the cops.

    The other solution, which is my least favorite, would be to convert all public pensions to defined contribution plans. But the problem with that is that public employees are not intelligent enough to make decisions on pension investments. So if the government managed the fund, guys like Cuomo would still raid it and turn it into a Ponzi SS type non existent fund.

    • Shag_Wevera

      Your post is so juvenile and insulting.

      • jefe68

        What do expect from a regressive tea party guy?
        Common sense?

    • jimino

      So you would support cutting off all those public pensioners we call “veterans” from their ridiculous benefits?  If not, explain why what they and their government employer agreed to should be any more protected than any other government worker.

      • Shag_Wevera

        Yeah, but they’re heroes.

        • curtcpeterson

           That’s debatable.

    • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

      “The Great Scott Walker”.

      “Ponzi Type SS”

      Nuf ced.

      • jefe68

        Amazing is it not.

  • Shag_Wevera

    If you think the time of unions has passed, I really don’t know where to find common ground with you.  In my opinion you are ignorant of history and a little vacuous on economics and negotiation.

    • http://www.facebook.com/futo.buddy Futo Buddy

      robots don’t form unions

      • pete18

         Famous last words.

        • http://www.facebook.com/futo.buddy Futo Buddy

          one has to wonder what form the singularity will take.

      • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

        Didn’t Walter Reuther famously say, “Robot’s don’t  buy cars”?

        • http://www.facebook.com/futo.buddy Futo Buddy

          yes as far as I can tell humans are really good as consumption. its like what we have in America now. our job is to consume what the rest of the world produces.

  • Shag_Wevera

    If I work 20-30 years for you, and part of my compensation is a pension, you are a thief if you take it away or reduce it after I have retired.

  • Shag_Wevera

    Unions will be back, once Chinese, Indian, and eventually African workers have an awakening (50-200 years from now).

    • http://www.facebook.com/futo.buddy Futo Buddy

      that’s funny. Chinese workers are being replaced by robots. much better. they work 24 hours a day instead of just 18 and they don’t get tired or commit suicide. why do people get upset when an American gets replaced by an Indian or Chinese person yet no one is mad at the automatic teller or the self check at every store now or Legalzoom?  the list of jobs that cannot be done by machines shrinks every day

      • Shag_Wevera

        I’ve never used a self check and never will.  Walmart has to pay a human minimum wage with no benefits to ring me up for my pork rinds and coca-cola.

        • http://www.facebook.com/futo.buddy Futo Buddy

          I don’t use them either but its mostly because I am too lazy and feel entitled. if there is a line and I only have one thing i’ll use the self check. do you ever use ATM machines? I do leave my shopping cart in the lot so as to ensure the cart pusher has job security. actually Walmart does not have a self check. say what you will about Wal-Mart but i have to applaud their commitment to hire every qualified veteran who applies for a job. they used to be all American made products and they did stop for a while but i guess they are also recommitting to buying american

        • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

          Walmart has self-checkout now? (I am not a regular.)

          The store which has guards standing at the exit looking at customers leaving now trusts me to check out my own goods?

          • http://www.facebook.com/futo.buddy Futo Buddy

            oh they have a crack force of geriatric aproned thugs

      • pete18

         Yeah, but those robots will be forming unions soon enough and they will be able to picket forever.

  • jefe68

    Here come the anti-union social Darwinian brigade.
    It will be a morning of a diatribes against unions by the regressive right. 

    • Shag_Wevera

      Don’t forget the knuckle dragging, invisible hand troglodytes.

  • http://www.facebook.com/futo.buddy Futo Buddy

    what’s coming? cat food shortage

  • William

    These type of old pension plans are a legacy of white privilege and should be replaced with a 401 plan that enables our more diverse work force to control their own pensions.

    • Shag_Wevera

      401k’s get me as excited as a towel snap to my “bits and pieces”.

      • William

        There has been suggestions by a few people in Congress for government to take these and other retirement funds held by private citizens and just give people a fixed return. This is a pretty scary proposal which hopefully never becomes law.

    • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

      So that’s what it takes to get you (of all people) to say “white privilege”.

      • William

         One of the reasons Nixon enacted affirmative action was due to unions discriminating against blacks. So there is a legit claim that these bloated pensions are result of white privilege.

        • curtcpeterson

          William, I think it’s all about the munny. Unions and other special interests own the politicians, who have to fulfill promises made in exchange for campaign funding. It’s true at all levels of the government in this country, apparently including the Supreme Corp.

    • keltcrusader

      what, so they can lose them in the next wall street manufactured “downturn”? 401Ks are an absolute sure way to lose people’s retirements accounts.

      • William

        Life is full of risks but a 401 is a much better way for individuals to control their own money. Voting for Coleman Young for 20 years was a bad investment.

        • keltcrusader

          Most people do not have the capabilities to manage their own 401Ks. This is just another way to separate the middle class from their retirement money and leave them destitute.

  • Wahoo_wa

    The challenge with unions in the public sector is that the benefits for public workers outpace the benefits of the citizens whose taxes pay for those benefits.  The number of public service workers in unions are statistically higher than private sector workers in unions.  Union membership as a whole in the United States is relegated to a very small portion of the work force.  In light of those factors, it’s hard to be on the side of unions and feel sorry for public sector workers whose pensions are getting cut, after years of inflated benefits and pay, due to current economic realities.

    • Shag_Wevera

      Then change said benefits gradually over time.  Don’t pull the rug out from beneath retirees.

      • Wahoo_wa

        I don’t think it’s practical to do so in an economy that recently took a very big hit.  The non-union public sector did not get a chance to have their benefits change gradually over time.  Unionized, public sector workers are not special class citizens (despite their insistence on being such while on the public dime).

  • http://www.facebook.com/grant.cook.969 Grant Cook

    Unions asked for more generous pension benefits ilo pay raises, and city officials were more than happy to write checks they’d never have to cash.  Were city planners wrong to not fund them well (or use unrealistic estimates of returns in funding) – yes.  But I don’t remember union bosses ever raising a campaign issue around underfunding either.. they figured they could just stick it to the taxpayer eventually.  Unfortunately for them, they were wrong..

  • creaker

    On the one hand uninformed house buyers and students get the blame for getting talked into loans they can’t afford  - on the other huge entities like Detroit, well staffed and well informed who made these agreements willingly and in good faith are supposed to be able to just throw up their hands and say “sorry, we can’t afford it now” and walk away.

    • thequietkid10

      Oh come on, the people who run these towns know exactly what they are doing.  They are making big promises to the most powerful groups in the city in exchange for political support.

      The public unions cash in, the politicians get elected (or reelected for the 12th time) and by the time anyone needs to figure out how on Earth we are going to actually pay for these pensions, those who made the promises are long gone, or are at the end of a long, lucrative, political career.

      • creaker

        So true – which just makes it worse that they can screw pensioners by making flimsy excuses.

    • concernedinVT

       kinda like Donald Trumps multiple bankruptcy filings – screws the little guys while keeping all his billions.

      • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

        And he’s mastered the trick of being thought as a “mogul” or “titan”.

        If I drove as many cars into bridge abutments as he’s driven companies into the ground, I’d be lucky to be alive.

  • pete18

    The guy is focused “like a laser-beam.”

    “Obama Pivots for the 973rd Time:”

    February 2009: The president tells Congress “now is the time to jumpstart job creation” and his agenda “begins with jobs.”

    November 2009: Meeting with his Economic Recovery Advisory Board, the president says his administration “will not rest until we are succeeding in generating the jobs that this economy needs.”

    April 2010: Obama goes on a “Main Street” tour, saying “it’s time to rebuild our economy on a new foundation so that we’ve got real and sustained growth.”

    June 2010: The president declares a “Recovery Summer” to highlight the jobs created by stimulus-funded infrastructure projects. “If we want to ensure that Americans can compete with any nation in the world, we’re going to have to get serious about our long-term vision for this country and we’re going to have to get serious about our infrastructure,” he said.

    December 2010: The president tells reporters “we are past the crisis point in the economy, but we now have to pivot and focus on jobs and growth.”

    August 2011: After lawmakers reach a compromise to avert default, the president vows “in the coming months, I’ll continue also to fight for what the American people care most about: new jobs, higher wages and faster economic growth.”

    February 2013: At the start of his second term, the president refocuses on job creation in his State of the Union address, saying “a growing economy that creates good, middle-class jobs–that must be the North Star that guides our efforts.”

    May 2013: Kicking off his “Jobs and Opportunity Tour,” the president says “all of us have to commit ourselves to doing better than we’re doing now. And all of us have to rally around the single-greatest challenge that we face as a country right now, and that’s reigniting the true engine of economic growth, a rising, thriving middle class.”

    http://online.wsj.com/article/SB10001424127887324564704578625973354325756.html?mod=WSJ_Opinion_MIDDLETopOpinion

    • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

      President Obama: It’s not my fault Republicans are nutjobs.

      But
      the deeper problem is the Republican opposition to negotiating the
      differences at all. Boehner insisted yesterday
      he would not lift the debt ceiling, a move he has previously conceded
      is absolutely necessary, unless Obama agrees to additional spending
      cuts, though Boehner has not even specified the cuts he has in mind.
      Meanwhile, the GOP is increasingly rallying around the threat of a
      government shutdown as a last-ditch stand to prevent the implementation
      of health care reform.

      So, John (Bad at his job) Boehner goes back on his word again.

      And the whiny-ass ttty-babies make noises about throwing another tantrum, threatening to shut down government again, to keep from enacting a law.

      The right-wing are not normal people who have gone to DC to govern. This ain’t my daddy’s GOP.

      • pete18

         Preventing the implementation of health care reform would go a long way to improving things and raising the debt ceiling is a bad idea. Sounds like they’re being very constructive.

        • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

          Yeah, it would. To you.

          “I’ll take all the debt ceiling raises which weren’t a crisis when the right was in power for $2000, Alex.”

    • StilllHere

      Where’s his jobs taskforce?  Summer break?

      Obama’s on his greatest hits tour, except he’s got none.

    • http://www.facebook.com/futo.buddy Futo Buddy

      and then we will all go to Martha’s vinyard

  • creaker

    This is what happens when you plan things out based on assumed future growth.

    Kind of like what all our 401k plans are based on.

    • StilllHere

      No, it’s exactly the opposite.  401(k) plans make no assumptions.

      • creaker

        The planning numbers are based on growth – actual payout is covered by that “past performance is no ….” line.

        • StilllHere

          Garbage in, garbage out.  Payout is a function of need and federally mandated minimum distribution requirements.

    • curtcpeterson

      Karl Marx pointed out that free enterprise capitalism can only thrive as long as there is economic growth. Ergo, if the mythical system is to perpetuate, growth would have to be perpetual. In the current recession we have seen that growth is not perpetual, and that only the 15% most wealthy (the capitalists) are protected during slow- or no-growth periods. The nation, as well as Detroit, has to come to terms with this fallacy in the myth of free enterprise capitalism.

      • creaker

        The same thing is happening nationally – the only difference is the federal government can take on annual $1 trillion chunks of debt and have the Fed pump in new money. Without this, the whole country would be going the direction of Detroit.

        And since there are no plans to pay any of this back, we eventually will.

        • curtcpeterson

          Tax reform has been both necessary and ignored for too long. However, if you are alluding to Social Security, it is fully funded by current workers. It adds nothing to the deficit, and, with adjustments mandated in the original Social Security act, never will.

          • creaker

            It’s only fully funded if you include the  IOU’s from “excess” SS funding that was spent – when paid out that money will have to come from somewhere. And when the time comes, they will again shrug their shoulders and say they have to do it.

          • curtcpeterson

            Not true – the only thing SS funds can be spent on and have been spent on is treasury bonds, because they are considered the safest investment in the world, wisely or not. Not one penny has ever been invested, borrowed or spent otherwise.

          • creaker

            And how do they convert these back into cash for payout?

          • curtcpeterson

            When Treasury sells bonds, they are borrowing money within the legal debt ceiling. They are considered, as I said, the safest investment one can make worldwide. Bonds pay interest on an ongoing basis, but are converted to cash if one sells them, redeems them at a discount, or gets paid at maturity. The SS admin has been buying bonds so long they have a constant flow of interest and maturity redemptions to provide the cash they need to pay benefits. It is a very simple, successful and practical system in spite of what the Tea Party will tell you.

          • creaker

            Still doesn’t answer the question – when the bonds need to be converted to cash, where does the cash come from?

  • creaker

    On the other hand a group who probably needs pensions less than just about anyone, is safe and secure. Hi, US Congress.

  • Prairie_W

    Of course, it’s okay to stiff  people on pensions and schools but go  ahead and build a new sports stadium and create a new “entertainment district.”  I just heard about this earlier today.  Here’s some of the news:

    ” …According to the Wall Street Journal,
    “The total bill for the city’s long-term liabilities is nearly $20 billion, and the city is now insolvent [.]” With 20 billion in debt, a
    shrinking population base barely holding on to 700,000 residents in a
    city planned for 1.5 million people, reinvention is the only move
    forward. The city must revitalize, diversify from its historical
    dependence on the auto industry, and support development of variegated
    private sector growth. Large-scale projects like this newly proposed
    downtown development will surely create more jobs and increase tax
    revenues.

    “However, many wonder who will foot the bill for this new entertainment district. According to the Detroit News,
    “The public, through an economic development fund, will pay $283
    million toward the project, and $367 million will come from private
    funding sources — a 44-56 percent split. But officials emphasized there
    will be no new taxes, and the money won’t come out of the city’s
    battered coffers.” However there is a large disconnect in the previous
    statement since the money from the public fund being used for this new
    downtown development would otherwise be going to the public schools. …”

    http://highbrowmagazine.com/2641-shadow-detroit-s-bankruptcy-city-s-private-sector-prospers

  • curtcpeterson

    Detroit: 1. Reduce all debt by 30% or another percentage that will resolve the problem.
    2. Include the bondholders in the haircut – no special treatment for them.
    3. Include the pensioners in the haircut, but with special treatment:
    Those who are too old or ill to work made eligible for Social Security benefits. Everyone else is measured by need and ability. A fifty-year-old healthy person can go back to work as his/her contribution to the solution like everyone else would have to. Municipalworkers are not sacred cows.
    4. The Federal taxpayers will guarantee remaining debt so Detroit can refinance at reasonable rates, but the guarantee has a short term – maximum five years.
    5. All these conditions depend on the city formulating a workable business plan and fulfilling obligations on time without further long-term borrowing. Failure to do either would result in a federal take-over and implementation by an appointed manager. Problem solved fairly and logically with appropriate caveats.

    • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

      A thoughtful set of ideas.

      But I’m under the belief that cops and firefighters (and maybe others?) aren’t in the SocSec system, so they don’t get SocSec.

      (Okay, Tom is on it now.)

      • curtcpeterson

        Some municipal workers (emergency services) are not currently eligible. However, as a solution to Detroit’s problem, they can be made eligible as a way to reduce the city’s pension problem while still affording the same protection for the old and ill that other citizens receive. That was what I meant.

        • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

          Thanks for clarification.

      • http://www.facebook.com/anita.paul.5680 Anita Paul

        Government employees usually dont get Social Security. They pay into a retirement fund.  If you were eligible for Social Security from prior jobs you are only eligible for a small portion of it. Reagan changed the rules before you could get both but now like i said maybe five percent of whatever you earned at a private sector job.

    • notafeminista

      Ah yes.  From each according to his ability, to each according to his need.

      How long before the “despotic measures” are recognized as taking place?

      • curtcpeterson

        I’m not sure your meaning didn’t go over my head. We have watched “despotic” austerity programs forced onto European economies along with incredible amounts of additional “bail-out” debt which has little or no likelihood of being repaid, while “the banks” are protected in fear of their collapse. The ultimate result will probably be economic chaos over an extended period, perhaps even revolutions here and there, a la the constraints imposed in the Treaty of Versailles in post WWI Germany.
        It would have made more sense two years ago in Europe, and in 2009 in the US, to reduce all loans by a significant percentage, current or not. There are going to be losses in the long run, even by the sacred banks and bondholders (in Detroit’s case). To identify those losses and avoid the pain and struggle and possible chaos in the meantime will reduce the amount of the ultimate loss.
        Iceland’s economy, devastated by the recession and corruption in their banking system, saw the benefits of this solution, employed it and experienced a remarkable, fast recovery while the rest of us sit around with our expensive thumbs up our keesters, wondering how we can keep Goldman Sachs and the Bank of Spain from losing any munny.
        Care always has to be taken to protect the vulnerable. The weakest member of a society is the measure of its overall wealth and welfare.

        • notafeminista

          One problem is the definition of “vulnerable” keeps expanding. Why wouldn’t it?  The minute a person figures out he can get something for nothing, he will stop producing.   People aren’t stupid.  They will stop having “the ability” (and have - if the drastic increase in government subsidized lifestyles is to be believed) and instead develop “the need”.   

          Have a look at photos of East Berlin after the wall came down and get back to me.

          We ain’t seen austerity yet.

          • curtcpeterson

            You may be right; perhaps everyone should be on their own and only get what they earn and when they earn it. The old and the sick should just die and be done with it under your plan.
            I’ll be over to watch you deliver your own mail, dig a well, pump your own water, wash your clothes in the brook, push your car through the muddy ruts, swim across rivers … you get the picture. The US has been a socialist country since the early days of the first Congress, and we should all enjoy the benefits.
            I hope I’m not being presumptive when I guess you are in the camp that thinks these benefits should only be enjoyed by the privileged and that taxes should not be collected to pay for those privileged benefits.
            Then again, maybe one of us is wrong.

          • notafeminista

            You aren’t espousing socialism.  “From each according to his ability, to each according to his need”  and the despotic measures to which I refer are from Karl Marx.  The despotic measures are referred to in Article 2 of the Communist Manifesto. 

            1)Your idea isn’t new.

            2)Your idea has failed.  Repeatedly.

          • curtcpeterson

            Actually, I wasn’t espousing anything. You attacked socialist ideals and I defended them, pointing out that the free-market, capitalist US system is a myth.
            Deregulation and money in politics have brought our country to its knees under Reagan, then under George Bush II, and socialist actions bailed us out both times. I would say “failure is relative”: the farther one is from the 15%, the more of a failure they mythical system is.
            Obama’s adherence to Bush’s disastrous economic policies have made recovery slow this time. Clinton and Greenspan were more effective.
            This discussion began with one statement that Marx, who was a communist, made, ie, that capitalism depends on perpetual growth for perpetual success, and my remark that perpetual growth is really impossible.
            If you can point out a logical reason to believe that economic growth can be eternal, I’d love to hear it. Since 1980 real US wages have been stagnant or worse, yet the economy has grown small amounts over time. This growth has been the product of the global market, immigration, loose personal credit and the growth of unproductive, unsustainable military misadventures (aka bloated defense budgets). Since only that holy 15% have seen growth in income, I would interject that our economic strategy for the past thirty years has been an abject failure for everyone else.

          • jefe68

            Oh please.

          • jefe68

            Lets go back to the Middle ages.

  • Rgrdy

    I agree with creaker, if we can bail out the banks for their bad decisions, do we then bail out the cities who make bad decisions?  How do the citizens whose benefits pay for these bailouts get compensated? 

    • thequietkid10

      IMO, we shouldn’t of bailed out the banks, and we shouldn’t bail out the unions.  If there are no consequences for failure, then capitalism doesn’t work.

      • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

        Why don’t we start the experiment of “consequences for failure” after the pensions are made good? It’s been quite a time since we’ve had consequences; shouldn’t destoy us to wait further.

        Sauce for the goose, says I. I’m wary of my economic overlords who only Get Fiscal Religion on this subject when the little people’s money is on the line.

        • http://www.facebook.com/grant.cook.969 Grant Cook

           The problem isn’t just Detroit.. if you set the precedent of bailing out Detroit, then Illinois and California will come a calling.  At least Sallie Mae and GM are somewhat paying us back.. to ask a taxpayer in Kansas to subsidize a $19 pension, okay, maybe.. to ask that same taxpayer to subsidize a Cali $100k pension, no, that’s not going to fly..

        • thequietkid10

            I’m wary of my economic overlords who only Get Fiscal Religion on this subject when the little people’s money is on the line.

          You and I are alike on that one, that being said your post basically reads “we should start being fiscally responsible, AFTER my interest group gets a bailout.”  The best time to stop bailing people out was the last time someone came asking for a bailout.  The next best time is the next time someone comes asking for a bailout.

          • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

            Well, I didn’t say anything about me personally belonging to a union or having a public pension.

            I simply can’t abide the “grown ups” in our Beltway having that proverbial father-son talk when it’s the working-class and middle-class guy’s time to get what they earned.

  • Bluejay2fly

    Here is the big issue that no one will probably talk about and that is the elimination of low skill jobs. When you look at Detroit it is not brigades of auto engineers, welders, machinists, etc who are wandering around the city unemployed.  There is ever increasing pressure on employers to pay more because the high cost of living demands it. A prison guard who makes 50K may seem greedy but in a society where just to live in his house school and property taxes are 5-6K a year. Minimum or near minimum wage does not pay enough for a person to live independently. Worse yet is the fact that retail and service jobs demand a skill set many young people cannot meet. So the alternative is living on the dole or committing crime until you are caught and then provided with free food, free heat, free medical, etc. The government hides this problem by racking up debt thereby giving away monies without present consequence. We need to come to the realization that there are many Americans who are barely sober enough and smart enough to work in an assembly line. When those jobs go overseas as they have that potential worker will now cost you a lot of money when she pumps out five children on the states dime or shoots someone in the face and goes to jail. 

  • JHWillson

    It will be interesting to watch how POTUS pivots (spins) on these public pensions. Do the unions think he’s going to repay his union cronies with no election in play?

    The Hypocrite-in-Chief has one of his first SCANDALS still refusing to die. His Auto Task Force destroyed 22,000 Delphi Salaried Retiree retirements in 2009 during his orchestrated General Motors bankruptcy and Auto Industry Bailout.

    We have been funding our legal battle for fairness and equality in Michigan Federal District Court since 2009 on the remainder of pensions slashed up to 70%.

    https://www.delphisalariedretirees.org/delphi/index.php/what-we-are-fighting-for

    After hearing POTUS’ comments on retirement security yesterday the sheer hypocrisy amazes me.

  • Wahoo_wa

    The lack of Social Security benefits was not known to me.  That definitely changes the discussion.

    • Kathy

      I work in another state as a public employee and I also pay 11% into our pension system, not the 6% that people pay into Social Security. We also didn’t get that 2% stimulus social security tax cut a few years ago.

      • Bluejay2fly

        In NYS my department had us pay 3%, good point we pay into the plan.

    • creaker

      I just did a quick search – PGBC doesn’t cover public pensions. So that’s not a possibility, either.

  • http://www.facebook.com/rmsteinborn Ross Steinborn

    Isn’t it ironic that the Feds were all to quick to bail out the car companies of Detroit, but are nowhere to be found when the people of Detroit need help. 

  • Kathy

    Let’s have a special bankruptcy law for Detroit that ensures that 100% of pensions are paid and fully funded before any private lenders get their bonds paid off and watch how quickly bankruptcy is taken off the table.

    • http://www.facebook.com/grant.cook.969 Grant Cook

      And watch every other city in the country’s price for borrowing go through the roof.. the muni bond market would collapse.

  • tomwbur

    Don’t some (many) public employees get new jobs after they “retire” from public work after 25(?) years, and they earn social security benefits from that new job, so they get both pension benefits and social security?

    • Kathy

      You lose partial social security benefits if you also have a pension. Also, if you retire early enough to get another significant job, your pension is very small. You only get a “good” pension level if you work 20+ years and retire at 65.

      • CoSoCar58

        You don’t lose partial SS benefits if you have a public pension and you and your public employer paid as much of your gross salary into SS as you would have in the private sector.  Federal employees might lose some because by history most of them haven’t paid into SS.

    • http://www.facebook.com/anita.paul.5680 Anita Paul

      No

    • Bluejay2fly

      To maximize on SS benefits you need to work 35 years so if you add 20 to that your talking retiring at 73. I think the 20 year pension is rare anyway most public pensions are 25 -30. In my state, NY we pay into SS as public employees. I get both the pension and SS but again I pay into the system. At 62 having worked from age 18 I will collect 1,200 a month in SS. The big leak in SS is Disability which many costs 80 Billion annually and includes a lot of fraud. I doubt there are 11 million people in America so “disabled” the can not even be a Walmart greeter. 

  • Kathy

    duplicate post

  • realedreform

    Tom, surely you realize that it is money-printing that is the root of Detroit’s problem and other cities/towns that will eventually follow suit.  As cost of living increases due to more currency in circulation, those with more clout can demand better future positions, higher pensions.  And so the promises are made. Can the Federal Reserve Board control this process by shrinking and expanding the supply as needed?  That’s the theory but in practice it doesn’t seem to be working out. 

  • Enuff_of_this

    There may be some people getting stiffed here, but what about the section of “retirees” who are gainfully employed in a second career drawing a hefty paycheck and a hefty pension check at the same time? I have seen this time and time again where a municiple employee will retire from service and then return to their previous as a civilian contractor being paid a premium and drawing their  pension check at the same time. The pension system was designed for retirement. Pensioners aren’t getting screwed so much by the city as they are being screwed by fellow pensioners.

    • Bluejay2fly

      If they reenter the work force they pay taxes on both the pension and the new job. There is no problem here. When a pensioner takes another civil job its wages would be paid to someone else anyway. The big argument might be fairness in hiring and most civil service jobs are regulated in that sense placing strict regulations on retirees who reenter public service. 

      • Enuff_of_this

        It’s not a question of paying taxes, it’s about double dipping and gaming the system.

        • Bluejay2fly

          Double dipping? The primary function of our congress is to be a concierge who introduces politicians to money. If you stay in congress and do not graduate to becoming a well paid consultant/corporate shill you are a moron. What about the revolving door in the Defense Department? I pay millions to train you as a NAVY SEAL and you get out and go work as a private contractor in Iraq charging the US tax payer over 100K while you earn that wage tax free. A retired city garbage man who takes up another job picking up dog crap in the city parks seems like small potatoes to me. I know, it’s an outrage if you need that job but, again, many states have strict regulations on retiree’s. 

          • Enuff_of_this

            How about the 45 year old city parking enforcement officer who has retired after 25 yers of service and begin collecting my $90,000 pension. after a well deserved three month vacation, I return to my former position as a civilian director of parking enforcement making an additional $140,000 a year. From your comments above, you seem to be okay with arrangements like this.

          • Bluejay2fly

            If he is getting 90K his pension which is usually half would have been $180,000. The governor of Illinois only makes $159,000 so that is one sweet gig. If he is getting 100% of his pay he would be earning more than an ADA in NYC or A SUNY college professor sounds like a man bites dog story or total BS. No, I am not OK with outrageous salaries but most of the time these numbers are total BS.

    • http://www.facebook.com/futo.buddy Futo Buddy

      not really

  • creaker

    Bonds are risk based – pensions should not be.

  • Coastghost

    Accord. to Emergency Mgr. Kevyn Orr, only 53% of Detroit property owners paid property taxes as recently as 2011. Detroit’s total tax take (per capita) is THE HIGHEST in Michigan, yet 40% of its streetlights don’t work, the murder rate is among the highest for cities with populations over 200,000. Reports of public corruption are as fresh as the administration of Mayor Kwame Kilpatrick, but surely his contribution to digging an $18 or $20 billion hole (funny how the figure of $18 to $20 billion so exactly matches the costs of Boston’s “Big Dig” cost overruns alone, municipalities must have their own rules for extracting funds from the Feds) cannot compare with the efforts of his predecessors, the ones who were not sentenced, so ‘twould seem.

  • creaker

    tell me where to sign up for this 8%, low risk thing

  • Yar

    5% rate of return and 10% rate of inflation.  Our country is borrowing 40 cents out of every dollar spent.  Not to say anything of quantitative easing.  The stock market is not designed to give wealth back, it is only allows people to trade wealth for a fee.  This is a huge problem for the baby boomer bubble of retirees, both for public and private employees.

  • Bruce Hooke

    I’m really wondering what we are expecting a 70 year old retiree whose only significant retirement income is a $19,000/year pension to do if we cut that pension? This sounds to me like a plan to go back to the 1920′s when many people too old to work ended up homeless and living on the streets. From a broad perspective, the only solution I can see is to in some way finally face up to the fact that the well off in this country have not been paying a reasonable share of the burden of keeping this country going for a generation or so.

  • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

    I like how Tom is talking about the Michigan Constitution’s guarantee of the pensions.

    We’re finally talking about the Gov’s fascination with getting Michigan municipalities into bankruptcy. This was undercovered for years. (See Benton Harbor.)

    John Day should have been part of the conversation earlier this hour. We keep hearing about the need for “skin in the game”, and this guest has it.

  • weidanian

    In what I have heard so far on the broadcast, and 93 comments, and nobody deems worthy to mention that the wealth which is being siphoned off to maintain endless wars around the world could be going to strategic investments in transitioning the economy, social programs etc and of course aid to municipalities to fix these things. Why are we talking about cutting pensions and teachers while this is still going on? Its absolute madness.

    • Bluejay2fly

      Detroit could have benefitted from the 250 Billion we have given Israel over the years. We have a class of Americans who are getting rich at the expense of others. Believe me the billions we give Israel went right into defense contractor’s pockets (See.. Foreign Military Sales Program)

      • ThirdWayForward

        I think that $250 billion is at least one order of magnitude off, maybe more than that. Foreign aid, all told, is a drop in our Federal bucket.

        Armaments, however, ARE a huge investment. Even if we simply chose to make them in Detroit, which we once did, the city would be much more healthy economically, and bankruptcy would not be looming before us.

  • concernedinVT

    when the financial collapse was occuring the banks paid out billions in bonuses because they were “legally obligated” to do so – why could they do that then but the “legally obligated” pensions are now being targeted?

  • creaker

    Using excess SS funds and shoving more IOU’s in the drawer is eventually going to bite us there, too.

  • https://www.facebook.com/kyle.rose Kyle Rose

    The way to prevent this in the future is a simple, logical consequence of the behavior we’re seeing: take retirement off the balance sheets of governments whose caretaker politicians think only one election cycle ahead, and put it in the hands of individuals who have an incentive to build the capital value of their retirement funds.

    Unfortunately, I don’t see a solution to the existing problem that doesn’t involve retirees having benefits slashed, absent a state or federal bailout: there simply isn’t enough money available to the jurisdictions involved. This mess may simply come down to teaching people two lessons: (1) The people get the government they deserve, and (2) politicians are motivated by re-election, not by the welfare of individuals. The sooner people learn these two lessons, the better off everyone will be.

    • ThirdWayForward

      In the case of Detroit, the citizens are getting a government that others in the state, who are not looking after their interests, chose for them. This is not democracy. It looks like the city has been railroaded — they are not the ones who chose bankruptcy.
      The state-appointed conservative radicals will protect wealthy investors and sock it to the little people of the city. This is what the Republican party stands for — the interests of wealth over those of the rest of us.Managed pensions are a better deal for most people when you consider the costs of investment management and the amount of expertise involved. They are a more efficient way of ensuring retirement security. But these systems rely on a sustained social contract, one that the conservatives are completely willing to abrogate at the first political opportunity.

      • ThirdWayForward

        I heard this morning on here and now that they  are planning to honor the pensions first and bondholders afterwards, which is a very good development in this process, provided that it holds. 

        And maybe if it turns out that Republicans are responsible for this decision to do the right thing, I may need to revise my assessment of them.

  • ThirdWayForward

    The red model of American governance is to create a fiscal crisis (in Social Security, Medicare/Medicaid, public pensions) by blocking measures to keep these healthy and solvent.

    Then the financial estimates are cooked to look more dire than they really are. They foment crises (some for real, some fabricated) and then try to use the crisis as an impetus to implement their radical economic policies (see Naomi Klein’s The Shock Doctrine).

    Then conservatives try to make draconian measures that renege on previous promises to little people while paying off the financial institutions (their political base).

    It is all very clear if one keeps in mind that American conservatives have never liked retirement security programs for the masses (Social Security, public pensions), and their hidden agenda has always been to underfund and if possible eliminate these programs. They particularly don’t like defined benefit plans that mean that their financial institution backers don’t get control of the money.

    The Michigan state legislature and governor office are all firmly in Republican hands and there is a war going on between Democratic Detroit and Republican suburban and rural Michigan. That backdrop to this situation needed more attention this hour. How can w make any sense of it without looking at the city-state political relationship?

    • https://www.facebook.com/kyle.rose Kyle Rose

      What does the failure of programs in a city and state dominated by Democrats for the last 60 years have to do with conservatives? Answer: nothing.

      As a libertarian (actually an AC), I have no love for conservatives, but this is possibly the most face-palmingly dumb example of blaming the other Team™ I’ve ever read. The mess was 100% created by Democratic politicians and their useful idiots on the left. Trying to pin the blame on Republicans and conservatives is the pinnacle of either disingenuousness or delusion.

      The American left owns Detroit, lock, stock, and barrel. Own it, own up to it, and learn from it.

      • ThirdWayForward

        Sorry, it’s neither disingenuousness nor delusion on my part.
        This Michigan situation has many parallels with the national situation. It would be as if the Tea Party got control of the Federal government, decided that neither taxes nor the national debt limit could ever be raised, diverted money into more armaments and tax cuts for businesses, and then declared the Social Security system bankrupt (when it is not in fact bankrupt).
        It was abundantly clear from this segment that we do not know the true extent of the crisis, or whether there is in fact a crisis. Republicans have declared a crisis. What is clear is that the conservatives are trying to create a crisis atmosphere where they can yank retirement benefits from public service workers (most of whom they know will never vote for them).

        I just looked and Detroit is now in the hands of an unelected city dictator-manager who was appointed in March, 2013 by the conservative Republican governor Rick Snyder. In Michigan, apparently, these municipal dictators can do pretty much whatever they please with city finances, unfettered by direct accountability to the citizens whom they govern.

        http://en.wikipedia.org/wiki/Detroit

        I didn’t hear the beginning of the program (maybe it was addressed), but this political backdrop of Republicans taking dictatorial control over Michigan city finances is extremely important for understanding the situation. 

        I do grant that anarcho-capitalists are at least more consistent in their economic ideologies than conservatives. And AC’s tend to be social libertarians as well, although often not when it comes to reproductive freedom. 

        But anarcho-capitalism (or Laissez-faire capitalism) as a system doesn’t work for very long — it is naive to think that the system will always maintain a stable equilibrium. There are inherent instabilities in no-rules markets that lead to systemic breakdowns. The 19th and early 20th centuries are littered with examples.

        Anarcho-capitalists (right wing libertarians) are deluding themselves that their social system would persist long into the future. Mass pension systems, such as Social Security, were devised in the 1930′s to deal with these problems — they were implemented to save capitalism and market systems from the threat of sudden widespread impoverishment and social revolution. 

        There comes a point where inequalities mount, people get desperate, and begin to agitate for fundamental change. Right now the concentration of wealth here in the US is at a historic high (the top 1% own ~37% of the wealth). As many social democracies learned in the 1930′s, it is far, far better to deal with economic inequality and the extreme social power imbalances it creates in a measured, deliberate way in advance than to stick one’s head in the sand, abdicate responsibility and risk the unpredictable social hells of revolution, civil war, fascism, communism, and military rule.Morally, many anarcho-capitalists subscribe to the notion that economic might makes right, that wealth gives one the moral right to dominate and exploit others in any way and as much as possible. It’s a very selfish, self-serving ideology that is tailor-made for those who have great wealth or aspire to it.

        • pete18

           Are you saying that you don’t believe Detroit is actually bankrupt? That it is some sort of falsehood devised by the Republican governor?

          • ThirdWayForward

            I am saying that the magnitude of the fiscal problem is very much unclear.

            Is Detroit $500 million in the hole or is it $15 billion? That’s a factor of 30x. The figure depends on what is included and what are the economic projections and this is subject to enormous political fudging.

            On a national scale, neither Social Security nor Medicare is “bankrupt” or even approaching it, despite all the hyped warnings we are constantly hearing from the right — the Detroit situation could be not unlike that. And there are easy fixes for both that would avoid any shortfalls that the Republicans completely oppose (because they really do not want to fix the system — in their heart of hearts they would rather destroy and eliminate it entirely — it is clear that this their long term agenda; parts of the party have been talking about these things for decades)You just can’t take anything that these radical conservatives say at face value — they have no credibility, no scruples, and no respect for truth.

            I heard bits of another discussion of Detroit later in the day, and one piece of it has to do with the ability of the city of Detroit to raise taxes, and this is subject to the radical conservative state legislature. So it sounds like they have their city dictator determining what possible solutions will be considered and that Michigan Republicans are in a position to veto any solutions that they don’t like.

            It’s a total power grab. This is what they do when they attain absolute majorities……….

            This Detroit debacle is much more complex than it seems at face value — one cannot discuss it separately from the politics, because the politics are dictating the scope of possible solutions.

            I really wish the program had been clearer on that — it would have been more useful to have a political roadmap of the positions.

          • http://profile.yahoo.com/JXSANCUDPIKQSPID5KT2U4XK5Y TF

            But making the magnitude of Det’s fiscal problems clearer is at odds with the political convenience of emergencyfication. (I’m sure you’ve figured that out–just adding it on.)

          • ThirdWayForward

            Yes, absolutely. Truth (empirical evidence combined with rationality) is always the biggest  enemy of crisis-mongering, obfuscation, and demagoguery.

      • highlandbird

        I love you!  Someone with a few brain cells left on the face of the earth :).  

    • highlandbird

      So you think that the taxpayers of MI should bail out the poorly managed Detroit?  So what exactly does that mean for fiscal responsibility across the boards?  No town has to be responsible any longer, because their neighbors will bail them out?  Moral hazard, ever heard of that?

  • ianway

    “Fait accompli,” “the reality on the ground” has become the go-to rationale in the era that is currently running far ahead of the excesses of the era of the robber barons.  Translation: “Promises, obligations, constitutional rights, money-owed for services rendered- oh well.  Life sucks for you people who believed in such things.” 

  • jimino

    How can anyone who claims to support the rule of law not be outraged by the idea of defaulting on a contracted-for, constitutionally-protected obligation?

     

    • StilllHere

      Please, it happens all the time in the consumer economy; the public sector should be no different.

      • Bluejay2fly

        OK lets execute all murders in prison because we now decide their crimes should merit capital punishment.

    • William

       We have a “living constitution” which remains in flux so what was before does not mean it matters much now.

    • highlandbird

      Surely you see thru the fog:  if there is no money left to pay the promised benefits, the benefits get cut!  No constitutional law can bend the the law of gravity or economics.  Ain’t no money left? can’t pay those promised benefits.  No matter what is printed on some piece of paper in the capitol.  

  • jimino

    x

  • CoSoCar58

    I signed the dotted line and worked my behind off for my pension.  I could have put that 6.5% of my gross salary into a different retirement account or had a career that paid worth a crap.     

  • 2Gary2

    Tax the rich and spread the wealth.  Its really that easy.

    • tbphkm33

      “Tax the rich and spread the wealth” is mythology and slander toward the left spread by the rightwing.  The issue is a bit more complex than that.  

      What the U.S. needs is incentives geared toward investment in the U.S., policies that spurs economic activity and economic diversification within the U.S.  No more smoke and mirror programs that ultimately just lets the rich and large corporations off the hook in regards to their social responsibilities to the U.S. society.  

      It is a complex issue, but the simple fact is that business as usual – such as the corporate revolving door as regulators in Washington – ultimately does not help The People.  These realities only help the rich and powerful.  The situation calls for common sense programs the put The People first.  Bottom line is that The People have to take the reigns of government back and make government work for the greater good of society. 

      • Bluejay2fly

        In the battle of Labor v Capital the entire society must be committed to sustaining a healthy economy. When labor come into work late, drunk and high, committed to doing as little as possible, stealing whatever is nailed down, or going out on “work” injuries you have a problem. Capital cannot expect bargain basement salaries when theirs is sky high, they should not move factories to the 3rd world just to evade environmental regulations or labor costs, they should be committed to the highest quality product possible and not cheap out to make fast money, and they should not use part time labor and other gimmicks to avoid providing livable jobs. The regulators must pass reasonable environmental regulations, enact fair tax structures, protect our industry with buy American and tariffs, subsidize costly projects, and be committed to making certain no money goes offshore. Consumers should preference local products and investors should reward corporately responsible companies with their monies. This economy did not free us from the tyranny of machines, instead it created millions of Americans who are unemployable and wound up in prisons, on welfare, on SSI or SSD, part of the military industrial complex, or part of the law enforcement, security, prison industrial complex all of which equals has cost us dearly.

  • DavyCrocketUSA .

    Pensions should not be cut in either the private or public sector. But a big difference for public employees is the Windfall elimination provision with social security, which significantly cuts SS benefits if you worked for a government entity that has its own retirement system regardless how much you paid into SS if you don’t have 30 years of substantial earnings in SS. 
    The fact is the middle class typically does not make enough to save completely for retirement and rely on SS or government retirement plans to supplement their savings. Private business and government entities should both be required to substantially fund their pension obligations and need these pensions need to be completely off the table for those that have accrued those benefits. 

    Sad that so many in the middle class seems so willing to eat the middle class to preserve the wealth of the rich and multinational companies. Almost like the Russian proverb that tells the story of a genie appearing to a impoverish farmer to grant a wish, with the stipulation that what ever the farmer gets from his wish his neighbor would get doubled. After thinking the farmer asks the genie to put out one of his eyes.        

  • MsAbila

    It appears that the Detroit pension fund crisis is just an other example of how earned benefits are taken away from workers with a stroke of a pen.   Shameful!

    • highlandbird

      Sure, these benefits were earned —  at the voting booth.  These folks voted for the politicians that screwed them by being irresponsible, now they pay the price.  You get what you deserve when you vote for profligate politicians that give out benefits like candy in return for votes.  THis city was run by and for the DEMOCRATS – end result —  BANKRUPTCY.  Take note America.

      • jefe68

        Take note. People will not be bowled over by wall street sharks a regressive right wingers.

  • highlandbird

    To the folks that are now going to take a haircut on their pension and health benefits:  suck it up, you voted for the politicians that over promised and were not fiscally responsible.  You were in bed with the (Democrat) devil.  Now you pay the price – so take it like a man.  You get EXACTLY what you deserve, you are NOT victims.   They are YOUR politicians who created this situation.  America take note.

    • jefe68

      Oh please. Your act is so tiring.

  • highlandbird

    FOLKS – you get what you vote for!  You vote for THE PROFLIGATE Democrats, you get bankruptcy.  These people in Detroit voted for the managers and politicians that ran this city into the ground, year after year.  So now they pay the price.  NO sympathy.  Be very careful for whom you cast your vote.  This city is a showcase DEMOCRAT run city.   No Republicans involved in this bankruptcy.  So who ya gonna blame – voters and Dems.  Ha!  Can’t blame George W. BUsh here.  

    • tbphkm33

      LOL – normal rightwing simplistic rhetoric.  Masking the real issue that no matter what political affiliation of the leadership of Detroit, the economic forces facing the city were largely outside of their control.  The old industrial cities of the “rust belt” around the Great Lakes all face similar issues.  Some just have it worse than others.  Manufacturing moving elsewhere, people migrating elsewhere, etc., are largely forces beyond the local politician’s control.  You can safely assume the elected officials did everything in their power to attempt to reverse the trend.

      Truth is, you can look across the entire United States and see such forces at work, neither Democrats or Republicans can successfully stand in its way.  Especially manufacturing jobs have moved off-shore.  Unless you go to extremes like Texas, “pro-business” which just means zero social safety net, poor schools, neglected infrastructure and no investment in the future.  We shall see how well Texas is doing ten or twenty years from now, especially as the effects of global warming become more-and-more evident and big business decides its cheaper to relocate to other states. 

      • highlandbird

        Of course, when Democrats are in charge it is never their fault, always “the economy.”  Well, it is economic policy which drives business away, drives taxpayers away, drives rational people away.  NPR always blames Republicans where they can, but Democrats NEVER, NEVER, NEVER, GET ANY BLAME on NPR.  I blame the Democrats, and all the people that voted for them, for Detroit’s sorry state.  But you don’t, of course, because you are an NPR listener, and no doubt a Democrat.  PS: I voted for Obama in ’08, but was not fooled second time around.  We in the US need fiscal responsibility –  defined contribution, not defined benefits, like the rest of the workers in the US.  Lifetime health and pension benefits are obsolete, Medicare and Social Security are good for me, and the municipal workers in Detroit.  Man up Detroit.

        • jefe68

          Oh please not the NPR BS. Get a life.

    • jefe68

      Two words. Bugger off. No a few more words.
      You regressive right wing wingers have no clue.
      NADA. You are so far up your own dogma that the light you think you see that stands for smaller government is really from your own neither regions.

    • StilllHere

      It’s a fact, but no they’re going to come after you for saying so.

  • HankKim

    Contrary to the politically opportunistic fiction put forth by Eileen Norcross and Roman Hardgrave in the Bloomberg opinion piece you cite above – To
    Save Pensions, Get Government Out — Detroit’s bankruptcy filing is
    not the result of “huge, unfunded public employee benefits such as pensions.” 

    Detroit’s
    story is that of a once great American city that has experienced unprecedented
    population loss, tax base erosion, property value decline and loss of economic
    competitiveness. Once the nation’s fourth most populous city, it’s now barely in
    the top 20. And as a one-industry town, Detroit’s fortunes have suffered
    mightily with the decline of the U.S. auto industry from world leader to
    struggling competitor in the global marketplace.

     

    Public pensions are not part of Detroit’s problem. In fact, its
    public pensions are well funded – over 96 percent for the Police & Fire
    plan and over 87 percent for other city employees. Throughout the country,
    public pensions are typically well funded, financially healthy and sustainable
    for the long term. The few plans that are in trouble are in jurisdictions that
    failed to adequately fund those plans during boom economic times.

     

    Some, like Norcross and Hardgrave, would exploit Detroit’s
    dilemma to push an ill-considered political agenda to dismantle public pensions
    and enrich life insurance companies. They should note that during the more than 150 years of public pension history, no public pension plan has ever asked for a federal bailout. But
    plenty of life insurance companies have failed – 170 of them between 1975 and
    1990, according to the Government Accountability Office.

     

    Norcross and Hardgrave – along with Utah Sen. Orrin
    Hatch, whose pension reform legislation they are championing – would be
    performing a far greater service for states, municipalities and their taxpayers
    if they would turn their attention to America’s real retirement crisis. The
    private sector’s retirement savings deficit is running upwards of $14 trillion
    – meaning future retirees will have insufficient assets, will be a drag
    economic activity and will put higher demands of public resources. Resolving
    the private sector retirement crisis is crucial to the nation’s economic
    well-being and to state and local financial security – and deserves to take
    center stage in the public debate.

     

    Hank Kim, Esq.
    Executive Director & Counsel
    National Conference on Public Employee Retirement Systems (NCPERS)
    Washington DC

     

     

     

     

     

     

     

    • TheDailyBuzzherd

      Thank you for this.

      The life insurance situation sounds similar to the thefts of pensions
      going on at Fortune 500 companies … they’ve raided them for 30
      years straight, often funding executive perks doing so, and then
      claim they haven’t the money to fund existing plans. They had the
      money then, they have the money now.

    • jefe68

      Spot on sir.

  • http://www.facebook.com/futo.buddy Futo Buddy

    perhaps we could do some nation building in detroit

    • StilllHere

      I think we’ve established you can’t help people who don’t want to help themselves.

      • http://www.facebook.com/futo.buddy Futo Buddy

        maybe we can work out some sort of a swap with Canada

      • http://www.facebook.com/futo.buddy Futo Buddy

        we call those people “insurgents”

  • innercityguy

    I don’t think the people who say that pension debt is not the problem understand the problem. Pension and health care contributions to public employees now crowd out all other expenditures.  Fewer police, fewer services, higher taxes.  Many cities, such as Detroit and Toledo, have declining populations, declining per capita income, and city tax rates in excess of 2%.  People who have a choice choose not to live in these cities, thus contributing to the declining tax base.

    Aligning public employee pensions and benefits with the taxpayers who support those benefits is the only long term solution to the problem. Otherwise, we are Greece,

    • jefe68

      See below/ The right is so misguided in there anti-union bashing. Some unions need to reform some outrageous practices, such as police backfilling overtime to get their pensions into a higher bracket. But to vilify all public employees is a fools errand.    

    • StilllHere

      Well done. It’s basically a math problem and the solution is to cut benefits.

  • CoSoCar58

    People on here have been saying that if you draw a pension from a government entity you get less in SS benefits.  This is not true if you and the public agency you worked for paid into the SS system.  I knew this to be the case, but I just got off the phone with the Social Security Administration and they verified what I’m saying.  I paid as high a percentage of my gross salary into SS as anyone else during my years with the state agency from which I am now retired.  SSA gave me my estimated benefits assuming I never work another day in my life even though I retired from my agency at only 52 and am now only 54, and I am okay with their estimates.  That does not change the fact that I signed the dotted line when I went to work for my state agency on the legally binding promise that upon retirement I would draw a pension and have health insurance, and also on the understanding that those benefits and not my salary were the proverbial carrot they were dangling in front of my face.  I lived up to my end of the bargain; now, come hell or high water they need to live up to theirs.  I’m not from Michigan, but Detroit employees and retirees and all public employees and retirees deserve to have their pensions and health insurance promises fully honored no matter what it takes – period.

    • DavyCrocketUSA .

      Please see  http://www.ssa.gov/pubs/EN-05-10045.pdf rather then providing antidotes, take 20 seconds to do some research.   

      • CoSoCar58

        That provision is for people who did not pay into the SS system.  I did.

        • DavyCrocketUSA .

          You are correct, I miss read you comment. As you state that provision is for for those like me in CalPERS or similar program. 

  • wsaintamour

    Great conversation, and an important one.  Unfortunately, the complexity of the question makes it difficult to separate the fundamental systemic problems from the political positioning.  A few facts may help the folks who are trying to understand the problem.
    1) The liability is huge; however, the number in the media often includes both pension and retiree health care.  Health care is by far the larger piece of it, and it is rarely well funded.  But it also is not as protected, and clearly not by the Michigan constitution, which only protects the pension side of the liability.2) Pension liability is still a big, frightening number; however, it is really the wrong number to focus on.  It is a bit like adding up how much people still owe on their home mortgages.  That big number is less important than IF communities are paying their “mortgage” payment.  Actuaries call this the “ARC” or Actuarially Required Contribution.  It appears that Detroit and other communities have not been paying this.  This undercuts the funding level of the plan, increases the percentage of the portfolio that has to be placed in more income-generating asset classes to pay monthly pension checks, thus reducing the overall investment return, and thus further increasing the liability and ARC.  You can see the downward spiral.3) The fundamental structure of a DB plan (traditional pension) for most plans in the country works pretty well, and most communities and plan administrators are diligent and prudent in keeping costs and unfunded liabilities low (on a basis point average, they are much less costly than private actively managed mutual funds).  Looking at 10 and 20-year returns, plans do meet or exceed the common 8 percent assumed investment return, so arguments that the return should be much lower is weak when the facts are reviewed.  The modest pension payments also are a steady economic stimulus to their community, as the payments continue even during recession.  Pension funds also are not buried behind city hall, but are used to purchase stocks and bonds – helping to build businesses and infrastructure.  One of the real problems is when politics elbow in. When economic times are good, legislators and community leaders agree to increase pension benefits.  Once pension benefits are increased, it is very difficult to reduce them for current retirees and active employees.  There are options, including a lower benefit for new employees or a lower benefit for FUTURE service for current employees.  When times are bad, organizations that financially benefit from elimination of pension plans gain political and media influence.4) There is another shoe to fall.  The main alternative to traditional DB pensions that has been advocated is a defined contribution plan – which is basically a tax advantaged savings account such as a 401k.  Switching plans to a DC plan actually is not a money-saving strategy in the short and medium term, as the costs for current employees and retirees still need to be paid off, and the new plan adds an additional cost on top of that.  The other problem with the DC model is that on average, people who are close to retirement have very small account balances compared with their life expectancy.  Having a 401k worth $200,000 may sound great, but when you divide that by their current income, then it might last 5 years, if the market doesn’t drop.  When the money runs out, a large population with no money will still have a vote, so general assistance will become a much greater unfunded liability than a traditional pension is.  Republicans should be concerned, as this may become a tidal wave that drowns conservative financial principles for a generation.  A balanced mechanism that leverages prudent investments, prefunding, pooling, and lifetime income streams may be the best path forward.To conclude, DB pensions generally are not broken, but there is room for abuse and poor decisions that ratchet up their cost.  The biggest danger is the ARC (required payment level), not the overall liability.  Communities and states that do not pay their ARC are making very risky decisions.  There are several very interesting new benefit designs that significantly reduce the liability of the plan, leverage the cost saving aspects of pooling, provide credible oversight, and still providing a life-time benefit for employees and retirees.  Focusing on some of these better, long-term approaches would clearly help advance the discussion — not only for public sector employees, but private sector employees as well.

    • ThirdWayForward

      THANK YOU SO MUCH — EXTREMELY HELPFUL POST.

      • wsaintamour

        You are welcome.  

    • http://www.creationoptimisation.com/ hadi loubane

      this is great
      http://www.cause.ws

  • ExcellentNews

    Sorry folks, but pensions for working bees have been cancelled under the Republican Oligarchy economic plan (in force since 1999).

    You see, the automotive executives who wrecked US manufacturing by virtue of their idiotic decisions (but who are probably very good at talking sports) need to pay for their yachts and hundred-acre estates. The conniving bankers who got 15% of every dollar lent need to support their mistresses and other expensive habits. The health insurance company CEOs depend on the 30 cents cut they take from every dollar spent on healthcare. Also, someone needs to pay for advertisements on Pox News to blame it all on unions and Benghazi…

    So there! You regular folks need to learn how to live on cat food in order to keep the gravy train for the oligarchy and their government shills…

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