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The Suddenly Poor Life: Millions Will Lose Their Pensions

oldgaranddad

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Or will our children live in poverty supporting us seniors...
If you have been reading the advice here on this forum you'd have a stash for you and your kids to get you through the tough times.
 

Fatrat

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Oh no doubt I stash hard, but what you don't understand is this is not tough times, this is the new reality, this will be slavery for most of the next generation. In this new version of " King of the Hill", there is a lot less room at the top, and a lot more starving peons down below.
 

Uglytruth

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When surrounded by so many poor will it be a blessing to have anything or will it just make you a target?
 

Uglytruth

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Remember the golden rule, loose lips sink ships
You might use it for barter but then someone knows. They use it for barter & want to know where it came from.
Then you get a visit from............ take your pick mad max.......
 

searcher

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Who would have thought...…………….

Philly Soda Tax Is Underperforming Lowered Expectations


by Tyler Durden
Wed, 06/13/2018 - 17:25


Via Political Calculations blog,

Things aren't going so well for Philadelphia's controversial soda tax in its second year of existence, which is under threat. Let's catch up with how it's doing in 2018:

The Pennsylvania Supreme Court will weigh the legality of Philadelphia's beverage tax in a Tuesday hearing as new data show the city is drawing in less revenue from the controversial tax in its second year than in 2017.​
The city's monthly revenue collections show PBT brought in $5.8 million in January and $5.5 million in February. Receipts for each month are collected by the end of the following month. The $11.3 million total is about $817,000 less than the soda tax revenue generated in the same period a year ago, when the first two months of 2017 saw the Kenney administration buoyed by PBT's strong start.​
The revised yearly estimate of $78.8 million averages out to a monthly expectation of $6.5 million, an amount the Mayor's Office exclusively told the Business Journal it will hit with March revenue.​

Believe it or not, there's good news here! The city did indeed hit its 2018 average monthly target of $6.5 million for the Philadelphia Beverage Tax in March 2018. Unfortunately, that was over $521,000 less than what the city collected in March 2017, where the city is now cumulatively over $1.3 million short of its reduced soda tax revenue target of $19.2 million through the first calendar quarter of 2018.

The following chart shows how Philadelphia's soda tax collections are faring:



At this point of time a year ago, the city was cumulatively over $1.8 million short of its original revenue target of $21 million for the first quarter of 2017, where 2018's first quarter revenue collections are now some $3.1 million below that level.

Now, we're going to say something surprising to those who have been following our ongoing series on Philadelphia's soda tax. We don't expect that ongoing underperformance in Philadelphia's soda tax collections will continue much farther into 2018.

Accepting that we could very well be wrong, here's what we're thinking. Starting with the observation that Americans consume the lowest quantities of the kinds of beverages that are subject to Philadelphia's soda tax during the first quarter of every year, we think that Philadelphia's revenues from its controversial tax were relatively elevated in the first three months of 2017 compared to 2018 because Philadelphians hadn't yet fully worked out all the strategies that they would come to employ to avoid paying the tax back when it first went into effect. Soda tax hacking strategies that included buying beverages that would be subject to the tax outside of the city or buying packets of sugary drink mixes that were not taxed by the city and making their own sugar-laden beverages.

By the second quarter of 2017 however, many Philadelphians had become adept at avoiding the tax, where the monthly tax revenue figures from April 2017 onward would be reasonable projections for the amount of revenue that would be likely to be collected over the remainder of 2018, aside from unique factors that may affect beverage sales and the corresponding tax collections, such as abnormally hot or cool weather conditions.

And then, there's the wild card of what the Pennsylvania Supreme Court may decide, which may make the entire issue of Philadelphia's revenue collections from its controversial soda tax moot. That court heard arguments in a case challenging the legality of Philadelphia's soda tax back on 15 May 2018. At this writing, the court has not yet indicated when it will issue a decision in the case.

The Philadelphia Beverage Tax's existence is also under threat from Pennsylvania's General Assembly, where legislation that would abolish the tax has been advancing through the legislature.

One issue that has been resolved however is which purported beneficiary of Philadelphia's beverage tax would "get stiffed" should city official accept the reality that the tax would not produce the revenue they had promised it would. The designated loser turned out to be Philadelphia Mayor Jim Kenney's "Rebuild" initiative to improve public parks, libraries and other city infrastructure, which has been dramatically scaled back from promised investments.

It was only ever a matter of time. Since the mayor has proposed hiking Philadelphia's property taxes to increase funding to support the city's public schools, it's likely that the Mayor's "free" pre-K program will be able to get the funds it would need to continue and to expand from that more stable source of revenue should the Pennsylvania Supreme Court rule against Philadelphia's soda tax. The way it should have been funded in the first place, if city officials had cared more about providing services to the public more than milking additional revenue out of the city's residents.

We probably shouldn't have said that last part. Philadelphia's politicians may start thinking about taxing milk as they might seek to close a "loophole" that they purposefully created when they originally crafted the city's controversial beverage tax.




Previously on Political Calculations

We've been covering the story of Philadelphia's flawed soda tax on roughly a monthly basis from almost the very beginning, where our coverage began as something of a natural extension from one of the stories we featured as part of our Examples of Junk Science Series. The linked list below will take you through all our in-near-real-time analysis of the impact of the tax, which at this writing, has still to reach its end.

https://www.zerohedge.com/news/2018-06-13/philly-soda-tax-underperforming-lowered-expectations
 

GOLDBRIX

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Just more proof "DEM. Libs have a mental illness".
 

Fatrat

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Add in more people realizing soda is overpriced crap and sales down. I wonder how long until this shows up in the diabetes rates.
 

edsl48

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Demographics and Destiny: Pension Trainwreck Coming Up


byMike Mish Shedlock
20 hrs-edited

A pension crisis looms as shown by excellent charts from the Harvard Kennedy School and the Peter G. Peterson Foundation
John Mauldin compiled an excellent set of charts and comments on the pension crisis in this week's Thoughts from the Frontline. This is a guest post.
The Pension Train Has No Seat Belts by John Mauldin.

In describing various economic train wrecks these last few weeks, I may have given the wrong impression about trains. I love riding the train on the East Coast or in Europe. They’re usually a safe and efficient way to travel. And I can sit and read and work, plus not deal with airport security. But in this series, I’m concerned about economic train wrecks, of which I foresee many coming before The Big One which I call The Great Reset, where all the debt, all over the world, will have to be “rationalized.” That probably won’t happen until the middle or end of the next decade. We have some time to plan, which is good because it’s all but inevitable now, without massive political will. And I don’t see that anywhere.
Unlike actual trains, we as individuals don’t have the option of choosing a different economy. We’re stuck with the one we have, and it’s barreling forward in a decidedly unsafe manner, on tracks designed and built a century ago. Today, we’ll review yet another way this train will probably veer off the tracks as we discuss the numerous public pension defaults I think are coming.
Last week, I described the massive global debt problem. As you read on, remember promises are a kind of debt, too. Public worker pension plans are massive promises. They don’t always show up on the state and local balance sheets correctly (or directly!), but they have a similar effect. Governments worldwide promised to pay certain workers certain benefits at certain times. That is debt, for all practical purposes.
If it’s debt, who are the lenders? The workers. They extended “credit” with their labor. The agreed-upon pension benefits are the interest they rightly expect to receive for lending years of their lives. Some were perhaps unwise loans (particularly from the taxpayers’ perspective), but they’re not illegitimate. As with any other debt, the borrower is obligated to pay. What if the borrower simply can’t repay? Then the choices narrow to default and bankruptcy.
Today’s letter is chapter 6 in my Train Wreck series. If you’re just joining us, here are links to help you catch up.
As you will see below, the pension crisis alone has catastrophic potential damage, let alone all the other debt problems we’re discussing in this series. You are sadly mistaken if you think it will end in anything other than a train wreck. The only questions are how serious the damage will be, and who will pick up the bill.
Demographics and Destiny
It’s been a busy news year, but one under-the-radar story was a wave of public school teacher strikes around the US. It started in West Virginia and spread to Kentucky, Oklahoma, Arizona, and elsewhere. Pensions have been an issue in all of them.

An interesting aspect of this is that many younger teachers, who are a long way from retirement age, are very engaged in preserving their long-term futures. This disproves the belief that Millennial-generation Americans think only of the present. From one perspective, it’s nice to see, but they are unfortunately right to worry. Demographic and economic reality says they won’t get anything like the benefits they see current retirees receiving. And it’s not just teachers. The same is true for police, firefighters, and all other public-sector workers.
Thinking through this challenge, I’m struck by how many of our economic problems result from the steady aging of the world’s population. We are right now living through a combination unprecedented in human history.
  • Birth rates have plunged to near or below replacement level, and
  • Average life spans have increased to 80 and beyond.
Neither of these happened naturally. The first followed improvements in artificial birth control, and the second came from better nutrition and health care. Each is beneficial in its own way, but together they have serious consequences.
This happened quickly, as historic changes go. Here is the US fertility rate going back to 1960.


Source: St. Louis Fed
[Mish Comment: I recreated the chart in Fred and added lines as I see them. John says we are going sideways but I suggest a new downtrend may be in place.]

As you can see, in just 16 years (1960–1976), fertility in the US dropped from 3.65 births per woman to only 1.76. It’s gone sideways since then. This appears to be a permanent change. It’s even more pronounced in some other countries, but no one has figured out a way to reverse it.
Again, I’m not saying this is bad. I’m happy young women were freed to have careers if they wished. I’m also aware (though I disagree) that some think the planet has too many people anyway. If that’s your worry, then congratulations, because new-human production is set to fall pretty much everywhere, although at varying rates.
Breaking down the US population by age, here’s how it looked in 2015.


Source: US Census Bureau
Think of this as a python swallowing a pig. Those wider bars in the 50–54 and 55–59 zones are Baby Boomers who are moving upward and not dying as early as previous generations did. Meanwhile, birth rates remain low, so as time progresses, the top of the pyramid will get wider and the bottom narrower. (You can watch a good animation of the process here.)

This is the base challenge: How can a shrinking group of working-age people support a growing number of retirement-age people? The easy and quick illustration to this question is to talk about the number of workers supporting each Social Security recipient. In 1940, it was 160. By 1950 it was 16.5. By 1960 it was 5.1. I think you can see a trend here. As the chartbelow shows, it will be 2.3 by 2030.


Source: Peter G. Peterson Foundation
Similarly, states and local governments are asking current young workers to support those already in the pension system. The math is the same, though numbers vary from area to area. How can one worker support two or three retirees while still working and trying to raise a family with mortgage payments, food, healthcare, etc.? Obviously, they can’t, at least not forever. But no one wants to admit that, so we just ignore reality. We keep thinking that at some point in the future, taxpayers will pick up the difference. And nowhere is it more evident than in public pensions.
In a future letter, I will present some good news to go with this bad news. Several new studies will clearly demonstrate new treatments to significantly extend the health span of those currently over age 50 by an additional 10 or 15 years, and the same or more for future generations. It’s not yet the fountain of youth, but maybe the fountain of middle-age. (Right now, middle-age sounds pretty good to me.)
But wait, those who get longer lifespans will still get Social Security and pensions. That data isn’t in the unfunded projections we will discuss in a moment. So, whatever I say here will be significantly worse in five years.
Let me tell you, that’s a high order problem. Do you think I want to volunteer to die so that Social Security can be properly funded? Are we in a Soylent Green world? This will be a very serious question by the middle of the next decade.
Triple Threat
We have discussed the pension problem before in this letter—at least a half-dozen times. Most recently, I issued a rather dire Pension Storm Warninglast September. I said in that letter that I expect more cities to go bankrupt, as Detroit did, not because they want to, but because they have no choice. You can’t get blood from a rock, which is what will be left after the top taxpayers move away and those who stay vote to not raise taxes.
This means city and school district retirees will take major haircuts on expected pension benefits. The citizens that vote not to pay the committed debt will be fed up with paying more taxes because they will be at the end of their tax rope. I am not arguing that is fair, but it is already happening and will happen more.

States are a larger and different problem because, under our federal system, they can’t go bankrupt. Lenders perversely see this as positive because it removes one potential default avenue. They forget that a state’s credit is only as good as its tax base, and the tax base is mobile.
Let me say this again because it’s critical. The federal government can (but shouldn’t) run perpetual deficits because it controls the currency. It also has a mostly captive tax base. People can migrate within the US, but escaping the IRS completely is a lot harder (another letter for another day). States don’t have those two advantages. They have tighter credit limits and their taxpayers can freely move to other states.
Many elected officials and civil servants seem not to grasp those differences. They want something that can’t be done, except in Washington, DC. I think this has probably meant slower response by those who might be able to help. No one wants to admit they screwed up.
In theory, state pensions are stand-alone entities that collect contributions, invest them for growth, and then disburse benefits. Very simple. But in many places, all three of those components aren’t working.
  • Employers (governments) and/or workers haven’t contributed enough.
  • Investment returns have badly lagged the assumed levels.
  • Expenses are more than expected because they were often set too high in the first place, and workers lived longer.
Any real solution will have to solve all three challenges—difficult even if the political will exists. A few states are making tough choices, but most are not. This is not going to end well for taxpayers or retirees in those places.
Worse, it isn’t just a long-term problem. Some public pension systems will be in deep trouble when the next recession hits, which I think will happen in the next two years at most. Almost everyone involved is in deep denial about this. They think a miracle will save them, apparently. I don’t rule out anything, but I think bankruptcy and/or default is the more likely outcome in many cases.
Assumed Disaster
The good news is we’re starting to get data that might shake people out of their denial. A new Harvard study funded by Pew Charitable Trusts uses “stress test” analysis, similar to what the Federal Reserve does for large banks, to see how plans in ten selected states would behave in adverse conditions (hat tip to Eugene Berman of Cox Partners for showing me this study).
The Harvard scholars looked at two economic scenarios, neither of which is as stressful as I expect the next downturn to be. But relative to what pension trustees and legislators assume now, they’re devastating.
Scenario 1 assumes fixed 5% investment returns for the next 30 years. Most plans now assume returns between 7% and 8%, so this is at least two percentage points lower. Over three decades, that makes a drastic difference.
Scenario 2 assumes an “asset shock” involving a 20% loss in year one, followed by a three-year recovery and then a 5% equity return for years five through year 30. So, no more recessions for the following 25 years. Exactly what fantasy world are we in?
Their models also include two plan funding assumptions. In the first, they assume states will offset market losses with higher funding. (Fat chance of that in most places. Seriously, where are Illinois, Kentucky, or others going to get the money?). The second assumes legislatures will limit contribution increases so they don’t have to cut other spending.

Admittedly, these models are just that—models. Like central banks models, they don’t capture every possible factor and can be completely wrong. They are somewhat useful because they at least show policymakers something besides fairytales and unicorns. Whether they really help or not remains to be seen.
Crunching the numbers, the Pew study found the New Jersey and Kentucky state pension systems have the highest insolvency risk. Both were fully-funded as recently as the year 2000 but are now at only 31% of where they should be.


Source: Harvard Kennedy School
Other states in shaky conditions include Illinois, Connecticut, Colorado, Hawaii, Pennsylvania, Minnesota, Rhode Island, and South Carolina. If you are a current or retired employee of one of those states, I highly suggest you have a backup retirement plan. If you aren’t a state worker but simply live in one of those states, plan on higher taxes in the next decade.
But that’s not all. Even if you are in one of the (few) states with stable pension plans, you’re still a federal taxpayer, and that’s who I think will end up bearing much of this debt. And as noted above, it is debt. The Pew study describes it as such in this chart showing state and local pension debt as a share of GDP.


Source: Harvard Kennedy School
For a few halcyon years in the late 1990s, pension debt was negative, with many plans overfunded. The early-2000s recession killed that happy situation. Then the Great Recession nailed the coffin shut. Now it is above 8% of GDP and has barely started to recover from the big 2008 jump.
Again, this is only state and local worker pensions. It doesn’t include federal or military retirees, or Social Security, or private sector pensions and 401Ks, and certainly not the millions of Americans with no retirement savings at all. All these people think someone owes them something. In many cases, they’re right. But what happens when the assets aren’t there?
The stock market boom helped everyone, right? Nope. States' pension funds have nearly $4 trillion of stock investments, but somehow haven't benefited from soaring stock prices.

A new report by the American Legislative Exchange Council (ALEC) shows why this is true. It notes that the unfunded liabilities of state and local pension plans jumped $433 billion in the last year to more than $6 trillion. That is nearly $50,000 for every household in America. The ALEC report is far more alarming than the report from Harvard. They believe that the underfunding is more than 67%.
There are several problems with this. First, there simply isn’t $6 trillion in any budget to properly fund state and local government pensions. Maybe a few can do it, but certainly not in the aggregate.
Second, we all know about the miracle of compound interest. But in this case, that miracle is a curse. When you compute unfunded liabilities, you assume a rate of return on the current assets, then come back to a net present value, so to speak, of how much it takes to properly fund the pension.
Any underfunded amount that isn’t immediately filled will begin to compound. By that I mean, if you assume a 6% discount rate (significantly less than most pensions assume), then the underfunded amount will rise 6% a year.
This means in six years, without the $6 trillion being somehow restored (magic beans?), pension underfunding will be at $8.4 trillion or thereabouts, even if nothing else goes wrong.
That gap can narrow if states and local governments (plus workers) begin contributing more, but it stretches credulity to say it can get fixed without some pain, either for beneficiaries or taxpayers or both.
I noted last week in Debt Clock Ticking that the total US debt-to-GDP ratio is now well over 300%. That’s government, corporate, financial, and household debt combined. What’s another 8% or 10%? In one sense, not much, but it aggravates the problem.
If you take the almost $22 trillion of federal debt, well over $3 trillion of state and local debt, and add in the $6 trillion debt of underfunded pensions, you find that the US governments from the top to bottom owe over $30 trillion, which is well over 150% of GDP. Technically, we have blown right past the Italian debt bubble. And that’s not even including unfunded Social Security and healthcare benefits, which some estimates have well over $100 trillion. Where is all that going to come from?
Connecticut, the state with the highest per-capita wealth, is only 51.9% funded according to the Wall Street Journal. The ALEC study mentioned above would rate it much worse. Your level of underfunding all depends on what you think your future returns will be, and almost none of the projections assume recessions.
The level of underfunding will rise dramatically during the next recession. Total US government debt from top to bottom will be more than $40 trillion only a few years after the start of the next recession. Again, not including unfunded liabilities.
I wrote last year that state and local pensions are The Crisis We Can’t Muddle Through. That’s still what I think. I’m glad officials are starting to wake up to the problem they and their predecessors created. There are things they can do to help, but I think we are beyond the point where we can solve this without serious pain on many innocent people. Like the doctor says before he cuts you, “This is going to hurt.”
We’ll stop there for now. Let me end by noting this is not simply a US problem. Most developed countries have their own pension crises, particularly the southern Eurozone tier like Italy and Greece. We’ll look deeper at those next week.

This is not going to be the end of the world. We’ll figure out ways to get through it as a culture and a country. The rest of the world will, too, but it may not be much fun. Just ask Greece.


Assessing Risk of Fiscal Stress in Public Pensions
As usual, that was another excellent report by John Mauldin.
The Harvard Kennedy School 50-State Stress-Test analysis on Assessing the Risk of Fiscal Distress for Public Pensions is an excellent 72-page report that is well worth a closer look.
 

searcher

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The latest casualty in the global pension catastrophe is…

Simon Black

June 22, 2018
Sovereign Valley Farm, Chile


In the year 6 AD, the Roman emperor Augustus set up a special trust fund known as the aerarium militare, or military treasury, to fund retirement pensions for Rome’s legionnaires.

Now, these military pensions had already existed for several centuries in Rome. But the money to pay them had always been mixed together in the government’s general treasury.

So for hundreds of years, mischievous senators could easily grab money that was earmarked for military pensions and redirect it elsewhere.

Augustus wanted to end this practice by setting up a special fund specifically for military pensions.

And to make sure there would be no meddling from any government officials, Augustus established a Board of Trustees, consisting of former military commanders, to oversee the fund’s operations.

Augustus really wanted this pension fund to last for the ages. And to keep a steady inflow of revenue, he established a 5% inheritance tax in Rome that would go directly to the aerarium militare.

He even capitalized the fund with 170,000,000 sesterces of his own money, worth about half a billion dollars in today’s money.

But as you can probably already guess, the money didn’t last.

Few subsequent governments and emperors ever bothered themselves with balancing the fund’s long-term fiscal health. And several found creative ways to plunder it for their own purposes.

Within a few centuries, the fund was gone.

This is a common theme throughout history… and still today: pension funds are almost invariably mismanaged to the point of catastrophe.

We’ve written about this topic frequently in the past. It’s one of the biggest financial catastrophes of our time.

Congress has even formed a committee that’s preparing for massive pension failures.

And here’s another, very recent example: the city of Wilkes-Barre, Pennsylvania is deep in the red with its police pension fund.

According to the Pennsylvania state auditor, the pension was 65.7% funded in 2011, i.e. the fund had enough assets to pay about two-thirds of its long-term obligations.

Now, that alone should have been enough to sound the alarm bells.

But by 2013, two years later, the fund’s solvency rate had dropped to 49.7%. And by 2015, it was just 38.5%.

Incredible. 38.5%. At that level, there’s simply no chance the city will ever be able to meet its obligations to retired police officers.

A few years ago, city politicians took notice of this enormous funding gap and tried to take some small steps to patch it up.

Specifically, the city proposed excluding an officer’s overtime in the calculation of his/her pension benefit.

It was a small change and certainly wouldn’t solve the bigger problem. But it would at least buy the fund a few more years of solvency.
So naturally the union sued.

And earlier this month a Pennsylvania court ruled against the city, i.e. Wilkes-Barre must continue calculating pension benefits the old way.
This helps no one; it only accelerates the demise of an already insolvent pension.

Oh, and it’s not just their police pension either. Wilkes-Barre’s pension for firefighters is hardly better off, just 46.1% funded.

Unfortunately, these pension problems aren’t unique to Wilkes-Barre. City and state pension funds across the country… and the world… are in similar, dire straits.

The city of San Diego has a $6.25 billion shortfall on obligations promised to current and retired employees.

The State of New Jersey has $90 billion in unfunded pension liabilities.

And of course, Social Security has unfunded liabilities totaling tens of trillions of dollars.

The situation isn’t any different in Europe.

Spain’s Social Security Reserve Fund has been heavily invested in Spanish government bonds for several years– bonds that had an average yield of NEGATIVE 0.19%.

You read that correctly.

Unsurprisingly, Spain’s pension fund is almost fully depleted.

The United Kingdom has trillions of pounds worth of unfunded public pensions.

Even conservative Switzerland has a public pension that’s only 69% funded – a seemingly fantastic number by today’s dismal standards.

Last year, the Swiss government proposed a plan to save its pensions, asking to increase the retirement age for women by one year (from 64 to 65, the same as men), and increase VAT by 0.3%.

But the plan was rejected by Swiss voters in a national referendum– the third time in 20 years that pension reform failed to pass.

And that’s really the key issue here: pension plans are almost universally toast.

Most of the time, politicians just ignore the problem and try to kick the can down the road to the next administration.

But occasionally they try to do something to help.

Yet whenever they do… voters reject the plan. Or the union sues. Or something else happens that prevents much-needed reforms from passing.

This merely accelerates the inevitable: these pensions are going bust.

I’m not trying to be sensational– these are mathematical realities echoed by the officials who oversee these funds.

For Wilkes-Barre’s police pension, it’s the Pennsylvania State Auditor who says the program is only 38.5% funded.

With Social Security, it’s the United States Secretary of the Treasury who says the program’s trust funds will soon be depleted.

Social Security even provides a date, like the expiration on a carton of milk, after which Social Security will go bad.

These warnings are all publicly available information, not some wild conspiracy theory. And that’s really what they are: warnings.

At this point, continuing to believe that these pensions will be solvent forever is completely ludicrous.

The only rational option is to take matters into your own hands. For example:

– Start saving more. You’d be shocked at what an enormous difference it can make to save an extra $1,000 per year when compounded over several decades.

– Learn to be a better investor. Averaging an additional 1% annual return for your retirement savings can add up to hundreds of thousands of dollars over the course of 20-30 years.

Consider a more robust retirement structure like a Solo 401(k) or self-directed SEP IRA that allows you a greater breadth of investment options– everything from real estate to crypto to private equity.

– And it may even be possible to stash $50,000+ per year in self-employment “side” income, (selling products on Amazon, driving for Uber, etc.) into that retirement account.

The signs are clear… anyone depending on social security or a pension for their retirement is in trouble. It’s time to take this issue into your own hands.

https://www.sovereignman.com/trends/the-latest-casualty-in-the-global-pension-catastrophe-is-23795/
 

Uglytruth

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I can only think of the lost opportunities and possibilities of enslaved "free people".
It sickens me to think of the waste & gaff.
 

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Unfunded Promises


-- Published: Sunday, 1 July 2018
By John Mauldin

Assumptions Everywhere
Negative Cash Flow
The Threats Go On
The Venus Flytrap: Entitlements
LA, Maine, Beaver Creek and Boston

In describing the global debt train wreck these last few weeks, I’ve discovered a common problem. Many of us define “debt” way too narrowly.
A debt occurs when you receive something now in exchange for a promise to give something back later. It doesn’t have to be cash. If you borrow your neighbor’s lawn mower and promise to return it next Tuesday, that’s a kind of debt. You receive something (use of the lawn mower) and agree to repayment terms – in this case, your promise to return it on time and in working order.

One reason you try to get that lawnmower back on time and in the proper condition is that you might want to borrow it again in the future. In the same way that not paying your bank debt will make it difficult to get a bank loan in the future, not returning that lawnmower may make your neighbor a tad bit reluctant to lend it again.

Debt can be less specific, too. Maybe, while taking your family on a beach vacation, you notice a wedding taking place. Your 12-year-old daughter goes crazy about how romantic it is. In a moment of whimsy, you tell her you will pay for her tropical island beach wedding when she finds the right guy. That “debt,” made as a loving father to delight your daughter, gets seared into her brain. A decade later, she does find Mr. Right, and reminds you of your offer. Is it a legally enforceable debt? Probably not, but it’s at least a (now) moral obligation. You’ll either pay up or face unpleasant consequences. What is that, if not a debt?

These are small examples of “unfunded liabilities.” They’re non-specific and the other party may never demand payment… but they might. And if you haven’t prepared for that possibility, you may be in the same kind of trouble the US government will face in a few years.

Uncle Sam has made too many promises to too many people, with little regard for its future ability to fulfill them. These are debt. Worse, some of them are additional debt on top of the obligations we already see on the national balance sheet.

Even worse, entire generations have planned their retirement lives around the government fulfilling those promises. If those promises aren’t met, their lifestyles will indeed become a potential train wreck.

That will be our topic today as we continue my Train Wreck series. This will be chapter 8. If you’re just joining us, here are links to prior installments.


In the coming weeks we’ll summarize the train wreck series and then shift the discussion to how you can prepare. But first, I want to leave no doubt about how big this problem is.

Assumptions Everywhere
Let’s start with what we know. The official, on-the-books federal debt is currently about $21.2 trillion, according to the US National Debt Clock. I say “about” cautiously because decimal points really matter when the numbers are this large. The difference between $21.1T and $21.2T is $100 billion. That used to be a lot. Now it’s a rounding error.

Anyway, $21.2T is the face amount of all outstanding Treasury paper, including so-called “internal” debt. This is about 105% of GDP and it’s only the federal government. If you add in state and local debt, that adds another $3.1 trillion to bring total government debt in the US to $24.3 trillion or more than 120% of GDP. Then there’s corporate debt, home mortgages, credit cards, student loans, and more. Add it all together and total debt is about 330% of GDP, according to the IIF data I cited in Debt Clock Ticking. We are in hock up to our ears.

But it’s actually worse than that, due to the kind of promises I mentioned above. Prime among them are Social Security and Medicare. Strictly speaking, these aren’t “unfunded” because they have dedicated revenue streams: payroll taxes. Most Medicare recipients also pay premiums. To date, these revenue sources have covered current expenditures and more, allowing the programs to build up reserves. But that’s about to change.

As of this year, both programs are in negative cash flow, meaning Congress must provide additional cash to pay the promised benefits. It will get worse, too. The so-called “trust funds” are going to run dry sooner or later, and it may be sooner. This month’s annual trustee report estimated Social Security will run out of reserves in 2034, and the hospitalization part of Medicare will go dry in 2026.

Just for the record, those “trust funds” don’t exist except as an accounting fiction. It is like you saving $100,000 for your child’s education and then borrowing all the money from your children’s education fund. You can pretend in your mind that you have set aside $100,000 for your child’s future education, but when it comes time to make those payments, you’ll have to pull it out of current income or liquidate other assets.

The US government has borrowed (or used or whatever euphemism you want to apply) all the money in those trust funds. So, talking about running out of reserves in 2034 or 2026 is rather meaningless. We’ve already run out of reserves. I was talking with Scott Burns about this and other facts over the unfunded liability (he wrote a book on it with Professor Larry Kotlikoff) and he gave me the great line, “The only truly bipartisan cooperation in Congress is that both sides lie.” Any time a politician talks about putting a “lock box” around Social Security or Medicare trust funds, he or she is either staggeringly ignorant or lying.

But, going with their terminology, these estimates of when the trust funds run out depend on a slew of assumptions. To estimate revenue, they must know how many workers the US has, their wages, and at what rates those wages will be taxed. To estimate expenses, they must know how many retirees will be drawing benefits, the amount of those benefits, and how long the retirees will live to receive them. They also have to assume an inflation rate on which the cost-of-living adjustment is based. A small deviation in any of those can have huge long-term consequences.

For what it’s worth, then, Social Security says it has a $13.2 trillion unfunded liability over the next 75 years. That’s the benefits they expect to pay minus the revenue they expect to receive.

Medicare projections require even more assumptions: what kind of treatments the program will cover, how much treatment senior citizens will need, and what those treatments will cost. All these could vary wildly but the “official” assumptions put Medicare’s 75-year unfunded liability at $37 trillion. It could be vastly more or, if we all get healthier and healthcare costs drop, could be less.

This being the government, I think the safe course is to assume their numbers are the best case, resembling reality only if everything goes exactly right. And of course, it won’t.

My friend Professor Larry Kotlikoff estimates the unfunded liabilities to be closer to $210 trillion. (Click on that sentence for a link to his Forbes column.) That’s a far cry from the $50 trillion official estimate.

So, at a minimum, we can probably assume Social Security and Medicare are at least another $50 trillion in debt on top of the $21.2 trillion (and growing) on-budget federal debt. And then you come to the scary part. This doesn’t include civil service or military retirement obligations, or federal backing for some private pensions via the Pension Benefit Guaranty Corporation, or open-ended guarantees like FDIC, Fannie Mae, and on and on.

Negative Cash Flow
Think back to my example of promising your daughter the beach wedding. That is sort of what is happening with Social Security, if you had accompanied the promise by asking your daughter to save a nickel a week toward paying for it. The resulting $28 after ten years would not begin to cover the cost, but your daughter will rightly argue she did her part. You will be on the hook for the rest, just as Congress will be on the hook with angry retirees who think they “paid” for their benefits.

That means benefits will continue once the trust funds run dry. Maybe they’ll make some minor cuts here and there, but voters won’t allow much, at least until enough Boomers leave the scene to let younger generations outnumber them. But as I continue to argue, Boomers are going to live a lot longer than the younger generations think. The deal each generation makes with previous generations is to die on schedule. The Boomer generation is going to break that deal. We will not go willingly into that good night.

But in reality, arguing over whether it’s $50 trillion or $200 trillion is pretty pointless. Long before we get to testing that hypothesis, we will have to cut spending or raise taxes or some combination of both.

This week, the Congressional Budget Office released its 2018 Long-Term Budget Outlook. Like the Social Security and Medicare trustees, the CBO makes assumptions, so it’s fair to be skeptical of its estimates. In fact, we had all better hope they are too pessimistic because we’re in deep trouble otherwise.

Because the CBO thinks federal spending will grow significantly faster than federal revenue, CBO foresees debt as a percentage of GDP will likely be 200% of GDP by 2048. But we will hit the wall long before then. Consider this table from the Committee for a Responsible Federal Budget.
CBO numbers show that by 2041, Social Security, health care, and interest expenditures will consume all federal tax revenue. All of it. Everything else the government does (including defense) will require going into more debt.

Yes, making that projection requires an assumption about tax revenue, which requires another assumption about GDP. It could be wrong. But if so, I think it will be wrong in the non-helpful direction because CBO projections don’t include recessions. (You think we’ll get to 2048 without some years of negative GDP growth? I’ll take that bet.)

Note also that the amounts CBO projects for Social Security and healthcare spending may well be low. I think they are very low. They assume some payment cuts to doctors and hospitals that Congress routinely overrules each year, as well as a different inflation benchmark to govern cost-of-living adjustments. And I have little hope Congress and presidents, now or future, will ever gain control over “discretionary” spending.

Of course, the interest expense depends on interest rates. CBO assumes the 10-year Treasury will go from today’s below-2% yield to 3.7% in 2028 and 4.8% by 2048. That might be too high, too low, or just right. Your guess is as good as mine (or CBO’s).

The CBO also assumes a fairly robust employment picture throughout that time. However, we are entering a period in which automation will replace mass numbers of human jobs. It might also result in new industries and new jobs, but history shows the transition to create new jobs will take time. Bain & Company’s Karen Harris estimates automation could eliminate 40 million US jobs by 2030 and depress wages for the jobs that remain. That will reduce payroll tax revenue and drive safety-net spending higher, neither of which will help reduce the debt.

It’s not just Bain, either. McKinsey, Boston Consulting, and other think tanks all expect similar job losses, which CBO does not consider. Yet, it will mean more people not paying Social Security and taxes, hence large revenue losses and even bigger deficits, and more unemployed people looking for the social safety net to help them.

Note: The bulk of those job losses will come in the latter half of the 2020s as new technologies kick in. And new technologies always bring about new jobs, but unfortunately not in the places where the old jobs were lost nor in the industries for which people are trained. To paraphrase Jerry Lee Lewis, there is going to be a whole lot of retraining going on.

So, take whatever estimates are made about future deficits and debt, and realize they are going to be worse. There will be fewer people working and paying taxes and more people living longer and using benefits. Kiss your assumptions goodbye.

The Threats Go On
So, the on-budget picture looks terrible, and even more so when you add the unfunded liabilities on top of it. What else could go wrong? Plenty. I’ll mention just four more possibilities.

First, at least some of the state and local pension debt I described two weeks ago could easily wind up on the federal government’s plate. Enough states are in a pickle to probably get some kind of bailout through Congress. Maybe not this Congress, but when it’s a Democratic Congress? It may be a whole other ballgame. This would add trillions to federal spending.

Second, CBO and pretty much everyone else assumes the world will avoid major wars. Aside from the death, destruction, and resource diversion, wars are expensive. Our relatively minor (in the historical scheme of things) Iraq and Afghanistan involvements added trillions in debt. Will we get through the next two decades without more such actions, whether large or small? I fervently hope so, obviously, but I would not bet on it.

Third, the life extension technologies I think are coming soon will raise Social Security spending because people will live longer. They may also raise payroll tax revenue if people keep working longer, but it’s not clear which way the scale will tip. It will likely be a net drain on the budget, at least initially. And by the mid-2030s when true rejuvenation is widely available, kiss your actuarial assumptions goodbye.

Fourth, all this presumes that those with capital to lend will stay interested in lending it to the US government. They may not, as the government’s financial condition becomes increasingly precarious. Yes, we’ve heard this before and it proved groundless. Things change. The fact that people cried wolf doesn’t mean no wolves are out there.

The Venus Flytrap of Western Civilization: Entitlements
My friend Dr. Woody Brock, one of the best economists and social commentators that I know, wrote a marvelous essay this last week about part of the entitlement issues. I’m going to close with a few lines from his letter. You can see some of his other work at www.SEDinc.com. His more exclusive quarterly Profiles are a treasure trove of economic insight. (Occasionally he lets me share them in Over My Shoulder, by the way.) Now to the beginning of his latest Profile:

The death of the extended family throughout the G-7 nations during 1850-1950 will go down as one of the most momentous developments of past centuries. For it is this development that gave rise to the modern welfare state with its crippling retirement and medical promises made to all citizens. How did today’s entitlements crisis begin, why does it get ever larger, and what can be done about it?

President Trump’s tax reform bill has rightly been criticized for inflating the US fiscal deficit. To many, this was unconscionable at a point when US federal debt is already 100% of GDP. Yet like everyone else, these critics have been mum on the far greater growth of debt that will accrue from ever-exploding entitlements expenditures. This latter prospect was identified a decade ago by the bi-partisan Simpson-Bowles committee as by far the gravest threat to the future of the US.

CBO projections show that within 18 years, entitlements spending will absorb all US federal tax revenues—leaving no revenues even for interest expense on the debt and for the military. In Germany, which proudly pays annually for its expenditures without incurring debt, Deutche Bank has estimated that by 2045, income tax rates of 80% (total, not marginal rates) would be needed for its PAYGO system. The entire workforce of the nation would be in bondage to the elderly. Other nations face even worse prospects.

Those spending projections and massive deficits are going to happen in the 2020s. Here is a graph that we used last year showing what is likely to happen during the next recession (which I now think we will likely avoid this year, but it is coming), if tax revenue falls to the same degree it did in the last one.
We will have at least a $2 trillion deficit in the next recession, plus a bear market that leaves pensions even more underfunded, and a slower recovery because high debt crowds out future growth. Numerous academic studies back up that statement.

I think a future Democratic Congress and president, or maybe a split Congress that is desperate for funding, will enact a Value-Added Tax (VAT) in response to this. At least that is what I hope. Woody is a little more pessimistic than I am and thinks, quoting at the end of his analysis, that politics and not demographics is the problem:

Furthermore, why need benefits be trimmed much less slashed when the staggering new wealth of the top 10% can be taxed to pay for all promised benefits? Today’s obsession with the growth of inequality will significantly impact how the US will resolve the entitlements issue. The nation will not cut benefits because doing so will prove politically impossible, as President Clinton has long stressed.

Rather, the nation will fund its promised Social Security and Medicare benefits via the only kind of tax that can raise the staggering sums needed to fund them: a net-worth tax on, say, the top 15% of the population. Raising income tax rates on the rich will not raise anywhere near the amount needed for the next 40 years. Only a net-worth tax can do so.

Here are the relevant mathematics. As already stated, the net worth of US households has now reached $100 trillion. The top 15% wealthiest families own 90% of this wealth, or about $90 trillion. When push comes to shove, resistance by the rich against a wealth tax will be swamped by the political reality that a good 60% of Americans will be obsessed with funding their old age. Thus, rich as they are, the very wealthy will have little political leverage with which to fend off an annual net-worth tax.

The political logic will be: “Look, you rich people have had a return on your wealth of over 6% during the past hundred years. Why should this change very much? But if this is so, then it is time for you to pay your fair share, that is, to part with 2.5% of your total net worth annually. Your wealth will still continue to grow. With increased annual tax revenue of some $2.5 trillion, it will be possible for Americans to receive their promised benefits.”

We would expect the same logic to translate into additional net-worth taxes at the state and municipal level.

The fallout from such a policy will of course be disastrous.

Oh, dear gods, I hope he is wrong. It would be beyond disastrous.

Next week, I will try to close this series by summing up all the debt we have to deal with globally, recognizing that we are all in it together. And we will begin looking at strategies we can take to protect ourselves. The good news is none of this is going to happen within the next few years, so we have time to make plans. I’m in the same situation as you and already implementing some changes.

LA, Maine, Beaver Creek and Boston
I am flying to Los Angeles in mid- July to talk about the future of social organization with Bob Lefsetz, whom I have long wanted to meet. Then I have the annual Camp Kotok economics/fishing trip to Maine, then a board meeting with Ashford Inc. at the Beaver Creek Park Hyatt, where Shane and I will take an extended vacation, and then a trip to Boston to visit with friends in the area, among them the above-quoted Woody Brock at his family’s Gloucester compound.

My twins and their husbands are coming down this weekend to be with dad on their birthday, and they are getting the entire family together for sushi one night. I’m really looking forward to that.

This week I had a meeting with someone quite inspirational to me and was going to tell you about it here. However, I want to tell the story carefully and we couldn’t get it edited by our deadline. I’ll work on it and share next time.

Meanwhile, I hope your summer is going well (or winter if you’re Down Under). Happy Fourth of July to all my US friends. Amid the celebration, take a moment to cherish the freedoms we have and remember that not everyone has them.

Your working on our plans for prospering during The Great Reset analyst,


John Mauldin
Chairman, Mauldin Economics

http://news.goldseek.com/GoldSeek/1530455740.php
 

TAEZZAR

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Unca Walt

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The nuclear family is a problem. The responsibility is somehow shifted to an undefined "gummint" person-thing-program.

Us Sneakydickers are throwbacks, no error.

I supplied a house and everything else for my parents for the last 25 years of their lives. There are numerous hidden benefits to this; my children had grandma and grampa always there. My house was on a sharp hill, so there were two "ground floor" entrances... even though my wife, me, and the boys lived "upstairs" (that required no stair-climbing), and my parents had a full bedroom, kitchen, bath, fireplace, windows, living room "downstairs" with private French-door entrance.

This is not being done anymore. It is a loss. Like TAEZZAR, we saved for our retirement. Few Americans will ever know the comfort of being debt-free.

AHA. Herself peeked over my shoulder and said, 'Tell them how we beat the banks.'

This was stone fargin luck, no error, but this is what happened: Because I beat Wall Street with a one-time miracle shot (bought at $1, sold at $51), we were temporarily sorta rich. We had our house custom-built, and since I had a shitload of money in the bank, they upped my credit card limit to a huge level.

At my request, I had that level raised even further.

And I CHARGED the cost of the house, property, and all new furniture onto that credit card. At that time (18 years ago), the banks had rewards that were significant for using their card. Especially when you put acreage, a Cadillac, new house*** and furniture on it all at once.

So we got to fly First Class to Germany, and I climbed all through Colditz Castle (a super-special POW camp in WWII), and we rented a Mercedes to drive the length of the Fairytale road. Rapunzel's Castle, etc. Glorious trip.

And I paid off the credit card before one cent of interest accrued. ***That includes the mortgage.

Stuck it to the banksters. :2 thumbs up:
 

TAEZZAR

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I supplied a house and everything else for my parents for the last 25 years of their lives. There are numerous hidden benefits to this; my children had grandma and grampa always there. My house was on a sharp hill, so there were two "ground floor" entrances... even though my wife, me, and the boys lived "upstairs" (that required no stair-climbing), and my parents had a full bedroom, kitchen, bath, fireplace, windows, living room "downstairs" with private French-door entrance.
Unc, that is great, even better than what I did & I thought I did well for Mom.
After Dad died, the vultures moved in on Mom to take what they could. They had her on 8 high BP pills a day !!! Can you even comprehend that ?
I took her out of southern commiefornia & brought her here to Orygun in 2004 & built her a little home of her own. Now that she passed, The vultures have returned to sue me for taking care of Mom & extending her life. I also got her down to 1 BP pill/day !!
 

Unca Walt

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But you won't loan me money!
You didn't pay me back from the last loan of $5. I put it in your mailbox. And I sent the money, too.

So... per our agreement, you have to live with Maxine for a full month.

Vigorish in the Sneakydicker Fambly can be cruel...
 

Joe King

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As of this year, both programs are in negative cash flow, meaning Congress must provide additional cash to pay the promised benefits. It will get worse, too. The so-called “trust funds” are going to run dry sooner or later, and it may be sooner.
It will be sooner.


This month’s annual trustee report estimated Social Security will run out of reserves in 2034, and the hospitalization part of Medicare will go dry in 2026.
It's already out of reserves. Unless one considers a government "IOU" as being a monetary reserve.

Fact is, gov will need to come up with at least an extra $3.7trillion over the next decade in order to have anything in the trust fund to be used to pay the promised benefits. Edited to add: yes, they need to tax it from you again in order to pay you back from when they borrowed it the first time.
...and on top of that, if interest rates rise to an historic norm over that same period, I fail to see how the gov will even begin to make ends meet.
 

Unca Walt

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Shit.

Shit shit shit.

I get a gummint stipend for being slow to duck. Nearly $2K per year. What'll I dooo???
 

DodgebyDave

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You didn't pay me back from the last loan of $5. I put it in your mailbox. And I sent the money, too.

So... per our agreement, you have to live with Maxine for a full month.

Vigorish in the Sneakydicker Fambly can be cruel...
You know, it will be 1000 years before another girl will be named "maxine". That's a good thing, too
 

Unca Walt

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Jeez. You again?

Awright. But this time, don't blow it all on food. Get some booze.


 

DodgebyDave

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Smooth! Get The Van!
 

searcher

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Sears bankruptcy and their retirees' pension plan - Enquête
CBC News



Published on Jun 26, 2018
Sears retirees may soon lose a big part of their pensions. That's because company executives invested only minimal amounts in their employees' pension funds over much of the last decade. But those executives followed the rules, and even acted with government support, at the same time that they distributed billions of dollars to their company’s shareholders. The story of the Sears bankruptcy sheds light on the murky world of corporations and their pension funds revealing how pools of money that are thought to be fully protected, can quickly evaporate with workers potentially losing hundreds of millions of dollars.

Enquête is Radio-Canada's flagship weekly current affairs program. The show uncovers corruption, crime, and abuse of power in Quebec and Canada
 

Son of Gloin

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It's become obvious to everybody with even half a brain, who pays attention, that any kind of "pension" held by a company, the government or a third party, like a union pension fund will be pilfered eventually. They're all a scam, invented to lure in good, hard working people and when the time comes, they're stolen right out from under the workers when they need them the most. Trust no one!
 

Goldhedge

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Pension scams are nothing new.

I remember 40 years ago pensions going belly up.

I forget who, iron workers... auto industry...?

We only think it's new in 'this' generation....
 

Fatrat

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One of the most shocking incidents of workers losing their retirement benefits occurred in 1963 when Studebaker terminated its employee pension plan, and more than 4,000 auto workers at its automobile plant in South Bend, Indiana, lost some or all of their promised pension plan benefits.-https://papers.ssrn.com/sol3/papers.cfm?abstract_id=290812 Worker been getting screwed long time...
 

Son of Gloin

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Pension scams are nothing new.

I remember 40 years ago pensions going belly up.

I forget who, iron workers... auto industry...?

We only think it's new in 'this' generation....
Steel workers. Many steel producers went belly up during the seventies and eighties, but before they went under, they made sure to plunder the employee pension funds to "keep the company going," or so they claimed. All the while they were doing that, they continually demanded more and more concessions from the workers, to "keep the company going," or so they said. Eventually, they sold the dregs of the mills off to profiteers, who then took more concessions from the steel workers, to "keep the company going," or so they said. They eventually liquidated all the assets and left the workers with squat.

Trust no one!
 

Thecrensh

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Steel workers. Many steel producers went belly up during the seventies and eighties, but before they went under, they made sure to plunder the employee pension funds to "keep the company going," or so they claimed. All the while they were doing that, they continually demanded more and more concessions from the workers, to "keep the company going," or so they said. Eventually, they sold the dregs of the mills off to profiteers, who then took more concessions from the steel workers, to "keep the company going," or so they said. They eventually liquidated all the assets and left the workers with squat.

Trust no one!
Pension plans, wage controls, union dues, taxes, government fees, tariffs, etc. are merely transference of wealth from the sheep to the people in power.
 

Uglytruth

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Blatant outright theft. Somewhere, someone, with nothing else to loose will eliminate whey they see as the problem.

Look st that South Bend thing and the devastation to that entire area. It even affected those that didn't work there.
 

Son of Gloin

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Blatant outright theft. Somewhere, someone, with nothing else to loose will eliminate whey they see as the problem.

Look st that South Bend thing and the devastation to that entire area. It even affected those that didn't work there.
South Bend thing? I missed that.
 

Uglytruth

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Somewhere above it talked about a car company in South Bend that went BK & devastated the region with unpaid pensions.
 

edsl48

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The Truth About Illinois Pensions In One Stunning Chart

Authored by Ted Dabrowski and John Klingner via WirePoints.com,
One graphic perfectly captures the absurdity of Illinois pensions over the past three decades.
It’s what Justice Samuel Alito described as Illinois’ “generous public-employee retirement packages” when writing for the majority in the Janus v. AFSCME decision. Alito didn’t use this graphic but he could have, because it makes his point.
In 1987, pension promises made to active workers and retirees in the state’s five state-run pension plans totaled just $18 billion. By 2016, they had ballooned to $208 billion.
That’s a cumulative 1,067 percent increase.
Contrast that to the state’s budget (general fund revenues) which was up just 236 percent over the same time period. Or household incomes, which were up just 127 percent. Or inflation, up just 111 percent.
Promised pension benefits have blown past any ability of the state, the economy or taxpayers to pay for them.

Wirepoints released a report on these booming benefits earlier this year, and while it received strong coverage online nationally, Illinois’ traditional media didn’t want to touch it. The findings interfere with the narrative that’s repeatedly promoted by public sector unions and politicians – that the crisis is all the taxpayers’ fault for failing to put in enough money towards pensions.
The report proved a lack of dollars wasn’t the issue. Illinois pension assets – buoyed by taxpayer contributions – also grew far faster than the same economic indicators in the graphic above. But taxpayer contributions could never keep up with the state’s explosive growth in promised benefits.
Overpromising is the real culprit of the pension crisis. Freezing and reversing that growth in promised benefits is the fair, and only, way to fix things.
The above graphic gives taxpayers every right to demand concessions from their public servants. The Janus ruling will hopefully give them more power to demand them.
And union members have a strong incentive to come to the bargaining table. After all, it’s their retirements that are teetering on the edge of insolvency in a state just one notch from junk status.
But If the unions won’t deal, Illinois should go ahead and freeze salaries, cut the subjects of collective bargaining, move to defined contribution plans, reduce headcounts and work with the feds on a form of state bankruptcy. With the constitution currently preventing any changes to pension benefits, those are the only levers taxpayers have to save this state from collapse.
Read the report: Illinois state pensions: Overpromised, not underfunded
 

gringott

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Here in Kentucky, the son of the former governor, Andy Beshear, is the attorney general, he is a D. He has been fighting the governor tooth and nail on almost every issue, lawsuits about any attempt to reform anything. He stopped the pension reform plan just passed using lawsuits. Now he announces he is running for governor [SHOCKING!] and his running mate is a female school teacher [DOUBLE SHOCK!].

Here is his running mate;
Coleman, of Harrodsburg, has previously run for office and is the daughter of a politician. She ran unsuccessfully in 2014 to represent Kentucky's 55th House District, the same district her father, Jack Coleman, represented from 1991 to 2004. The district represents Mercer, Washington and parts of Jessamine County.

His main goal - fix the pension problem [may be 2nd worst in the Nation]. How?

A dedicated stream of revenue to save the pension system.

What would that be?

When asked how he would deal with the ailing pension systems, which have an unfunded liability of more than $40 billion, Beshear said he would fully fund them by pushing for tax reform and legalization of gambling in Kentucky, a political goal his father was never able to accomplish.

His father pushed this for his entire time in office. He was in the pay and service of gambling interests, and his son it seems is exactly the same. As for "tax reform" wtf is that? More taxes on top of what we have now? They just got raised and a bunch of new taxes like over 6% on LABOR, such as car repair or your lawn mower man if you use one. What would reform be? Make it 10%?

These teachers in the education racket can't seem to get enough of our money. I thought the State-run lottery was the solution to Public education money problems. Never hear about that anymore, it was a long time ago, I guess they figure we the people forgot about that "fix" that fixed exactly nothing.

Part of Beshear's campaign funding for his election to AG came from illegal "straw man" contributions funded by a kickback scheme by a member of his father's cabinet and the son's deputy upon taking office, he is currently serving 70 months in Federal Prison. Beshear has promised to donate the contributions to a charity of his choice once the "audit" of the 2015 campaign is over.

This is like if I take drug dealer money to run for office, then later say oh I didn't know, I will donate the money I got years later to a buddy's non for profit. Maybe. LOL.

My opinion? He should be kicked out of office and a special election run. He barely beat the R guy even with the criminal money.

Read more here: https://www.kentucky.com/news/politics-government/article214551645.html#storylink=cpy


Look out taxpayers, you are about to become serfs to your overlords in the Government School System. Over half of my property taxes go to the local school system, and everything I pay a bill on such as insurance, power, telephone, etc has a school tax on it. Never mind the percentage of my Federal and State taxes that go to "education". Maybe I am just moving from serf to slave.
 
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edsl48

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Here in Kentucky, the son of the former governor, Brashear, is the attorney general, he is a D. He has been fighting the governor tooth and nail on almost every issue, lawsuits about any attempt to reform anything. He stopped the pension reform plan just passed using lawsuits. Now he announces he is running for governor [SHOCKING!] and his running mate is a female school teacher [DOUBLE SHOCK!].

His main goal - fix the pension problem [may be 2nd worst in the Nation]. How?

A dedicated stream of revenue to save the pension system.

Look out taxpayers, you are about to become serfs to your overlords in the Government School System. Over half of my property taxes go to the local school system, and everything I pay a bill on such as insurance, power, telephone, etc has a school tax on it. Never mind the percentage of my Federal and State taxes that go to "education". Maybe I am just moving from serf to slave.
4

...but "it's for the children,"
 

gringott

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Yes, for the children, and the current Governor spoke harshly about the teachers who did a sick in across the state without warning, causing parents to scramble that morning when they woke up to find someone to watch their children.
The holier than Jesus teachers can do no wrong and are perfect, therefore, the current governor must go so we have a leftist teacher dominated government that serves only them.
 

TLM

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I'm receiving a pension from a major international Chemical company.
They have a plan called the rule of 85. When your age and yrs. of service adds up to 85 you can receive your Pension.
Once I reach the age to collect social security the pension is offset by the amount of SS I collect, and my total income stays the same.
If inflation stays under control, I should be ok.
 
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