Paul Krugman reports that Dean Baker’s got the scam nailed in a very sharply argued analysis of state pension shortfalls. (pdf)
Those rapacious public employee union contracts that starve the taxpayer to support caviare-and-champagne retirements for state and local civil servants?
Not exactly the problem.
__
Krugman reprints Baker’s chart showing that the largest share of any shortfall in public pension funds (by far) derives directly* from the bankster-led destruction of the global economy.
Baker’s report lays out the case in more detail, with this key takeaway:
The shortfalls facing most state and local pension funds have been seriously misrepresented in public debates. The major cause of these shortfalls has not been inadequate contributions by state governments, but rather the plunge in the stock market following the collapse of the housing bubble. Given the low PE ratios in the stock market, pension fund assumptions on the future rate of return on their assets are consistent with most projections of economic growth and past experience. Furthermore, when expressed relative to the size of their economies, most states are facing shortfalls that appear easily manageable.
And as for the “easily manageable” claim, here’s why Baker says we are facing a false crisis:
The total shortfall for the pension funds is less than 0.2 percent of projected gross state product over the next 30 years for most states. Even in the cases of the states with the largest shortfalls, the gap is less than 0.5 percent of projected state product.
__It is also worth noting that some of this shortfall has likely already disappeared as a result of the recent rise in the stock market. If this rise is not subsequently reversed, then a substantial portion of the funding shortfall has already been eliminated.
Let’s recap: public pensions are sufficient, most of the time, to secure an adequately secure old age. Many private pensions are not, and the risk of such shortfalls has over the last several decades been systematically transferred to the retiree. The solution to this discrepency of outcome is….let old teachers starve?
__
My answer? Pete Seeger said it better than I can.
__
*or proximately in the case of cuts in state contributions to pension funds evoked by the collapse.
Image: Helen Searle, Still Life with Fruit and Champagne, 1869
Cacti
Like I’ve said before, the GOP changes who to hate like seasonal fashions.
Last season it was Mexicans, the season before it was gays. Muslims are also a trendy choice, and hating on black people never goes out of style.
Yutsano
Champagne = STEEPLEJACK BAIT!!
And remember, one dollar that goes to a pension fund is one less dollar that a Galtian overlord can’t claim. And we all know that situation can’t be allowed.
BGinCHI
Tom, thanks for posting this. I skimmed through, but don’t have time for a close read right now. And I have a question.
Isn’t the problem two-fold? The market dip is one factor, but in states like IL, the state gov’t has used the pension funds as a slush fund. They have not paid in yearly as they were supposed to, and now they are seriously underfunded. The issue here is that politicians and taxpayers who are complaining about the pension fund haven’t even been paying into them. There’s a lot of bad faith here, as well as political chicanery.
joe from Lowell
TESTIFY, Brother Tom!
joe from Lowell
@Cacti: Sure, but teachers?
These people seriously overreached this time. Heck, they overreached in 2006 when they hated on immigrants, but going after teachers, cops, and other public employees was a seriously dumb move.
jwb
@joe from Lowell: It’s only dumb if they suffer sufficiently bad electoral consequences for the risk. Given the short-term memory of Americans and the right’s traditional virtuosity at playing divide and conquer, I’m not yet ready to pronounce it a dumb move. We’ll see how the recall elections in Wisconsin and the general elections in 2012 go before evaluating whether it was actually epic political overreach.
PurpleGirl
@joe from Lowell: Teachers are easy targets: they only work part of the year, they get two months off during the summer, they get those vacations during the year, they don’t work a full day; besides it has to be the teachers’ fault that our children aren’t learning and do so poorly on tests and they’re unionized and the unions only care to protect the bad teachers. Don’t you know that?
/snark
arguingwithsignposts
But, but, but … all you front pagers got taken in by EDK – the Grifter Salaam Douthat strata. ABT wallah OODA WAI!
Address my post, libs!
joe from Lowell
@jwb: It didn’t take until the 2006 elections to realize that Bush’s Social Security privatization scheme was a disaster.
Look at Wisconsin. The Republicans are losing badly in a political fight that they picked. That should never happen. They screwed up.
Loneoak
@arguingwithsignposts:
You forgot to call us cudlips.
The Dangerman
@joe from Lowell:
Makes me think that:
a) They know they are going to have their heads handed to them in 2012 and they are going Full Metal Asshole while it doesn’t make much difference
b) They know that they aren’t going to have their heads handed to them in 2012 because the fix is in after so many states turned red (i.e. the Diebold Dilemma) and they are going Full Metal Asshole while it doesn’t make much difference
BGinCHI
@The Dangerman: Thanks Mr. Optimistic.
gbear
@arguingwithsignposts:
Allied Waste of Minnesota
9813 Flying Cloud Drive
Eden Prairie, MN 55347
Omnes Omnibus
@The Dangerman: Schroedinger’s election?
rikyrah
I had to set someone straight who was trying to wail on those ‘public employees’. I wasn’t having it. Had to tell that public employees don’t get over like fat rats. They do a service, get underpaid compared to the private sector, pay for their own pensions – most don’t qualify for social security because they have a pension. I just wasn’t having her ignorance. My mother and father were both public employees of different sorts, and they were good employees.The public sector was THE major factor of the creation of the Black Middle Class.
I’m not having it. Fuck all y’all. Nobody told you to be stupid enough for fall for Republican bullshyt, because your asses only thought they would be messing with the Black and Brown folks.
Davis X. Machina
@joe from Lowell: This is far from new, and happens reliably whenever there’s a recession.
A little pro-teacher sentiment in ’92, when Jock McKernan (Mr. Olympia Snowe) balanced the state budget with a pension raid would have been nice…
major matt major
Let teachers DRINK THIS with their cat food.
joe from Lowell
@The Dangerman: I had really hoped that the myth of the all-knowing, all-powerful Republican political operation had been put to rest after 2008.
Republicans have fallen into a self-destructive spiral. First, they make up some line of bull for political purposes and propound it far and wide. Then, they believe the thing they just made up, because after all, they heard it from reliable Republican sources. Then, they take the thing they just made up and use it as the foundation of their political strategy.
And then they’re shocked to discover that people don’t want collective bargaining banned.
The Dangerman
@BGinCHI:
My glass is always half full and half empty.
Actually, given the jobs report this week, the weak field on the Republican side, and lack of any hats actually in the ring from them leads me to think they know they have no chance. If the economy continues to rebound, we might even see a few names decide to sit this one out. One of the first runners deciding not to run will be Palin.
Davis X. Machina
Optimists see the glass as half-full. Pessimists see the glass as half-empty. Republicans say ‘That’s my fucking glass!”, and take the glass, regardless of whether it’s half-full, or half empty.
Nick
@joe from Lowell:
In the worse economic crisis since the 1930s, 60 million people thought Sarah Palin should be one step away from the Presidency. In extraordinary circumstances that occur once a generation, Democrats can just barely beat the GOP political operation.
arguingwithsignposts
@The Dangerman:
Filled up your car with gasoline lately?
Moonbatman
More wingnut butthurt on a humble policeman’s pension because he may have inadvertently violated someone’s right.
Peace Out. The Power is Yours.
Nick
@arguingwithsignposts:
well, I guess we should start drilling for oil again, huh?
Jamey
@PurpleGirl:
Also, traditionally, teachers are women. Let’s not overlook this–it explains pay scales, and the ability of the Governor Sandwiches of the world to marginalize the education fields.
jwb
@joe from Lowell: That they overreached in Wisconsin goes without saying. That’s not the question. The question is whether the potential reward from the overreach was worth the risk. It’s only a dumb move if the reward wasn’t worth the risk. And we don’t even know yet what they risked. If Walker manages to force this bill through the legislature despite everything, the recall doesn’t work, and the Republicans win in 2012 despite a recharged labor, then it will not have been a dumb move. If GOP senators are recalled, Walker is recalled and the GOP has their collective asses handed to them in 2012, then it was an extraordinary dumb move. I’m not confident enough in the American voters’ ability to punish bad behavior to say yet that this was a dumb move. But I’m working hard to increase the likelihood that it is seen as an extraordinarily dumb move.
joe from Lowell
@Nick:
It’s sad to watch Democrats struggle with PTSD from the 80s.
The Republicans have lost the popular vote in 4 of the last 5 presidential elections. Next year, they’re going to make it 1-5.
But it’s always 1988 somewhere.
joe from Lowell
@jwb: Any win, even in the most favorable circumstances, requires work.
But damn, did they ever give us something to work with!
The Dangerman
@arguingwithsignposts:
Yeah, and I’ve read where the rise in prices is greater than could be attributed to the rise in prices for crude. I hope that Obama taps to the strategic preserve if necessary to keep things moving along.
Nick
@joe from Lowell:
is this supposed to be comforting? the fact they ever won the popular vote at all in the last 30 years is telling.
Yutsano
@The Dangerman: He can do that all he wants. The price of both oil and gasoline are speculated on an open market. (I use the term loosely, you just try as a mere prole to participate in a gasoline auction.) So the prices reflect more market forces than mere supply and demand. Invisible Fisting occurs often outside of normal parameters.
joe from Lowell
@Nick:
To someone who thinks that Democrats can only win once in a generation, and only when conditions are hugely in their favor? Yes.
Delia
@The Dangerman:
Allowing for the fact that Ed Schultz makes KO seem refined and polite, I do think he may be the man for this hour. Last week he was claiming the rise in gas prices is due to Wall Street speculators and saying he’s going to be running some sort of special investigation this week to prove it.
Davis X. Machina
@The Dangerman: It’ll be interesting to see what happens if they start pumping the crude out of the salt domes.
It’s the Strategic Petroleum Reserve, so I expect a lot of attacks on the administration for endangering us all, by making our fighting men and women thumb rides from the jihadis.
It’s the Strategic Petroleum Reserve, so I expect a lot of attacks on the administration for being profligate and not taking the long view.
It’s the Strategic Petroleum Reserve. It’ll have to be refilled, at a higher price than it was filled, and who do we buy that oil from? Fidel Chavez! That’s who! (Because it’s unpossible that it might come from our friends in the Gulf, or from domestic sources named after a popular soft drink…)
It’s the Strategic Petroleum Reserve. It’ll have to be refilled, at a higher price than it was filled, by drilling in ANWR, and national forests, and in your backyard, and buying oil from domestic sources named after a popular soft drink, and that’s a good thing.
Obama hates the environment, because rather than seizing the moment, to do something to slow global warming, as higher prices discourages use, he’s killing polar bears instead!
And God knows what else. We never seem to need to tap the Strategic Nonsense Reserve.
Nick
@joe from Lowell:
Well it isn’t. Here’s another fun statistical fact for you. Number of Republican presidents in the past 60 years to win 50% or more…5. Democrats? 2.
joe from Lowell
@Nick:
Who cares about the past sixty years? We’re talking about the political situation today.
Stop cringing, you pansy! You’re like the elephant who had a rope tied around his ankle as a baby, and still thinks he can’t break free.
joe from Lowell
We are going to kick these people’s asses, Nick. It isn’t even going to be close.
And, not only are we going to win this election, we’re going to win this election with the issue of labor rights playing a prominent role, setting the stage for even more important progress in the future.
Unless we lose our nerve, and buy into this “center-right nation” bullshit.
Nick
@joe from Lowell:
sorry, but I don’t see much different between the political situation today than in the past 60 years, except the country is probably even more further to the right than it was then on everything but social issues.
arguingwithsignposts
@Nick: Put up some polling numbers to back that shit up. consistently, polls have shown people don’t want entitlements cut, and they want higher taxes on the rich, etc. Stop listening to the wingnut wurlitzer.
Steeplejack
@Yutsano:
Nice painting. Very nice.
Yutsano
@arguingwithsignposts: He’s a journalist AWS. All he HAS is the wingnut Wurlitzer.
@Steeplejack: Heh. Thank our esteemed host. But I had a feeling you’d appreciate that one.
ksmiami
@joe from Lowell: At least we can always always count on the Repukes to overreach and let loose their inner-outer douchebag asshatery. It happens everytime
Nick
@arguingwithsignposts:
and yet they vote for the exact opposite. What people want don’t matter if they don’t follow through by voting for people who will endorse those policies. They vote Republican or they vote for Blue Dogs. When given a choice in Democratic primaries, often they vote for blue dogs. Hell, even when asked to vote directly on those policies, they don’t always. Tax hikes on the rich went down 2-1 in Washington State last year. Why?
Yutsano
@Nick:
Because it wasn’t properly stated what the increase was for. Hell I don’t recall seeing a for stance stated anywhere. Plus I’m of the opinion that should be done in the legislature since that’s what I pay them to do. So that’s a really bad example.
Nick
@Yutsano:
Suddenly it matter WHY we’re raising taxes on the rich?
Yutsano
@Nick: In a state that has never had an income tax and is proud of that tradition, umm, yes. Plus this was voted on Nick, you can’t just put an initiative out there and say virtually nothing about it in the positive.
Nick
@Yutsano:
If people have conditions in which they will support a policy, then they don’t really support it. It’s better to say “people want tax hikes for the rich AT CERTAIN TIMES OR CERTAIN THINGS” but that leaves the door open for the right wing to exploit the issue when those certain times/things aren’t a factor.
Omnes Omnibus
@Nick: People almost always have conditions under which they will support a policy. I support a policy of wearing a warm coat, hat, and gloves while outside during the winter, except if I am someplace warm. Or if I have mittens instead of gloves. Or if my coat has a hood.
Nick
@Omnes Omnibus:
then propaganda will always work. the end.
If someone you trusted told you it was 70 degrees out, you’d probably believe them. People TRUST Rush Limbaugh, Glenn Beck and Sarah Palin and don’t trust you or me or President Obama. They’d freeze to death before admitting they trusted the wrong people.
Yutsano
@Nick:
That doesn’t make sense in the context here.
Yes. It’s called governance. Why should the rich be taxed just to make you feel better? Isn’t taxation with a purpose (supporting the least among us) a better argument than using the government to play Robin Hood?
Omnes Omnibus
@Nick: Saying tax the rich in all cases makes as much sense as the Republican argument that taxes must always be cut.
Nick
@Yutsano:
I don’t know if you realize it, but this is the argument you’re making…that the public would support raising taxes on the rich just cause. We don’t need to explain it.
Republicans argue (wrongly) that raising taxes on the rich will hurt the economy. Democrats argue we should raise taxes on the rich because…well…WALL STREET! BOO!
How are you not surprised we lose this argument every time? We have no argument.
Nick
@Omnes Omnibus:
but this is exactly what we’re saying…or at least how its coming across
Yutsano
@Omnes Omnibus: I will figure out your trick one of these days for saying things better and more succinct than I ever could. I suppose that’s why you went to law school and I’m ebil unionized gubmint worker.
Omnes Omnibus
@Yutsano: 2d try due to FYWP: It’s laziness. Succinctness requires fewer keystrokes.
Mike Kay (True Grit)
@Nick: Dems won by 7.27% – how is that “barely” winning?
Omnes Omnibus
@Nick:You are the one who implied that the reason did not matter.
Nick
@Mike Kay (True Grit):
compared to the margins FDR, Nixon and Reagan won, it’s barely winning.
Nick
@Omnes Omnibus:
I was being facetious. I was responding to the implication that reason did not matter, because that’s how it comes across. That the people want to raise taxes for the rich, no matter what the reason it is.
Omnes Omnibus
@Nick: That did not come through.
jefft452
”In the worse economic crisis since the 1930s, 60 million people thought Sarah Palin should be one step away from the Presidency”
Landon got 40% of the vote in ‘36
I’m as pessimistic as the next guy, but thinking we are boned because McGrumpy and the Snowbilly got 45% is just too far a stretch for me
opie_jeanne
@BGinCHI: Same in California with CalPers, except it isn’t broke yet and did pretty well this past year. But governments have not been required to pay their half of the bargain for years because the fund was doing so well. All of the money that has been paid into it for several years was the employees’ half. The governments got a great deal.
The second it suffered a loss, right when the market tanked, people outside the system started shrieking about it but had no clue what they were talking about.
We rely on that program that we paid into for so many years; it’s our money, dammit.
opie_jeanne
@rikyrah: Applause!!!
asiangrrlMN
Tom, this is what’s frustrating me about this whole debate, as it were. The wealthy have so successfully set everyone else at each other’s throats. My brother and I were arguing about the fallacious unions make a kabillion dollars an hour (back before he converted), and he pointed out that when he worked in the private sector, he didn’t have such sweet benefits. I finally said, “Well, you should be pissed at your bosses for that–not for people in unions.”
I think it’s easier to get pissed at the ‘evil public employee’ making slightly more money than you do than to despair at the system that only favors the top earners.
Socraticsilence
@Nick:
Two things:
Re-elections are generally either losses or the big, big margin of victory elections- Nixon 1972, Reagan 1984, Clinton 1996, hell even Bush 2004 all won by significantly larger margins in both the popular vote and the electoral college than they had in their initial runs at the Presidency- Obama will do the same- at this point their isn’t a single Republican opponent (two months out from the first debate) who would come within 10 points of Obama- for god’s sakes in Virgina- basically the definition of an Obama swing state (for most Dems solidly red), the Presidents margin as of last week ranged from 8% or so (against Huck) to 20%+ (against Palin). The fact that unlike his two term predecessors who inherited a crappy economy and lost significantly in the mid-terms (Reagan and Clinton) Obama never fell under 40% is a testament to the deep well of public trust in the man. Barring a catastrophic event or a truly sharp dip in the economy Obama will win easily in 2012.
Nick
@Socraticsilence: Oh I don’t think Obama loses in 2012, but I’d be shocked if he gets above 53%.
mclaren
Yes, as numerous commenters have pointed out, there are a few states that are in deep trouble over public employee pensions and their problems will not be “easily fixed.” California, Illinois, Nevada come to mind. Michigan is a real disaster area.
Many of the other states are in generally good fiscal shape, but California a black hole and personally I don’t think the state will be able to continue the way it’s going. Something will have to break. Either they’re going to have to start firing their overpaid $100,000-a-year prison guards and emptying out their prisons, or the entire state will collapse into insolvency.
Nick
@mclaren:
That should solve the 12.5% unemployment rate problem in California.
Nick
@asiangrrlMN:
I made the same argument here recently and the response I got was “well, I can’t get what they’re getting, I’m small business owner/work for a small business”
Basically, it’s “I can’t have it, so neither can they”
mclaren
@Nick:
That’s why California is a fiscal black hole. At this point, any solution creates massive problems. Repealing Proposition 13 will force millions of California middle-class workers out of their homes and crush home prices statewide, crashing the economy. Firing those overpaid prison guards will increase an already horrible unemployment rate. Cracking down on California employers who hire illegals immigrants will put countless small businesses out of business and depress the economy.
The disaster that is the California economy has been building up to this epochal crash for 35 years, and at this point there just aren’t any good solutions. It’s the same deal as Detroit: there’s no magic bullet, no slick neat little one-liner policy that will magically save that decaying and dying city.
Mnemosyne
@Nick:
Chuck Butcher has had a good retort to that recently — as a contractor, having the labor he uses be unionized helps him as a business owner because it means his competitors can’t undercut him by using non union or illegal, sub minimum wage workers. Unions level the playing field for employers as well as employees, which is why the big corporations have spent so many years undermining and trying to destroy them. Having smaller businesses be unable to compete against the big guys is a feature, not a bug.
steve
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