General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsPension Theft: Class War Goes to the Next Stage - Dean Baker
The specifics of the situations are very different, but the outcome is the same. Public employees who spent decades working for the government are not going to get the pensions that were part of their pay package. In both cases we have governments claiming poverty, and therefore the workers are just out of luck.
http://www.truth-out.org/opinion/item/20433-pension-theft-class-war-goes-to-the-next-stage
Coming soon to a pension fund near you.
Ed Suspicious
(8,879 posts)retirement savings. Get the money up front for your own investing. What a disgusting state of affairs. I guess they've been stealing airlines employee's pensions for a number of years now. I think this is scope creep.
socialist_n_TN
(11,481 posts)nm
happyfunball
(80 posts)Nothing new here other than it is a government entity raiding the pension funds for money.
Pension funds have always been a bad idea. It is just a way for a corporation or government to pretend they are paying the workers more when they really aren't.
What we need is an improved social security to work as a real and secure pension fund.
Of course, as we remember from Bush's second term, the corporate raiders want to get their hands on that too, so we need really strong legal controls on that fund.
pa28
(6,145 posts)The chilling story lurking in the backround here is that many city and state employees have opted out of Social Security in favor of their pension plan.
If their pension ends up being used to satisfy bondholders in a Republican led bankruptcy their retirement plan is suddenly shaking a tin cup on a street corner. What is happening in Detroit today will be used as a precedent tomorrow in other cities around the country.
TBF
(32,067 posts)now they are going after the bigger money.
cbdo2007
(9,213 posts)TBF
(32,067 posts)401K was a street scam from day 1. I'm really surprised you'd even question that.
http://www.forbes.com/sites/mitchelltuchman/2012/12/19/is-your-401k-a-total-scam/
cbdo2007
(9,213 posts)I put money in, it goes up, I take out more money than I put in.
Don't see where the "scam" part occurs.
TBF
(32,067 posts)Forbes article to start with. Then if you have questions we can go over them.
badtoworse
(5,957 posts)TBF
(32,067 posts)FDIC is still insured.
And my personal financial affairs are not at issue - at issue is a financial system in which a rigged stock market makes a few wealthy at the expense of many.
badtoworse
(5,957 posts)I have to disagree with you about 401k's. My wife an I have been investing in ours for almost 30 years and we've done extremely well. We're not wealthy, but we've accumulated ample resources for retirement The key is to be disciplined, learn about investment risk so you understand what you're putting your money into and invest in quality funds. That approach has worked for us.
cbdo2007
(9,213 posts)seeing as how his response to me was "read the article" rather than some kind of factual discussion points.
An article in Forbes changed this guy's life, yet 100 years of data should just be ignored. lol
TBF
(32,067 posts)because your response indicated you hadn't. I'm not interested in the game you're playing.
badtoworse
(5,957 posts)You need to look at returns net of fees. Nobody is going to manage investments for free. It's an area you need to consider when you decide what funds to invest in. I don't mind paying fees for good fund management and good returns on my money. I've gotten that and I'm quite satisfied with the 401k's I have.
TBF
(32,067 posts)you and your wife retain your funds. Not only fees, but you also lose money as you take it out (better to pay the taxes now while they're likely lower and cut back now than hope for lower taxes later), and most people investing in 401K really aren't very knowledgeable about what they are doing. It is more a revenue stream (the fees) for the brokerage houses than anything else. As for you personally and anyone else I know that we've all grown up with this system and done our best on an individual level.
That said, my argument is more with the economic system we have in this country overall and 401K is just a piece of it. Systemically I view the entire thing (capitalism as a system and those who maintain it - Wall Street) as operating one big Ponzi scheme.
If we can't come up with a way to completely rid ourselves of it, however, I'd at least like to see it highly regulated and taxed (as we had from roughly 1930-80) so that those on the bottom have a fighting chance. Right now what I see is a few at the top getting very wealthy at the expense of so many others.
badtoworse
(5,957 posts)The inequality in how income is distributed and the lack of opportunity are serious problems that need to be fixed. We'll probably disagree, but I don't believe sending more money to Washington is the way to do it. I've actually gotten pretty uncomfortable with the size and reach of the federal government. I'll spare you the dissertation, but things like NSA, TSA, loss of liberties, government monitoring of cell phones and email, etc. concern me greatly. More taxes, even on high income people would only make the government bigger and more intrusive. In any case, I'm not convinced the government would spend the extra money in ways that truly created more opportuntity for people. I think it's likely the money would be spent in ways that make people more dependent on the government. I'd favor policies that grow more and better private sector jobs, but that is a discussion for another thread.
There is one big advantage to a 401K that you didn't mention - the money is in your account and it can't be raided like a pension fund. Yes, there are risks to investing the money, but if you do it steadily over an entire working career, you should "dollar cost average" a lot of that risk away. If you don't understand investing, you can and should get qualified advice. Contrast that with the situation in Detroit - those unfortunate pensioners will be lucky to get 20 cents on the dollar. You would almost have to work at it to lose 80% of your investment in a 401K. You also have flexibility with the money when you retire. You can convert part of the principal to income and leave part of it invested as a hedge against inflation. You can't do that with a defined benefit plan.
TBF
(32,067 posts)at least about role of government. I sense you are more libertarian in outlook even if you have voted for dems as the best candidates, while I am a libertarian communist. I don't believe that government in the form of aggressive central control is always the best form. I'd like to see much more in the way of co-ops and workers having more control in their government through direct vote and more control in their working environments. Just not a fan of capitalism as the way to organize the economics. In fact I'd love to see a resource-based economy as opposed to monetary based. But that's a discussion for another day.
Despite the fees I hear your comment about the 401K at least being in it's own account as opposed to the pension plans. It is still less secure than a FDIC-backed account but I hear you that you feel more secure with that form and I can understand that.
1000words
(7,051 posts)Yah ... didn't think so.
etherealtruth
(22,165 posts)1000words
(7,051 posts)The city's unique situation makes it easy to pillage but impractical to use as a model for a larger effort, in my opinion.
mstinamotorcity2
(1,451 posts)bad talk about Detroit. But it seem that the real issue is getting lost. They ask is Detroit worth saving??? Stupid people. I wonder if other peoples lives, homes, churches, and schools and way of life were under attack just how would they feel. It is theft. Pensions here are contributed by the employee and employer. Its no surprise to me, this Country is used to free labor and living off the profit thereof. The Rethugs are on a National agenda. Right now America thinks this is just a Detroit problem. Believe me, repugs are waiting to enact this same measure all over the Country. All Republican Governors have to do is hold back on revenue sharing to towns and counties they don't feel are suitable and send them into a financial crisis. Our Governor kept 300 million. When Detroit is one of the biggest drawing revenue cows in the state. If they are cutting public jobs, what makes anyone think their pensions are safe. No such animal. They have been meeting here in Michigan in the UP for the last five years. It is where this plan got hatched. It is no mistake that Governor Snyder, Kevin Orr, and Mike Duggan were all friends in college. When the meeting was in Mackinaw Island all the major players were there. Koch brother reps, Prince Family reps, DaVoss family reps, and Walton family. This is about the 1% staying the 1%. And keeping a political influence over our Government.
freshwest
(53,661 posts)That money went somewhere, and the voting block that put the Rethugs in charge of it all, thought they were entitlted and the workers and citizens of Detroit were not.
It's been a long time coming, media and films disparaging Dettoit and other cities as if they are full of evil people. The propaganda against Detroit was no more true than the rest of the myths pushed since the Nixon era that went on steroids with Reagan.
The questions that Americans not yet affected must answer:
Is Detroit and its citizens not worthy of fair treatment by those in less metropolitan areas?
Are the rural or suburban areas full of more righteous, hard working or intelligent people than those who built Detroit into a place that the world envied for its ability to organize natural resources, technology and human skill to command the world market?
I say NO to both questions. And it's why I see America as having a long staanding plantation mentality that sees those who are not rich or connected as deserving of no respect, decent education and homes, healthcare, and entitlted to rest, retirement and relaxation. They only deserve the lash of the owners.
This way of thinking has been disguised with new words, rhetoric, whatever. It says that the premise of equality, as the Condederacy's president and vice president stated, was not a viable system. That some were born to serve and be used, and others were born to rule.
We can either live up to equality for all, or surrender to feudalism. I fear we are far down that road in the practical sense because the people have allowed bigotry and greed to take over instead of realizing we must stand as one.
WillyT
(72,631 posts)Thank you for that !!!
MisterP
(23,730 posts)rhett o rick
(55,981 posts)invested in her company's stock. As the company started to decline, the exec paid themselves bonus's and sold their own stock until the company and stock werent worth a dime. And that was 15 years ago. My good friend lost his retirement when Enron bought control of his employer and converted the retirement investments into Exon stock. Say goodbye retirement. I think Northwest Airlines went bankrupt and dumped their pension debt about 15 years ago.
Dreamer Tatum
(10,926 posts)to pay all of Detroit's bills.
In clear English, without hoary, bullshit references to "the 1%," Iraq, Afghanistan, and anything else that doesn't have anything to do with Detroit.
Explain to me how people who bought the municipal bonds are "banksters." If you think this is pure theft, please cite something
in the way of evidence instead of damning people for the unpardonable sin of investing in muni bonds.
mike_c
(36,281 posts)Stiff the bond holders and write off the losses, first-- or at least before making the alternative statement a reality: workers accept the risk of not being paid for work they've already performed despite the promises that were made to them.
My solution is to make good on ALL pension and similar outstanding obligations to public workers, and then pay whatever is left to whomever wants to stand in line for it. But pay workers and pension obligations FIRST, not last.
badtoworse
(5,957 posts)When the bonds were issued, the rates were set with the assumption that in a bankruptcy situation, the bondholders would have a senior position. That is the normal pecking order. Change that and bond rates would be much higher. Many municipalities would be effectively shut out of the market.
Dreamer Tatum
(10,926 posts)Know how many times you can tell the investors (who represent MILLIONS of people, btw) to go hang? ONCE.
Then where are you? If you can't borrow another dime, you are SOL.
And for those ignorant of the muni bond market: EVERY MUNICIPALITY BORROWS MONEY.
mike_c
(36,281 posts)Protect the investors and screw the workers who actually did the work to pay the investors? You're damned right I'd change those rules in a skinny minute. Note too that I'm vested in CalPERS which is likely one of those bond holders, so I'm expressing my willingness as one of those likely investors to wait in line behind the city's pension obligations. But dammit-- as long as we're willing to accept the reasoning that investor's expectation of return is of greater importance than the employer's obligation to pay its employees for work they actually performed, I don't give a rat's buttocks whether any city in America will ever enjoy a triple A credit rating again. They need to earn their rating by making good on ALL their obligations, not by screwing their workers so they can make the investors whole first.
badtoworse
(5,957 posts)Not screwing the workers won't mean jack to a bond investor if the bonds aren't senior in a bankruptcy situation. Such "bonds" would receive a substantially lower credit rating and some might be able to get a rating at all. You might not care what happens to the credit ratings of states, cities and towns across the country, but you would almost certainly feel the impact. Those states and municipalities (including yours) will have a much more difficult time borrowing money. Many bond investors like pension funds and insurance companies have rules about minimum credit ratings they can buy and it's likely that numerous municipalities would be unable to sell their bonds to such investors. In any case, borrowing by ALL cities and towns will become a lot more expensive. Having to pay a lot more in bond interest will mean that everyone's taxes will go up and there will be less money available to provide services. My guess is that you'll be among those screaming the loudest about how the banks are screwing us again.
pa28
(6,145 posts)Pensioners will probably get 20 cents on the dollar.
That's the problem.
Dreamer Tatum
(10,926 posts)and in any case those obligations were far less than $1B...a fairly small amount.
Moreover, unsecured bondholders are taking a MASSIVE haircut, way bigger than the 80%
that pensions are alleged to suffer.
I don't see anyone making money on Detroit. I know I'm in the extreme minority, of course, but
people with facts often are.
Blue Meany
(1,947 posts)Dreamer Tatum
(10,926 posts)If the art gets sold, it's to pay bills. Please tell me who "makes money" from art being sold.
I'm dying to know who you think is screwing Detroit. Tell me who isn't losing money. Please.
pa28
(6,145 posts)Orr offered around twenty cents on the dollar to them and around 70 cents to bondholders. Both parties refused.
Bondholders will take the smallest haircut and the judge may decide that pensions will be zeroed out much like shareholders in a corporate BK case. We'll have to wait and see.
mike_c
(36,281 posts)Thanks for posting it!
Skink
(10,122 posts)WillyT
(72,631 posts)Enthusiast
(50,983 posts)Starry Messenger
(32,342 posts)I wonder if all the people whining "where is the money?" would be so sanguine if their own salary was suddenly reduced. Pensions are deferred wages.
econoclast
(543 posts)In years when the Detroit pension fund had returns more than forecast, those 'extra' earnings were distributed as 'bonuses' to pensioners in the form of an additional monthly check. The "13th check". Total distributed was about 1.2 billion dollars. If keft in the fund, that would be about 2 billion dollars today. My understanding is that if that 2 billion was still in the pension fund the pensioners would be off the hook....though I'm not certain about that.
But what is certain is that it is another case of privatizing the benefits but socializing the risks.
Egalitarian Thug
(12,448 posts)ERISA is a great example from which we should learn a vital lesson (but have thus far managed to avoid) regarding the American systems of legislation and governance.
This was a law intended and sold as a measure to protect workers. What was created was the proverbial half-a-loaf, that was further reduced to a crumb, and then transformed into legal sanction of outright theft from workers by owners. Does any of this sound familiar?
badtoworse
(5,957 posts)Egalitarian Thug
(12,448 posts)confidence schemes played by the parties work.
We have been told over and over that accepting shitty legislation is OK because they'll fix it later. The fact is that more often than not, the bad law is made worse and can even be twisted into doing exactly what it was passed to prevent.
badtoworse
(5,957 posts)warrprayer
(4,734 posts).... "next they'll come for your retirement money". These people worked hard all their lives believing that money would be there. When is enough enough? They AREN'T going to stop with Detroit. This is their vision for America.
Damn all Third Way investment bankers to hell too.
KamaAina
(78,249 posts)The answer is that their unions were pressured into accepting additional pension benefits rather than increased wages. When a pro athlete does this, it's called "deferred compensation". But as yet, the NFL has not tried to take any of it back.
badtoworse
(5,957 posts)Nobody is claiming the problem is high pensions
KamaAina
(78,249 posts)Illinois -- with a Dem governor and legislature! -- is another example cited.
badtoworse
(5,957 posts)Numerous states and cities have promised more over the yaers than they can deliver. If they don't have the money, then something has to be done. Unless more revenues can be raised or other costs get cut, that means a haircut for the pensioners (as Illinois has done). The Illinois haircut stinks, but it's way better than the screwing that the Detroit pensioners are going wind up with - 20 cents on the dollar if they're lucky.
KamaAina
(78,249 posts)Because the corporations and the one-percenters are getting a free ride.
badtoworse
(5,957 posts)There aren't any free rides there.
sendero
(28,552 posts)... for decades, who would be surprised that the public sector would join in?
IMHO, a lot of these cities should have consulted a real actuary before making the promises they made. They were never realistic to begin with.
upi402
(16,854 posts)Maybe when we get a valid media.