Friday, July 2, 2010

Social Security “Means Test” and "Two-Tiered" Pensions

http://blog.lifecourse.com/2010/02/californias-fourth-turning/

“The very political coalitions that tend to prosper during (expansion) - those which win by outbidding the others on how much they can distribute pleasure, borrow from the future, and undermine institutional barriers—guarantee that the whole system has to be smashed to smithereens before it can be rebuilt. Right now, we have politicians in power whose entire political careers have been built around the wrong logic for a (crisis).”

Here is a recent interview of House Minority Leader John Boehner –

http://link.brightcove.com/services/player/bcpid1886260998?bctid=104611069001

“I think raising the retirement age, going out 20 years – not affecting anyone close to retirement, and eventually getting the Retirement Age close to 70 is a step that needs to be taken.

I think secondly, instead of using the Wage Inflator, that increases in Social Security should be based on the CPI (Consumer Price Index). I think it is a more accurate reflection. Over time, it will have a significant impact on the “actuarial soundness” of the program.

And thirdly, I think we need to look at the American People and explain to them that we are broke and that if you have substantial non-Social Security income while you are retired (pause) why are “we paying you” at a time when we are broke? “

This guy is the Republican leader? No wonder the stock markets are tanking...

We all know that the CPI was altered in 1994 and is now a bogus measure of the Cost of Living, designed to significantly underperform inflation, thus keeping the annual COLA lower than it should be to maintain the purchasing power of your Social Security check.



For younger Americans who have to pay into Social Security every month, but know that we will never see a penny of the money, the natural question to ask of Boehner is “if the system is by definition broke, then why the hell are we being made to pay into it?”

Everybody has to sacrifice except for a few select social cows – think AARP and Public Employee Unions.

I’m going write this for the millionth time, at some point society will choose to finance the needs of the youth over the needs of the old – the needs of the future student over the needs of the retired teacher. We clearly haven’t reached that stage yet, but the battle lines are being drawn and the old are going to lose, because society ALWAYS sides with the youth.

If you are retired, then your benefits are going to get cut. Period. You will have to rely more on self-financing more of your retirement than you thought you would have to be.

http://www.governing.com/columns/public-money/Generational-Battle-Brews-Over.html

“Generation X and Gen Y are getting fed up and might not take much more. That's what I'm hearing from a number of younger public employees who responded to my column last month on the incumbent employee conundrum. The gist of their feedback was this: They don't appreciate bearing the brunt of pay cuts and benefits reductions -- the ones imposed by employers who try to balance the books on their pension and retiree medical plans by slashing compensation for younger employees and new hires. They'd like to see their elders share in the pain -- or at least pay their share.”

“Senior public employees who are vested in the retirement plans with ten or more years of service tend to consider themselves untouchable. So if Baby Boomer benefits can't be cut, the conventional approach to benefit rollbacks is to "tier" the retirement plan with reductions for new hires. This line of thinking leaves the next generation to pay for the mistakes and delusional thinking the Baby Boom negotiators -- on both sides of the collective bargaining table -- have had in the past decade.

There's no question that public-sector retirement benefits need reform, and in many cases this will mean a rollback that trims the benefits for new hires -- and thus younger workers -- disproportionately. But unless the burdens are shared more equally, a backlash could start to brew. We'll likely see it first in union halls: Younger workers will demand more seats on the bargaining committees and reject contracts that fail to share burdens of benefits reform more fairly.”

http://www.slate.com/blogs/blogs/kausfiles/archive/2010/02/16/does-the-uaw-even-want-more-members.aspx

“(T)he UAW has basically cut a deal with GM that protects its existing members in their $28 an hour (plus benefits) jobs, but give new, future hires a much worse deal: $15 an hour jobs. If those new workers are UAW members, they will be able to lobby within the union (and, more significantly, vote) to equalize the pay of the old-timers and newcomers at some intermediate level-- say $22 an hour. Why would existing UAW members want that? Better to keep the newbies out and exploit them for all they are worth in order to subsidize the cushy, unsustainable deal the UAW veterans enjoy. ... It would almost be as if the existing UAW members had become the profit-seeking owners of the company!”

“The union becomes just another quasi-shareholder representing a limited number of old-time members. Eventually, as those members retire and expire, the union ceases to exist.”

The battle lines are being drawn between the haves of the have-nots of the benefits wealth-distribution gravy train. Obamacare was simply a rouse to get the Taxpayer to pick up the healthcare benefit that was promised to union workers (both private and public), but whose funds were never set aside. But Obamacare will never end up being funded and may simply be the last great promise before Social Contracts are rewritten en masse.

Promised future pensions are so large that they have bankrupted the airlines and the auto makers and are now in the process of bankrupting states and municipalities (do you own any Municipal Bonds?).

Eventually, states and municipalities will be ruled by voters who do not benefit in any way from these pensions and they will change the payouts. They will either go to court and argue that the rights of the taxpayer were never represented in the negotiation of these benefits or they will put massive excise taxes on pension incomes. Either way, the pensioner will see a significant decrease in their take-home pension check and this will take a tremendous burden off the rest of the economy.

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