By Fareed Zakaria
I was struck last week to hear that the city of San Bernardino, California is declaring bankruptcy. It follows similar moves in the past month by Mammoth Lakes and Stockton, also in California. Before them it was Harrisburg, Pennsylvania, Jefferson County, Alabama, Central Falls, Rhode Island – the list continues.
What in the world is going on? Companies go bankrupt all the time – but what happens when a city goes under?
In reality, the two aren’t that different. Companies file for what’s known as “Chapter 11” – a provision which enables them to renegotiate deals, to downsize, to fire people. But filing Chapter 11 also gives them the option of liquidating – or breaking up. That would be essentially impossible for a city – it also happens to be unconstitutional. So cities go for “Chapter 9,” which covers municipalities: that’s cities, but also towns, villages, taxing districts and utilities.
641 cases of municipal bankruptcy have been filed since Chapter 9 was created. Most have been smaller cases involving utilities. But when an entire city goes bankrupt, things are much more complicated. It affects public sector jobs and vital services like fire and police departments.
Now, naturally, we assume all bankruptcies are a bad thing. They're humiliating, they impact business, they’re difficult to recover from. The situation is far from ideal. But it’s actually not without its benefits.
Take for example San Bernardino. It was running a $45 million deficit (on a $130 million budget.) But its creditors – workers and retirees – were unwilling to help out. The best the unions were able to do was to offer what they thought was a major concession: allowing newly-hired public safety workers to retire with 90 percent of their salary at the age of 55 – instead of 50, which had been the earlier deal!
That won't work in a chapter 9 bankruptcy. An independent judge brings all parties to a table where an agreement has to be reached – no matter how painful. And, we need some of those painful decisions – not just at the federal level, but at local and state levels as well. At its heart, the bankruptcies you keep hearing about these days aren’t about taxes being too low or spending on city services being too high – they're about pensions.
California's pension-related costs rose 20-fold in the decade since 1999. This frightening trend is true almost everywhere in America. And it’s simply not sustainable. A recent Pew research survey found that the gap between state assets and their obligations for public sector retirement benefits is $1.38 trillion. It rose by 9 percent in 2010 alone – and it will likely keep rising until these obligations are renegotiated.
The truth is America is sacrificing its future to pay for its past. To keep up with burgeoning pensions, states and cities are slashing services. It's also feeding into the unemployment problem. State and local governments have 445,000 fewer workers today than in 2007. Even if you exclude teachers from that number, we have 231,000 fewer workers.
For decades now, local governments have doled out patronage by increasing pension benefits – these costs impact the budget years later, when the officials who gave the benefits are safely retired themselves. We're now having to reckon with those choices.
I'm not saying bankruptcies are a good thing. But they are a mechanism that allows us to admit an emergency and renegotiate the deals that are, well, bankrupting the country.
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This piece hits the nail on the head. The pensions 'time bomb' is finally blowing up in our faces. For years we have seen weak public sector (and some private sector) remuneration committees capitulating to ever more outlandish demands from employees, safe in the knowledge that the committee members will be safely retired before anyone fully realises what they have done. It is outrageous that young people today have to face years of hardship to pay for the long, luxurious retirements of today's retirees. Sadly today's young people can expect a retirement that will more closely resemble that of the WW2 generation, short, austere and within the limited means that we now have at our disposal. It will be interesting to see the reaction when States are forced to publish their unfunded pension liabilities later this year. The number currently sits at some $2tn. That is before we get onto the subject of the pernicious effects of pension funds on global stock markets...
Consider:
Remember some have become extremely wealthy, at the expense running the U.S. into the ground. Just look at the Wall Street CEO's and our politicians.
Our politicians make far more than their $175,000 annual salaries.
And as if that’s not enough, a number of them then go and work for lobbying firms, where some make $1,000,000-$2,000,000, annually, selling out our country.
That’s why this nation is in economic ruin.
Irrelevant: In the face of a two TRILLION dollar shortfall, the acts of a handful of business sociopaths doesn't even amount to a drop in the bucket. Do the math.
Irrelevant to the pension issue. Union trolls are not helping the situation.
I'm with you, Barry, but as a southern California taxpayer, I am also appalled at the cost from illegals. In California, they receive free everything (free schooling, medical care, welfare, legal assistance for the times they are arrested or incarcerated). When they cause an accident and have no car insurance (mandatory in California), nothing happens. All of this adds up to a burden I don't wish to carry.
Americans have allowed politicians too much power; they rarely serve in the best interest of the people who voted them in. We've allowed others, especially un-Americans, to tell us what it means to be an American.
In the meantime, America is moving quickly to the bottom of the snake pit; we will be a third world country in no time, Spanish will be the language of the American people.
The Union in this country drove most of the business away to the foreign lands. Union has their own interest to serve, and they are not for the working class
We've been sold out by the politicians we elected to help us. They stole the power and money from American people years ago and it never ends. How can we take away their pensions and primo health care and other perks? How about term limits? They'll never do it. We need a 21st century voting system where anyone with a computer or access to a mailbox can vote on some of these questions. We have the technology but they'll never do it.
Wall street is the reason we have jobs, politicians are the real problem. I hate reading how blame is placed on the job creators. Lets be honest, Democrats have sucked the system dry while we republicans keep tyring to enlighten them to economic "reality". Notice I didn't say theory . . . theory is for liberal professors that never worked in the real world. Reality is what keeps us employed.
CEO: Your so far off base, I just had to sound off. Wall street is the reason we (The US) are drowning in debt. Need I mention the "Great Recession" was caused by the GOP and the greedy money types on WS. This article in a off handed way was saying "we the people" are the problem, but not one word was mentioned about rising oil prices or rising cost of health care or big Pharma. The sole reason is unions? I throw the BS flag....Politicians and management are the problem, "We the people" do not set our own retirement package, we only agree to it before we are hired. It apalls me that a person can serve his/her state or nation for 30+ years and when it comes time to retire.....THEN they become the problem.
The GOP and the so called job creators make me sick. DO NOT promise benefits if you are not willing to pay them.
Look deeper, the problem is big business not the worker.
Sorry Barry, I am definitely a liberal independent but I have to say that in terms of big money it is the retirees and unions who sucking the system dry. I don't like having to say it but there it is: the frustrating part about all of this is that if retirees and unions were willing to confront the issue head on we would not have to resort to bankruptcy to get people to admit that the money they are "owed" does not exist and no amount of mob rule politics will change that.
Every single politician right or left wing, that tries to bring up this stuff becomes the messenger who gets shot.
retirees and unions
Retiries still pay taxes and most have other jobs to keep food on their plates.
Unions have ensured that wages have not risen since 2008. The only thing some have earned is a retirement that will allow for the health and mental wellbeing of their ranks.
Wall Street is the conduit, not the problem. Wall Street did not force these municipalities to rack up huge (and obviously unsustainable – retire at 50 with 90% of peak earnings??? They're paid benefits longer than they work!) pension benefits and, when times were good, spend on ego infrastructure projects. Look at the explosion of budgets during the 2000s – many of these California towns increased theirs by 200 to 300% despite little to no population growth. Wall Street facilitated bond issuances by these municipalities to cover their egregious spending – for a while. At worst you could call the investment bank bond departments "enablers."
Barry,
I understand your frusteration but you are wrong. Politician salaries and the wealthy have nothing to do with municipality balance sheets. Politicians trying to buy votes with handouts to the public sector unions goes the the heart of the problem. Apparently facts and the truth don't mix with your reality.
Wall Street creates few to no jobs. Wall Street is a money broker, nothing more or less. When did a money broker ever create any jobs past those required to push paper from one pile to another? The very idea is ridiculous. They surely do some wonderful advertising though, as witness the comments of people convinced that Wall Street is the fount from which all economic blessings flow.
Job creation comes from only three sources, creation of a new item or idea that people desire, creation of a more efficient means of production of an item thus lowering the price and increasing demand, and production of infrastructure to increase efficiency or reduce costs – the latter is usually government funded though not always. All other "sources" of job creation are simple results of the boom and bust economic cycle, no lasting jobs are created by that, merely temporary distortions in the economy which cause people to chase back and forth after the new 'thing'. Wall Street's part in any of this is vanishingly small. What Wall Street was in some past decade is not relevant to what it is now, which is merely a means for "cashing in" after building a successful business. Was Facebook funded by Wall Street? Was Google? Was Apple? The answer is absolutely NO in every case. The worship of Wall Street is ridiculous.
Everyone is a genius now. Blaming pensions and pension costs on the Union who do nothing more than vote as bloc, is ridiculous. One commenter said 'obviously unsustainable' ... ya think now that pension funds were run dry by Their bad investments. All the legislators are so brave now, as well as the non-union, many of which are unemployed banging the drum to blow-up unions. Where is the liability on the CPAs and Actuaries that signed off and approved the balance sheets and pension increases that were 'obviously unsustainable'? When investments were turning double digit gains, the actuaries and governmental units approved the pension increases as a way of keeping current costs down (most unions gave up something (like raises), in order to achieve a better pension. Actuaries have to approve and CPAs need to determine risk annually ... where are the whistle blowers in the 90's? Unions are not the blame. In fact they trusted their counterparts to hold their funds until their negotiated period of distribution. And now bankruptcy is the answer? Try, increased life expectancy, and the overwhelming increase in medical costs ...that's where the pension pain (like Soc Sec and Medicare) exists. Really, who's to blame?
I was amused yesterday to read that several Republicans in the House, including Paul Ryan, have invested thousands in shorting US Treasury bonds...meaning, if the US economy tanks (ie. if we fail to raise the debt ceiling and default on our debts), they'll make millions!
Have to wonder about the wisdom of having elected representatives in Washington who can control whether our economy sinks or swims, who are betting their own financial gain on having it sink...so if they vote (again) to not raise the debt ceiling, is it a principled position?...or simple greed at the expense of their nation's economic health?
Obama '12 – are you brain dead? The problem mentioned in the article is public employee pentions. That's a union issue which is trading dollars for votes with the current administration. Let me guess, Haliburton is somehow involved too. Get off your stupid talking points
Considering the Obama Administration make strenuous efforts to HIDE the fact that the USA has $120 TRILLION in unfunded liabilities – you can hardly point the finger at CITIES?
How exactly is the Obama administration hiding it? BULL Shiite, the Obama administration is working diligently trying to get us out of the UNFUNDED Bush WARS.
Somehow "We The People" need to stop Big Oil, Insurance, Big Pharma, Wall St and Politicians.
Why wont RoMoney give us any details.....? Because he spews only HATE.
Romney and the GOP promise to return us to the glory days of the Bush Administration!
But wasn't it the Bush/GOP government that gave us the largest expansion of social programs since Medicare, when they passed the Medicare-D Rx program? One which, unlike Obama's Affordable Care Act, was TOTALLY UNFUNDED!!! The Medicare-D program has been running totally, 100%, on borrowed money from the moment it started! But per the CBO, the ACA is totally paid for, through a combination of tax increases and spending decreases.
Which sort of accounting to you prefer?
P.S. Have you seen any of the new stories about one part of the ACA that has just begun to kick in? Thousands of Americans are receiving letters from their health insurance companies telling them that the company spent less than 80% of premiums on actual healthcare, so they're required to rebate a pro-rated portion of the insurance premiums back! In one case in Florida, a guy who buys his own family policy out of pocket, a family of four, are getting a check for $2,400 back! General opinion thus far, almost everyone getting rebates think its great! FYI, if insurance is paid by the employer, the employer gets the rebate. No wonder Republicans were desperate stop the ACA before AMericans realized what it actually does (vs the falsehoods the GOP have been spreading about it).
Exactly. What's a pension? What fantasy world do these people inhabit? I work my tail off to pay taxes to support public sector pensions, which is somethin I will never see. Something is wrong with that picture.
In this article, if the example of city workers retiring with 90% at age 55 is true ( although I really cant believe that), it is NOBODY's fault except the city itself. WHO set that type of system in place.....the worker? hardly
DONT let someone put in 30+ years, THEN pull away the retirement.
This entire thing is squarely management's fault.
Oin2012,
you dont "offer" union employees anything – you give in to their bullying demands or face the consequences. it is the workers and unions fault; the employers cave to keep things operating and avoid strikes, picketing, etc.
and by the way, efca, card check are govt mandated ways to assist unions getting into the private sector where they wreck the same havoc as in public employment.
Communism and Socialism provides pensions for everyone. Capitalism does not. With Capitalism, the hardest working people pay for the pensions of the others. Take your pick. As an engineer working for 'private enterprise', I have no pension, no reitrement insurance either.
It doesn't matter whose fault it is. It doesn't matter who demanded what. You can blame unions, politicians, workers, voters, retirees or anyone else that you want to. The simple fact is that cities have made promises that they cannot keep. The money simply isn't there. We have to deal with it. If necessary – people will deal with in in bankruptcy court.
Deneb,
I agree completely. I think when Obama said the private sector is doing fine, I think he meant the private sector is doing fine .......at paying for public sector pensions.
I too don't understand why we should pay for a benefit for other people that we don't get.
anyway, one good point from this article is that there are fewer public sector jobs due to these pensions. It sounds like without the pension obligations, the economy would be better not only due to lower taxes, but also would allow for local govts to hire more people. just a thought.
j
What a bunch of cry babies. You're an engineer; your choice. Could you have worked for the City? Probably, but for whatever reason you decided to go in another direction. I could remember years and years ago hearing "I'll work for the City because of the benefits." Was there any secret? Now you act surprised over the benefits? You think that the world collapse is from the "bullies" in the unions? Now what, has the world smartened up after all these years or is the economical downturn the signal to bust up the unions? Big surprise, those enormous 2% to 4% raises municipal employees got (not the double-digit, merit based +xmas bonus raises in the private sector) added up and the Cities in Calif. declaring bankruptcy couldn't see it coming and bowed to the bullying pressure of 500 cops or firemen without seeing the train coming. Try reality sometime. Think it through clearly ... hmm, we could bow into the pressure and declare bankruptcy. Nice idea.
I'm 60, and for the first 50 of those years, all I ever heard was everyone had a choice. They could work in the private sector and make far more money, but there was more risk and no guarantee of benefits, or they could work in the public sector, where they'd have decent benefits but a lower salary than they'd make in the private sector. And generally, that was always true. Public sector employees traded lower pay (and increasingly lower esteem as Republicans steadily turned them into some sort of villains) for their retirement package.
Now those packages (freely entered into by municipalities in good times) are coming due, and "No Tax, Never" Republicans refuse to ante up.
FYI, let's also note that at the demand of conservatives, over the last 20-30 years the retirement funds of public employees – controlled NOT by the employees but by elected officials with ideological schemes - were increasingly turned over to "fund managers" selected by politicians, often with disasterous results, creating much of the shortfall.
Next time around get an uncle or aunt that can pull you into the system, or just become a lucky minority and the welfare state is at your feet.
I am a public worker and have 30 years service, yet I am only 55. I could retire at 60% of my highest three years salary now. That would provide me a monthly retirement for the entire 30 years that the person hired to replace me is working! How in the world can any city afford that?
Now take the cops and fire folks... they retire at 20 years and they hire them young. Lets see...
1) Hired at 20 years old, retires at 40, collects for 40 years.
2) Hired to replace number 1, retires in 20 years, collects for 40 years.
3.
I expect to fund my retirement myself. I fully expect SS to be gone or meaningless by the time I retire in another 15years at age 65. My point to all my posts is DONT offer employees outlandish perks in the first place, then blame the employees.
The GOp is terying to turn theworker against the other worker, we can not let that happen.
Obama in 12... I am afraid I did not finish my thought previous. It is that you end up paying close to four people fpr every cop or fire person that is working within a municipality. With the longevity of the workforce now, the old models do not work. these retirements were designed when the life expectancy was late early to mid seventies.
And sir, I completely agree that the workers should not be blamed and that there is an effort to pit one against the other. However, the mentality of unions and workers that cannot see that things must change is blind. It is liken to the entire society of welfare and freebies that have been created... we went too far.
You are completely incorrect (at least in California). Cops nor firefighters get to retire after 20 years service at age 40. Thats just false. The formula is based on 3% per year of service multiplied times years of service and you can not colle t prior to age 50. So using the 20 years you stated, if someone hired on at age 30, did 20 years and retired at age 50 (minimum retirement age for cops/fire) they would get 60% of their base salary (which excludes overtime). To reach the 90% maximum benefit takes 30 years of service. Since you can't be a cop until after your 21st birthday, it means the person could retire at age 51 assuming they reached 30 years of service.
To be honest someone could go anytime before age 50, but they will not collect a dime until after age 50. So in my case, I came on at 25 and have 20 years service. If I left police work now, I will not collect retirement money for 5 more years. When I turn 50, I will get 60%. For someone who claims to be in the retirement system, you sure don't understand it.
Cop – Even adjusting for what you describe I expect you can see the trap in that math. The GOP is not trying to turn workers against anyone – it is simply pointing out that 1 + 1 does not equal 3, no matter how pure one's intentions in hoping it so. Too many people have been promised too much money and no amount of taxation can solve the problem without grinding the economy to a halt. E.g. allowing the top tax bracket would raise an estimated $50 billion over the next 10 years (CBO estimate, not mine). That's $5 billion a year against a TRILLION dollar deficit. Where's the other $995 billion going to come from?
Clarification – allowing the top tax bracket to reset to 39.8%...
It is completely unfair to tell someone who worked all their life that their pension is gone or reduced to a point they can't live. Part of the promised salary is retirement. Although I believe not contributing to one's retirement is wrong, but punishing those who are retiring is wrong. Face it – our politicians promises are nothing but lies. When the American people can finally see through their party line and vote for responsible representatives is when we may see our country turn around.
Could not agree more. But I am afraid that all of us are going to sacrifice a lot before this is over. Its a double edged sword, but I am going to continue to work and that in turn will prevent a younger person from having a shot at a good job. I think most of us that are anywhere near the retirement age are re-thinking leaving.
people need to understand the a retirement pension IS a contract. When you break a contract, isn't that against the law? can't you sue for damages?
Shane – contract renegotiation is what bankruptcy facilitates. A loan is a contract, but if you can't repay it you can restructure/reduce it through the bankruptcy process. Most creditors would rather restructure voluntarily and have a little more control over the situation than risk bankruptcy and have a judge decide "too bad – here's what you're getting."
That's right Zack, teach the youth and everyone else in America that you don't need to keep the promises you make to others in your business transactions. To promise a pension, or other benefit such as healthcare, for ones investment of time, labor, life, and love, and then to change the terms of the agreement at a future time is an abhorrent practice.
Essentially, the problem in the US and Europe is paying people not to work. Most people know that handouts do that, but they forget that pensions do the same. Every penny that goes to paying someone to do nothing is wasted.
And Gov't pensions/benefits obscure actual compensation being too high. Example: the average postal workers gets $88,000 a year in compensation. When you mention this, they all say, "No one makes $88,000 a year". But lets say you work 30 years and retire for 30 years. The costs of retirement get added to your working years. So if you cost $55,000 for the 30 working years and $33,000 for the retired years – there's your $88,000.
Yet if we simply paid them $88,000 a year (no retirement or benefits) – everyone would say: "That is way too much for a job with no education needed, that nearly anyone could do."
Pensions are a way for them to hide what they really cost. And that is/was the problem.
Why can't people ever seem to grasp the real problem? This civilization is fundamentally flawed. 100 years ago, before the modern world of electricity and diesel engines and mass-production manufactruing, people worked much more than they did 50 yrs ago. Today, we have automation, robots, etc. doing our work, so why are still working 5 days/week. We should be working less, not more. But instead of some people not working at all, we should ALL be working less. These need not retire at 50 while others work 5+ days/week – everybody should be working 3 days/week. But, hey, that's just me. You keep working 5+ days/week, and I'll figure out how to retire, then, you can work 6 days/week. Wise up.
a pension is not paying someone to do nothing. They have already fulfilled their side of the labor contract by performing the services up to retirement. A pension is deferred compensation, not a hand out. It is money you have already earned, but not yet been paid. Don't drink the cool-aide. The jobs went overseas for profit. Don't promise retirement benefits to a worker, ship the jobs overseas, then try to reneg on the contract to provide the pension.
I have a rather substatial deduction from my paycheck for my pension. Frankly, the "They get benefits they don't deserve..." story is worn out. Generally it comes from the folks who don't fund their accounts at $650-$900 mo for 30 years. That's MY money, I DO deserve it, if someone decides that they can't fund the pension when I get to retirement I want ALL of My money back with 8% interest compounded quarterly for the last 23 years. Understand that I feel just as strongly about our government and Social Security. They promised and they need to deliver. Folks could have self-directed for all of those years. Of course I know that the same folks that are complaining about pensions wouldn't have saved money in a self-directed SSI fund either.
Right. 100% of your average earned wages starting at 50!? LOL! Is this some of kind of a joke! Does money fall from the sky in cities offering this absurd nonsense? Where in the he11 does the money come from to pay these OUTRAGEOUS pensions for some people they might live to be a 100 or more years old! Thats 50 years of full pay plus MEDICAL!?
You've got to be kidding me!
What this piece does not mention is that the foreclosure crisis has put a big dent in property tax collections. In California, Gov Brown has signed a law that allows cities to force banks to modify loans for anyone who has any income. Before you real estate shills put in your greed inspired comments to this, I want remind them and everyone that after WW2 FHA and the VA financed housing on that premise; loans were structured to accommodate whatever income the borrower had at the time. This is what led to the stability and boom of the 1950s. It was only later on that various real estate shell games emerged. The fact is that only a small segment of the public trusts real estate as an investment. They are correct to do so. A home is for living in, not gaining unreasonable wealth for nearly no work at all. (That is one of Gandhi's Seven Blunders of the World; "Wealth without work".)
I won't go into a full debate with your entire post, but you said a mouthful regarding the reduction in property tax collections. When the real estate market was exploding (esp. in CA) what did those cities and counties do? Instead of reducing property tax rates as collections mounted, they found more and more ways to spend the new money. Much of this became permanent spending (hiring, raises, massive benefit increases) or was squandered. Now they're stuck at the higher budgets but back to where they were ten years ago with taxes. The city treasurers in these places should be strung up.
bryanfred, when the housing bubble was bubbling, the state did NOT collect all that much more revenue. The simple answer: Prop 13.
Pension money is supposed to be invested based on a percentage of salary. If you make 30k/yr the pension fund should be getting $250/month. After 30 years of employment your pension should be able to pay a certain percentage of your income based on interest alone.
Defined benefit plans may be either funded or unfunded.
In an unfunded defined benefit pension, no assets are set aside and the benefits are paid for by the employer or other pension sponsor as and when they are paid. Pension arrangements provided by the state in most countries in the world are unfunded, with benefits paid directly from current workers' contributions and taxes.
In a funded plan, contributions from the employer, and sometimes also from plan members, are invested in a fund towards meeting the benefits. The future returns on the investments, and the future benefits to be paid, are not known in advance, so there is no guarantee that a given level of contributions will be enough to meet the benefits.
http://en.wikipedia.org/wiki/Pension#Funding
The problem is not the employees or the unions, but gross mismanagement and corruption on the part of the city managers over the last few decades. Instead of putting aside funds to pay the pensions, they spent the money–some on city services like parks and roads, some perhaps on graft and large personal pension. On top of that, they probably convinced the federal government that they would provide their employees with sufficient pensions that there would be no need for social security–more unkept promises.
But those managers are no longer around. It's clear that more regulations are needed so that public employers as well as private employers put aside money for pensions they have promised their employees. It's also clear that this nonsense of allowing them to opt out of social security must stop.
As for the size and nature of the pensions, I doubt that someone could start working at 45 and retire at 50 or 55 with 90% of their pay. The author has clearly left something out–like a requirement that the person have worked for 30 years!
The problem is difficult. The culprits are long gone. But putting the blame on the employees and retirees is wrong, dead wrong. And for a corporation or a city to use bankruptcy in order to get out of contracts is also wrong. Unfortunately, I think the only solution is for the federal government to come to the aid of current employees and retirees. At the same time, the cities cannot continue to escape paying social security and must be forced to set aside sufficient funds to pay for the pensions of new-hires. And the unions will need to accept this.
Nonsensical post. There are many audit processes to ensure the rule of law is followed.Scare monger – stupid scare monger!
Sorry, folks, but I call BS on this comment and on Mr. Zakaria's article. It's ridiculous to pin the blame for multiple cities going bankrupt solely on pensions. Did anyone, including Mr. Zakaria, consider the fraud perpetrated on many cities by bankers (see Matt Taibbi's excellent article outlining Wall Street's use of Mob tactics to screw the average taxpayer), or the corruption by political sheisters to ensure that their cronies are awarded contracts for millions, while providing sub-standard goods and services? Many of the cities noted have problems related to the housing bubble – are you blaming that mess on the payment of pensions, too? I'm not saying that pensions aren't one factor of the problems, but there's no silver bullet to this: it's a huge house of cards. Convenient to pin it all on the unions, but not very accurate.
Excellent point! Twenty-thirty years ago, mostly at the demand of elected politicans (usually conservatives convinced the market would ALWAYS do well), the retirement funds of public employees were turned over to Wall Street "fund managers" who ALWAYS made a great profit, whether the funds did well or poorly. Billions, if not trillions, of dollars have essentially vanished in the recession from these funds and now cities are coming up short.
But it wasn't the employees' fault, and they shouldn't have to bear the blame or cost. They served us honestly and honorably, usually for 30 or more years. We should keep our promises to them. Most agreed to accept smaller incomes over time in exchange for better retirement payouts.
My faith has been restored. I knew that if I looked long enough, I'd find a comment that referenced the article above about bankrupt cities. It does seem true that we can no longer support the kind of wages that can support a middle-class family.
I used to admire the social benefits that Europeans have, but without a manufacturing base there isn't the kind of tax revenue to be generous with such things as healthcare, unemployment, and disability benefits etc. We have to give some serious thought about what kind of society we want to have going forward. Neither candidate wants to go into specifics about which programs they'd cut if elected in 2012.
you do realize that you've been fed a load of bull (assuming you actually believe what you said).
i'm not in a union (nor do i have any plans to be), but even i know that our fiscal problems don't have much to do with pensions and unions. and if you know anything about how most state and fed'l pensions work, the workers paid into the pension during their career. they don't just work for 25 years, and then *poof*, the gov't hands them money. people actually contribute a portion of their salary to their pension. they pay in, just like many of us pay into a 401k.
pension costs are rising, true. but the ONLY reason they are rising is due to health care costs. the health care industry has slammed everyone, and shot up the cost to employ people, no matter what the industry. but even then, pension costs are small when compared to the costs of everything else.
as people have already said, all of these counties/municipalities are going bankrupt due to bad investments, mostly made by corrupt politicians. the people at the top are trying to spin it to put fault on the pensions, mostly because they are heavily invested in the banks (or are getting paid by them). cities are beginning to realize that, while their pension costs may rise 10-20%, their fees to banks are rising by a much, much higher percentage.
yves smith said it best recently. she said [sic] "if a union wants to make a deal that costs the state 5% more, the state will break up the union. but if a bank makes a deal that costs the state 20% more, that's just capitalism..."
james:
As a retiree, I will say that what I get is in line with the so called "private" sector and is in no was luxurious. I am able to pay my ongoing bills, am not able to afford a new car or home, (thank heavens those are paid for) and I get along. The luxurious pensions you mention exist, but not at my level, and not at the level of the unionized workers that I know in any city or state, (and I know a few).
On the other hand, my state legislator, who is term limited to eight years, will get a lifetime stipend of about four times his annual salary when he leaves that office, plus what he will get if he is elected to another inconsequential office. (He still gets full salary from his day job too....). The financial hemorrhage you mention exists, and is serious, but those who are shouting the alarm and pointing fingers are the ones with their collective snouts deepest in the trough.
Other things to consider
1. Tax revenue was pumped up by WS debt machine. They used securitization to capture the profits and sell the risk. Most cities were unaware of this bubble and budgeted according to incoming revenue and historic stock market returns. When WS popped the bubble the cities were left with a bunch of promises that they couldn't pay for. This has to do with WS greed.
2. Now the FED is printing money and conservative investments pay squate so pensions are earning a lot less. This also makes the situation worse.
I see no where in Fareeds article any mention of Wall Streets roll in the problems facing cities.
I predict an economic surge, after the RNC. If it creates good poll numbers for Romney, it will continue. Places like San Bernardino just need to holdout a little longer. Almost there…
Could you explain the steps San Bernardino should take?
Why would you call me names in a previous post and then expect cooperation? If there is no tax revenue to sustain the cities' upkeep and security, people will eventually just have to leave or risk staying. Just like a hurricane, the city should (as San B has) notify the population of the impending increase in risk.
Okay, what have you done with the real JAL, the guy who cannot put a proper sentence together to save his life.
Jal -
# $120 Trillion unfunded liabilities
# 100% DEBT to GDP ratio – and rising by 10% [that's $1.2 Trillion a year!
# The fact that 60% of Public debt matures in less than 3 years
# And 2 weeks ago Obama doubled down on his failed policy of borrowing MORE money from China to grow
GOVERNMENT spending [to paper over the cracks] instead of using it to promote growth in the Private sector
and create jobs!
But YOU predict an economic SURGE? Gimmee a break! Did you just arrive from the Planet Zog? Pfffft!
Ouch, are you implying that Obama and associates should find another government post to ruin?
The assumption on most of these postings is that the deficit and rot started in 2008. If my memory serves me right, President Bush had a surplus when he was sworn in. Please don't give me the 911 reason because the recession President Obama inherited is worst.
YEP, I believe this guy thinks ALL the economic woes of our cities and states started in 2008, some where around the time president Obama was sworn in.
Those damn liberals.....
It was the GOP and Bush who came in with a $154 BILLION surplus, and blew it within one year!
It was the GOP and Bush who created Medicare-D, the largest and most expensive social program expansion since the creation of Medicare...and DID NOTHING TO FUND IT!!! IT'S RUN 100% ON DEBT!!! By contrast, the ACA is 100% paid for, per CBO scoring (partially revenue increases, partially spending cuts elsewhere). But it adds little to the debt.
Per a host of economists who've looked, the current annual deficits are 35% the lost revenue due to the 2001/2003 Bush tax cuts (which, remember, were supposed to expire on December 31st...so if they go up then, its the GOP who voted that way NOT Obama).
When you factor in two wars, one a war of choice and not necessity, which - for the first time in American history were launched with no tax increases to pay for the war - and add it to the tax cuts, you hit literally 50% of the deficts we're now running. In fact, everything Obama has done since coming into office has only increased the deficits we would have had under any President by 10%.
So why in heck would you think the political party which has on multiple occasions proven they can't balance the books and who create massive debt and financial loss whenever they're in charge, why would you think they'll somehow get us out of the mess they mostly created?
The republicans will do nothing to make anything better, they never have and they won't in the future. Mitt's taxes will go down even further, he will have legitimized off shore, tax sheltered accounts, ALEC will write legislation for their own purposes and the Sheldon Adelson's of the world will buy elections, the People be damned!
Republicans have got nothing but misleading information and the same bad policies that got us into this mess. If you think cities aren't hurting in part because of Starve the Beast and it's all the unions fault, you are not being honest or you are truly brainwashed.
Because Israel forces us to sponsor their terrorism, to the tune of 3 billion a year....
I have nothing to back this statement.
I just like saying stupid things.
Nothing to see here folks, move along, ( drum roll...)
$2 billion wow i'm scared. What's $2 billion when we are talking about $15 trillion in debt.
Indra, perhaps you should consult a world map to realize what countries surrounds Israel. Should Israel falls, the domino effect comes to play. Salam.
pensions in washington state are 60% of pay for number of years of work plus age must equal 85. ...no wonder california is going bankrupt at 90% at 50 years old.
I dont need to know anything, the stupid americans will believe anything with number.
We muslims invented math.
It's not about who invented it.....it's about what you do with it......It's a shame because at one time in history
the leaders in the Arab world were some of the most enlightened and educated on the planet. Your culture
has been hijacked by religious leaders that preach an intolerant and close-minded interpretation of Islam that benefits few. It only fuels the cycle of hate and mistrust others see in that part of the world.
Mathematicians in India discovered the decimal numeric system as well as the concept of 0. The arabs/persians came to know of it from the Indians and then transferred the knowledge to the western world. Quit lying that it was invented by Islamic mathematicians.
y'all didn't "invent" math, you didn't even discover it....saying muslims "invented" math, is like saying muslims "invented" religion.
They should've kept that to themselves, now we use your math to put precision guided missles at your door step, life's a biotch ain't it.
Ender, do the math: how many virgins in heaven are left for your suicide squads? Salam.
In Oregon pers is a massive burden on the state. We shouldn't be cutting services, but cutting PENSION AND PEOPLE RETIRING AT 50. STUPID
Some how I think all this crap could be fixed with two simple words, TAX REFORM!!!
Taxes are the core of this issue. Comparable salaries go up so the city has to increase salaries of street department workers, firemen, police officers, etc. or lose them to neighboring cities or the private sector. But they can't make it happen and get elected. So they increase pensions, reduce the age to get them, etc. because it won't be their problem in 20-30 years so they get elected and this blows up in other peoples faces 20 years later. States and the Federal government all have this issue because people aren't accountable for their actions and nobody will raise taxes anymore (even if it is the right thing or the needed thing). The States get away with it more because they will get bailed out more.
It's the same way in the private sector though. The small companies go bust but the large companies with terrible long term business plans get bailed out.
I agree we need tax reform but it only addresses the symptom and not the cause (and not nearly enough). Balanced Budget Amendments wouldn't help here (this shows the problem with them as well) since all the pension decisions were made decades ago. Complex issue that requires many solutions some outside the scope of taxation.
Excellent post, good coherant thought. A complex problem requires complex solutions.
tax reform won't solve the issue, tax collections will. How bout we collect the taxes that go uncollected first. Then have a sit down regarding what tax rates are fair based on income. Stop giving tax breaks to people with 15 kids. you get one tax credit for having a child, after that, you don't get anymore. If you choose to have more kids, then you foot the extra cost to raise them, why should you get an additional credit and have the tax payers foot the bill?
A large number of cities have become third world like and poverty sinkholes and suffer from third world like financial conditions. http://seekingalpha.com/article/731651-american-third-world-cities-are-going-under
Why were you struck just because all the stats you look at are wrong
Arguably, cities have pension obligations they simply cannot meet, however jerking the pension rug out from under persons who are near retirement is not fair. People build their lives based on pension benefits. Now these lives will be destroyed and there doesn't seem to be much sympathy for the worker who devoted his entire working career for this employer, often working at a lower salary, because that worker had a promise of a pension at the end of the road. This is simply not fair nor humane. I see too many companies doing this. Just declare bankruptcy and then say "I'm sorry, we can't fulfill our promise to you." How sickening and criminal of them, and it appears to be perfectly legal.
Agreed, it stinks. But I have yet to find a way to balance a budget by somehow pouring 'humanity' into it. The spreadsheet takes no prisoners.
Face it: Communities have for years been scamming public employees, conning them into working in abysmal environments, buffeted by petty politics, for low pay, in exchange for a pension plan that anyone barely capable of balancing a checkbook could tell couldn't possibly work.
Thing is? The unions let them get away with it.
So much poison, you should be careful when you swallow your own saliva.
Do you kiss your mother with that mouth–your children?
Sorry, pensions are just like 401Ks for private sector... 401Ks got screwed over the last decade... pensions will go the way of 401Ks.. whatever the reason.... pretty soon, non-Politicos will enter the local politics and reshape everything.
It is fair when those people are only 50.
Hey, come work for the state, which are far easier jobs to get and keep. And in so doing, retire earlier, with better pensions than every one else. Vote for us and we can get you this sweet deal..... Californians have been bought off by Dems for half a century with this methodology and now we are reaping the benefits. Doesn't seem like it was such a great deal now, does it?
Have the DEM's been in power for half a century? I can see why you would blame them....
My friend who works for the state has gotten cost of living raises every year since this whole recession started. He whined and cried about having to now pay 1% more for his insurance and pension than he did before. He has full dental, vision, and medical coverage and only has to pay $3, $5, or $10 for prescriptions. Another friend of mine who is a cop, retired at 45 at a full pension, and is now collecting a pension PLUS making a good yearly salary flipping houses.
Contrast that to my private sector company, we pay into a 401K which does not match – up to 13% of our salaries, we pay about 10% of our salaries towards MEDICAL insurance – we have no vision coverage, and we are part of a dental network which only pays 50% of COVERED services. Haven't recieved a raise since 2006, as a matter of fact had pay CUT by 25%.
....and the public sector workers wonder why people have a bad opinion of them?
Should many of Southern European towns be able to do the same – filing for bankruptcy – their governments wouldn't be asking for bailouts now!
America is sacrificing its future to pay for its past?! For its past what, Fareed?!
Its past, made of productive labor, produced the present, which by ITS productive labor has a chance of producing a good future. Our pensions reward the productive labor of the past without which little wealth would exist, now or in the future. Some of us took poor salaries because the job promised a good pension; we have sacrificed already, so to speak. Now, according to you, we should sacrifice again because the economy has shrunk, because we need an enormous Defense budget, and because the rich need not pay fair taxes?!
Pensioners have a contract that must be respected. Cities that go bankrupt do so because of a shrunken tax base. Help for them should come from an improved economy and a more prosperous tax base. If this is not possible, it should come from re-allocated government funds, like those destined to foreign bases, foreign occupation, foreign wars, and foreign aid. Fareed, it would be helpful to your fine awareness if you spent time with the middle class. You already know a lot about intellectuals and their think-tank meetings. Run some earth through your fingers; let go of index card.
Explain to me how a pension that guarantees a good salary for however long you live for doing no work is a fair deal. The problem with this deal is that nobody can predict how long the average person will live when you first get hired, and the accounting for local governments did not require that they set aside this money as the worker earned it.
As long as the tax base is growing a pension is a good deal for the local government – they make a promise and can show a good history of keeping it. However, as soon as they have a bad year cash flow kills them and they have to borrow to pay their pension. It is like betting that the stock market will have 30 straight years of up with no down. Companies made this same bet – until the government started making them set money aside. Then pensions for new employees stopped.
A middle-class snow plow operator, teacher, or policeman should not expect to be able to retire solely on their pension. To be able to retire, you must save.
That only works if you can afford to save, Some jobs simply don't pay enough to save.
And you just hit the nail on the head." the accounting for local governments did not require that they set aside this money as the worker earned it." Before there was anything like a pension in this country,people put they're own money aside for retirement if they could. That money was there and ready to use. When company's and governments started supplying pensions to draw workers in, people were led to believe that that money was being put aside until they retired.
Now the government had gotten to the point they take over private pensions as they're personal piggy bank to bail out ss due to mismanagement and greed. So why should someone that has worked and paid in all those years have to carry that burden?
If you really want to know where your tax dollars are going, look at the current costs of the black box budget for our government .I would like to retire one day. I can't eat a black box project that no one can know about to even vote if its needing more money or is not a viable program to persue.
Fareed Zakaria, Your editorial comments urging state and local governments to not pay, or renegotiate pension payments, shows your lack of understanding as to the work of those employees and the way they have been traditionally paid over the years. You were of course talking about police, fire fighters and teachers but you lacked the courage to name these groups. Police and fire fighters are hired to jobs with the understanding that they will put their lives at risk for low wages. The way they are convinced to take these jobs is promising that if they live, after 20 years they will be able to leave their dangerous job for an early retirement. Teachers are hired at a very low wage scale with the promise that they will slowly see a raise in pay ending with a decent pension in their old age. That editorial comment made you sound like an ignorant “tea Bagger”. When one compares what they do for their salary and compensation ( which you would reduce) and what you do for your incredibly inappropriate pay illustrates what’s wrong in America. Grant Borst
Came to post after watching show today, but you said it for me, Grant.
I was terribly disappointed that Zakaria, for whom I had great respect, would propagate the "pensions are killing the economy" propaganda.
These retirement benefits were taken, reluctantly, at bargaining tables because when raises were denied and denied, at least we could bring SOMETHING to our members to settle a contract. AND A CONTRACT IS WHAT IT IS. Seeing bankruptcy as an opportunity to break contracts is beyond cynical. I remember the many who wouldn't even CONSIDER restricting the bonuses of those that destroyed the economy because it was promised in their "contract". A promise made should be a promise kept, and there are many paths to fulfill contractual obligations.
WOW, nice post. You remiinded me of the wall street bail outs, which caused by the greedy business types. They pulled in Billions of tax payer dollars, just to give the people who destroyed this country a bonus that was somehow "Promised" to them. The difference here is a pension is a "promise" an bonus is not, yet these greedy types got their bonus as "promised", paid by tax payers.
Personally... I would have fired every single one of them, with a kick in the ast, and a note around their necks saying "Thanks for nothing".
My husband has worked as a firefighter for over 30 years. The union has negotiated his salary that include pension agreements. To say that these retirement benefits will no longer be honored is not right. The lower salaries were agreed to with the understanding of retirement benefits. Whether you are a corporate raider pillaging retirement funds or a city reneging on retirement benefits its not right.
Lower salaries? I know two women, one worked for the town police, the other from the fire department. Both of these women retired at 45!! That's sick.
I agree it isn't fair to pull benefits out from under people but ALL levels of governement need reforms in their pensions and healthcare for retirees. Why the hell should taxpayers pay for these people after retirement?
I say they get a little bit higher salaries and some form of standard benifit (maybe 3% contribution to a 403b) for retirement, no healthcare coverage – like any business! Once government starts acting liek a business the better off the towns will be financially.
Kandee – If your husband signed a contract to that effect, he can SUE. To deliberately break a contract by either Emloyer OR Employee is illegal.
This is a nightmare for and others like you. I wish you only GOOD thing sin the future.
Your husband sat around doing mostly Nothing for years. I guess washing the fire truck every day counts.
Overpaid and underworked. That's what firemen are.
I grew up in a city with a volunteer fire department. It's worked out just fine for over 85 years.
Get rid if paid fire fighters. That's a start. Millions if men will do the part time job for free if you let them.
Mike B – your ignorance and stupidity is showing. Can you imagine anyone suggesting getting rid of fireman. Do you have any idea the intense training, psychological and physical, required to save your mother's life?
It is interesting how Fareed neglected to mention San Bernardion was keeping its financial problems secret during negotiations with the union. It negotiated these agreements while burning up its cash reserves, knowing it could not pay the contracts it was negotiating, and did not inform the union of its problems. After making a contract with the unions that the unions had know way of knowing the city could not pay, it is blaming the unions who never got to see the books. Now the city files bankruptcy to reneg on its agreements.
In other words, it negotiated in bad faith so they could get a judge to set their budget within their means instead of negotiating with the union to live within their means. This piece is lazy journalism. Do you really believe the unions negotiated an agreement they knew would bankrupt the city and nullify the contract being negotiated?
Bull.. It's not just police, fire, emergency workers. Its every clerk, secretary, electrician, you name it that works as a public employee in CA that was promised these crazy benefits. I'd pull the plug on these things with a clear conscious. I don't hear it talked about but government has been building their own constuency for decades. This is a class warfare that no one talks about.
Why is everyone acting as if this were only a California thing, or only pensions?
Chapter 9 bankruptcy (municipalities) has been on the book since 1937, and to date, over 640 municipalities have declared bankruptcy.
In 1994, GOP-run Orange County, CA, declared bankruptcy with over $1.7 BILLION in debt (largest such bankruptcy until 2011). A debt caused not by pensions but by interest rate-related losses (the county managers invested county assets badly.
In 1999, Pritchard Alabama declared bankruptcy, unable to pay city employee pensions.
In 2005, Millport Alabama declared bankruptcy because a factory, the city's only real tax base, closed and moved to another state.
In 2008, Gould Arkansas declared bankruptcy after city officials "spent" the employment tax they'd collected from city employees (in other words, they stole it).
In 2009, Pritchard Alabama AGAIN declared bankruptcy after they were unable to pay state mandated pension increases.
In 2011, Jefferson County Alabama declared bankruptcy (largest on record), over $4 BILLION, due to sewer revenue bonds tainted by a interest rate swap bribery scandal with JPMorgan and county commissioner Larry Langford, and bond insurance credit rating collapse in the late-2000s subprime mortgage crisis, followed by the occupation tax being declared unlawful in Alabama...
Get the point? Its not unique, its not just California, its not just pensions...
This article from Bloomberg pretty much spells out the reasons for Stockton and San Bernadino- they believed in the theories of the quants, like Wall Street, that the housing market wouldn't be cyclical and that prices would continue to rise, so the pension agreements they made with their public employees were based on wrong-headed assumptions about the amount of property tax they would continue to receive. Plus, they issued pension bonds- idiotic.
http://www.bloomberg.com/news/2012-06-27/why-stockton-is-bankrupt-but-your-town-here-isn-t.html
There is lots of clearly relevant information left out of this article. However, providing an accurate picture would fail to convey the point Zarkaria is making.
Pensions are a problem because they are a way that politicians make promises at no current expense for money to be paid to people far out into the future. Dem's have been using this trick for years and now the bill is due.
Doesn't mean a thing. IF there was a work contract signed by either party it is ILLEGAL for either to break it. Period.
And people complain about lazy Europeans lol. Pension age is 67 here for most people. People can go before but with significant loss of pension rates. However, there are exceptions for people with hard manual jobs and sick people.
I get a laugh from the people talking about the lower salary that they accepted knowing they would get a good pension. What a joke. If someone offered me a job that paid 5 times the going rate, I'd be a little skeptical about their ability to actually pay it. Public service pensions are the biggest ponzi schemes going.
All governments coffers are Ponzi schemes.
And 401ks are like playing Russian roulette with some fat, overpaid, Wall-Street pantywaist playing with our money.
Why are American cities going bankrupt?
They're going bankrupt for the same reason the nation is going bankrupt: twenty to thirty years of massive mismanagement and corruption.
And, to be honest a current president who has TOTALLY ignored tackling the economy for 4 years!
Oh, and I hope no-one ATTEMPTS tp blame the GOP when the Democrats had House and Senate for the first TWO years of Obama's Office!
The Democrats controlled both the House and the Senate for the two years preceding Obama. They took over at the beginning of 2007. That is why the economy started to come apart by the end of 2007.
I will. It took Bush and Co eight years to deregulate everything, start two unfunded wars, and tank our economy. The problem with the Dems was being nice and wanting to compromise with the republithugs, when they should have squashed them like bugs.
I'm an independant and I'm voting OBAMA.
If you think honest counts, then be honest...
An examination of where the current $1.3 trillion deficit came from concluded that 35% of it is due to lost revenue (lost to the Bush/GOP tax cuts of 2001/2003 - when the GOP controlled the White House, Senate and House)...
Another 15% were due to Iraq and Afghanistan (and remember Iraq was Bush's personal war of choice)...
Another 15% is lost revenue from the slowed/depressed economy, which Bush and the GOP created...
ANd tell me...which party started two wars and didn't try to pay for them? First time in U.S. history we went to war without raising taxes or trying to pay for them...
And which party created Medicare-D, the largest social program expansion since the creation of Medicare (and then made exactly zero effort to pay for it)? Note that when Democrats introduced SS in the '30s, and Medicare in the '60s, and the ACA in 2009, ALL THREE included revenue features (and spending cuts in the ACA) designed to actually pay for the programs. Medicare-D was 100% financed by debt!
So, which party can handle finances better?
exactly, unfunded liabilities, like two wars and a medicare prescription drug benefit and bloated defense budget. Eisenhower had it right "Beware of the Military Industrial Complex"
http://madmikesamerica.com/2010/09/jfk-eisenhower-warns-beware-the-military-industrial-complex-and-clandestine-secret-society/
I repeat...over 640 municipalities have declared bankruptcy since 1937. The largest ever was in 2011 in Jefferson County, AL, and had absolutely NOTHING to do with pensions...Second largest was Orange County, CA, (a GOP controlled county) and also had nothing to do with pensions...
People are cherry-picking 2-3 cities, from one small period of time, and trying to claim more than it really is...
Remember some have become extremely wealthy, at the expense running the U.S. into the ground. Just look at the Wall Street CEO's and our politicians.
Our politicians make far more than their $175,000 annual salaries.
And as if that’s not enough, a number of them then go and work for lobbying firms, where some make $1,000,000-$2,000,000, annually, selling out our country.
That’s why this nation is in economic ruin.
wow!!! possibly so true.
We will see the quality of teachers decline if their pension promises are not kept. New York State's Teacher Retirement System is fully financed. Also, 90% of pension outlays from the fund come from income on investments. Teachers in states that did not maintain adequate fund balances are doomed. Welcome to the new amerika-land of the rich, home of the screwed.
I agree 100% The sad part is my grandma has now passed on. This was NOT the future that she promised me as a kid. My grandmother would be rolling over in her gave to know that big corporations have gone back on their promises. Of course they don't care now that she's gone... just like they don't care about any of us. We're completely exploitable / expendable.
First, it's important to recognize that what is bankrupting cities is not solely pension costs. Local governments - like our national government - are often incapable of operating a balanced budget. They provide services well in excess of what they can afford. But the issue of public sector unions is an interesting and difficult one. Almost by definition, public sector union membership is often the largest single organized block of voters to be courted by people running for local office. So, does a candidate ever get elected by promising to cut the wages and future benefits of the largest block of voters? Take a wild guess . . . .
Yes, when in doubt, screw the little guys. Don't address the badly run Goverment that put the city in the position to begin with....
Unfortunately the American middleclass beleived in another lie (reality). That the gonvernment, stock broker and employer will take care of us in times of need, or retirement. The reality is it was just BS to get us to put our life's energies into a purpose, profit or patriatism. We gave up our self relaince and belief in ourselves for this BS and now are screaming 'foul'....and it is! As a businessman the graph lines of profit and employee benefits cross at some point and are not sustainable. Simple math. We believed in a dellusional situation, "promiced", because we wanted to and it is failing us. We must take some responsibility for beleiving this fantasy. 90% income at retirement? 60% income at retirement? Come on!! Moral is we need to get back to some self reliance and personal responcibility for our selves not in an obviously broken system and the promice of wealth and services when we stop working.
“The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.” ― Alexis de Tocqueville
Pensions, like Social Security, need to be funded properly. Within just 50 years, we've found a way to mortgage our entire future to pay for past promises. As a 35-year-old, I'm not interested in paying the bill. Absolute mismanagement.
That being said, I believe the contracts should be honored as much as possible. Compromise will be necessary. Probably can't pay the full pension benefit, but we should do as much as we can to honor our public servants.
The problem: unions and politicians. The solution: remove unions and politicians from the equation and let the free market decide just like the union/politician free private sector.
Wow – muddled thinking from the right as well as the left. With no unions, the workers have nothing to protect them from politicians abusing them. Back in the 1800's if you wanted a job with the government you paid for it to your local politician. Police were corrupt because they couldn't arrest the guy that gave them their job without being exposed. The unions (and federal gov't) helped fix this. Do you really want to go back to this?
How would the free market work? Your house catches fire and you get 3 bids from the local firestations to put it out? Go to Walmart, Target, and Sears to have them supply your local police? Certain functions are inherently governmental and need to be paid for by the community via taxes. This is really a simple accounting issue – benefits provided to employees need to be properly accounted for at the time the employee does the work. The government has to be managed well enough to do the accounting right.
Does anyone know what the hell a budget is these days???? When I got married in 1965, I knew what I made and I knew what my bills were to be. I lived within my means and 4 years and 3 months later my wife left with 10 grand, and I was left with nothing but lawyer fees and a child support payment of 95 dollars a week. (for 16.5 years) I survived a second marriage of 10 years.. Again I was broke, but thru it all I became a retired (not early)wealthy man.. All because I learned how to budget my money as a freshman in high school... To many cities are run by people who in their homes live with a caviar diet on a Asian Carp salary... jmho
It's California, let the Jews in Hollywood pay for it.
I dont know about you, but I'm sick and tired of hearing about how workers are being paid too much, etc, when clearly the trend has been to take away pensions, benefits, wages, etc. Why don't we do this: Lets return to the way things were in the 1950's when the richest folks paid 90% tax rates, and average middle class workers got 30 days paid vacation a year and free medical and dental?
Why are cities going bankrupt? Offering (paying for,) ever increasing benefits and salaries for city employees may or may not be a factor. Ignoring other financial matters may or may not be a factor. Having a Democrat mayor and city council may not be a great help.
Illinois will need to bankrupt out of its pension obligations, and it is only a matter of time before it will as it really has not other choice. Taxes are high as it is and people are already leaving the state because of issues related to taxation and quality of life (one person every ten minutes according to a recent report, resulting in billions lost in productivity and tax revenues). Raise taxes even more than they already are and the exodus of citizens voting with their feet will pick up the pace.
But, when Ilinois does bankrupt out of its 53 billion pension deficit (a low number by most estimates – in part because fuzzy math is used to minimize the deficit) that bankruptcy needs to drag down the politicians (legislators and judges) who receive ridiculously generous medical benefits and pensions for life after serving a whole lot less than a lifetime. I have my doubts that the politicians wil be included in taking a haircut, especially when one looks at the deals made that result in a privileged few being able to double and even triple dip and the ongoing lack of any real fallout despite it being widely known, but one can only hope. Maybe instead of Illinoians voting with their feet and leaving the state, a more practical solution would be to target the beneficiaries of the abuse, and just go after their heads – literally and figuratively – as there is more than one way to terminate pension benefits.
Illinois is going broke because of three things.
1. The tax base of manufacturing packed up and left due to obscene workman's comp laws. Ow, my shoulder hurts. Give me $20,000
2. No one has had the balls to tackle the deficit in the last 15 years (Republican or Democrat) Sooner or later, the bill comes due.
3. Other than a recent small increase, not one politician (local or state) has the balls to raise taxes or really cut spending. They recently closed Tamms prison (like they should have a long time ago) and you would have thought the Gov. had taken the Lord's name in vain.
America itself, like Brazil, like Ireland, like Greece soon–will be going bankrupt due to a failure of a 2-party system to compromise and Obamanomics. Obama is the worst thing that every happened to America because he just doesn't understand the importance of housing to the overall health of a nation. So goes housing, so goes a country.
Just witness what is happening in Spain if you think I'm wrong!
I am so sick and tired of hearing the whining that workers' pensions and wages are the problem with cities' budgets.
The real problem is that cities tried to get workers to work for years by promising what it was impossible for cities to deliver because they did not set aside the appropriate funding for their promises year by year as the debts accrued. If that had been done, not many years would have gone by without cities calculating that they couldn't promise workers what they would not be able to deliver. The workers had the audacity to believe that if cities promised them a compensation package they would be able to expect its fulfilment when the time for the fulfillment came due.
And now these workers/retirees are "greedy" because they had every right to expect the compensations that they were promised as a part of their employment packages by cities? Isn't it rather the cities that should shoulder the blame for fraudulent hiring practices?
The workers are not "greedy" for expecting to be paid what they were contractually promised.
It is the cities that are guilty of funds mismanagement and illegal employment compensation practices from the beginning. Quit pinning all the blame on the workers.
Hey, I promise you a quadrillion dollars and all the wine and caviar you can eat when you retire. So, instead of actually preparing yourself for an eventual retirement, you should just believe what I say and take no responsibility for yourself.
Yeah, that mentality will get you nowhere.
So the gig is up. The government have been able to pay their employee at below local average wages by offering promise of generous pensions. Essentially I will pay you less now, but will make it up later w/ pensions. only when it's time to own up to the promise, they declare bankruptcy. How is this not theft and a crime?
The government does not pay below average wages.
Do you think it's different today?
Good start Fareed. You need to dig a little deeper. You now need to look in to the inter-relationships (Family- wives, husbands, cousins, uncles etc) with school boards, city council, etc. that negotiate these contracts or fund the grants or buy the land. You could spend the rest of the year on this one topic. Interesting stuff.
"The truth is America is sacrificing its future to pay for its past. To keep up with burgeoning pensions, states and cities are slashing services." Right. Like this has nothing to do with 30 years of shifting taxes off of the super rich based on made-up economic theories. Teacher and Firemens pensions are the villians here? Wake UP – all this deficit reduction stuff – This is just the richies trying to make sure there's enough credit for their next bailout – which they know is coming since the bought their way out of financial reform.
pensions and unions are bankrupting us all. Initially, the unions served a purpose and were necessary to improve working conditions and create fair pay. Because the unions have gotten greedy beyond belief, they are spiraling downward and will soon be a memory. I can tell you that I make less than the average public employee. I do not belong to a union, nor do I have a pension waiting for me and I have not received a wage increase in almost two years. I am tired of working so hard for government employee raises and pensions. WAKE UP PEOPLE . We can not afford to provide pensions any longer! We cannot afford to appease unions any longer. Simple, done.
Has it ever occurred to you that:
" I do not belong to a union"
Might have something to do with:
"nor do I have a pension waiting for me and I have not received a wage increase in almost two years."
The man who does not ask or demand civil rights for himself will never have them given to him. The concept that unions are bad is one of the biggest hoaxes in this country propagated by people who consider dealing with organized labor detrimental to their own incomes. Virtually every other industrialized nation uses unions to effectively negotiate workers rights with the government. Here we have lobbyists to negotiate on behalf of the rich alone while everyone else gets screwed. Those pension contracts need to be paid. Ordinary people have no method of renogiating their contracts and obligations (how many of you wouldn't mind renogiating your mortgage or credit card debt?) So why should businesses, cities, the ultra wealthy, etc. be able to? The law only works if its applied equally to EVERYONE.
I could also quote the republican mantra for you if you'd find that more agreeable "if you don't like your job you can get out"
Unions are spiraling downward because of a couple factors non of which have to do with whether they are bad or not. The right since the 80's has been on a campaign to get rid of unions because they are large donors to their opposition. If the Evangelical church gave money to the democrats at the same level the rhetoric would be against the church along with unions. The me first mentality pervasive in the country has a lot to do with it also. Since the laws were changed to outlaw the practice of having to join the union to work in a union shop what you have is a lot of people who say why should I pay dues when I can get the same benefits as the union guys without paying a penny. Problem is that once the unions are gone and there is nobody to fight to keep those wages and benefits up they will be taken away. All these people that say that unions are no longer needed are playing right into the plan of the right and corporations to strip workers of rights and benefits so we can all work for third world wages while those at the top who run things reap all the reward for themselves.
Unfortunately your words are true. The rich have have turned worker against worker, hiding their wealth and the fact the problems are created by them. At issue is we should all unionize, thus we all can have benefits. This mantality of "I dont' so "You shouldn't' also is absurd. Unions help us all to fight corporate money, you that do not have benefits must join in, NOT opt out.
Forward...(I mean that sincerely)
Retirement for anything shouldn't be under 65 and it should be closer to 70 or higher. A person should be responsible for paying for their retirement if they choose not to work any longer. If they didn't plan ahead and chose to just wait for a handout, they should have to wait for a long time. Of course, Liberal ideology will never go for this because they just want to give everyone handouts, but in case you haven't noticed this is what got us into the problem in the first place.
This is what happens when you kill more babies than you make. No one left alive to pay taxes or make pension payments.
Time to rethink Roe v Wade
Leaving your comment about Roe v. Wade aside. If people in this country could afford more kids they would probably have them. It used to be that a family of 4 could live on a single middle class income. Since Reagan started all his trickle down nonsense in the 80's middle class wages have gone down or at best stayed flat. Why would anyone have more kids than they could afford to support? If they did I'm sure you would also be against any public assistance to take care of these kids and even if you agreed to things like welfare and such these additional people would be more of a drain on society than and benefit. We don't have enough jobs for the people we have and a larger percentage of the population is slipping below the poverty line every year.
As a FF and a Cop we can take all the raise and perks we want, what are you going to do lose your home, you will pay...we got you by the balls.....
I cannot believe you want to move out of our fair city, we'll find another sucker..
The Government gave you success, and we can take it away...
US has built so many financial pyramids in so many ways: they have difficulty to figure them all out! I think they should invent a new level of bankruptcy: something more spectacular and with more fun! After all, that is where they are going for years and decades to come!
How many of you actually voted in the last local election. You only have yourselves to blame, regardless of which side of the argument you are on.
Why this news is in Worled's section?
Not all of us. Just the middle class. That's because we have other people in the middle class who are dumb enough to vote against their own interests and support Republicans who will not be happy until the entire tax burden is shifted away from corporations and the wealthy and onto the middle class.
I'M DEMOCRAT AND I'M VOTING FOR ROMNEY, WHY ??? AMERICA IS BEING INVADE BY ILLEGALS FROM MEXICO–SOUTH AMERICA AND COUNTRIES FROM THE MIDDLE EAST.
DEMOCRATS AND OBAMA ARE NOT GOING TO ENFORCE THE IMMIGRATION LAWS OR SECURE THE MEXICO BORDER. ROMNEY WILL DO BOTH. MY COUNTRY COMES BEFORE MY INTEREST../.\
JOHN KENNEDY-AS NOT WHAT YOUR COUNTRY CAN DO FOR YOU-AS WHAT YOU CAN DO FOR YOUR COUNTRY.. AMERICA IS BEING INVADED BY ILLEGALS AND IT GOT TO STOP AND ROMNEY IS THE MAN FOR THE JOB.
Your postings lack any validity. Stop yelling as noone is reading your posts. If you want someone to read your posts, say something based on reality not muslim jinn tactics.
Three words: Public, Service, Unions
Right on the money. Any public union members should be required to pay 3X the taxes of their customers who pay their wages. Then balance the city state fed wages , pension paid vacation sick leave etc...
To listen to folks on here you would think this is a simple issue. Just do away with all pensions and Social Security and make everyone work for minimum wage till they drop and all our fiscal problems would be solved.
That is what the rich GOP/Tea Nut types are spending hundreds of millions of dollars to obtain. Slave labor right here on the american shores. They wont even have to shipt their products oerseas to produce
IF WE DIDN'T HAVE UNIONS ??? WE WOULD NOT HAVE PENSIONS-NO BENEFITS AND LOW PAY THAT WON'T BUY YOUR GAS...
THOSE WHO ARE ANTI–UNIONS ARE BUSINESS OWNERS AND PEOPLE WHO HAVE LOUSY JOBS. THEY ARE JEALOUS OF HIGH PAY UNION WORKERS.
I WAS UNION FOR 37 YEARS AND RETIRED WITH A GREAT PENSION. THANK YOU UNIONS.
I'm on the front-lines regarding municipal pension obligations and OPEB (other post employment benefits) disclosures. Unequivocally, it is an absolute travesty what public employee Unions and complacent municipal officials have promised their workers while the taxpayer has been asleep at that wheel. That public employees receive compensation and benefits in retirement greater than any private sector worker could dream of while enjoying immense job security is not the path we need to stay on. We are behind Greece by 10 – 15 years. I disagree with 95% of Fareed's analysis but he is 100% on point here.
We are over populated! End of discussion. there are more kids being born than jobs. Let's take up the whole religious propagation biblical stuff in a few hundred years.... Let's now embrace the idea that we need to back off on the reproduction and work to fix the problems.
oooh, the idea of birth control is a taboo subject with the GOP and the Catholic church. Heaven forbid the thought of a couple actually planning a family and being prepared before creating a life.
Well, the article is correct but if you try to do anything about it you're "stomping on the middle class and bashing teachers," or at least so says Barack Obama...
Romney 2012
No Jeff, this article is shallowand only partially scratches the surface of the problem. take for example: Fuel costsrising nearly 100% in one budget year, health care rising at double digit rates year over year, pharmaceutical costs skyrocketing at nearly50% during a budget year, how can a state or local government budget for that? The there is the political problems and how they fit in, take for example the rising incarceration rates, the penal system is bloated. How about jobs being sent over seas, wages remaing flat or decreasing.
This article does not touch the inter related problems, but focuses only on what the GOP wants you to think.
Think for yourself, bankruptcy is a complex issue, and its solution will be complex.
Union membership dues are used to get certain politicians elected. Union membership is advised oo who to support at the ballot box. When certain politicians get elected they reciprocate by rolling over to meet union wage and benefit demands. This scenario repeats itself until there is no money left in the till. Europe is the shinning example of how this game works. The US is next. Sad but the facts speak for themselves.
Unfunded pension obligations. In the private sector, companies with fully funded pension plans were ripe for the taking–usually leaving a shell of it's former self. Private or public–bad times, hold off funding pension plans. And for both, raid them if possible, e.g. cut taxes or minimize increases in case of public sector. To forsake a small tax increase 20 years ago, we're stuck with both high taxes and burgeoning obligations.
You're right, the future is being cut off–but not just that of the young-the pensions will be cut too, so pensioners will feel the pain. Retirement plans for the officials who made the bad choices–I'm guessing it's from a different pot of money. And the games played by banksters to "help" cities with swapped based financing–they already got their cut.
This why they are going bankrupt...crying out loud...wake up!
http://finance.fortune.cnn.com/2012/07/11/libor-sucker-hometowns/
FINALLY, someone posted this. THANK YOU. Check it out, people, that is the biggest reason by far...
Now you WNYPlanner, know the truth. Bankers.
Just keep outsourcing and exporting our manufacturing infrastructure to India and Asia.
Nearly done now – and China pretty much already owns the U.S. economy.
Just keep paying lip service to our existing (corrupt) political system, and not demanding change.
Well Said. it is true that Outsourcing and greed Wallstreet folks has contributed to this outcome. Hope the policy makers understands the issue and address it.
One quick think they can do to stop Outsourcing is to stop giving any bonus or stock/price awards to companies decision makers if they outsource or laid-off in the name of saving cost.
UNIONS are the cause and the problem. Union workers bankrupt America
This article does not address the financial devastation wrought by offshoring. If we weren't offhsoring our jobs like mad in this country, then our municipalities would have the means to pay their pensions. We need tariffs. The American Financial Crisis was caused by the decimation of our tariffs.
Just did several web searches for "Canadian cities declare bankruptcy" and "Mexican cities declare bankruptcy" and couldn't come up with anything actually in those two neighbors. What're they doin' right?
THEY PAY CASH
When our leaders (both parties) take as much money as they do from lobbyiests and serve the interests of those who sent the lobbyists, what do you expect to happen.
In most countries this would be called bribery and corruption, but here we call it "a campaign contribution".
That's why the nation and our cities are in ruins.
What was it–$21 Triillion currently being hideen in off-shore bank accounts?
This is part of the reason our cities and the nation is in economic ruin.
Because of democrats!
bring back manufacturing like we had before the ninety s, kick the unions out, make minimum wage $2 an hour, and restart the banking system, get rid of real estate crooks for a stater..
Fareed,
Please do a segment on natural gas cost effectiveness and whether or not there is such a thing as "clean coal".
Thanks for being a source of credible information...
WHAT ! What credible information? This article barely scratched the surface of the problem, is one sided and shallow.
Clean coal does exist, we have one in our area.
Think.....!
Did anyone hear on the Piers Morgan show that in 2008 the Unions contributed $200 million towards Obama's campaign and did this without Union members approval.
Unions need to keep the "golden rainbow" as the carrot to entice new union members for their dues. But at what expense? Well, now we see.
Who stands to gain from all these bankruptcies ?
Also, I am sure most of us know someone who has personally declared themselves bankrupt. I don't think they are embarassed about this. The ones I know, speak of it freely and matter of factly. They ought to be embarassed but they are not because it has come to be an acceptable norm – just like "fat" is the new American physique.
Jeez, it is depressing when you think what this once great country has become.
PUMA–GIRL--I WAS A UNION MEMBER FOR 33 YEARS . I WAS A MAILMAN FOR 33 YEARS. WE AGREE TO GIVE THE UNION THE MONEY TO BE USE FOR CONTRIBUTION TO POLITICIANS WHO LOOK OUT FOR US. THE UNION S LEADERS DO NOT NEED OUR O.K. THEY ALREADY HAVE OUR O.K. IN ADVANCE,.
MY NUMBER # 1 COMPLAINT ABOUT UNIONS IS WHY SHOULD NONE UNION PAYING EMPLOYEES GET THE SAME BENEFITS AS THOSE WHO PAY UNION DUES ??
PUMA GIRL ARE YOU ONE OF THOSE NONE PAYING UNION WORKERS WHO ENJOY THE GOOD BENEFITS THAT UNIONS PROVIDE AND FIGHT FOR ??????
THE # 1 REASON STATES ARE GOING INTO DEBT ????? WAY TOO MANY ILLEGALS USING OUR SERVICES FOR FREE..
ONLY THE BIG STATES WITH THE MOST ILLEGALS ARE IN DEBT LIKE CALIFORNIA-ILLINOIS.
Why? Because Romney is coming, so they just thought they would get a jump start on how he wants it to really be?
Why are cities firing so many people in these economic times? Our taxes are way too low and need to be raised. I am 18 and I almost got a job at a town hall TV station. They sent me an email two weeks after the interview saying that the position had been eliminated and they would not hire anyone. A lot of people can't get jobs because nobody in this country wants to pay for anything.
the real problem is cities privatizing and selling everything. chicago has privatized parking including street parking for the meters, and illinois sold the tollways to some other country. as far as unions go they are somewhat good the standard of living is much higher in america with more unions but when it comes down to contract negotiations it could take a long time and strikes happen. and illegals have nothing to do with it its a scapegoat for what is really going on in this country....its all the politicians democrats and republicans....we need to start fresh they are only in there for their self gain and not for the people.
Over the coming decade, upon entering what was *supposed* to be their retirement years, at *least* a full *HALF* of all American workers will either be entering POVERTY or will be forced to work until they drop dead. If THAT'S not a national economy-killer I don't know what IS.
The FACT is that the pension benefits of the *overwhelming* majority of public sector workers in the U.S. haven't been changed much at ALL since their original inception, leaving the retirees with only a VERY small fraction of their original wages for pension pay-outs... most less than $35,000/year, many less than even $20,000/year.
When it comes to commenting on the difficulties that foreign governments and their citizens encounter, Mr. Zakaria appears to consistently bend over backwards with extensive and detailed "facts" to justify his left-wing approach to international problems. But when it come to domestic issues, he invariably defaults to overly-simplistic *opinions* based on a very small number of the most extreme examples, and his "conclusions" rarely if ever appear to be rooted in any real facts at all.
Even the very small pension is much much more then most people get (nothing). $20000/year for 20 years is $400000. How much money is on the ordinary American worker's 401 K? Even if they try to save money it loses its value. The pension system is unfair. It may have worked well 30-40 years ago, today it is collapsing.
When companies send their products abroad to be made, insisting' they can be made cheaper' why is it that the price of their goods an services are higher, when they come back.
JOHN GREAT POINT AND I HAVE THE ANSWER.....TARIFFS ON GOODS COMING TO THE U.S. SHOULD BE TRIPLE WHAT THEY ARE NOW. BUT CORPORATIONS HAVE THE POLITICIANS IN THEIR BACK POCKETS. SO THE POLITICIANS KEEP TARIFFS LOW IN EXCHANGE FOR POLITICAL CONTRIBUTIONS..
OBAMA TRIED TO END ALL TAX BREAKS FOR AMERICAN CORPORATIONS DOING BUSINESS IN CHINA-OBAMA ALSO TRIED TO RAISED THE TARIFFS, BUT GOP BLOCK IT FROM PASSING.
MANY DEMOCRATS VOTED WITH GOP.
We can protect our cities by bankruptcy if we just maintain the tax department progress, ok mostly all the small business like retail stores liquor stores, convinent stores etc the owners mostly saving the tax and provide wrong information to the cities, they save there taxes and looting the money from the cities
LOOK EVERY TOWN IN AMERICA HAVE THOUSANDS OF ILLEGALS USING THEIR SERVICES FOR FREE. THAT ADDS UP.
THEY MORE KIDS THEY HAVE, THE MORE IT WILL COST TAX PAYERS..
IF THEY GET INJURE ON THE JOB, THE BUSINESS THEY WORK FOR SHOULD PAY THEIR HOSPITAL BILLS, BUT TAX PAYERS DO. BUSINESSES ARE GETTING A FREE LUNCH.
Cheap labor overseas, equate to higher prices when the goods and services come back to the USA.
pensions are part of big spending big government ... politicians buying votes by bribing the voters rather than keeping the government's fiscal house in order. We need smaller government, less government spending and more private sector influence.
The truth which most cannot handle. We have a ton of illegal immigrants having babies and draining the Medicaid and social service system. We are gong down the toilet people please wake up.
The Red's attacking the unions here are simply acting like parrots repeating what the Saudi owned Fox network tells them to think. Facts are, this is what happens when a handful of people own 90% of the wealth. You people should really pull up the Ayn Rand interviews (what the GOP base their mantra on) she flat out states that no one should have a retirement or any rights what so ever, the ruling class are the only people that matter. This is who the right praise and exactly why none of them should be in office.
All city should go bankrupt and cancel pension and free healthcare plan for future employees. 401 k and social security and retiring at 65 just like the rest of the population.
Wow someone with common sense.
Incredible!
You mean to say that illegals are not the ones that ransaked the cities into bankruptcy?
I just came here from mexico. They want to give me a public sector job handing out welfare to illegal aline. Per this article I will have to work past the age of 25 before retiring with 90% of my pay? Achi wowa.
they are broke...they cant meet obligations.....tax revenue is way lower than expenses.......time to go broke.....call it in .....disavow your debts...and start over....this time be smarter......dont promise all your employees the sun and moon....
US free trade agreements killed these cities. Also, corporations constantly looking for the best deal from US cities is why these cities are going broke. American greed has killed American cities. Unions are not blame for these issues, they dwindling influence but they remain a popular whipping post. Corporate greed, your 401K, healthcare, poor schools, and corrupt politicians are why cities are under siege.
Unions have outlived their usefulness in many sectors. US manufacturing and public sector could benefit from a reduction of power.
WRONG. IF WE DIDN'T HAVE UNIONS ?? AMERICA WOULD BE A THIRD WORLD COUNTRY. BUSINESSES CAN PAY YOU WHAT EVER THEY WANT WITH NO BENEFITS....
DO YOU WANT TO WORK FOR $ 8 DOLLARS AN HOUR AND NO INSURANCE ????
CITIES ARE GOING BANKRUPT BECAUSE THE CORRUPT OFFICIALS ARE SIGNING MULTIMILLION DOLLAR CONTRACTS WITH THEIR WHITE JEW CHUMS AND GET A CUT OUT OF IT. A BIG OVERHAUL IN CONTRACTING SYSTEM IS NEEDED.
ILLEGALS GETTING EVERYTHING FOR FREE IS A HUGE PROBLEM TO. LOOK AT CALIFORNIA, THEY HAVE 5 MILLION ILLEGALS. IS OBVIOUS WHY THEY ARE IN DEBT. RAISING PROPERTY TAXES TO PAY FOR THE ILLEGALS . NOT RIGHT.
Uncontrolled government wages and pensions? There was just an article the other day about a police recruit that was injured in training and has never worked a day as a police officer, yet he has received almost $500,000 in wages and benefits over the last 14 years.
I BLAME OUTSOURCING OF OUR JOBS AND 20 MILLION ILLEGALS USING OUR SERVICES FOR FREE.
NAFTA-–OVER 20 MILLION JOBS GONE. JOBS THAT WON'T BE PAYING TAXES IN THE U.S. OUR TAX BASE IS GONE.
Why U.S. cities are going bankrupt? Look for the Union label.
WRONG. OUTSOURCING OF THE JOBS # 1 REASON AMERICA IS BECOMING DOOMED... 20 MILLION ILLEGALS TAKING OUR JOBS AND USING OUR SERVICES FOR FREE...
OPEN LEGAL IMMIGRATION IS ANOTHER PROBLEM. LIKE AMERICA NEED MORE IMMIGRANTS. A JOKE...
Does congress have union dues subtracted from their small wages?
Just outlaw the so-called unions in public funded (welfare) jobs. The funding for retirement of future workers. . . must have been the union playing poker.
Blame the atheists and non-Christians for it!!
That is a good idea: they have done it in Europe anyway....
I will fix America. Its simple. we all just need to get on the same page. check out my TED talk and share with every American you know. Soon this will effect everyone.
http://www.ted.com/conversations/12375/direct_democracy_vs_representa.html
Thanks,
Andrew Witte
You are going bankrupt anyway: why would not make it look like it is a good thing!
When did our business schools stop teaching principles of how to make money, and instead shift the focus to how to cut costs? Today's business leaders are inept, self-indulgent, and not worth the paper their millions is printed on. Is there anyone here who doesn't see the 401(k) campaign on the part of executives as a way to eliminate pension plans and hike up their stock price? Republicans. Democrats. Business executives. They are all crooks. All of them.
"The best the unions were able to do was to offer what they thought was a major concession: allowing newly-hired public safety workers to retire with 90 percent of their salary at the age of 55 – instead of 50, which had been the earlier deal!"
-----------
Please note that the city supervisors, making over $300,000 and down to the police and firefighters averaging $130,000 is virtually pure theft and this is not typical of unions or public officials. San Bernadino was simply robbed by its elected officials and the average citizen didn't pay any attention to it.
San Bernardino allowed pensions to be 3% of final salary for each year worked. Most pensions are closer to 1% and even federal pensions are 1.75% to 2%. The average CALPERS state pension is less than $20,000 per year.
City Supervisors, as you call them, do not make 100,000 per year. Police and Fire Fighters may make 100,000 dollars after alot of overtime.
Uhhhh....Union$ + Democrat$ = Vote$
Wow this site will NOT print my comment about lack of responsibility from unions and democrats in this artcile.
The sentence...local governments have doled out patronage by increasing pension benefits... should read ...local Democrats have doled out patronage to Unions by increasing pension benefits for Votes...
We need to set up a commission and name names. Who began disassembling American companies and relocating them abroad for cheap labor? Who invested the money to train these workers and build these plants? Was it our own tax dollars? Who funded the propaganda to destroy our unions and our workers. We must stop all American companies from relocating abroad for cheap labor immediately. If they do, then their products should be taxed enough to match the cost of American made products using safe and fair American labor. We now need some Protectionism. We must stop all immigration, legal and illegal. If we have a shortage of Engineers, then we should have our local educators target those students who excel in math and science and use the money we've been allocating for importing Engineers, to educate them. If a person wants a government funded abortion then they should accept sterilization as the cost to the American taxpayer. We can't pay for their abortions and their children's education, meals, health care and transportation. We know what the answers are in order for us to crawl out of this abyss. Do we have the courage to stand up to the social engineers of this century and say enough. Romney may be the beginning.
"Wow this site will NOT print my comment about lack of responsibility from unions and democrats in this artcile"
The day I see ANY repubulican politician give up their benefits.... or Mr. Cheney give up his taxpayer paid for heart transplant is the day I will believe its all democrats fault.
Certainly benefits were ovepromised to retirees in many of these cities but they did work for them...they completed their service so why they will have to take some cuts they should still get their benefits.
In addition....the day I see the average American CEO which earns on average 225 times in a year what the average worker does take a pay cut or have his taxes increased is when we should start cutting public employee benefits.
The door swings both ways....
"The sentence...local governments have doled out patronage by increasing pension benefits... should read ...local Democrats have doled out patronage to Unions by increasing pension benefits for Votes"
How much was doled out to Wall Street? How much did Fox vehemently defend the salaries of the people who Fox says are so smart? If they were why didn't they avoid the recession then?
When are republicans going to stop giving money away to Halliburtion...big pharma and the like?
Why are cities going bankrupt,let me tell you why.First they spend more money than they have.Businesses left this country because they were being taxed out of existance.No jobs, no taxes coming in.People being wholesale fired let go whatever the newest word is this week.Pretty soon you have a domino effect.This is beginning in California and spreading everywhere like wildfire.Inflation is rampant. The cost of everything is going thru the roof.Example,I bought steel entrance door a few years ago [3] and went back for another one.First price was $68.00 and now the same damn door is $215.00.
WHY CITIES ARE IN DEBT ?? –GOING BANKRUPT ?????
. JOB OUTSOURCING TO CHINA–INDIA–MEXICO...TAX MONEY THAT THE GOVERNMENT WON'T COLLECT.
MILLIONS OF ILLEGALS GETTING FREE SERVICES, LIKE SCHOOLING FOR THEIR-FREE HOSPITAL CARE–FREE WELFARE--UNEMPLOYMENT--FOOD STAMPS.
CALIFORNIA HAVE OVER 5 MILLION ILLEGALS USING THEIR SERVICES FOR FREE. ILLINOIS THE SAME. WHO PAYS ? HOMEOWNERS IN PROPERTY TAXES GETTING RAISED.
Gee, Fareed. Before you became a journalist were you a rocket designer or a nuclear engineer ?
There is never a solution for this beyond cheating the retired. There's nothing wrong with changing the current agreements but not if we have zero corporate taxes like GE. Trying to "fix" these issues in a vacuum is a sure way to failure.
Americans have turned their back on their country and their own products. We are bankrupting oursleves and losing jobs because NOBODY wants to buy American. It is time to discard your foreign vehicles and other products that could be made by American owned companies. It is the ONLY way out fo this mess.
You are so right!
Do the illegal aliens also have a separate union? While unemployment is still above 9% avg obama took down border patrol. The aliens don't care about minimum wage and that saves even more money for the companies vs unions or shipping products overseas.
Let's say you are twenty years old and you want to work in public srvice. The pay is less than other jobs you can find but not bad even though the private market (in good times) pays better. The city cannot afford to pay competing wages with GM or other profit based industries without raising taxes so they kick the can down the road and offer future benefits. You weigh your options and say, you know what, I may not make as much per hour but I will have great benefits when I retire. You decide to take the job and work there thirty years making a decent wage but not as much as you would have in the private industry. Politicians decide that companies and municipalities do not have to keep their pension funds fully funded and can "Invest" the money any way they see fit. The fund becomes a rainy day fund that bails out every poor decision or downturn and then you have a stock market crash and some London playboys fixing the LIBOR rates and suddenly you find yourself a few hundred million short on your obligation to pay the promised benefits. Who's to blame? That poor sap that decided thrity years ago to work for less money because he had a contract that assured him he would get excellent retirement benefits. Really? There is a lot of blame to go around and there are a lot of corruption where people should face real prison time for but THE LAST person who should be blamed are the people who accepted a job with a negotiated benefit and complyed with their end of the contract. They cannot go back and accept that "other" more lucrative position retroactively to make more money or get a better retirement plan.
The premise of lower pay is flawed in many cases. In the Chicago suburbs, many teachers earn double the median household income or more! Police officers and firefighters earn 70-80K within 5 years! My driver's education teacher was making $120K back in 2004! I don't think he would make half of that in the private sector(with no pension to boot). Unsuprisingly, Illinois is in dire straits financially.
Well in Kentucky, when I got laid off in 2003, I thought about going back to school to get teaching credentials and become a math teacher. I looked at the pay and for a teacher with twenty years experience and a Master's degree, they paid $44,000/year. I'm an engineer and would have to have gotten my Master's and worked for twenty years to take a 30% cut in pay. Maybe there are locations where civil servants make exorbitent salries but for most of the country, it is not that way. Anyway, that does not change the fact that the worker had a contract and fulfilled their part of the deal. The blame should fall on the elected public official if the pay was higher than what was fair at he time. The law used to state that the overseer of a pension plan had to ensure the money was physically set aside to make sure that games were not played like this. Then corporations lobbied congress to allow them to "invest" the money and make even more for their retirees. This resulted in flat out theft and the coffers were drained and then they cry that they have to pay all this money to the greedy retirees. If they would have funded the pensions simultaneously, this would not be the problem it is now. It's like spending your rent money throughout the month in a casino trying to make a fast buck and then complaining when rent is due that you don't have enough money for the greedy landlords.
Has anyone noticed that this whole situation is in essence a Ponzi scheme.
Those who got in first got everything and those who signed on last are gonna get diddly squat.
Let's not go there, but I will. Why is there no money? Of course the blood sucking, self serving politicians have taken care of themselves throughout these tough times, that's a given. Then we have the rest of the non-working leeches sucking away at the system, you know who they are. Cut all wefare and other freebies in half for starters, period. Save a whole lot of money there.18 year old baby factories,if that old, you get money for 2 kids. Don't like it, too bad. Figure out who daddy is and get him to pay the bills. Oh yeah, as far as unions go, thank a union member for your paid benefits, paid vacation or anything else you get. Corporate America isn't going to give you anything they don't have to and could keep for themselves.
Suburban expansion, corporate greed, corrupt politicians, poor education, company relocations, and a lack American pride is why cities are failing. Metro areas keep expanding because everyone wants to live in the suburbs, and these suburbs keep expanding outward therefore takin resources away from the main city. Every company wants a tax break to bring jobs to a city. Companies have paid taxes to support the infrastructure that helps keep the city they are loacated in viable. Now companies feel they should not have to pay any taxes but donate money as they feel to things they want to support within their area. Corrupt politicians make deals that make them a small fortune at the detriment to the city they are elected to represent. The US education system is outdated. The teaching methods still being taught in colleges is the problem, as well as the school days are tooo short and the school year should be longer. Poorer communities would benefit from longer school days where an extra hour could be devoted to help those that won't get the help at home. There is too much technology out there for our kids to be falling behind the rest of the world. Companies have no loyalty to anyone but their shareholders, so they pit communities against each other in a reverse auction to get the best deal. Companies do not move because they are losing money, they are always looking for the better deal. NCR moved form Dayton, Ohio to a some city in Georgia because they offered lower taxes. The company moved too make more money for shareholders. They didn't move because they were losing market share, they moved to cut operating expenses. This is why the middle class is shrinking because companies want to pay every worker less and less. The only people who benefit from relocation are the Executives and the shareholders. American pride is went out the window when Nixon went to China.
Fact is, we should be smart enough to turn down the continuous increases in pensions and other union benefits before we ever get to a point of having to declare bankruptcy. The way things have worked has basically allowed previous generations to live large at the expense of the current generation entering the workforce and the next one.
easy answer. There is money. The money collected goes out to the employees, specially the big bosses. The rest of it to public services. He who distributes the money, he keeps to collect more to himself. That's the reason cities go bankrupt.
Silly little girl – only muslims keep the best for the higherarchy.
Look at Muhammed who, no matter what he had initiated, kept the best booty by saying it was for allah.
don't ask me why california is broken, the people have the answer are the spanish politician when they love the manitos alias la RAZA don't need work because the uncle sam have to provide everything for them.
And this is why Unions for government employees are a bad idea, one even FDR and other stalwart supports or unions early one said would lead to ruin. For companies, profit limits what they could offer and what unions could demand. For governemt organizations, they simply kept increasing taxes a little at a time and giving in to union demands (while accepting union campaign donations off to the side, nudge nudge, wink wink). So you end up with situations like this where union personnel can retire at age 50 with 90% pay (Note: I am lucky enough to be in a company where I am on deferred benefits pension, and the best I can get is 60% pay with forty years service at age 62 .. the best someone could get at age 50 (with 30 years service if they started at age 20) is 33%). Hopefully my example shows how out of touch government / federal pensions are with reality. Now I'm not going to say all such pensions outright are bad. For example, early retirement with good pay for Fire Fighters is warrented given the service they provide and how age can hamper their ability to safely protect the public. They give a lot, so we should do so in return. But should some paper pusher sitting in an air conditioned office be able to get such a generous package? Nope. It's time the federal and government workers were broken. They are destroying this country for their own self interests. SO in our self-interest, it's time to vote in people who will dismantle them.
You are 100% correct.
Islamic islamic will come to see you with great fury! Fury that even protestants will fear! But not Catholics! Allah be praised!
This article should be three words long.
"Union worker pensions."
Corrupt WallStreet Bankers-3
Fareed is so far off base he could be tagged out by the center fielder. Cities, (and county and state governments) have practiced cronyisem, used rediculous tax abatements, hired unnessicary consultants and otherwise spent money like drunken sailors and now we should blame workers and retired workers for wanting the wages they bargained for or benifits they were promised? Sorry, that dog won't hunt. Our leaders (mostly college boys and girls are stupid wastrels who have led us down the path of distruction. Enjoy it.
Fareed is so far off base he could be tagged out by the center fielder. Man I have been a Umpire for 30 years never heard that one NICE....
If going bankrupt means not having to pay pension benefits to government workers and teachers, then let's all declare!
There's no point in educating people like you. It's hopeless. You Republicans should just run around in the woods with your bear skins on with a knife in your teeth.
Public pensions are not the problem. For the most part, except for some egregious few examples, these pensions are hard earned over 20-40 years periods of service. Pension benefits were negotiated as an offset to lower public sector wages compared to comparable private sector job wages. Why does anyone think it is morally correct not to live up to the promises made to public sector workers? Would you advocate for having a private sector person's higher pay "clawed back" after 40 years to equalize tocomparable pay of public sector workers? Do you want to eliminate or reduce the military retirement benefits including VA care for our veterans (who after all are a part of the public sector)?
The real problem is politicians who are afraid to fund their obligations to these pension funds. Sort of like a father who won't pay alimony or child support because it may cut a bit out of his paycheck. When you refuse to live up to your obligations for 40 years the bills add up. Public ensions are not the problem. The problem lies with career politicians and people who write ridiculous articles like this one.
You never stopped to think about what expanding government would do eventually. How can government promise to pay later when they couldn't pay a fair wage with taxes collected 30 years ago. Growth rates are exponential in nature....the bankers have duped us and taken all the money. Obviously a govenment or even a country can't grow exponentially. You have to save today for what you'll need tomorrow. If the pension coffers are empty because no one funded them 30 years ago or because too many people have drawn it down, I'm sorry, your goverment screwed you over. Get off my tax burden.....
This is only what conservatives have been warning about all along. Governments are leaches on society and it's a travesty that we consider them an employer. Business with employees produce. Governments consume. Governments have grown so large they can no longer be maintained and they must fail. People wil have to learn to fend for themselves again instead of relying on the government to save them from every ill that comes their way. Maybe then they will stop taxiing us to extrmemes and people can save for retirement instead of assuming the governmet will pay for it.
I cannot believe these unions demand 90% of a salary as a retirement! That would break any business. It would surely break a municipality. I work for a county government. We get 50% of our pay as retirement at the age of 55. Some agencies within the county get a supplement between ages 55 and 62 to help with the shortfall between retirement and the collection of social security. We get to maintain county medical coverage in retirement as long as we pay the deductible just as we were. That's fair. But 90% of a salary???? That's outrageous and selfish of those workers to think they can get 90% of a salary for the rest of their lives for sitting at the house. Seriously? Wow.
I feel that the moslems should be sent to Seria, They are a terrible group of animals.
They are goat loving group that beat thier wives and that is OK. If they come to my house they might not get home.
Cali is controlled and run by liberals and it's everything they want to United States to be.
If you want to see the future of the US just look at California and vote Democrat.
I like how the article does not say anything about how these citys got into thier pension problems is that most of these cities Failed to pey into thier funds properly and are way behind even years on premium payments. I dont know how that can happen but thats the case. And Who decides to pay or not to pay, the politions of course and now they owe millions. And like usual they blame everyone else and take blame for nothing. Wake up America. I will not be ruled by the stupid rich!
I go back and forth on these. On one hand, yes, some of the deals worked out were wildly stupid and should never have been agreed to, was massive fiscal irresponsibility to agree to some of these benefit packages (if not outright negligent/criminal), and I agree that the money is simply NOT there to make good on them.
Yet, I'm not thrilled with the idea that the government can promise the world to get votes in good years, then turn around and say "oops, sorry, tough petunias for you" in the bad years. When people might have been planning their retirement around these years for 20+ years, and not have any way to regain the ground that is about to be yanked out from under them. Somehow, I think government will learn to love this "switcharoo" power and use it a bit tooo much....
Total mismanagement & miscalculation for the last several decades by (elected) officialse that had no clue – that's why they're all in such a bind now. Was it a secret that people are going to retire, expecting their pensions? Was it a secret that people need health insurance during their retirement? All this could have been managed responsibly ages ago – now of course the blame game is being played – it's the retirees, it's the unions, it's that everyone is living longer, etc. etc. etc. It seem to me that everyone was running around with blinders on. Unfortunately, now everyone has to pay the piper (except the officials that go us into this mess.)
The entire model of our economy, based on interest rates and inflation of currency, is unsustainable.
"$100 invested at 7% interest for 100 years will become $100,000, at which time it will be worth absolutely nothing." – Robert Heinlein
Be Worth more than current dinner and a movie... Batman sucked !! Why did they bulk up Patrick Stewart and have him wear a mask ?
Why US cities are going bankrupt?
Because we are busy nourishing other nations, while we struggle to meet ends need.
They are giving too generous pension benefits to its employees. Start paying its employees reasonable pensions, so the cities will have other priorities to address.
HOW DARE THEY LIVE TO RETIREMENT AND BEYOND?
Why don't they just die like all Republicans want old people to do?
THE GOP SAYS TO DIE ALREADY!
Part of it is pensioners living so long. My grandfather retired on a pension from the City of Long Beach after managing many of their parking lots with an acceptable pension. Trouble is, he retired in the early 80's. He's still around, quite alive and kicking. 91 years old and he does a lap or two of a high school track every morning, bakes wicked good cookies, and does math as a hobby. Poor old Long Beach has been paying him for around 30 years now. Nobody could have anticipated that a smoker who spent plenty of time sucking down fumes in parking lots would still be alive now. But with the assistance of a pacemaker and various other bits of modern medicine from time to time, he's still here. Medicine is an amazing thing, but the downside is it's very expensive and it prolongs life in a manner that allows it to make more money in the future. It's fantastic to still have my grandpa around, no complaints from me, but I'm betting Long Beach taxpayers wouldn't mind him kicking the bucket, lmao!
God bless your grand father, do not be a hindu, ignorant and please do not complain about him, you are one of the blessed one.
Three words: Public Employee Unions.
It used to be that having a public sector job meant you traded lower pay for job security. Now, not only is the pay equal or higher, the unions still demand pensions that will end up bankrupting all of America, where nearly no private sector employer offers a pension any more.
So-called labor unions should be a donation line on 1040 tax forms not instant/automatic donations after paying taxes.
Texas teachers: 1) receive pensions starting at age 60, 2) fund 50% of the pension, 3) cannot strike, 4) cannot collective bargain, 5) have no tenure, and 6) are usually not eligibile for SS. They earn their pensions.
Why not eligible for Social Security did they pay SS taxes ?
Baby boomers never fail to amaze me. How is it fair to fix budgets on the backs of young/new employees? What ever happen to shared sacrifice? The WW2 generation sacrificed a lot so future generations could enjoy prosperity. Baby boomers want future generations to sacrifice so that they could enjoy an unrealistic retirement.
You make it sound as if the boomers didn't work to pay their way.
Let's see, boomers started coming on the scene in 1946-1950 in big numbers.
Most of them started work at age 16 doing things like bagging groceries, flipping burgers, stuff like that. Then at age 18 starting in 1965 they entered full time employment. Some went on to college so I'll guess 70% of the males and 40% of the females were at work by 1970. If they worked until 2010 the average age would be about 62, some would be 65 and eligible for retirement. They have worked since about 1964 so that is about 46 years. I suspect most of them worked at middle income jobs which pumped a great deal of money into the federal tax base and they would have been the ones who built homes, bought furniture, refrigerators, etc. That created a lot of jobs that would even exist without that spending power.
Why do you think they are asking the next generation to pay for their retirement when they already worked 40+ years to pay for their own. Don't blame the boomers who worked all those years for the mess and greed of politicians, wall street and bankers.
Obamanation
Overpopulation.
Because the middle-class who is the source of the tax base, is dwindling.
Middle-class jobs were sent overseas. So now how do you grow a consumer economy without consumers?
What say thee 1%-ers?
.
Just hire illegals
Don't pay em any Pension
Deport them at age 50
Problem solved
I15.9 trillion national dept , millions of unemployed migrants and growing number of closing establishments, non working government economic solutions, what do you got?-Cities going bankrupt.
40 years of democrats management of American cities.
Just look at the South, where they've been in complete and utter control for the last 40 years.
Why are american cities going bankrupt? Corrupt Wall Street Bankers plus half the country on Welfare?
Cities are going bankrupt because of miss management & absence of national wage structures for officers & managers of local bodies. Above all breach of trust of tax payers who pay them after election to public offices. Retirement benefits far outweigh their career responsibilities & performance. They make full use of political influence with impunity with no oversight. Like Bell city of CA Managers were being paid above the national leaders salaries at Washington DC. A son of a union leader was being paid $80,000 per annum with high school diploma not done in case of other such employees. It was to buy union leadership for selfish motives amounting to bribe in public offices..
So, let me get this straight. Most of us have stood in line, waited our turn, done all the things that we were "supposed to do" now they are taking away the promises they made. And we are supposed to be happy about it. Soon we are going to find out that the Bankers have stolen all of our retirement funds too.
I think that there are many mild mannered folks out there that may turn to revolution if this crap keeps going.
Are you able to explain whom is taking anything away?
Are people really blaming the private sector? They are the ones that pay taxes. When a public employee is paid they are given tax money taken from taxes paid by a private sector worker. Yes the private sector has shrunk, this equals less taxes to pay public sector workers. With the high taxes imposed on private business, no wonder they look to find a cheaper location to work. Quit the government spending, reduce the public sector, did you see how many new employees the IRS is hiring to enforce obamacare?
Government workers don't pay taxes? Everyone wants to cut government until it affects a program they like. Please tell us where to cut since you are self-sufficient and don't need government services. How about starting with firemen most of the time they just sit around. We can hire them when your house is burning. Hope they get their in time. Teachers, now there is another worthless group. Road workers, engineers, air traffic controllers, meat inspectors, no doubt less of them would be beneficial.
Let the private sector do it. Like all those contractors in Iraq and Afghanistan. Those people are certainly trustworthy.
Pensioniers are keeping local economies, churches and families with children – alive.
Most of the over the top pensions come out of law enforcement. In California it was particularly bad when state correction officers were given lucrative union contracts in return for supporting the governor. This drove up the cost of law enforcement throughout the state. Thank you Gray Davis.
You have said alot of nothing.
What are the facts?
My experience comes from friends.
Picture this.
A guy hires in to a business and works there for 40 years. All that time his wage was determined by the cost of all things related to his being an employee. Unemployment, workmans comp, insurance, etc. The company has a dollar amount they are willing to pay for an average years wages. So if the guy wants money in a pension fund he works for a lower wage. In some cases it amounts to as much as $2 an hour that is placed in the pension fund on behalf of every worker.
The guy gets close to retirement age but guess what. The company is in money trouble so they need concessions on pension pay to retirees. The poor slob worked for less money per hour all those years with the understanding pension would be there. Now he's 65, probably can't find other work and they tell him he can't get the pension promised to him.
Does that sound fair?
That's one more reason to say to hell with the pension, pay me the full wages and I'll take care of it myself.
The money grubbers are going to keep robbing the workers until they erupt in a fit of anger and storm the banks and offices and wall street and maybe even the halls of congress. Once it starts the carnage will be horrendous.
All that money they hid away at the expense of the workers won't do them any good when every bone in their evil, greedy body is broken.
I want no part of the violence, but I can see what's coming and they will have earned it.
Sorry Morgan, but the Greeks retire form Public Service at age 50.......a far cry form 65. Apples and oranges.....Let the Civil War begin
Since you state that all your info comes from friends, how is that info believeable?
Who are these friends?
What companies do they work for?
Because all municipalities want to be like Greece.......fat pensions starting at age 50
All municipalities want to be like Greece – REALLY?
All municipalities want to be broke and borrowing money?
It's simple CORRUPTION!!!! POLITICIANS cave to UNIONS who in turn FUNDS their CAMPAIGNS to be RE-ELECTED and the VICIOUS CIRCLE is CREATED!!!! "More Money, More Money, More Money"!!!!!!
p.s. oh, yes; somehow UNIONS manage to hire those politicians' wives/children/lovers.... as ADVISERS and make those BRIBES LEGAL!
Who is corrupt?
If you are going to make accusations, should you not present facts?
Or maybe, it's all BS from a muslim agitator.
The way America is going, some state will have to declare bankrupties in the near future. Will the Federal government bail them out? I do not think so. Better fix the probem right now, or the whole system will implode soon.
How about all of those towns who invested in/devoted budgetary $ Wall Street and, for the most part, ended up being taken to the cleaners for it. Does that apply to any of these bankrupted towns and cities at all?
I don't get it, I know Fareed as a strident American imperialist , wanting to impose American rule and culture on everyone on the globe and possibly the universe and believing that is a good thing. But he doesn't seem to know that the most elementary principle of why a free market system functions better then a centralized planned economy is the concept of bankruptcy. It's not a negative but a positive. It weeds out the inefficient and rewards the efficient through increased market share the productive vs the unproductive.If the banks had been allowed to go bankrupt in 2008 we wouldn't be having any problems today.The "good" banks would survive and take increased market share curing the financial system or what is left of it and allow it to rebuild on healthy foundations. And the bad banks the incompetent and the criminals, and the corrupt would have gone under.Bankruptcy is the single most important thing for a free market system to function.And as a strident American imperialist Fareed should have been taught this and know this by heart.
I know it will hurt, but why not renegotiate the terms of the pension? Cut it in half. This is what should be happening at all levels of the public sector. Lifetime health bennies, gone. It will not be popular, but it will eventually be necessary.
Socialism always fails in the end when you run out of other peoples money to spend...
This is the result of Keynesian economics trickling down to local level. It's happening all around the world. The only real loss is the bank's losing interest from the money they printed thanks to fractional reserve banking. The majority of people are tapped out and cannot be taxed further so the only option left is to borrow money that they cannot pay back.
Peak Oil is bankrupting the fantasy of perpetual economic growth on a finite planet, which was historically maintained by perpetual debt in the expectation of endless cheap energy for further growth. That model was never sustainablel, and now we're seeing the global and local consequences of playing that game for so long..
Mr. Zakaria is completely uninformed on this issue. Pensions had nothing whatsoever to do with bankruptices in Harrisburg, where they made a foolish investment in a waste incinerator, and Jefferson County, whose sewer treatment investment went south. In Vallejo, Stockton, and San Bernadino, the troubles were chiefly sharp declines in revenue brought on by the real estate decline, combined with generous retiree health care promises, plus imprudent debt issued by Stockton and San Bernadino.
This leaves us with Central Falls, RI and Prichard, AL, that filed for bankruptcy due to pensions. Both also experienced sharp declines in revenues due to industries leaving town. Trying to extrapolate these two very small towns to a national level, is wildly uninformed. Go ask Meredith Whitney.
This blog post is terrible and glosses over the details of several of the cities it mentions to jump directly to the conclusion it wants. For example, the City of Harrisburg (Pennsylvania) and it's financial problems stem from a variety of issues, such as a $280 million dollar debt for an incinerator that does not generate a sufficient yearly income. This project started out as an $80 million dollar project and then ballooned due to contractor failures and the City's failure to properly secure a decent contract with the contractor companies. Also, it is the state capital and cannot tax the state buildings; therefore, it misses out on a significant amount of tax revenue. There are also numerous other issues, such as a population of approximately 48,000 and fair amount of that population that do not pay property taxes. Also, a high amount of corruption, which recently lead a court approved receiver (Governor selected) to quit because the corruption ran fairly high up and he was more or less told to ignore it. Another poster mentioned Jefferson County and Matt Taibbi's Rolling Stone Magazine article as a worthwhile read. It is and I recommend that others interested in the topic of municipal finance read it, as well as the author of this blog post.
Pensions were originally created for hazardous occupations, firefighters and policemen, because they were by their nature short careers. Police and firefighters were professions of young, active, healthy people and a pension starting at 50 years old made some sense.
However, desk jockey civil servants browbeat local officials into the same type of pension plans for themselves and it is just flat out unsustainable.
My research shows that Pensions were createdas the 19th century ended and Employers faced an aging workforce with potentially diminished capacity. In response, some of the more enlightened employers started providing a variety of benefits for their workers – a response that is often referred to as the beginning of welfare capitalism. These early pension plans were developed based on three different rationales: career, welfare and efficiency.
So, now CNN wants us to recognize that bankruptcies can be a good thing, even though they're painful. What are the odds that they'll perform an about-face when it comes to discussing the auto-industry and Mr. Romney's suggestion to take the car companies through bankruptcy?
A system of bankruptcy is a good thing. It's good for creditors and debtors, and it's good for the economy.
There are actually three situations that need to be dealt with:
1. Some debts were not incurred in good faith–the borrower never intended to pay the money back. Debts of that sort should be dealt with as the cases of fraud that they actually are, and not as a bankruptcy at all.
2. Some debts could be repaid, but the debtors would rather not. Ordinary legal processes for collecting unpaid debts generally suffice in these cases, without a need to resort to bankruptcy.
3. Some debts, though, simply cannot be paid back. Bankruptcy is a legal framework for recognizing that fact.
http://www.wisebread.com/bankruptcy-is-a-good-thing
One major point that you neglected to mention is that most cities, towns, villages are REQUIRED to levy and contribute to police and fire pensions as a state mandate. The municipalities have no choice but to continue cutting services to increase donations to public safety pensions because state legislators keep enhancing benefits through legislation. In most cases (and I know since I work in local government) unions are favored by arbitrators, state legislators get campaign donations from unions, and municpalities have to try to clean up the mess when the other two parties are finished with their deals. Do you research and you will find that no municipalitiy contributes more than required and most can't keep up with the minium because state representatives keep upping the anty. The politicians are in bed with public unions and the taxpayers are left holding the bag. Most city management would love for unions to go away and for these mandates to stop. However, no one seems to be connecting the dots.
I work for a state govt, and somewhere around $500 is taken out of my check to go toward retirement. I'm assuming the cities have a similar setup, so I'm failing to see how pensions are handouts.
Teachers steal full time pay for part time work while spitting out the least educated students in the civilized world.
Firemen sit around 90% of the time doing NOTHING yet still get huge salaries and pensions.
A cab driver had a much more dangerous job baht they'd a problem. The cabby doesn't work for our corrupt government.
Change is coming.
It's coming fast!
Goodbye pensions for government workers.
It's about time!
Mike b. Did a teacher treat you bad? You have no idea how hard these people work-they earn every penny they earn and more. Teachers take some vacation but mostly they spend their summers taking courses to better themselves.
Go pick on people like you who complain but do not do anything to help.
The issue in California is Prop 13. Passed back in the 70's during Brown's last Governorship by the voters, it crippled the state and local government's abilities to collect taxes and effectively cut the state's tax revenues to a modest trickle. The results are what you now see today – our schools are at the bottom in the nation due to poor funding, wild fires rage out of control because we rely on a volunteer force to fight them, and lax government oversight that allows for things like the Park service finding $54M in funds while thinking it's facing a $20+M deficit. This is government dysfunction due to it's size, and the people who say it's too small are relying on you being too stupid to know better.
What about the "UNDERGROUND ECONOMY" the gardeners, the guy who washes your car out of the back of his truck, the carpenter who repairs your fence, the maid who clean your house, NONE are paying taxes, construction has been hit so hard, none can afford taxes, & the wealthy take advantage of it big time, there is always someone cheaper, that will never change, they can pay cash, get a 10 to 20 % discount, but no taxes are being collected, not enough money for that!
The decision to remove sales taxes on internet sales is devistating stores and the commnunities in which they are located. People will go to a store and try out different items. Then they will go back and make their purchases online. Then the cities do not collect the taxes they once collected. People living those cities still demand the services those taxes used to buy. When cities raise property taxes to make up the shortfall, people move out of the cities,making the problem much worse.
Retirement at 55 with 90% of pay! No wonder they are bankrupt. I worked for 35 years with the Bell System, one of the largest companies in the world, and did not get 30% of my pay a year for my retirement. It has been 13 years now and I have not received a penny increase since retiring. I find I was in the wrong business....I should have gotten a government job. Foresight isn't much, but hindsight is 20/20.
Time to pull the plug on pensions and public unions. They have drained entire cities dry, where the only answer is to raise taxes so everyone that pays taxes leaves which only leaves people sucking of the teat of gubmint sticking around.
Governments need to switch to a pay-as-you-go system. Romney should be able to fix this at a national level by restricting governments from authorizing future government expenses on the taxpayers. Bonds excluded since there is something tangible to show for it. Since today's taxpayers should not have to suffer the burden of generous promises made even 10 years ago. Also wonder why the unions are so against government employees contributing to their own pensions. Even contributing 5% has resulted at least several times in the past few years in the unions going completely bonkers.
Also one of Obama's brainchilds is to form a national police and fire union. That way ALL the police and firemen in the entire country can go on strike at once! What a mind! Or is it really Trumpka?
Hey jihad terrorist, you were lied to by your leader, they said if you blow yourself up, you will go and meet 72 virgins, what they really meant was, you were to be greeted by a 72 year old virgin. Getting back to Cities going underwater, the rule should be, if your city is about to go belly up, sell em off to the neighboring city dirt cheap, the last person to leave turn off the light.
90% salary at 50 yrs of age retirement? Is this an article on the USSR or what?
It is much WORSE than even this article says. Treasury bonds are under 3% and falling. Corporate bonds, which is what pensions usually buy, average 4 percent more than treasuries. Ergo, the average return of pension funds will probably be about 6.5% over the next decade or longer.
Meanwhile, the adequacy of pension plans is judged based on whatever assumed rate of return the city chooses - 7 percent or higher is common. The shan will hit the fit, big time, somewhere down the road. Expect more of these bankruptcies and serious government pension reductions in the future.
Because the US is being systematically demolished by foreign banksters, with the help of US politicians.
No one in the private sector gets a 90% pension. No one in the private sector gets the pension set on a single year. No one in the private sector gets to "save" leave in order to "spike" the last year. The "spiking" alone gets many far more than the average of their salary in their last 3 to 5 years on the job.
The GREED of the UNIONS has reared its ugly head finally. Unions made the transition from "what do our members DESERVE?" to "how GREEDY can we be?"
Madoffs ponzi has nothing on what the unions have been pulling for years. It's sad it takes bankruptcy for the unions to be put back in check. The insane pensions and benefits paid out got way out of hand.
The union employees who work for me just found out their pensions will be .30 on the dollar and the retirement age was pushed back 10 years. This story is coming to a pension fund near you soon. In the mean time your union officials will continue to take 6 figure salarys.
Unions ruined many companies and now they are doing the same to cities.
Why is it that we in this country are always so willing to blame the common man, but not the corporation? Surely, it must be the workers' fault, right? We're so greedy, trying to scratch and claw for every extra penny the great and generous masters are willing to let fall from their coffers! How gracious they are! How unfair of us to expect them to provide for us from their meager billions! Wake up, America. The corporation is not your friend.
We are now $ 5 trillion dollars more in debt than we were when Obama took office . Five trillion more and
projected to go up up and up . So stop blaming it all on President Bush . Obama spend $ 1 trillion dollars
on Stimulus Projects ( which produced almost NO jobs in the private sector ) and another $ 1 trillion
dollars in Omnibus Spending projects . This money also provides more voters for him . You don't put out
a fire by pouring more gasoline on it ! We cannot sustain this debt .
I am looking at a town budget that is a fabrication and it is going to pass since the Mayor has three of the council members to vote with him. This leaves one council member with honor and sense but no way to turn the tide against this sham. 800 households in debt for 7 million dollars and the Mayor is still spending. No way they can meet their bills and the auditor has told them that much. Sad to say nothing can be done except vote them out and last election it was a paid vote which was the first time I had ever seen that happen. So I can give up trying to convince people to listen or fight with just a few others. Needless to say the Mayor has thrown everything at us but the K9 dog.
Small town politics at its worse.
....
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If u go back in the history of the world we r repeating it right now ,Rome good example .Frankly we r at the top of the pyramid at this point and unfortunately I don't think it can be stopped no matter who's falt it is .the blame should go around to almost everyone .flaw in mankinds charactor . When it crashes and it will soon enough History will repeat itself again ,just a more level playing field
I am a perfect example of what Islam can do for you!
Saeed, seek professional help.
Hey Saeed, I don't think you're real. You're probably just some troll who wants us to think you are a crazy radical muslim. Whatever rock you crawled out from, do us all a favor and get back underneath it.
This guy is not a Muslim.
You sound super cute... I wish everyone could be as generous and giving as yourself!
As I have told you before, phukkk you, and everyone who looks, thinks and acts like you. Your life hopefully will be short, God willing.
What rock did you crawl out from under. Stick to the topic or stay off the page. You rabble rousing tea party illerates are an irritation and a good reason to not vote at all, and I'm a moderate republican.
I'm with the "you're a hoax" crowd. Reason being? The IRA is pro palestine, and the UVA protestant Royalists in Northern Ireland are pro-Isreal.
Your sentiments therefor go against logic.
every reason why to let these ret@ards stay in their own country
What a TERRIBLE thing to say. You are sick!
Saeed is JAL a $ $ hole.
Saeed–I have emailed your comments to the FBI
Soon they will be watching you.
Soon you will be in Gitmo.
Saeed, eat some roast pork, have a shot of Jack Daniels and chill. Did you hear, there are no more arab virgins left for your fellow arabs. Salam.
Saeed,
If you are Muslim that means you are a merderous child molesting coward.
Here's what my middle finger will do for you.
wow, this sure reaks of a tea bagging gop'er maybe trying to incite some form of violence against our muslim brothers. any real true thinking american will see through this and not fall into a trap of spewing rhetoric and hate...oh wait , after reading the comments... sadly it's way to late. one question to my american friends to the south of us...the term thinking american...is that an oxymoron? i guess it's kinda like army intelligence, jumbo shrimp, gun control, good fast food and i love this one...american culture.
Jake- your country would do better to model itself after our culture than France's, eh! Your country has never been known to be culturally rich so you just borrow a European one. Without that you have hockey and canadian bacon. That is about it, eh!
And you are telling me America has culture?? ROFL That is the joke of the century. All of the original culture came from Ireland, Italy and Scotland in the US and then with illegal Mexican immigration, Mexican language is nearly the second language now.
The hatred for Islam (calling them 'child molestors') shows how much hatred, racism and bigotry there is in the US. I am ashamed!
What else is there?? Those in-bred, hick-town, rednecks?? You call those illetrate and dumb people cultured? You are the joke of the century.
Yep, that is part of American culture. It is a melting pot that all share the same desire for freedom and the right to pursue happiness. If someone's idea of happiness is living in the country and having a lot of guns, then they are free to do so in this great country. The greatest country in the history of mankind by the way.
Stern: "Mexican language" . . . you know they speak Spanish there, right?
Oops! I just crapped on my Koran...
Saeed, me thinks you're going to reeeealllly regret making these comments, especially in a public forum.
DC I completely agree with you. I think our, uh, "muslim" friend is probably some slug that crawled out from under a rock and can't find his/her way home. I don't think he/she is a real muslim at all.
Rdonath and dc
Way to cut your friend Saeed loose when he becomes an embarassment. Just like a gangrened finger or a cancerous tumour, you just cut him out.
We have followed his rantings for month and we all know that just like you, Saeed is muslim.
Saeed and his caravan have left a most notable trail to you guys.
I hope you enjoy the notoriety.
Saeed, these are your friends, probably cousins, and they treat you so bad. Is that what you want Saeed, for your family to treat you like came dung?
"You're probably just some troll..."
Ya think?
Successful troll is successful.
IRISH LAS
remember, as Saeed's sister, you are not allowed to have a Sxl relationship.
Your children will have 3 heads and no pckers.