Diminishing returns

The new Social Security report is out.
One year closer to reduced benefits - and demographics is destiny.

Bad news for the young

Wall Street Journal gives the young Obama voters something to think about - how much they are going to have to pay for continuing Obama policies.
While many seniors believe they are simply drawing out the "savings" they were forced to deposit into Social Security and Medicare, they are actually drawing out much more, especially relative to later generations. That's because politicians have voted to award the seniors ever more generous benefits. As a result, while today's 65-year-olds will receive on average net lifetime benefits of $327,400, children born now will suffer net lifetime losses of $420,600 as they struggle to pay the bills of aging Americans.
When will you wake up, young voters?

Why Detroit's doomed

Megan McArdle looks at the pension report from Detroit - and comes away in shock.
Between 1985 and 2008, they handed out roughly $1 billion this way. Had they been invested, one estimate says those funds would be worth almost $2 billion today -- or more than half the current shortfall in the funds.
These “bonuses” were used to lower the contribution the city was required to make, to give retirees a little something extra around Christmas time, and to fund individual savings accounts that workers are offered along with their pensions. In 2009, when the financial markets were completely frozen and the automakers were shotgunning through the bankruptcy courts, the pension trust paid 7.5 percent interest into those accounts -- which is about 7.5 percent more than they would have gotten at a bank. This while the pension funds were busy losing about a quarter of their value.
Are you ready to contribute to save this group?

iWant your money

American Interest has the latest plans by Illinois unions to keep their retirement benefits - taxing downloads.
Most of these proposals are standard union boilerplate, but the taxes on cable TV and digital downloads stand out as particularly regressive. Normally, labor fights sales taxes because they are regressive; because poor people spend a higher percentage of their income on consumption goods (the rich save and invest), the poor end up paying a higher percentage of their income on sales taxes than the rich do.
But when it comes to union benefits, it’s clear that public union leaders only care about the money and will happily squeeze the poor as hard as they can.
They want to fill their coffers when you fill your iPod.

"Squeezy, the Pension Python"

What to understand how badly government pensions are doing?
Illinois tries "Squeezy, the Pension Python."
Squeezy seems to hang out around government buildings.
It's actually squeezing taxpayers harder.

Cut back? Never

Bloomberg looks at another pending financial disaster - health care guarantees for state retirees.
Is the problem

• Benefits out of whack with reality
• Private employers should be as generous as public.

Private employers have to live in reality. Government employees can make promises - and ask children yet unborn to pay for them.
Or else.

Who spent your retirement?

Via Instapundit, an interesting article for Baby Boomers planning to live to 80 (or retire before then).
Who's going to pay for your retirement? Because the money's gone and no one young can afford to buy what you need to sell.
It may be unfortunate that this upcoming generation was unavoidably destined to take on debt, and that it was only a question of whether the student loan industry or the mortgage industry yoked them in first. But it appears that student loans won the race to reach their prey, which is bad news for Boomers seeking to sell their homes in 2015-20.

Part of our social security problem

For those who think there's no Social Security problem - the money has been saved for use until 2037 - the logic just fails.
It's a numbers game. There's not enough workers coming into the pipeline to pay for benefits of those retiring. The young won't be able to pay enough taxes to cover the "bonds" that will supposedly be "redeemed" so Social Security can remain solvent for the next 26 years.
Remember the era when Social Security was born. My parents and in-laws were born in that generation - 1935 to 1949.

• My dad was fifth of seven kids.
• My mother was third of six kids.
• My mother-in-law was fourth of six kids.
• My father-in-law was seventh of 13 kids.

That's lots of kids to pay for Social Security benefits when they grew up. Lots of benefits to be paying out now.
How many people do you know with six kids now? How many with four? Most families are one, two or three.
The shrinkage of family size shouldn't come as a surprise. Why government officials didn't plan for Social Security based on that, we don't know.
Numbers like this show the pension trouble, the Social Security trouble that this country can't avoid. Even if Democrats and President Obama try.

The chasm

Instapundit highlights two ways 2011 will be a year of chasms - between ordinary people and the public sector that has used tax funds to insulate itself from reality over the years.
The chasm in the global warming debate - the snow crisis demonstrated, in high definition, the gap between the fear-fuelled thinking of the elite and the struggles of everyday people. It illuminated the million metaphorical miles that now separate the fantasy politics of our so-called betters from the concerns of the rest of us.
And the pension tsunami - Spooked by the University of California's pension revolt - in which its highest paid executives are threatening to sue unless UC fattens their retirement benefits - a Democratic state lawmaker introduced a bill Thursday to prevent all public employees from gaining dramatically increased pension benefits.
The elites can't expect to keep living as they have, and asking the common man to pay for their continued lifestyle. It's a lesson the unions in New York are going to learn really soon.

Let them Oliver Twist in the wind

George Will joins the crew riding the "pension tsunami wave."
The nation's menu of crises caused by governmental malpractice may soon include states coming to Congress as mendicants, seeking relief from the consequences of their choices. Congress should forestall this by passing a bill with a bland title but explosive potential.

Private pensions have strict rules to make sure there's enough money for future benefits. Public pensions? Not so much.
Less candor, realism and pre-funding are required of state and municipal governments regarding their pension plans. (California Republican Rep. Devin) Nunes's bill would require them to disclose the size of their pension liabilities - and the often-dreamy assumptions behind the calculations. Noncompliant governments would be ineligible for issuing bonds exempt from federal taxation. Furthermore, the bill would stipulate that state and local governments are entirely responsible for their pension obligations and the federal government will provide no bailouts.
No bailouts. I like the sound of that.
Because bailouts aren't governments helping their employees. It's government forcing some citizens to make the futures of other citizens easier.

The bill is now coming due

More on New York's pension problems, coming to areas near you.
In plans across the country, during booming years of the late 1990s, many workers were promised retirement payouts that were "too good to be true" and, thus, impossible to make good on.
The miscalculation is massive. Technically estimated at $452 billion as a result of flawed accounting, the real unfunded pension obligation in state pension plans is closer to $3 trillion.
h/t Instapundit.

More California trouble

Instapundit highlights another article on the pension trouble looming in California.
The union guy offers some good advice. Probably not the way he meant it.
"When you have men and women standing side by side in extremely stressful, hazardous, grueling situations over the course of a career, it's hard to look one or the other in the eye and say your future security matters less," said Carroll Wills, a spokesman for California Professional Firefighters, which represents 30,000 state public safety workers.
Yeah, it's not fair if you have better pension benefits than younger people. We should cut yours to the level we now think we can pay.
If we've cut more than we need, we'll make it up.
But I don't think you want taxpayers working until they are 75 to pay for you to retire at 55. They will remember your quote.

Lock up the speculators

Democrats are mad at Wall Street. Are they also mad at politicians, like those in California, who made bad bets on the market?
Here's the kicker–Obama in his speech said that "one of the main reasons our economy faltered was because some on Wall Street made irresponsible bets, with no accountability." The exact same language could be used, with 100 percent accuracy, to describe public officials all over California–including Los Angeles Mayor Antonio Villaraigosa, who just today is unveiling his latest too-little, too-late package of reforms. All of these labor-backed bureaucrats bet irresponsibly that they could more than double pension promises to state employees over the past decade, because the "accountability" moment was deferred to when those payments came due.

Pension tsunami update

Rush Limbaugh mentioned this story about how much drug company profits will shrink under health care reform.
Let's think about this.
Take $90 billion in profits, and you lose lots of tax revenue, right? If not business taxes, then taxes paid by employees on that money.
The government plans to pay pensions for its employees. You usually buy stocks and bonds to have the growth to pay for those benefits.
Weaker companies produce fewer dividends to shareholders and worse returns. So the pension funds will be short of their goals.
So, do you raise taxes more to pay pension obligations, or reduce the promised payout to retirees?
If you're not careful when you chop down a tree, it may take out your favorite flowers when it lands.

We'll see more of this

Instapundit notes a story from Atlanta, where taxpayers are suing the city over its past decisions for funding pensions.
In 2002, the city spent about $36 million on pensions. That total is expected to quadruple to $160 million by 2015, according to the report. Mayor Kasim Reed, who took office in January, has said the rising pension costs leave the city to do little else, aside from policing the streets, fighting fires, and providing water and sewer service and trash pick up.

Stating the bad news

Doug Ross collects the bad news of certain states with rich pension promises and poor prospects.
The mathematical impossibility of paying off the overly rich pensions of public sector employees is hitting home in state after state. The battle over dwindling financial resources will pit taxpayers against the unions; once the citizenry gets wind of the outrageous defined-benefit pension plans crafted by SEIU bosses, there will be no containing the rage.

Remember 1983?

Instapundit links a report on the future of Social Security, with this scary quote.
“We won’t have a crisis,” says Michael Astrue, commissioner of the Social Security Administration. “2037 is a long way off and there is no reason to panic, but this is a serious issue we need to resolve. Younger people tend to overreact.”
Okay, 2037 is 27 years away. Going the other way, 1983 is only 27 years away from today also. Does it feel that long ago?
We wouldn't be worrying about Social Security in the near future if we had looked at the numbers in the baby boom generation more in 1983.

Time for a Tertium-lanche

Checking Instapundit this morning, he links Tertium Quids' post on the problems with the Virginia Retirement System.
Instapundit finds lots of pension problems around the country. Figures that Virginia is on the list.

Baltimore's pension woes

Instapundit links a column by Baltimore radio talker Ron Smith about public pensions and the lack of reforms. How long can public pension plans ask people with lesser pension plans to give more to them? Just because a politician promised it doesn't mean the taxpayer will always pay for it.

I'd prefer...

...that the Obama administration worry less about stem cells and more about the looming pension tsunami - shortfalls in public retirement funds. This pain is coming quicker than any benefits of embryonic stem cell research.