You Will Never Retire
The most depressing local story in my time in Rhode Island is the state government move to slash pension for state workers. A bipartisan effort, led by Governor Lincoln Chaffee but with significant help from the majority of Democrats in the legislature, has decimated pensions. The retired will likely never see a cost of living increase in their lifetimes. A 66 year old who lives another 25 years will see his or her life spiral further into poverty every year. Like problems in the United States Postal Service, it’s hard to deny that pensions aren’t a real problem for Rhode Island’s budget, but the solutions created for both fall entirely upon working people. Slashing pensions doesn’t solve the long-term poverty problems that the pensions are intended to eliminate.
What’s happening in Rhode Island is the canary in the coal mine. While maybe we are seeing a slight move back to economic justice in this country, I simply assume I will never be able to retire. I may be forced out when I get too old, but who among you has the money to retire? Who sees 15, 20, 30 years down the road the money to retire? I sure don’t. Of course, by the time I am forced out, the nation will have had to reckon with baby boomer poverty as the masses all retire without savings and with significant consumer debt. So who knows what the system looks like in 2040. It might be gone entirely. Or maybe we have these problems solved. But Rhode Island is pointing us in the wrong direction. If this can happen in a state as pro-labor as Rhode Island, it can happen anywhere.
Progressives always talk about electing “more and better Democrats.” Well, that’s happened in Rhode Island. Democrats have 5 to 1 margin in the legislature. Chaffee is an old-school Republican who is now an independent, but it’s not like he controls what the legislature does. What have all these Democrats done? Become the only state in New England to pass a photo i.d. law for voting, decimated state worker pensions, and passed a law declaring that bondholders have the first right to state tax dollars. It makes one wonder whether there are Democrats out there who will, say, tax the wealthy before destroying the social safety net?
It is that “better” part which is ultimately critical.
This is a sign of how important culture and ideology can be. The “left” today isn’t the “left” of the New Deal. Right-wing narratives have set some basic fundamental assumptions of the whole problem-solving conversation, so the outcomes can only reflect a win for the 1%. The worldview of anyone in business or law is fundamentally shaped by the cultural landscape of those professions.
If you teach at URI, I would guess you have TIAA-CREF, which is not a state retirement fund. While that retirement fund may have its own long term issues, it is not affected by the state’s actions.
Yes, it is TIAA-CREF but my statement was more a general thought about the decimation of our retirement systems. I’m equally unconfident that my retirement account will provide anything like a living wage when I am finally forced out.
TIAA-CREF administers the money, but the main problem is the amount of money that the state kicks in. TIAA-CREF might be a sound administrator of money, but if the state doesn’t kick in the money for TIAA-CREF to manage, you’re still not going to get a lot out the other end.
TIAA-CREF is more like a 401(k) than a state pension fund. The university controls the contribution they provide (usually a match of the employee contribution, often 5 or 6% of salary) and it is all front end. Once the university provides the match, it no longer controls the funds, the employee does. The university (or state) does not control pension payments.
The university controls the contribution to TIAA-CREF, not the state. I suspect if URI attempted to eliminate their contribtion, there would be employee unrest, especially if Loomis works there. In any event, the article does not say that state contributions to the pension funds will be changed, just that the payments to retirees will be much more parsimonious.
This is almost equivalent to the case if Social Security had no trust fund and had poorly invested money collected.
“The university controls the contribution they provide (usually a match of the employee contribution, often 5 or 6% of salary)”
A good time to thank my union and my forebearers for getting a 9% contribution from URI.
Yes, be thankful. And pay careful attention to allocations.
“The university controls the contribution to TIAA-CREF, not the state.”
This is not true everywhere. See the state of Florida, where a state law increased employee mandatory employee contributions at the expense of state contributions.
A large part of the problem is that people have internalized the idea that paying taxes for government services and benefits is so bad that people are not willing to have their taxes raised at all, even if the value of the services and benefits that the people realize is far greater than the taxes that they pay. To be certain, no solution is possible unless the wealthy are taxed at a higher rate, and there are a number of places where we can provide government services more efficiently and effectively (particularly in the area of health care). At some point, though, it’s possible, if not likely, that we would need to raise taxes on nonwealthy people to provide needed services and benefits (as was done for Social Security and Medicare when those programs went into effect). Insofar as the idea of raising taxes on nonwealthy people is not completely anathema, there is the belief that nonwealthy people will not get bang-for-the-buck from agreeing to pay those taxes, and the belief (with reason) that the powers-that-be will raid those taxes at the first opportunity to provide tax relief for the wealthy.
Yes, and the Democrats in the legislature rejected any tax hikes out of hand because they were sick of being seen as unfriendly to business. Much better to institutionalize poverty of course.
true enough. of course, since business depends on demand, this kind of farsighted, austrian-theory economic policy ultimately works to the detriment of everyone, businesses included.
unless these businesses produce solely for export (foreign & domestic), they are dependent on local demand. reducing a bloc of consumer’s ability to purchase goods/services, reducing revenues, etc., etc., etc.
are there no democrats, anywhere in this great land, capable of explaining, in bite-sized terms, how basic economics works, in a demand (capitalist) economy such as ours?
People are willing to have their taxes raised. This is an elite problem, not a mass one.
Polls suggest people largely oppose tax increases in the abstract, but will support paying more for a whole host of things.
Polls also show that people generally identify themselves as conservative or moderate in the abstract but when asked about specific progressive programs support specific progressive programs. The problem is that the abstract seems to determine how people vote more than the specific and concrete. Since people are opposed to tax increases in the abstract than there will be no tax increases.
I agree with you on the first part, but not the implication. Republicans run on the abstract where they have the advantage, but Democrats don’t press their advantage on the specific, where they do. We’re better at addressing the deficit is bad politics, they want to kill SS and we want to strengthen it (not cut it less) is not. Needless to say, Democrats arguing over taxes in the abstract is not as smart as saying ‘we need to raise taxes to protect A, B, C, etc.’ yet that is how our debate had gone.
Also, there is no evidence that (general) public opinion is the primary driver of policy. Elites don’t like tax increases, and lobbyists fight it – these are the things that matter most.
Public pensions have been getting cut for over twenty years as it is, and not every public pension had a COLA back in the day as my father can tell you as his IPERS (Iowa Public Employees Retirement System) checks haven’t kept up with inflation since he retired in 1995 and their COLAs were discontinued for those retiring after 1990. IPERS now has “favorable experience dividends” for post-1990 retirees, but his returns on those haven’t been very favorable.
And otherwise sensible people think this is unexceptional.
Part of the problem here in RI is the conflation (purposefully by anti-union forces I believe) of state and city pensions.
Some cities here are on the hook for big bucks, usually to public safety retirees where, in the larger cities, upwards of 70% retired with disability pensions equal to their active pay. Every year some ex-cop retired with a bad back disability pension is caught running a gym in Florida, or some such thing.
State employees, usually well-connected and in the legislature as well (for decades a part-time, $300/year job), even non-state-employee legislators, were able to, for a few thousand dollars, ‘buy’ seniority and collect pensions well over $50,000/year.
Now these are a small percentage of all employees, but with lazy TV journalists, a dominant Republican newspaper (when that kind of thing mattered), there actually is a successful ‘right wing noise machine’ here that has managed to tar all public employees over pension issues.
I’ve never really understood how you can slash pensions. Aren’t those contracts with the employees? Labor has really lost the public perception issue on this. If the state wants to slash public employee pay, that may or may not be a bad idea, but you can at least debate it. But when you are slashing benefits for retirees or near-retirees you are reneging on pay agreements for a lifetime of work already done. It’s crazy.
No, in a word. It’s been litigated. Not for public employees, if the reduction is done by the state legislature.
So how is this legal then? Changing COLA rules is no different than reneging on your obligations.
The very brief nutshell version is that:
(a) Yes, it is reneging on moral obligations, but
(b) In most states the legislature either retains the right to amend pension plan rights, or the pensions are legal (as in codified in state or municipal law) and not contractual rights and the current legislature can’t be bound by the acts of prior legislatures. Once an MOU expires they are free to do as they wish.
So there’s no contractual violation, they’re just giving the screw to workers who counted on having the money. This is bad, but no different than cutting social security payments, medicaid, food stamps, or any of the other ways governments are sticking it to the 99%.
In Illinois of all places, this is against the constitution. Not that they don’t try.
That Constitution was ratified in 1970. No way workers would have the same sort of rights today.
My thoughts exactly, and this goes back at least to the airlines bailing on their pension responsibilities right after 9/11. I thought contracts were sacrosanct; guess not.
“I’m no expert but it seems like bullshit to me.”
The Contracts Clause turns out to be like the arrow of time — unidirectional.
Contracts are only sacred if you are a big business of top executive. For the rest of us, they are mere suggestions to be heeded or discarded at the whims of the MOTU.
As a technical matter most of the changes are either done through the contract process or don’t require changes to contracts.
For example (very briefly and avoiding LOTS of complications), a state can at the next MOU negotiation tell its employees that the new MOU will replace current defined-benefit pensions with 401(k)-type plans retroactively. The union will whine. The state will then say that they’ve reached an impasse and simply impose it. There’s not much the union can then do, so it will try to make the best bargain it can in the face of the inevitable.
And that’s if there IS a contract on the table. In some states, the government can simply change things b/c the statutes or MOU already allow it.
I think the answer is actually pretty simple— people of conscience need to learn how to identify sociopaths
Or, as some people say, “psychopaths.”
From my observation deck, I see so many of my contemporaries (I’m mid-50s) who haven’t saved a dime for retirement, figuring that Social Security plus whatever they’ve socked away in savings, will suffice and if needed, they can sell their houses (if they own), and now they’re suddenly panicked realizing that retirement is ten years away and they’ve seen their assets drain faster than a burst boil.
My retirement, barring a miracle, will be delayed but I should be able to retire at an age when I can still get around and enjoy the world. I’ll just wish I had saved more so I could have more time doing just that.
Dudes, you all will retire.
As soon as your health insurance is too expensive, or you’re too sick. Then you die in the gutter after the bankers take all your assets in return for “care”.
Getting rid of pensions does eliminate the incentives to maximize the utility of employees as they age. That means the effective retirement age is going to go lower.
I used to wonder how an organization could recruit people for suicide missions, like the Mumbai hotel attack. If we keep up GOP policies for another thirty years, we’ll all know exactly how.
Traditional retirement involves moving in with your kids’ families and them supporting your downward spiral until you die.
Of course the kids will already be living much worse than their Boomer parents because they had much less invested in them and were instead seen as investment vehicles.
It’s a good thing that years of double-digit unemployment (and underemployment) will have no impact whatsoever on retirement security.
I’m hoping I can eventually get a federal or decent state position with a decent pension plan so I don’t end up in a gutter when I’m 70.
QUESTION: Was the pension something everyone signed on instead of contributing to Social Security or in addition to? Sorry if the answer is in the link, but I just don’t have time to read all the articles today.
thnx
In many states, the pension replaces socsec contributions. Not only for higher ed, but also k-12. this is a big problem.
You see the same problem is a lot of cities, where there are no Republicans competing serious at the electoral level and yet policy is still a major problem.
It strikes me that part of the problem is that there isn’t much mobilization to pressure Democrats in deep blue places to be progressive. Take the death penalty. While there are certainly good people working the issue in CT, MD and CA, most of the commentary is about how awful TX or GA is. I think you see that same sort of dynamic repeated across issue areas and constituencies. Obvious primaries are one way to do that – but I’m talking about the more day-to-day pressure. Without suggesting that electoral politics don’t matter, it should be clear that 1) it isn’t the only thing that matters and 2) it is a very blunt instrument.
“Slashing pensions doesn’t solve the long-term poverty problems that the pensions are intended to eliminate.”
Light a man A fire and he’ll be warm for a night
But light a man ON fire and he’ll be warm for the rest of his life
One big issue is that most retirement plans are based on the stock market, which hasn’t moved in 12 years or so. The Dow Jones closed today at 11,997.70; it closed on December 1, 1999 at 11,497.12.
Pension plans, 401(k) plans, individuals all need better appreciation than that to meet retirement goals.
The idea that taxpayers will make increased contributions from their dwindling resources in order to make public pensions whole is highly unlikely. The appreciation issue is beyond the control of either political party.
Pensions don’t just invest in the stock market. Most are HIGHLY diversified. CALPERS has tons of REITs, bonds, patent trusts, and all sorts of junk.
The problem is that pension funds generally assume they need an 8% return over time, and they only get that in booms. I’d bet they’re getting more like 4% or 5% right now, which is good but not good enough.
I believe that Our Galtian Overlords have decided on the Goldfinger Method for dealing with the problems of the old and poor:
“I don’t expect you to talk, Mr. Bond, I expect you to die.”
They. Don’t. Care.
If you’re no longer of use to them, please have the decnecy to crawl off and die somewhere out of their sight, you worthless scum.
Eh, I’m ahead of the curve: I confidently expect to die of a massive heart attack before I’m 60. Maybe before I’m 55. As far as I can tell, the way to do this is to live very self-indulgently until you’re about 54 and then go on a sudden program of physical exercise (running, basketball, whatever). It will be a little rough on my family, but at least they won’t have to worry about supporting me in my old age/illness, etc. All else fails, I can “accidentally” drive into the path of a bus or something.
That’s the joke about the two-party cum one-party system in the US. Go up to New York and look at “Independent” Mayor Bloomberg. He’s as conservative as they come, but he sticks an “I” in front of his name so he doesn’t wig out the Democrats. Or look at Cuomo or Schumer. Big bank friendly. Rich guy friendly. These aren’t your Saul Alinsky class-warfare radicals. These are very staunch conservative politicians.
Then swing down to Texas and guess who is Governor? The man that ran Al Gore’s Presidential campaign in 1988. Texas was a bright blue state straight back to the Civil War. Then the 80s happened and BAM, suddenly, magically everyone is a Republican.
It’s meaningless. 5-1 Democratic Majority doesn’t mean a damn thing, if the Democrats are just party-picked business friendly machine produced insiders.
“Then the 80s happened and BAM, suddenly, magically everyone is a Republican.”
It’s far more accurate to say the civil rights movement happened, among other things.
With Democrats like these, who needs Republicans?
Well, maybe we do. With Republicans pushing these measures there might be appropriate pushback. Think of Bush’s plan to privatize social security. Now think about Simpson/Bowles/Supercommitee “fixing” social security.
Erik, in sort of related developments in the UK, some evil jerk came up with an idea even more repellent than unpaid internships, which already favor the rich. He came up with the idea of an internship where the intern has to pay, often substantial amounts of money for it.
http://hurryupharry.org/2011/12/07/social-mobility-going-down-the-tubes
Between the destruction of pensions and the pay for it internship, which will someday appear in America, the vast majority of humans are screwed.
we already have that in the U.S., where interns often pay for college credit for unpaid internships.
That’s already the situation in teaching and those sorts of companies exist already for internships in DC.
The retirement issue is part of the reason my partner and I moved to Europe. We’re both well educated with desk jobs working in fields that we both like. We enjoy our work. I don’t necessarily want to “retire.” I do, however, want to have the chance to travel and not live as though my work is my life.
I now live in the Netherlands and get a little over a month off per year, plus holidays. I nearly always leave work 8 hours after I arrive and I rarely have to take work home. If I continue to work in the Netherlands, I will get extra time off after I turn 65. I can comfortably work until my 80s (assuming I’m healthy) and also have time to enjoy my life.
That sounds like a good idea. This country is toast.
That’s “more” Democrats. That means its safe to mount grassroots campaigns to primary Democratic incumbents so you get better Democrats.