No, the officials making these pension decisions are politicians who mostly, while they may have government pensions, have lots of other resources, so that the pension doesn't matter much. The only thing it will deter is non-independently-wealthy people from becoming politicians, but there are barriers to that already.
That's likely true in large cities, but most cities (and thus most city governments) aren't large.
Many small city elected officials are part-time, often unpaid or with a largely symbolic stipend: they don't have public pensions from those positions at all. So they are even less subject to “if you make bad pension decisions, we’ll take your personal pension away” leverage than fulltime big-city and state politicians, who are likely to have (but not depend on) public pensions.
Yes, but the people who pass the laws are the people who would be affected. You'd have to find a simple majority of people moral enough to do it. I think today, that's a hard sell.
More and more I'm thinking the only outcome for a lot of these States and municipalities is going to be bankruptcy. The long term austerity measures that are needed are too onerous and the entrenched powers are too corrupt to do anything about it until it's too late.
Fixing that doesn't require long term austerity, it requires a few years of collective willingness to pay moderately higher taxes.
...
Note that I'm not as anarchist or libertarian as the above makes me sound, but it does emphasize the point I'm trying to make: I don't think you'll ever convince the current generation to pay for the previous one so I don't think there will ever be a collective willingness to pay "moderately higher" taxes. My bet is on an ugly outcome where the old and young battle it out in the courts between haircuts to pension plans and higher taxes with politicians muddling their way to an ugly middle ground that no one likes.
An unwillingness to collectively pay taxes is also a major reason our infrastructure is falling apart. In the scheme of things it wouldn't take all that big an investment to dramatically improve things, it's just fallen out of fashion.
If you don't, you won't be compelled to pay. Pack up and move somewhere that's not fucked.
If, OTOH, you bought property, you took on this risk in doing so. You should have priced in the pension shortfall, and the expected future tax repercussions, when you made your purchase, and the seller should have born the cost of their jurisdiction's mismanagement in the form of a reduced property value.
That wouldn't be a 1% friendly solution though - too much of their wealth is tied up in land and equities. It might mean that landlords in the Bay Area couldn't collect rents of $6,000 a month for doing nothing. Most of that unearned cash would flow in to state coffers instead.
It's ironic, because the Howard Jarvis Taxpayer foundation (the group behind prop 13) tried to justify prop 13 by saying that raising property taxes would hurt the elderly. Californian voters believed them.
Now that their actions created a massive hole in California budgets, they advocate for stripping California pensioners of their money as the "fiscally responsible" solution.
People believe them now too.
Edit: For those erroneously believing propaganda that hiking taxes leads to an automatic exodus:
https://www.cbpp.org/research/state-budget-and-tax/state-tax...
The other problem is that we don't just need to come up with money; we need to find ways to convince/force governments to stop making these promises in the first place. A government promise about something it'll do 30 or 40 years in the future is not quite worthless, but it's just not an institution capable of reliably keeping it.
(Whatever politics you think drives me to say that, I mean that and I mean lots of other things too. If nothing else, in the general case, a legislative body can not truly constrain future legislatures, who can always just vote to not keep their old promises, made by people who are mostly not here anymore, for constituencies that were growing in power 30-40 years ago but are now dying off and not very useful to the current 30-40-year-olds in the legislature. Looking to governments to keep promises so many decades in advance is far more risky that many people seem to account for on all kinds of levels. The history of the 20th century suggests that counting on your government to even exist in 40 years is, in general, not the safest bet!)
In CA specifically, I don't see the threat of bankruptcy being enough to overcome prop 13.
Plus if it was in the cards there would be a massive exodus that would further erode the tax base which would be a vicious downward spiral.
> ... and eliminate corporate tax cuts and tax loopholes.
Referencing "eliminating tax loopholes" is like saying "We need to do something about guns". It's meaningless without specifics.
> That wouldn't be a 1% friendly solution though - too much of their wealth is tied up in land and equities.
Equities aren't taxed by States or municipalities, at least not from a "wealth tax" perspective. If such a wealth tax was passed I'd immediately invest in U-Haul and other mover services.
Raising income taxes enough to cover these obligations would lead to an exodus of high earners as well. That doesn't address the municipal pensions either as they don't necessarily have income taxing ability nor high earners to tax.
> Now that their actions created a massive hole in California budgets, they advocate for stripping California pensioners of their money as the "fiscally responsible" solution.
The fiscally responsible thing to do would have been to not make promises to pensioners to buy their votes. Sadly that continues to this day. Try running as a politician that's going to address this problem with any form of austerity measures for the people involved and see what happens.
Other than provide housing in an extremely high demand area.
Property taxes are an interesting solution. Of course people who don't own property will still pay them indirectly through rents.
The amount of free money yielded in real estate appreciation and rents in California is staggering. It could easily fill any state budget hole if the political will was there to take it from the people who did not earn it and give it to the people who did.
Do you mean "ownership?"
>The amount of free money yielded in real estate appreciation and rents in California is staggering. It could easily fill any state budget hole if the political will was there to take it from the people who did not earn it and give it to the people who did.
People didn't earn the property they own? I hesitate to ask you the question, but if things are so expensive, and you don't currently own property, why live there in the first place?
I'm all for decreasing the wealth gap and the wage gap, but what you seem to be asking for is free shit.
That's the effect that untaxing land (e.g. prop 13) has on property values. That's the money that would be going toward unfunded pension liabilities were the land not untaxed.
Also took the risk of it decreasing in value relative to the dollar in 38 years.
I mean if it's free money, why don't you go buy up a $900K property and get some free money in 38 years? There is a little more to it, and of course, you realize, that it might not have increased in value over 38 years like it did the last 38 years.
Of course luck has a lot to do with it. I've lived in my house for about 15 years or so (not in CA). It's nearly doubled in value, but the interest payments alone over time cost about as much as the property, so it's a break even, then add inflation and I've probably lost some. I live in my house though, and I'm eagerly awaiting the day when I can live here without any more mortgage payments.
Moral hazard? That's the backbone of politics
If we are going to be adults, these pensions are contractual and need to be paid out. It’s not a responsible behavior to use retirement plans as weapons at the 11th hour.
If we're going to be adults, we're also going to recognize that many of us were not adults when these contracts were drawn up and signed. Many of us were never even born, and some of those who were of the right age opposed them to some degree or another.
Maybe we should recognize, in a truly adult fashion, that the mistakes of previous generations should not be passed on to the current generation. Maybe adults should recognize the math just doesn't add up.
> It’s not a responsible behavior to use retirement plans as weapons at the 11th hour.
It's not a responsible behavior to over promise pensions and bankrupt dozens of states either. Nor, in the pursuit of fulfilling those reckless promises, is it responsible to bankrupt future generations.
Which curiously, is exactly the solution we have in place now: reduced benefits for new employees to compensate for outsized ones for retirees. Should they stand for this?
> It's not a responsible behavior to over promise pensions and bankrupt dozens of states either. Nor, in the pursuit of fulfilling those reckless promises, is it responsible to bankrupt future generations.
You're ignoring the substantial hand states have had in making this crisis. Several have continually neglected their annual contributions. Maybe they were backed into a corner when tax reciepts fell in 2008, maybe it was a political self-inflicted wound. When states like Kansas or Colorado cut taxes and take on substantial debt, it's pretty goddamn odious to point to budget shortfalls and say "Sorry employees, we can't make our pension obligation, we have interest payments to make!"
Moreover, when demanding pensions take a cut while paying lenders 100 cents on the dollar, you're concentrating investment losses onto those least able to afford it.
So are you okay with a future generation repudiating their contracts and obligations with you when you reach retirement age? After all, all of us are someday going to part of a "previous generation" and none of are so perfect that our generation has made no mistakes.
Why do so many people behave as if aging is something that only happens to other people?
There are solutions that provide the benefits of retirement without pitting young against old.
> KEA opposes the pension reform, in which new hires will have to enter a hybrid cash balance plan, which differs from a traditional pension, and would limit new sick days that teachers can put toward their retirement.
https://www.cnn.com/2018/04/11/us/kentucky-teachers-pension-...
Now that they enjoyed not having to fund the pensions for 30 years, they are retiring and expecting the next generation to pay for them having their cake and eating it too.
I find it very difficult to really figure out where the greater moral hazard here lies. As you state this was a problem everyone knew about when setting these public pensions up and it was easier to kick the can down the road. You will find it very difficult to convince me that the average union member in the 80's didn't know the sweet deal they were getting. It was a trope growing up in the 80's/90's to hear adults talk about "scamming" the overly generous pensions systems of the day.
I think it's interesting public unions in Illinois advocated 30 years ago for enshrining pension benefits into the state constitution. That language was added specifically because the public unions knew the deals they were making with politicians were not fiscally sustainable.
At this point I don't see a good way out and something major will break at a societal level before it gets fixed. There simply is no way to pay for these promised benefits and still maintain local and state government at a functional level in many states. I don't think bailing them out federally is an answer either - again for moral hazard reasons. I also don't think quadrupling taxes on the next generation is morally any better either.
In many ways this discussion is moot. The math is so overwhelmingly bad in some places it's simply not fixable from the revenue side only. Everyone is going to have to share some pain here, and that includes those receiving benefits.
Washington will also look at this as an opportunity to take more power from states and move it to DC. Of course they can also print/borrow money do this.
More likely it was added because they knew that there would eventually be a concerted political effort to strip them of their pensions )and raid those pensions) by a combination of business lobbies and wall street.
>I also don't think quadrupling taxes on the next generation is morally any better either.
What is your moral objection to taxing unearned income at a higher rate?
We’re just arguing about the amount of the transfer at this point.
So, younger adults who are just entering the workforce are going to shoulder the burden for paying for these deficits based on decision made when they were children or not even born.
Pensioners in the private sector do face those risks.
http://www.mlive.com/news/detroit/index.ssf/2013/10/10_thing...
There's a serious moral hazard for politicians. It's easy to give constituents services today at the expense of benefits in the future, when they'll be out of office. I wonder if a law that clawed back these government official's pensions if they were found to break from good accounting practices, would be a deterrent?