Yesterday’s New York Times carries “Padded Pensions Add to New York Fiscal Woes”, the usual story about retired public employees in their 40s collecting pensions of more than $100,000 per year. These pension are automatically adjusted for inflation, exempt from state and local income tax, and these folks should live quite a long time since they retired young and no longer suffer from the stress and sedentary lifestyle of a worker. If these folks live 50 years post-retirement and investment returns in the crippled-by-pension-debt U.S. economy continue to be roughly equal with inflation, that’s up to $5 million of today’s dollars for every person who ever worked for the government.
Given the voting power of public employee unions, there does not seem to be any practical way for states and local governments to shed these obligations. As thousands of the highest earners in the state (i.e., the public employee pension collectors) are exempt from income tax, it is plain that these pensions will be paid for with dramatically higher property taxes. How to warn folks considering buying a house in one of these towns, then, that the value of their house will be sucked dry by taxes necessary to pay retired 45-year-olds? How about a law that towns and/or states with a significant pension overhang be required to change their name to something Greek?
New Jersey would be renamed “Epirus”; California “Peloponnese”. Yonkers would become “Kalamata”, etc.
Related: “Pensions: How states and local governments indulge in deficit-spending.”
Maybe they should all be renamed Sparta, in readiness of things to come. The good folks of Sparta, NJ, seem to be struggling to be spartan enough, though:
“But the closing of Mohawk Avenue, the elimination of courtesy busing and the institution of activity fees are just part of the solution to the extension of unemployment benefits for the very teachers who are being laid off for budgetary reasons. The school board and administrators have estimated an extra $1 million cost for the extended benefits, which were passed by Congress and signed into law by President Barack Obama last month.”
Retirement benefits don’t seem to have been on the negotiating table.
http://www.njherald.com/story/news/21SPARTASCHOOLSCHANGE
http://www.njherald.com/story/news/12Sparta
http://www.njherald.com/Sparta-Election-2010-April-
It is true that somebody has to pay for this stuff. It’s also true that that will likely be middle / upper middle class americans who aren’t as sophisticated at avoiding taxation as American corporations or the wealthy. It is just this type of article that keeps us idiots who are paying for this angry at cops and teachers and firefighters. Cut their pensions in half! Let a retiree in the NY-metro area live on 50K/year instead of 100K/year!
Of course, we can look at this from another angle. If we are talking about what is fair and equitable and making value judgments that a cop (or teacher or firefighter) in a major metro area doesn’t warrant this type of pension based on the value they’ve provided to society that is one thing.
How about the average mid-career corporate trading desk wall-street guy who makes mid-six-to-low-seven-figures for moving money around? How about the internet entrepreneur who got lucky and cashed out with millions. But whose product, of course, was ultimately shuttered and whose engineers were all laid off. How about the trust fund baby who now spends his adult life getting worthless advanced degrees or playing at a jobs. How about the C-level exec who sits in meetings and figures out how to sell more worthless widgets and doesn’t even do a good job of that. Do these people deserve their earnings?
But maybe it isn’t about what these retiree-pension-receivers are worth to society in an absolute sense, but rather that we all have to pay for them, and we simply can’t afford it. Well, if you don’t think you have paid for and are paying for the rich and their planes and boats and country club memberships, you are quite naive. And perhaps, instead of getting angry at these 100k pensioners, you should get think about whether, if we soaked them rich folk, maybe our towns wouldn’t be going bankrupt, the middle class wouldn’t be paying as much, and they would still get to live a far more materially-rich life than the undeserving pensioners you are angry at now, cry as they may that it isn’t fair and now their hard-earned and well-deserved wealth can’t trickle down to the rest of us.
Very interesting article, they did mention that the law has changed the retirement age to 62.
The argument that you get a high pension because of the lower pay compared with private industry also goes out the window, it looks like there is no reason to work in the private industry anymore, lets all go get a government job and pay ourselves a high salary.
I have not heard if many Canadian cities are in the same position. Although in Canada we pay big money to our public pension fund managers so they are much better than their US counter parts 🙂
http://m.theglobeandmail.com/report-on-business/canadas-pension-funds-perform-at-a-cost/article1522495/?service=mobile
I believe the end game will be more Italian than Greek: limitless money printing leading to devaluation in real terms of those $100K/year pensions. As happened in Russia as well, old people were getting pensions which post-collapse were worth $30 per month.
The adjustments for inflation will be based on the published CPI not the actual CPI (US government has been doing this for at least the last 15 years at this point).
It’s not a bad idea, but you should make sure existing Greek-named places actually qualify: Ithaca, Syracuse, Attica, Corfu, Corinth, Homer, Ilion, Lysander, Macedon, Marathon, Minoa, Palmyra, Solon, Troy, Tyre, and West Sparta (in New York State alone; they have a thing for the classics). Also, does Greece, NY, sound Greek? The Greeks themselves have never called their country “Greece” (at least in Greek).