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NJ Public Pension Slugfest Reporting Omits 15 Years of Governors Stealing From Workers

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If you live in the world according to the mainstream media, the row between state executives and unions is all about (by implication) greedy unions trying to preserve their perquisites when budget “realities” demand that they suffer. Consider this excerpt from a recent article New York Times article about the fight in New Jersey:

Across the nation, a rising irritation with public employee unions is palpable, as a wounded economy has blown gaping holes in state, city and town budgets, and revealed that some public pension funds dangle perilously close to bankruptcy.

Um, the “wounded economy” trashed the state budget? Funny how the article fails to point fingers at the real perp, which is the global financial crisis, brought to you by your friendly TBTF banks. Andrew Haldane, Executive Director of Financial Stability for the Bank of England estimated that the costs of the financial crisis was 1 to 5 times global GDP. If you were, as economists recommend, to try to tax them to recoup the cost of the damage they did over a period of 20 years, the charge would be over $1.5 trillion a year. That’s more than the market cap of the biggest global banks. Funny, their staff and executives got record bonuses in 2009. So maybe the unions have the wrong strategy. They need to screw up in a particularly destructive manner.

And how exactly did the crisis “reveal” that some pension funds were close seriously under water? A more accurate rendition would be that, at least in New Jersey, the state has been raiding the pension kitty for over 15 years. This is not news to anyone who has been paying attention, any more than underfunding of corporate pensions. In the Garden State’s case, Governor Chris Christie skipped the required $3.1 billion pension fund contribution last year. He claimed this move was to force reform, but what impact does another $3.1 billion failure to pay have on an unfunded liability that was already over $50 billion?

The shell game started in 1995 with Christine Todd Whitman. As Bob Herbert reported:

Over the past 25 years the State of New Jersey has struggled, under a succession of Democratic and Republican governors, to reverse a social and economic decline that, by the 1960′s, had hit many Northeastern industrial areas.

Difficult budget decisions were made, often at significant political cost. But the benefits for New Jersey residents were many. A vastly improved higher education system was developed and state aid to local public schools surged. The environment was cleaned up. Mass transit was improved. The state’s budget was balanced without gimmicks and its credit rating was triple-A….

Now many of the gains made over a quarter of a century are in danger of slipping away because the current Governor, Christine Todd Whitman, has chosen to finance her political ambitions with a popular buy-now, pay-later economic policy that will place a financial stranglehold on future generations of New Jerseyans….

This is best illustrated by Mrs. Whitman’s decision to withhold billions of dollars that should be going into the public employee pension funds over the next few years, and using the bulk of that money to balance the state budget. Then, with an audacity that dazzles her supporters and even draws grudging admiration from opponents, Mrs. Whitman smiles and characterizes the withheld funds as savings.

Of course, they are not “savings” — not in any sense of the word. The pension obligations at some point will come due and future generations will have to meet them.

Not only will the money have to be made up, but future taxpayers will be deprived of the income that the money — if properly invested now — would be expected to generate…The changes that she has made have been drastic. According to the New Jersey Education Association, which has filed suit against the state, the employer contributions to the pension system this year will be as much as 96 percent below the amounts contributed in the early 1990′s.

The state also did a swell job of investing the money it did have. Per a 2009 FireDogLake article:

Orin Kramer is also Chairman of the New Jersey State Investment Council, which is tasked with oversight of the state’s public pension system. In 2006 he successfully pushed to shift a huge chunk of the state’s $72 billion pension fund to private money managers rather than state employees. Kramer was the “prime architect of the diversification strategy” that saw union retirees pick up the tab for $115 million in Lehman Brothers losses on money invested shortly before the firm’s collapse

And the Lehman losses were not a one-off; New Jersey has the dubious distinction of being the only state ever reprimanded by the SEC for pension mismanagement, including phony accounting:

The story of the accused New Jersey pension fund was that it has saved enough from 2001 to 2007 for a reserve whose purpose is to improve payouts. This was the feature of a five-year plan to support public workers and teachers. It turned out that it was nothing but a creative cooking of the books.

The regulatory authority’s Director of the Enforcement Division, Robert Khuzami, cried out foul for the deception, where the investors were the obvious losers. Fraudulent representations of the true financial picture brought in over US$ 26 billion of fresh cash from less sophisticated financiers.

The rule of Governor Donald T. DiFrancesco, a Republican, as well as those of James McGreevey and Jon Corzine, Democrats, witnessed the amassing of the shenanigan statements. The incumbent office of Gov. Chris Christie currently faces a colossal contribution deficit. The only options include tax hikes, skimping on fiscal spending, which is mostly on public service, or worse, further drowning itself in debt.

Christie has been compelling more belt-tightening measures, from which the education sector is not spared, in order to choke up the lost billions. The ugliest scenario could mean bondholders brawling against poor New Jersey pension fund beneficiaries for the fund capital.

In case you wonder about how those bonds were issued, a 2009 Forbes story sheds some light:

Seeking to make up lost ground without putting up more money, the state’s leaders looked to the magic of the stock market. In 1997 New Jersey sold $2.75 billion of bonds paying 7.6% interest, putting the proceeds into the pension fund to be invested for higher returns.

At that time Whitman said the ironically named Pension Security Plan would save taxpayers about $45 billion. It hasn’t worked out that way. The fund has earned less than 6% annually since the bonds were issued.

And note Corzine did attempt to remedy the situation, increasing contributions and cutting benefits, but did not go far enough.

Although Christie has been gunning for the unions in his zealous efforts to address the budget shortfalls, inconveniencing those at the top of the food chain is off the list. Christie nixed a millionaire’s tax last year.
Now of course you can argue that the unions should have taken some sort of action or negotiated harder. But did they have the leverage?

And what should the unions do now that they are in this mess? I’d fight for shared sacrifice. The dire state of the budgets is hitting everyone. The union members will have to take less, as many Americans have had to. But they need to recognize that these fights over pensions are an effort to eliminate public unions as a political force; the budget battles are simply a useful excuse for the right to break a long-standing foe. Thus the unions need to find a way to regain the moral high ground. New Jersey, one of the richest states in the US, has mismanaged its way into this mess. That fact needs to be hammered hard, and the unions also need to put forward a realistic plan in which they make concessions provided upper income earners do their part to address the budget shortfalls.

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122 comments

  1. Jojo

    You know that you are going to upset Mish with this article? {lol]

    IMO, public unions should be ended for the simple reason that it is just too easy for politicians to “buy” union votes by providing excessive compensation and benefits that must be funded by the taxpayer. The taxpayer gets the same services but at an ever increasing cost.

    1. DownSouth

      Using your logic, then democracy should be eliminated because it is “just too easy for politicians to ‘buy’ [insert offending interest group] votes by providing excessive compensation and benefits that must be funded by the taxpayer.”

      The “taxpayer” in this type of argument was traditionally cast as the person of wealth or high earnings (a minority) and the feared “interest group” hails from the propertyless masses (very much a majority).

      When the Republic was young, popular democracy had not yet been road tested, and these sorts of arguments might have had some legitimacy. But given the experiences of the past 230 years, the fears of “an excess of democracy” that preoccupied the Founding Fathers have proven unfounded. Even with the expansion of the voting franchise to the propertyless, the wealthy have had little problem manipulating the political process to their benefit. The threats to the Republic do not, nor have they ever, come from the workers. Quite the opposite, it is and always has been the robber barons and the bankers who have been able to lock the workers out of the halls of power.

      1. Michael H

        DownSouth,

        Sorry to get off topic here, but in case you’re not already aware of it, you might be interested to know that both you and Yves Smith are referred to, and quoted, in a recent article by Don Hamerquist, which appeared on Jan 3rd, 2011 at khukuritheory.net, and is entitled “Hollow states in a time of austerity and chaos”.

        In this article the author deals with the following questions, among others: “Why are policies of austerity an almost universal capitalist response to the crisis? More specifically, why is Obama ….now promoting a version of austerity that entails a blatant increase in social inequality and contains almost no pretense of shared sacrifice?”

        http://www.khukuritheory.net/austerity-butterflies-and-the-future/#more-1180

        1. reslez

          Unfortunately the author does not understand the monetary system under which the U.S. operates. The U.S.’s ability to issue debt has nothing to do with “imperial privilege”, nor does the U.S. require creditors foreign or otherwise to sustain its budget deficit. This negates the author’s entire thesis. Furthermore he derides those who object to the obvious corruption of the present system as utopian dreamers, which “makes it hard to take them too seriously”. I’m forced to return the favor by not taking him seriously.

          1. Michael H

            Fair enough. Let’s say you’re right about the author not understanding the monetary system, I don’t have a good enough understanding of economics to dispute this.

            (On a personal note, after 18 months of unemployment, I’m currently working two temp jobs, with long hours and no benefits, in an effort to keep my schizophrenic daughter out of homeless shelters and off the streets, and this doesn’t leave me nearly as much time as I would like to understand the reasons for the economic catastrophe that I see happening all around me. All I know is that I see more and more people whose lives are falling apart, therefore I’m grasping at straws, looking for direction…..)

            However as for the “obvious corruption of the present system”, my interpretation is that the author was in agreement on this point, his only disagreement being that he seemed to believe that capitalism is nothing but robbery, therefore the current system (i.e., liberal capitalism) is corrupt beyond any hope of reform. Perhaps I misread him?

            But forget this author, put things in simpler terms. It seems to me that we are facing a kleptocracy and class warfare from above. The union bashing articles on this thread are a typical and sickening example of this, as the corporate media does everything possible to shift people’s anger away from the banksters, away from the criminals on Wall Street, and get them fighting each other instead. Divide and conquer, and it would appear that this strategy is working.

            Throw peak oil into the equation and it looks pretty bleak, it looks like the ruling elites have decided to steal everything they can get their filthy, criminal hands on before the entire system collapses.

            But what do you think, do you see any hope of reforming the current system? For that to happen, wouldn’t a majority of people in the lower classes at least have to understand that the elites are our enemy and that we’re facing class warfare from above?

          2. Patrice

            As everyone else seems to have moved on, I’ll take a crack at this one, responding to the questions of Michael H.

            Michael H said: “But what do you think, do you see any hope of reforming the current system? For that to happen, wouldn’t a majority of people in the lower classes at least have to understand that the elites are our enemy and that we’re facing class warfare from above?”

            No, there is no hope of reforming the current system. The liberal class sold out to corporate power a long time ago, and it has completely abandoned the the working class. Now it’s reward is to see the middle class itself being wiped out. And yet many liberals still have this naive faith in the law, and legislative bodies as an effective vehicle for reforming a system that is corrupted beyond any hope of reform.

            It will never happen. The only hope left is for the people to rebel. Are you familiar with Mao Zedong’s formula: “Marxism comprises many principles, but in the final analysis they can all be brought back to a single sentence: it is right to rebel against the reactionaries.”

            “Marxism is both a taking sides and the systematization of a partisan experience. The existence of a science of social formations bears no interest for the masses unless it reflects and concentrates their real revolutionary movement. Marxism must be conceived as the accumulated wisdom of popular revolutions, the reason they engender, the fixation and detailing of their target. Mao Zedong’s sentence clearly situates rebellion as the originary place of correct ideas, and reactionaries as those whose destruction is legitimated by theory. Mao’s sentence situates Marxist truth within the unity of theory and practice. Marxist truth is that from which rebellion draws its rightness, its reason, to demolish the enemy. It repudiates any equality in the face of truth. In a single movement, which is knowledge in its specific division into description and directive, it judges, pronounces the sentence, and immerses itself in its execution. Rebels possess knowledge, according to their aforementioned essential movement, their power and their duty: *to annihilate the reactionaries*.

            A translation of chapter 1 of Alain Badiou’s “Théorie de la contradiction” (Paris: Maspero, 1975).

    2. rjs

      it’s about time someone upset mish…he’s become part of the cadre of apologists for the plutocracy that’s trying to turn segments of the middle & lower class against one another…

    3. Mannwich

      You mean we won’t get the ENTIRE story from “Lou (one issue) Dobb” Mish? Shock of shocks.

      So by your logic we should also eliminate the big banks sinc they have way too much influence over our politicians.

      1. Jojo

        Eliminating democracy and eliminating banks are pretty poor responses to an article and my post about UNIONS!

        I think the term for these type of nonsense responses are “straw man arguments”. Jeez.

    4. Paul Tioxon

      We are all Welfare Queens now, driving our Caddies to the Welfare Office before we stop at the liquor and drug emporium.

    5. ignoreland

      Of course there’s an ever-increasing cost! Bread goes up, milk goes up, housing prices go up. Are you going to consign public employees to soup kitchens and homeless shelters?

  2. a

    Re Whitman borrowing money and investing in the stock market: this was the natural result of economists on both sides of the political spectrum (on the left side, think of DeLong and John Quiggan, although DeLong is hardly left and Quiggan is not an economist!) who touted the iron law of the equity risk premium, that equity always outperform bonds. It’s just one more place where we’ve been econned.

      1. a

        Thank you for that. I only read Delong when he is linked to or in error. I’d like to say, “better late than never.” But I guess I’m not that magnanimous. I think it would be better to ask, How can someone who has been so wrong still be allowed in the profession?

        1. DownSouth

          I think the more perplexing question is: How can someone who has been so wrong and is still so wrong still be allowed in the profession?

          Too many apologisgts for greed and selfishness are willfully ignorant and proud of it.

          1. jake chase

            Calling economics a profession is like calling prostitution a profession. In either case participants survive only for so long as somebody is willing to pay them. William Gaddis characterized law as a self regulating conspiracy. This fits economists like a glove.

          2. liberal

            Jake Chase nails it. The economics “profession” is a joke—they (as a group) couldn’t even see a multi-trillion $ property bubble. What a bunch of hacks.

  3. bob

    What about the snowstorm fallout?

    http://www.syracuse.com/news/index.ssf/2010/12/nyc_plow_drivers_admit_slow_re.html

    The title of the article-

    Some NYC plow drivers admit slow response to storm cleanup was no accident

    The article then goes on to say that-

    “City Councilman Dan Halloran, of Queens, told The New York Post he met with three plow drivers and two Department of Transportation supervisors on Wednesday, and they admitted to slowing down the snow removal process.”

    No facts, just the word of Dan Halloran, City Councilman.

    The pols spend money on themselves and their friends and then when the bills come due, throw the public employees under the bus.

    The article I saw originally had a picture of a “sleeping plow truck driver”. Of course it was not mentioned how much he had worked in the days leading up to his nap, or the very well thought out laws that require commercial truck drivers to sleep every now and then.

    This makes for a wonderful work environment, I am sure. Everyone now believes they are a “CUSTOMER” not a taxpayer, or citizen.

    “damn it I want to be able to drive my Bentley to the grocery store at 2 in the morning, plow the roads you lazy pieces of shit”

    When they do start hiring again, what is the price premium for dealing with these self entitled customers?

    1. eric anderson

      It’s not about the toffs being able to drive their Bentleys to the grocery store at 2am. It’s about emergency workers being able to respond to a 911 call.

      More evidence Big Government can’t even do simple things properly.

  4. anne

    unionise everything! Make wages decent for all … novel idea – more money in people pockets – more to spend – economy gets better. Want a consumer society – well you have to pay people more!! Funny about that! And look after the less fortunate – it is a western society after all.

    1. Jojo

      I believe that either EVERYONE should be in a union or no one should be. Why should some get the opportunity to be better protected that others don’t have access to? Why should shareholders or taxpayers pay more to some worker segments for the same products/services than they pay to other workers?

      1. Dan_in_KC

        Oh yes – lets all get in a race to the bottom on OUR wages. We can’t have a group of workers who have been taken advantage of by a divide-and-conquer management strategy start working together. Why gosh – the powers that be are only protecting us from our poor ignorant selves.

  5. Steve

    Born & raised in NJ. Family ALL in education.

    Yes Whitman ommited pension payments. But as I recall, at the time the pension fund was OVERFUNDED according to the trustees.

    The stock market was rocking… Bond prices had been steadliy rising making those investments worth a ton… That’s also why they issued the 7.6 yld bonds to invest in equities…
    “double digits equity gains were the norm..”

    But let me say this as well,,,

    My Mother retired in 1987, after teaching for 34 years..
    Her salary when she retired was about 35k per year…
    Her pension these days is about 25k after colas and other pension increases…

    My Wife started teaching in 1992.. Her salary these days is about 100k (6hrs/day 180 days/per yr)…. PLUS the bennies
    which are REAL good….. They even pay MY longterm care policy !!!!! I don’t work in the system…..

    There are excesses and problem on both sides….

    OH and MY property taxes are about 20k/yr………

    Steve in NJ

    1. DownSouth

      This may not be an outright lie, but it is the sort of distortion that is the stock and trade of that portion of the wealthy who do not want to pay taxes to educate other people’s kids and who can afford to send their own children to private schools.

      The average teacher salary in NJ is in the mid to upper 50s. The average starting teacher salary is in the high 30s. Over the past 10 years, teacher pay in NJ has increased 19%.

      http://www.employmentspot.com/employment-articles/teacher-salaries-by-state/

      http://teacherportal.com/teacher-salaries-by-state

      And if your property tax bill last year was $20,000 then you must live in one heck of a house, because the average property tax bill in NJ is only about $7,000

      http://www.nj.com/news/index.ssf/2009/03/rise_in_nj_property_taxes_lowe.html

      Of course there is a wide range in what teachers make, and the apologists for greed and selfishness always seize upon some exception and talk about it as if it were the rule. As one of the articles linked above explains:

      Teacher salary also varies according to education level of the teacher. A teacher with a four year bachelor’s degree may make less than a teacher with a master’s degree. The ranges for teacher salary in Chicago, IL vary from $37,372 to $89,620. This wide range obviously incorporates education level and experience of a multitude of teachers. Teacher salary also depends on what school level or subject teachers specialize in. A secondary school teacher may make more than a primary school teacher. In Chicago, a primary school teacher makes approximately $44,480. A secondary school teacher makes about $4,000 more, or $48,180. The average mathematics teacher makes $38,211, while the average science teacher makes $62,391. These teachers may make up to $52,977 or $87,946, respectively. A history teacher at the secondary level makes $38,256. The highest reported income for a history teacher in Chicago is $53,106. These wide ranges include teachers in public and private institutions at a variety of experience levels.

      1. Wendy

        $20K for property taxes in NJ may be a tad on the high side, but $7,000 is absurdly low. I sold my house in a mixed/middle class commuter town last year for $560k; taxes were $17k/yr. This is the norm. Some may say a house worth $560K is “one heck of a house” but it’s the same house you’d get for probably half that cost, and even far less, in other areas of the country.
        Property taxes in NJ are unbelievably screwed up, and they are going to be the noose that keeps tightening. NJ has to compete with other NYC-commuter areas which offer far lower taxes, albeit with no yards, garages, gardens, amazing NJ pizza and the like. A $600K condo in Brooklyn for example comes with property taxes of something like $1K to $3K/year. The disparity is truly shocking. NJ’s big problem is redundancy; every single tiny little town has its own government, school system, everything, and they are all redundant of one another. I personally know people in government jobs whose job duties take approximately 25% of the time they spend at work. The rest of the day is spent killing time, with no work to do. Sounds unbelievable, I know, but it’s true. This bloated wasteful system is completely entrenched; I don’t know how they eradicate it but the bills are now just literally too high. Look at how property values are falling in NJ, and they will continue to do so while the property taxes are so high, and the budget will force solutions – maybe not the best ones, as this article notes.

        1. eric anderson

          How do retired people live in New Jersey? My mother’s Social Security check is barely more than $17K annually. After paying taxes on a middle class home, she’d have nothing left for necessities?

      2. steve

        Downsouth,

        I’m not distorting anything… Those are ACTUAL figures, FOR REAL..

        Of course salaries vary by # of years working and Education level…

        But WE’RE not talking about average salaries.. We’re talking about PENSIONS IN NJ … And those pensions are based on a formula using ENDING SALARY (not average or starting) and # of years worked….

        For example: In NJ a teacher can retire with a full pension at age 55, if they have put in 25 years of service.. The pension would be approx 25 divided by 55 times the last years salary or about 45% of the final years salary, plus medical, dental and colas..

        As for 20k property taxes… 4br 2 1/2 bath house built in 1970… BUT the property it sits on has a great view…
        So they tell me the land is worth 700k and the improvement 180k….. 880k total assesed value…. It ‘s nice.. but it’s not a Mcmansion…. and it’s paid for….

    2. Richard Kline

      Oh hey ‘Steve,’ something I’ve noticed is that bought-and-paid-for, comment-hijacking, public relations crypto-commentors stepping into threads with hard-right factsheets tend to use shortened forms of typical white male names and have no comment history but are totally opaque. Like, say, ‘Steve,’, ‘pat,’ and ‘dave.’ I’d like to know who is funding your media-manipulation efforts, brother. And you are a guy, there’s a typical pattern to your word-choice, the education level presented and all the rest.

      You’re for real? Quick fact check: Where do you live? What’s the average tax base in your township or immediate area? What is it that your wife does? Specifically? What is her certification? How many years has she been in the system?

      Don’t want to share any of that background? Then as far as I’m concerned, you’re a plant.

      1. steve

        Hey s Rich,

        Can you read? Did you read my first post? It specifically say’s “My wife started TEACHING in 1992″…

        I’ll interpret.. My wife is a TEACHER. 2010-1992 equals 18 years of service now in 19th….

        That would be at the TOP of the salary guide in her district.
        Six years to go to a full pension….

        Monmouth County NJ

        PLANT THIS!!! (hand holding crotch, Jersey Style)

        (Just in case you still don’t think I’m from Jersey LMAO)

        1. JTFaraday

          ooh, Club Monmouth. Nice.

          Ocean view, to include Manhattan? Are you part of the Teabagger Crew over there?

  6. Pat

    What you say about states pinching money from the pensions may be true, but there is another side to the story. Here in California (SF Bay Area) many public employees (especially prison guards, police and firefighters) are vastly overpaid and have ridiculously generous pensions. Prison guards get paid close to $100k each, police $120-150, and firefighters $90-120k, and they get to retire in their mid 50s at almost full salary. These jobs are generally not demanding and do not require anything more than high school educations and skill sets. There is little serious crime in much of the Bay Area and the police spend most of their time looking for things to ticket, in order to justify their positions. Firefighters no longer have many fires to fight and spend most of the time sitting around the firehouse and answering minor medical calls. The unions muscled these high wages under the noses of amateur volunteer city councils and with the complicity of city managers during the go-go 2000′s. Because these terms are locked in by personal employment contracts (protected by “the sanctity of contracts” legal doctrine), they cannot be reversed. In many cities police and fire salaries and pensions run up to 60-70% of city budgets. California spends $9 billion a year on prisons, a large amount in comparison to the current budget deficit of $20 billion per year. So much of the state and local budget problems are due to these inflated salaries and pensions. The pension funds did not exercise due caution in investing their funds because they knew that the state would always be on the hook if the money disappeared of Wall Street.

    1. Charlie

      Americans are bombarded with the narrative that unions are inherently liberal, peopled by liberals, supported by liberals…point of fact, the vast majority of prison guards, police officers and firefighters are conservative.

      1. bob

        You just described the “the tea party” movement, as I see it. The most “radical” are usually direct or spousal beneficiaries of state run health care.

      2. jake chase

        Extortion comes naturally to every monopolist. I think it was the Wobblies who called for One Big Union. Big Bill Haywood was murdered in 1910, Debs was imprisoned in 1920 and union socialism disappeared. Today’s unions are content to rip off the non-union work force.

        1. KFritz

          Fail. In construction at least, union workers keep wages UP for non-unionized workers AND contractors.

    2. ScottS

      I heard there was a financial crisis on Wall Street, leading to fraudulent foreclosures, which lead to a huge decline in property tax revenues. Maybe that has something to do with the state budget problems.

      Seriously? A bunch of unsourced claims. I wonder where these numbers come from. Do you just take hourly wages and multiply it by 40hours/week x 52weeks/year? A lot of these union positions, like auto workers, don’t work 52 weeks a year. Does the number also include benefits, and assume that every employee’s benefits cover a family of 5? Please show your work.

      In fact, I know a prison guard in California. He says they pay more to keep a prisoner than he gets in salary, which means he isn’t making more than ~$35,000 a year. He sure as hell doesn’t drive a Mercedes, and lives in one of the cheaper parts of central California.

      If he has a decent pension, SO WHAT? We should all be so lucky. This 401(k) BS just means that your private company can yank its matching whenever it feels like it. Color me unimpressed.

    3. reslez

      Yeesh. You can tell people are riled up when they start ranting about what an easy job firefighting is. Firefighters retire in their 50s for good reason. I don’t know how effective a 65 year old would be in dragging a typically obese American from a burning building or chopping a ventilation hole in an exterior wall with an axe. Yes, unlike in your fantasy it really is an extremely physically demanding job.

      San Francisco firefighters respond to between 120 and 150 working fires a year. In addition to fire emergencies they also respond to medical 911 calls — ALS ambulances (that means advanced life support) — 25 a day or around 9000 per year. Of course firefighter/paramedics actually turn a profit for the city which gets to charge the patient’s insurance for a very expensive ambulance ride. Firefighting is highly specialized work and these days integrated into homeland security and incident response, including HAZMAT. Most of the homeland defense money goes to police, though, which is why a lot of cities have cut their fire departments in the last few years.

      Most San Francisco firefighters live in the city which as you know has quite a high cost of living. Unlike you I won’t pretend to know what their average salary is but I expect it to be higher than it is in less expensive cities.

    4. Richard Kline

      Oh hey Pat, cherrypick your bogus arguments, that’s the rhetorical ticket. Except you leave out many of the relevant facts. All of those professions you mention are high risk: that’s factored into the time-served and salaries. They have excessively long hours; that’s factored into the salaries. Those pensions for prison guards you mention? Oh they’re high, because a judge set them high. Why did he do that? BECAUSE THE STATE HAD BEEN CHEATING THOSE GUARDS FOR YEARS underfunding their pensions. So now, yes, they’re high ’cause the guys were shortchanged for a long-time.

      Nitwits only look at the tail end money quote in a discussion. You have to look at the whole discussion to understand what you’re talking about. Now, I’m no great fan of prison guards or police, but if you, Pat have a problem with somebody retiring _with pension_ after, 30+ years in a high-stress, high-risk, FOR THE PUBLIC job (and you have to have that kind of time in to retire with full benefits, or else stay on longer), than clearly you just don’t want a civil society around you. If that’s the case, Pat, by all means huddle in your house with your gun with no police and the bad guys all around. Most of the rest of us are willing to pay for a civil society—but you can put a ‘no police needed’ sticker on your forehead and good luck to you.

  7. scm0330

    Public sector unions have no “natural” adversary in the bargaining process. The taxpayer gets screwed, and the overall competitiveness of state and regional economies heads inalterably south. The public sector ends up with an increasing share of a pie that is shrinking in relative terms. Public unions have a hammerlock on their bought-and-paid-for pols, who are eager to dole out goodies to buy votes. What’s been amusing to watch/read/listen are the torutured arguments of the public union enablers (like this article above) in defending the system, which is indefensible.

    1. ScottS

      You can’t be serious. No natural adversary? You think public administrators just concede large swathes of their budget to employees without a fight?

      Teachers have to negotiate cost of living each and every year, and they don’t always get it. They are, in effect, getting a pay cut more years than not. Administrators know that their paychecks get carved out of what is left after the teachers get paid.

      No natural adversary? Yeah right.

    2. Richard Kline

      So scm0330 (is that short for scum? Just curious . . .), you’re out of your mind. Public unions do not have any kind of whold on their hiring authorities, and are heavily targeted by ‘I don’t want any taxes’ pols. The issues with public employees are not in the land of over-payed or over-pensioned: those are fabricated, billionare-funded memes. Salaries in the public sector lag behind the private sector; seriously, just do your homework guy. The issues with public employees tend to be under-performance because it’s hard to fire and somebody’s gotta do the job. Beef there if you want, but arguing against paying for work performed is just . . . uncivil.

  8. eric

    Thank you for shedding some light on this issue. Most public employee pensions are very modest, and governors who skip payments to their pension funds, like corporate executives who do the same thing, are criminals and should be publicly excoriated if not prosecuted. The union-bashing that has become so common these days is an infuriating example of the divide-and-conquer strategy in the class war of the rich on the poor.

    1. Doug Terpstra

      Well said, eric. The raid on worker pensions is a merely a foretaste of the coming attack on Social Security. It is a clear enactment of the formula in the “Shock Doctrine: the Rise of Disaster Capitalism” by Naomi Klein, wherein engineered crises are used to demoralized, divide and disempower the working class and loot the treasury and privatize the commonwealth.

      It’s been practiced again and again throughout Latin America, and I am convinced that at some levels this is premeditated here in the “homeland” (detestable term). Although I hope it does not end with heads on pikes in the streets, I do expect the heads of the banking cartels, including Bernanke, to lose their freedom for life if this is played out as plotted.

  9. MikeNY

    You can blame the banks until the sun goes out. The fact remains that the 2003-2008 “recovery” was fictitious, a bubble economy, the spurious gains of which most of us in the private sector have now surrendered. Yet our total tax levy has only gone UP.

    Why do you keep insisting that government employees be exempt from the pain?

    1. liberal

      “…the spurious gains of which most of us in the private sector have now surrendered.”

      LOL. The banksters haven’t surrendered theirs. Their parasitism is in the hundreds of billions annually, AFAICT.

      1. MikeNY

        You’re assuming, for the sake of being snarky, and setting up the flimsiest of straw-man arguments, that everyone who DOESN’T work for the government sector in this nation works on Wall Street.

        Grow up.

  10. RichFam

    A couple thoughts:

    * These pension funds were underfunded before the financial crisis. A pension fund is a stream of cash flows and so properly valuing and hedging those cash flows requires much higher exposure to fixed income assets in the fund mix. If the people managing and consulting these pension funds understood that better these funds would have been in better shape. So blaming the “tbtf” is an easy thing to say but is basically bull.

    * Public unions have become important voting blocks in local elections so in seems less than honest to fail to at least acknowledge the conflict of interest. Local politicians who have a responsibility to tax payers negotiated with unions over pensions as union advocates not taxpayer advocates.

    * Before turning to taxes better pension governance would be a better place to start with fixing this problem. The right has a few good points as does the left on this subject. But what “millionaire” would move to NJ or stay there if they could avoid it?

    * I would point to corporations requirements regarding pensions as a place to start. Companies have requirements on the discount rate and the level of funding that force them to act economically rather than politically as it related to pension benefits.

    1. dave

      1) Definitely true. Both unions and politicians have known for a long time that pensions were being underfunded and did nothing. If your going to rely on retirement benefits you have a responsibility to fight to have the necessary assets put aside for them.

      People make a big deal that public employees earn less in exchange for promised benefits. There is a reason why they accept money in the future instead of money now. Because its easier to get money in the future because politicians have no intention of ever paying out these claims, that’s why they don’t put aside the assets. When public unions forewent money today for money in the future it became a risk, a risk they did not manage well. An egg in hand is worth two in the bush.

      2) Definitely. What bothers me about the public unions is how easy it is for connected people to exploit them. The cop that puts in a ton of overtime on his last year so he gets a massive pension. Etc. This stuff never gets fixed because the benefits are sacrosanct, no matter how unfair or lacking in common sense they are.

      3) There is no easy fix now beyond everyone taking a hit.

      4) And here comes my pet peeve. Private corporations do this too. When you try to suggest they use more reasonable assumptions they balk. And why shouldn’t they. Why should GM use more conservative pension assumptions then the state of Michigan? How can you regulate a company use better assumptions when your own pension plans assumptions are junk?

      Public pension funds have set the example for irresponsibility, and everyone followed.

      1. Jim the Skeptic

        Dave said: “Public pension funds have set the example for irresponsibility, and everyone followed.”

        You must be very young or a Republican.

        Public pensions have been promised and paid for since before 1935, thus some of them were able to opt out of Social Security.

        The ‘Employee Retirement Income Security Act’ (ERISA) was passed into law in 1974 because of the problems in the private pension funds. Pensions would be promised if you worked until age 65 then as you approached age 65 you would be fired. ERISA set up a vesting system that stopped that practice. Unfortunately that law did not go far enough and companies found other ways to STEAL pension funds.

        The funding problems with public pensions started about 1996 as states withheld funds to balance their budgets during recessions.

        So the truth is that private pension funds have set the example for irresponsibility, and the politicians have followed.

        1. dave

          I’m an actuary. I know a thing or two about pensions. The worst offenders when it comes to setting bogus actuarial assumptions are public pensions. Politicians do not care what happens in the future. And union leaders are happy telling their membership that they got them all these wonderful benefits without actually putting in the hard work of holding politicians feet to the fire when they underfund them.

          Do I care what the track record was a few decades ago. No. We weren’t dealing with a massive demographic crunch in the 60s. We are now. I know what decisions have been made on public pension funds over the last two decades and I know they are garbage.

          1. Jim the Skeptic

            Dave said: “Do I care what the track record was a few decades ago. No. We weren’t dealing with a massive demographic crunch in the 60s. We are now. I know what decisions have been made on public pension funds over the last two decades and I know they are garbage.”

            Ahhhhh, a Republican. Never to be confused by the facts of decades ago! Public entities always cause more problems than private ones, right! :^)

            And the actuarial basis of pensions is not nearly as important as the number of potential retirees? This from an actuary! Reminds me of the old joke about the business that lost money on every sale, but it made it up in volume!

            Dave said: “I’m an actuary. I know a thing or two about pensions. The worst offenders when it comes to setting bogus actuarial assumptions are public pensions. ”

            So you believe that public pension funds pay actuaries to demand the government pay excessive funds into the pension plan? As I said in another post one of the my state’s pensions funds actually sued the state for failure to adequately fund that pension system. (In the late 1990s)

            Have a good day.

          2. dave

            “And the actuarial basis of pensions is not nearly as important as the number of potential retirees? This from an actuary! Reminds me of the old joke about the business that lost money on every sale, but it made it up in volume!”

            What are you even trying to say here? Its easy to fund current pension expenditures from current tax revenues when the taxpayer to retiree is favorable. It is hard when it isn’t. Paying for all those future retirees requires putting money aside now, and that’s hard. Its the first time we’ve had to do so on a mass scale because in the past the demographics were always favorable.

            “So you believe that public pension funds pay actuaries to demand the government pay excessive funds into the pension plan? As I said in another post one of the my state’s pensions funds actually sued the state for failure to adequately fund that pension system. (In the late 1990s)”

            There is nothing excessive going on here. The states use ridiculous assumptions in setting reserves that make them way to low. Simply normalizing them to something realistic would require higher contribution rates. Unions don’t pursue this, generally, because higher contribution rates means higher taxes, and then they have to go to justify to the public why their taxes are higher. Its easier to tell union employees the reason they should accept lower wages is because of the amazing benefits they will receive at some points in the future (even though nothing is being set aside for them) so that they keep paying union dues and you as the union boss get paid. If it blows up on the next union boss its not your problem.

          3. KFritz

            Are you a Republican? Do you think the public sector is inherently parasitical and wasteful? I didn’t detect that in your comment.

      2. RichFam

        The Pension Protection Act (Bush 2) forced pension funding onto the company income statement and requires contributions to true up underfunding. When a company is underfunded and can’t find the money to contribute, usually they are also operationally/financially troubled (GM).

        As far as this whole thing about over promising benefits and pay back to unions, I have no idea what we should pay a teacher or a policeman in retirement only that governance is poor in how its negotiated, managed, accounted for, etc… As for as I’m concerned we should pay our (good) teachers as much as possible. I think an honest accounting of it (like counting the pension deficit in budgets and honest dealing on public union retirement packages) is fair to all taxpayers.

        1. Jim the Skeptic

          RichFam: “As far as this whole thing about over promising benefits and pay back to unions, I have no idea what we should pay a teacher or a policeman in retirement only that governance is poor in how its negotiated, managed, accounted for, etc…”

          I think the public should be very concerned about governance. Unless the news is completely made up, some states have increased pension benefits beyond any reason. I do not believe there are many of those states. State legislators are taxpaying citizens too.

      3. Richard Kline

        So dave: “Both unions and politicians have known for a long time that pensions were being underfunded and did nothing.” That is total bullshit, and I find no need to be polite about it. We’ve had thirty years of public unions being sandwiched between pay cuts or pension underfunding. There are only so many battles you can fight at any one time. Unions have known and argued about this underfunding FOR THIRTY YEARS. Where were you, dave? I know those arguments, but the major media of course couldn’t find too much ink or pixels to talk about these problems. Unions have been fighting to hold on against unending takebacks since the 70s.

        Since you obviously don’t know what you’re talking about, I’m not even going to bother with the gross canards in the rest of your remarks. (And by the way, you wouldn’t be a paid media-planter for the far right, would yah, ‘dave’? Just asking when I see an anonymous bullshit piece that’s a paste-up of hard-right talking points . . . .)

  11. Jim the Skeptic

    Across the country, State legislators passed the laws setting up or modifying the pension plans. Governors signed those laws.

    Public employees did not have the power to cause the laws to be enacted. They simply took jobs based on salary and benefits. They are better educated than employees in the private sector, tended to value security, and took the longer view.

    During the last 30 years, private pension funds were being raided by owners, purchasers, and bankers sponsoring hostile takeovers and some not so hostile. The courts approved that theft. Even blue-chip companies such as IBM tried to convert their defined benefit to defined contribution with formulas that deprived older workers of benefits already earned!

    During the last 15 years, state legislators underfunded the public pension funds. My state was legally required to provide funding at the level set by the actuary. When they did not the pension fund sued the state over that issue. Even that has resolved the issue.

    The size of pension benefits is not the main issue. If benefits have become overly rich, rewrite the law so that future retirees get less.

    The main issue is that pension funding in this country is scandalous. This attitude has gone so far that now the claim is being made that even promises of Social Security benefits do not have to be fulfilled! That funds collected specifically for Social Security could be used for other purposes!

    The plain truth is that our society have become corrupt.

    Our grandfathers sealed deals with handshakes, their word was their bond. No one would trust such arrangements today. Written contracts are required, but those contracts no longer require a “meeting of the minds” which was a traditional requirement. Contracts are riddled with gotchas! Anyone acting like this in our grandfathers time would have been ostracized.

    What do we do about this corruption. When someone tries to abrogate some obligation, I call him out.

    When some slimy bastard says that Social Security recipients can be screwed, I ridicule the theft in the simplest, harshest terms possible.

    Any foreigner buying 30 year US Treasury bonds must be certifiably insane!

    1. Jim the Skeptic

      Oops.

      “Even that has resolved the issue.” should be:

      Even that has not resolved the issue.

    2. Charles Kiting

      Public employees did not have the power to cause the laws to be enacted.

      WTF?

      Teacher strikes, transit strikes, and public safety strikes (and even mere threats of strikes) are indeed power to cause legislative action. The idea that unionized public employees don’t have the power is ludicrous.

      The unionized labor isn’t the whole problem, but they are a significant portion of it. Another portion are the cherry-picked actuaries that provide figures people want to believe instead of providing realistic numbers. In the 60′s, did any actuaries for City Of Detroit pensions forecast a 50% drop in population? I doubt any did, but you can rest assured that an actuary that DID forecast that was immediately replaced.

      1. Jim the Skeptic

        Charles Kiting said: “Teacher strikes, transit strikes, and public safety strikes (and even mere threats of strikes) are indeed power to cause legislative action. The idea that unionized public employees don’t have the power is ludicrous.”

        In my state there are no state recognized unions for public employees and so they can’t strike. And guess what, they have a pension plan anyway! But I don’t want to confuse you with the facts! :^)

        I would never accuse you of being a Republican, you seem more like the Tea Party type to me. Very very angry.

        Sorry to hear about your wife beating, family deserting grandfather, most of us had more normal families. Our grandfathers made agreements and lived with them.

        You seem to believe that corruption is the norm! Good luck.

        1. Charles Kiting

          Jim, you do realize your state is the exception rather than the rule? Your state may be in better financial shape so perhaps the problems others are feeling aren’t hitting as close to home for you as they are for others. But I am merely projecting.

          Again, cherry-picked actuarial analyses are certainly not the province of public pensions, private pensions were there first.

          You of course are free to make the mistake of labeling me whatever you want.

          1. Jim the Skeptic

            Charles Kiting said: “Jim, you do realize your state is the exception rather than the rule? Your state may be in better financial shape so perhaps the problems others are feeling aren’t hitting as close to home for you as they are for others.”

            The majority of states have problems but they have been and will continue to manage them. I think a minority of states have huge problems for a range of reasons. New York, California, and Illinois apparently have been ignoring their problems. My son in law was originally from Chicago and he complains all the time about the public pension systems in Illinois.

            I just don’t believe it is fair to blame the employees. GM and Ford did that for years, until foreign car makers came into the country and used those same employees to kick their butts.

            If states made bad decisions on their pension plans then they need to correct that situation. States should make the needed changes, if the employees don’t like it, they can quit and find other employment. If they strike, fire them.

            Don’t me wrong, we all have very good reasons to be very angry about the government debt, and the policies that removed tariffs and killed off good paying jobs in this country.

            I have been a registered Independent for 35 years. I have just been trying to send a message, “None of the Above”. Not on my ballot, but I wish it was! :^)

            Sorry, I will not excuse corruption. Reneging on agreements after the fact is only done by slimy bastards.
            It was wrong when private employers did it, and it will be wrong when government does it!

            Have a good day.

    3. Charles Kiting

      Our grandfathers sealed deals with handshakes, their word was their bond.

      My grandfather beat his wife, ran out leaving her with 2 kids, and never paid one cent in child support.

      Stop with the fairy tales already. Our grandfathers were as corrupt as any other generation, that’s why the handshake deals went the way of the dodo.

    4. Charles Kiting

      Our grandfathers sealed deals with handshakes, their word was their bond.

      You are right about that. Our grandfathers came up with that scam, too.

      But I believe anyone taking or giving a 30-year mortgage is either insane or corrupt. That’s why they were so rare prior to FDR. The only place they were common were mutual societies which required extensive vetting before you were allowed in (to minimize the free rider problem).

      (Before you accuse me of being a Republican, the 2 largest de-mutualization waves came because of legislation enacted during the Nixon and Reagan terms. These were cheap ways to raise quick capital, but came at the cost of increased risk years later.)

  12. Mike M

    “And note Corzine did attempt to remedy the situation, increasing contributions and cutting benefits, but did not go far enough.”

    Corzine made some very public announcements that he was going to tackle this problem, which took a ton of cajones, considering he did that in bubbled up times before the crash, and he would be urinating into the wind blown by the corrupt state legislature to do so. Unfortunately, he didn’t wear his seat belt one day on the lower GSP, and, well, six months in the hospital and rehab robbed him of any kind of momentum he may have had, which was very little.

    “Although Christie has been gunning for the unions in his zealous efforts to address the budget shortfalls, inconveniencing those at the top of the food chain is off the list. Christie nixed a millionaire’s tax last year.”

    Now, please. You know, and I know, and Christie knows that the governor of Connecticut was chomping at the bit to start advertising for all of the rich people to move to his state as soon as that tax was enacted. Either that, or maybe Colorado, Arizona, Nevada, Utah, etc, etc,. I have lived in NJ for a large portion of my life – trust me, it isn’t worth any more taxes than present levels. Rich people are much more able to just get up and move.

      1. Mike M

        Absurd argument coming from, of course, the NYT. How do you think people become “rich”? Let’s forget about old family money and the easiest way, inheritance, and concentrate on the other way – they start and run a successful business. Now, you tell me who in their right mind will start a business in New Jersey or New York with all of the regulation, taxes, and outright corruption they would have to deal with. Have you been to upstate NY? They just lost two more seats in congress due to population drain. Where are those people going? The sunny, low tax and regulated West and South. Now, you want to tax the owners and high employees of those same business and corporations that have decided to stay? How old are you? Have you watched corporate flight out of the Northeast over the past forty years? Did you think that was just because the CEOs wanted to play golf 12 months a year?

        I will be retiring in a year or two, and, first priority is to get out of NY state and move to a low cost, low tax state elsewhere. I would love to live upstate around Saratoga Springs, but, nope, they lost me, and, I dare say, hundreds of thousands more. Now, you tell me what that will do to revenues when middle class people like me are still escaping in droves. It’s going to be damn hard to support those public pensions with my tax dollars gone, and, the irony is, most of those public monies are probably being spent in Florida or Arizona or North Carolina for thirty to forty years, because that’s probably where a lot of public employees retired to those places. That is not sustainable.

        1. ScottS

          The rich don’t work and don’t pay taxes. We don’t need or want the rich. Let them leave.

        2. Iolaus

          It is not “an argument” from the Times. It is an actual piece of reporting, with quotes from researchers. Surprising, I know, from the Times, but real nonetheless.

          1. Mike M

            That’s being naive. Do you not think that the NYT, like most news sources these days, has an agenda?

          2. horatius

            The NYT has David Brook, Ross Douchehat and Tom Friedman working for it. Not a credible source of news anymore.

  13. Jim Haygood

    Public employees should be screaming for ERISA to be extended to ALL pension funds, public as well as private.

    As the recent crisis has proved, it is no more acceptable for the public sector to have the discretion to underfund pensions than it was for the private sector up until 1974. It’s a proven path to disaster, regardless of the whether the plan sponsor is public or private.

    Likewise, participants in government benefit schemes (that’s ALL of us, via Social Security and Medicare) should be demanding for these irresponsibly managed plans to be brought under ERISA. An immediate result is that trustees would have a fiduciary obligation to beneficiaries, not to corrupt politicians. A second prompt result is that the monstrous underfunding of these plans would smack the public upside the head like a day-old dead fish.

    Federal benefit plans are the biggest scams of all. That they refuse to conform to their own law (ERISA) setting out prudent practices for pensions is prima facie evidence of bad faith.

    Bankrupt state pension plans in Illinois, NJ and Big Kali are just the hors d’oeuvres; Social Security and Medicare are the main courses at the social bankruptcy ball, to be served up in a spectacular ‘Bonfire of the Middle Class’ flambé. Enjoy!

    1. Jason Rines

      I have seen some cuts in Medicare benefits in the Health sector I am working in but they are items that are mainly cosmetic, medical devices such as scooters, that kind of thing.

      However, I don’t expect much in terms of serious cuts at all to Medicare. The Federal Reserve will continue to devalue the currency and the insurance companies already passed through the inflation onto the customers. Did you see your health insurance premiums go up in 2010? I sure the heck did, it was a 21% increase in three months after Obama Care passed.

      There is no other way out now beyond devaluation. That doesn’t mean I absolve the model and individuals of responsibility, it is what it is at this point.

      Benefit increase freezes are what is taking place over cuts with the poublic unions.

      As the currency lands around .55-.60 representing the true value of America’s assets, income to liabilities, the cop or teacher (mainly management) getting that $80k a year retirement plus insurance will also have their purchasing power reduced. All this said, the playing field still must be leveled back toward productivity.

      1. horatius

        Most of the provisions of Obamacare don’t take effect until 2014. Thanks for playing teabagger.

  14. ep3

    Yves, thanks for fighting on the good side of this.

    But I disagree that the unions should give a little. That sounds too much like the “Obama negotiating tactic”. I think the unions need to stand their ground, walk out, strike, refuse to budge. Let the other side come to the table first. That a**hole Christie has the high ground and is going for broke. The unions need to take a stand to regain some leverage.

    1. dave

      Whose going to strike? The retirees? They already don’t work.

      Maybe the younger workers, but oh wait the union agreed to separate pay scales and rules for them because it was the only way to meet pension obligations.

      1. Cynthia

        Getting nowhere trying to fight the fat cats on Wall Street sends the message that we have more to gain than lose by joining in on what they are doing, which is to milk Uncle Sam for all he’s worth.

    2. Jojo

      I agree. I would love to see the unions go on strike. Because there are a whole lot of unemployed people who would be willing to take their pay & benefits at 50% on the dollar.

        1. Jojo

          Sure, let the union members join the rest of us at the bottom.

          Oh, you say we should raise the bottom level higher?

          Sorry, you are in the wrong country. We only want to help the peasants in 3rd world countries raise their standard of living.

  15. Max

    Let me add that this coordinated attack on unions is part of an attempt to hollow out government agencies so their functions can be privatized. We are witnessing one of the final chapters in the corporate takeover of the last profit center in America: government services. Soon your roads will be cleared by Halliburton, and your streets will be patrolled by Blackwater.

    1. Cynthia

      Why is it perfectly okay for fat cats on Wall Street to act as a union in order to buy influence in Washington and wield power in the boardroom, but when working stiffs on Main Street try to do this, they are portrayed as greedy and lazy and demonized as commie terrorists, who are out to destroy our flag-waving, baseball-playing, apple-pie-eating form of economy?

      1. dave

        Because they are both wrong and letting wall street off the hook doesn’t justify letting greedy unions off the hook. Both of them should be taken to task in the name of justice.

        1. Mannwich

          But both won’t. Guess which one won’t? On principle alone, if I’m a union beneficiary (I’m not), I dig my heels in until our “betters” sacrifice something significant in “for the sake of the country”. Until then, they can go pound sand. Give up an inch, and the elites take a mile, no, far more than that.

    2. Charles Kiting

      A distinction without a difference. In the past they were cleared by Waste Management and patrolled by Pinkerton.

      If you think jacking up taxes on rich individuals and rich corporations is going to lessen their influence in government, you don’t know history very well.

      You aren’t going to flatten the bell curve. You can tax the existing rich until they are no longer rich, but they will be replaced by new rich and they will peddle influence exactly like their predecessors.

  16. Matt

    Whenever there has been derivatives, fractional reserve banking for example, there have been financial bubbles and crashes. Whether talking tulip futures, South Sea Stock futures, US housing prices, or the TBTF shadow banking system.
    To expect the people in some place like Montana to be taxed to bail out grossly underfunded operating and pension budgets in California, Illinois, or New Jersey, is beyond my ken.
    So I fully agree the leaders of NJ overpromised, underfunded and stole the pension funds. So either increase NJ taxes or cut the pensions for it is New Jersey’s problem.

    1. reslez

      Since you’re so eager for states to fend for themselves, why don’t we also say that Montana, which receives far more loot from the federal government than it pays in taxes (in fact it’s one of the worse offenders), will instead pay and receive nothing; and likewise for New Jersey (one of the worst off) which will get to keep in state all the wealth it normally sends to Washington.

  17. Matt

    The history of pension abuse in the US continues unabated by ERISA or the passage of time. My aunt lost her city pension in the 70′s when the city sold the hospital to a for profit conglomerate. Today we have non profit pension plans going bust and they are not even covered by the PBGC.
    And ERISA is of no help for those who worked less than 10 years under the same pension plan, there is and was no job portability protection.

  18. Good ol' Murica

    F$%k it! Every one needs a pension. We already see people dying on the stree. Are we trying to increase the number of people that die, needless, slow, emaciated deaths? Yes of course we are! It really begins, no where to go but down. Perhaps we’ll start shooting each other on the way to work the way Iraqis did when the scraps got lean. I hope not, but hey, history repeats itself.

    1. Mike M

      Well, actually, life expectancy has never been higher, which is, of course, part of the problem, when some retire at 55 with very generous benefits, and may very well make more in retirement than they did working. You tell me how any public or private entity can afford to pay for that.

      1. ScottS

        Or maybe infant mortality has gone down, increasing the AVERAGE life expectancy disproportionately. Please show your data.

        1. Mike M

          The average life expectancy of an American male in 1900 was barely 50 years old. Women weren’t very far behind. By the time FDR signed the SS bill, (I think that was 1933), it had risen to the very low 60s, which makes the retirement ages make sense. Today, what, with many diseases eradicated, medical care very much advanced (heart transplants were invented in the 60s, not they are somewhat commonplace), and physical work done by few, we can count on the high 70s. I hope.

          Here’s a zinger for you, in case you missed it on New Years, when it was reported. As of Jan 1, 2011, 10,000 Boomers a day will turn 65. That’s 3.65 million a year, for 19 years. And, there ain’t no stopping that train, as we all know. Remember that figure when you try to ignore the incredible cost to our society that will inflict. Sure, sure, you can argue that it just isn’t fair that certain people are being blamed, but, bottom line, we will not be able to afford this unless the Canadian geese that bespoil my golf course start dropping golden eggs instead of that ugly green stuff they leave in the millions.

          1. Mike M

            It’s not bad, per se, but, it’s just going to be so damn expensive at a time when most have nothing saved, and our entire society is in debt to it’s forehead.

          2. ScottS

            Mike,

            It’s not bad to think about how to deal with the bulge going through the snake.

            But your premise is that people are spending more of their life in their unproductive retirement years.

            I still am convinced that infant mortality is a significant contributor to the AVERAGE life expectancy.

            So if the entire population was one child who died at birth, and the mother who lived to be 50, AVERAGE life expectancy is 25.

            If medical progress let that child live through birth and on to adulthood, let’s say the child also lives to be 50. AVERAGE life expectancy is now double, at 50 years.

            We’ve doubled the number of productive man-hours, without an increase in unproductive retirement years.

            So aggregate statistics can be misleading.

            Furthermore, the upshot of a significant number of baby boomers retiring is that they will draw down their investments and start consuming. I think we can all agree that too much money is invested, not enough is being spent. That will be a bonanza for the economy.

          3. Mike M

            Scott

            Too much money is invested??

            They don’t have any money. One third will only have SS, nothing else. The middle third have maybe 20,000 savings, a lot of HELOC debt, and minimal job security. Let’s no even talk about health problems from obesity and sloth, with no or minimal health insurance. The top third aren’t exactly partying like it’s 2004, again saddled with enormous mortgage debt (at that age! duh!) and maybe enough savings to get by in small town Kentucky until they leave us. Well, wait, there’s the top 5%, who will do well. God bless their thieving little hearts.

            They all blew it all on the real estate scam, thinking that would make them comfy in “retirement”. We all see how that worked out. I don’t get that part, anyway. You have to live somewhere, so, what was supposed to happen, they were going to cash in and live on a hammock somewhere on the Yucatan? dumb.

      2. reslez

        Well, actually, life expectancy has never been higher

        Average life expectancy in the U.S. dropped in 2008, the most recent year for which we have figures. This was widely reported.

        Happily, life expectancy for the rich in the U.S. continues to greatly exceed that of the poor and middle classes. (link) It’s reasonable to expect the gap to widen given the skyrocketing cost of quality medical care and the deepening poverty of unemployed and disemployed workers.

    2. ScottS

      Quite right.

      The madness of it all is that we are fighting over resources that aren’t even scarce.

      Energy and food and housing are all plentiful. Even water isn’t a problem for the most part. Why do we have to moralize and pretend that some people deserve more resources, especially when it isn’t certain that they have done ANYTHING to merit it.

      1. KFritz

        On which planet? I live in California, and water is NOT overly plentiful here. For most of the planet, the assertions of abundance are a non-sequitur.

        1. ScottS

          As I said, water is not scarce for the most part. In SoCal, we have a fragile network piping us water. It is certainly something to plan contingencies for, as is energy (and consequently, food).

          My concern is that we are fighting over resources that aren’t currently scarce. Not that they couldn’t be and probably will be at some point.

          It’s hardly a non-sequitur. The entire profession of economics is deciding how to allocate scarce resources. The resources we are fighting over, I contend, aren’t even scarce.

          If someone tried to tax and regulate oxygen consumption, you would call them crazy since there’s no apparent scarcity of oxygen. But we constrain distribution of food out of habit, not necessity.

          Ammonium nitrate fertilizer has lead to the production of more food than we can consume. Less than 3% of the population is required to produce food, and we already subsidize most of their costs. Why bother rationing it? The argument for rationing resources has become more moral than practical.

  19. Mike the Mad Biologist

    Did public sector employees pay what they were obligated to pay into their own funds? Yes. Did states, on behalf of the taxpayers, meet their obligations? No.

    In NJ, this went on since 1995.

    This is obviously the unions’ fault.[/snark]

      1. ScottS

        The taxpayers got the benefit of NOT meeting their obligations. They have no responsibility to make things whole?

        1. Mannwich

          And, the taxpayers voted in these scoundrels who made these deals with the unions. Remember the “sanctity of contracts” meme? It’s all unbridled short-term-ism IBGYBG (“I’ll be gone, you’ll be gone”) in action. Reaping the fruits of that now.

        2. Charles Kiting

          Taxpayers on the whole saw no reduction in taxes whatsoever. Any federal rebate check was swallowed up by increased local sales taxes, property taxes, and interest payments. We may agree that the top 5% saw a practical increase in monies, but the top 5% still only gets 5% of the vote.

          If you want to argue that the top 5% has lobbying power, then you’re arguing that the popular vote doesn’t matter all that much.

          Let’s also not deny that an increasing percentage of the citizenry are getting government checks. This tends to put more votes onto the side of keeping the status quo.

          1. ScottS

            Who said anything about a tax reduction? Taxes were not increased as they should have been to cover the pension payment, or the bond wasn’t issued to cover it, or whatever financial wizardry you want to use to fund the pension.

            Taxpayers didn’t suffer the tax increase they were on the hook for. So, they benefited. You’re saying it’s too late, the window has closed? Sure.

            If my cable bill gets lost in the mail, I’m still on the hook to pay. We had an agreement.

            So if the contract was agreed on and the taxes weren’t raised to cover it, or the budget reallocated to cover the obligations, isn’t that contract negotiated in bad faith? That is, they had no intention of making sure it happened.

            You seem to be defending a contract negotiated in bad faith. I KNOW that wouldn’t fly if it were the banks were the aggrieved party. Hell, they get bailouts when they buy their own fraudulent products and those go bust.

      2. Mike the Mad Biologist

        Charles,

        The taxpayers were the dolts who elected said officials. It went on for fifteen years–that was time enough to elect people who could have fixed the problem.

        Personal responsibility shouldn’t be the sole purview of single poor minority mothers. Or schoolteachers. Or fireman…

  20. Brian

    Some things in Yves Smith’s above post is valid, however, much of the pay and benefits of public workers were unrealistic to begin with. More importantly, Ms. Smith doesn’t address two points on the other side of the coin: (1) public workers (via public unions) derive their income from an involuntary source and is very much subject to abuse; and (2) public workers have a monopoly on services (like fire, postal, trash, etc). So are monopolies good when its a labor monopoly or a governmental monopoly?

    Yves Smith’s analysis of the banks and the financial industry is superb, and her book makes a host of extreme insightful points, but it seems on this issue of the government’s role, analysis breaks down and with it objectivity and it simply become impassioned arguing: this is for both sides of the debt (Mike Shedlock moralizes more than presents facts against public workers). However, I’ve worked in the public sector and there is a lot of abuse and over compensation–or I suppose the Post Office is in deep financial problems because it’s run efficiently?

    1. ScottS

      Government exists to fill the gaps in the private sector. Public parks shouldn’t take in revenue (at least, enough to cover expenses). That’s what makes it a public park. Most people couldn’t afford to visit parks if they were private, and had to generate a profit — or, more likely, there would be no public or private parks.

      So what about throwing public funds at a private company to manage the parks, you say? This lends itself to cronyism and abuse much worse than whatever it is you imagine park rangers are getting away with. Look at the defense industry. Billions for a stealth plane that doesn’t exist, and wouldn’t be useful if it did.

      And any publicly-funded private service would have to make a profit, by definition. That’s fine when the good or service is a complex commodity that would be silly for the government to get into, like pens. It would make no sense for the government to manufacture pens. But paying a private company to do something as bespoke as forest management is simply a giveaway to that company, which has little-to-no competition. And then you get graft and crony capitalism.

    2. reslez

      Some things in Brian’s above post are valid, however, much of the pay and benefits of banksters were unrealistic to begin with. More importantly, Brian doesn’t address two points on the other side of the coin: (1) banksters (via government guarantees) derive their income from an involuntary source which is very much subject to abuse; and (2) banksters have a monopoly on services (like lending and public deposit guarantees, access to the Federal Reserve discount window, etc.). So are monopolies good when it’s a bank monopoly?

      Brian’s analysis of the public labor unions and the public sector is well-intentioned, and his comment attempts to make some insightful points, but it seems on this issue Brian’s analysis breaks down.

      The truth of the matter is this: The banks were in trouble due to their own stupidity and were bailed out, to the benefit of billionaires. The public unions are in trouble due to collapsed tax revenue caused not by them but by banksters. Yet the unions will be crushed into subservience because they are average citizens rather than criminal billionaires. The money that was found for the banks will magically vanish for hardworking citizens and we will turn members of the middle class into residents of the poorhouse. And deluded members of the middle class will cheer it on.

  21. Bill Jones

    The problem is simple:
    NJ population growth over the past decade just over 1%.

    NJ increase in GDP 34%.

    NJ increase in Govt spending >67%.

    What did the fools think would happen?

  22. Debi

    So – just to recap….

    Teachers/state employees have contributed to a pension fund in good faith, and the monies were misappropriated by our state government (diverted to provide other services). Now we are in a crisis, as there is no money to pay the piper. Christie has somehow shifted the blame from the state to the teachers, portraying them as a greedy, selfish lot who are not willing to do their part to sacrifice in light of the current economic crisis (primarily due to global bankers, who continue to charge up to 30% interest rates which keep people in debt and giving huge bonuses to their employees, even after being bailed out, because the feds handed them out cash without insisting on substantial reform in return).

    A proposed solution would be a millionaires tax (trust me, I’m not wealthy), which would serve to drive more businesses and our wealthiest residents to move to North or South Carolina, thus losing their tax contributions entirely.

    I have been teaching in public schools for almost 20 years, and spent 4 years in a private special ed school. With a masters degree, my salary is $73,000. If I retire at 62, with 25 years in the pension, I will collect less than half of my highest three years average – projected less than $35,000/year. Is this excessive?

    Education is the only portion of your taxes that can be voted on. If a township wants to cut taxes, it stands to reason that teachers who are among the most experienced are also the highest paid, and would be replaced. You can hire two new teachers for the cost of one experienced one – unions ARE necessary to provide this protection. The states which do not have unions have a difficult time attracting teachers into the profession, and keeping them. As a result, the quality of education suffers.

    The governor needs to realize that you cannot separate the teachers from their union – they are one in the same. I don’t always agree with the union’s actions, but believe they are acting on our best behalf. There is no data to support that charter schools provide a better education for students – in fact, there is growing evidence of just the opposite. So why support them? Charter school teachers are not members of the union – it’s just a way to try to break the NJEA. Vouchers – again a way to divert students to non-union schools.

    My husband is self-employed, and his business is down over 70% from three years ago. We are hanging on by our fingernails. I get what is going on in the private sector. However, when the economy does recover, businesses will again reap the benefits. Whatever teachers “give back” now is gone forever.

    Yet no one seems to be looking at other areas for reform. Abbott (or “former Abbott”) schools are sucking funds at an alarming rate – equal education is not provided by throwing excessive funds into new, state of the art buildings! If you don’t think there is a problem here, I encourage you to take a tour of any of the new “Abbott” high schools!

    Local and state police – they receive a full pension after only 20 years, based on their highest salary. Isn’t it strange how many officers are promoted for one year just prior to their retirement to ensure a higher pension? Also, their pension includes overtime (teacher’s pensions are based on salary only.

    I have several friends and relatives who are proudly living on unemployment and state handouts – all of which are more than capable of working. “Stress” seems to be the most common overly diagnosed cause for staying home. Why work, when they can live comfortably at sit at home and watch TV? Their children get free medical, food, college tuition – all of which are paid for by tax money. It’s so rampant, that there doesn’t even seem to be any shame associated with it!

    Maybe the governor should be spending more time plugging the gaping holes in our system and less portraying teachers as greedy, and to blame for the state of the state!

  23. MrdnDiogense

    January 25, 2011, 9:56PM

    To ALL those stating the tax payers of NJ are tired of getting screwed.

    You need to ask yourself how you’d feel about being hired for, say, $1000/wk and then being told by your employer that he was only going to pay you $750?

    You need to ask yourself if you had your property stolen and the police found out who had received it would it be right for that person to keep it, or should they have to return your stolen property to you?

    The State of NJ STOLE over ONE HUNDRED BILLION DOLLARS in contractually obligated matching payments to the pension funds of the public workers. They shorted each and every public worker, week in and week out, of funds meant to meet DEFERRED PAYMENTS [not benefits, not entitlements, but DEFERRED COMPENSATION] by not making the matching employer payments into the pension funds. The workers clocked their end of the deal, week in and week out. They made their payments.

    Then the last six governors and their legislatures GAVE THAT STOLEN MONEY TO EVERY TAX PAYER IN THE STATE OF NEW JERSEY. They did it in the form of Homestead Rebates and by artificially keeping state income taxes lower than they would have been otherwise. They did it to curry favor with the voters in an attempt to keep their elected offices, and many did just that.

    So we know who stole the money and we know who received it. Yet the resolution to the problem being proposed by Governor Christie is NOT to ask those who received the stolen property to give it back in the form of higher taxes, but to ask those that have been already ripped off to be ripped off yet again. To accept increased medical contributions negotiated by contract, retire later in life than agreed to by contract and at less money then they are LEGALLY AND FAIRLY ALLOWED UNDER CONTRACT.

    How would YOU folks feel under such circumstances? Would you think it was just dandy that, having been stolen from once, you were being asked to pay a second time? If you get mugged, and the state’s public workers were politically mugged plain and simple, how would you feel about being asked to give up a few years of your life to pay for a high priced private attorney for the person who robbed you?

    Be HONEST! Be FAIR! Treat your public employees the way you would want to be treated yourself.

    Governor Christie, stop asking public employees why they are booing you when you speak in public, stating you are the first one to tell them the truth. They are booing you because the truth you are telling is a political expediency. You don’t want to raise taxes because you want to get re-elected. Just like the six before you who found it expedient to steal from the public employees, you want to do the same thing again.

    You say you want everyone to have to take a bit of the foul tasting sandwich which is the state’s current budgetary problems. Yet you ask the state’s public employees to take the biggest, foulest tasting, bite. You do this instead of the only fair way to share the problem between all the state’s residents and that is to raise taxes.

    BE FAIR. RETURN THE STOLEN MONEY. Apply the Golden Rule and treat the public employees the way you would want to be treated yourself.

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