Economics and Bosses
Peter Dorman at Econospeak, who is smarter and nicer than I am,* boils down the question:
[D]o you believe that managers normally make the right decisions over how to run organizations?
If you believe that premise, please explain:
- Why all those great managers of the late 1940s through the mid-1970s ran defined benefit contribution plans, but their successors—who supposedly are more capable—are only capable of offering defined contribution?
- That “underfunded pension benefits” are evil, but “overunded” pensions led to the LBO (now “Private Equity”) movement of the 1980s.
- That, in the 1980s, GM being $1B underfunded caused Congress to pass a bill allowing pensions to become fully funded over 20 years—and that most of those targets were missed?
If bosses are so good at managing “ongoing concerns,” why do they take their payments upfront? What does—and should—this tell us about discount rates?
*This is a fairly low standard, outside of people who work in finance.
This article explains for many of us on the right what is going on in the union/Wisconsin fight. “Public Unions & the Socialist Utopia”
From here: http://www.realclearpolitics.com/articles/2011/02/27/public_unions__the_socialist_utopia_109046.html
It explains the near existential fervor of the left’s fight. The article makes these points:
“Unionized public-sector employment is the distilled essence of the left’s moral ideal. No one has to worry about making a profit. Generous health-care and retirement benefits are provided to everyone by the government. Comfortable pay is mandated by legislative fiat. The work rules are militantly egalitarian: pay, promotion, and job security are almost totally independent of actual job performance.
…
But I think this misses the point. The point is that this is how the left thinks everyone should live and work. It is their version of a model society.
Every political movement needs models. It needs a real-world example to demonstrate how its ideal works and that it works.
And there’s the rub. The left is running low on utopias.
The failure of Communism-and the spectacular success of capitalism, particularly in bringing wealth to what used to be called the “Third World”-deprived the left of one utopia. So they fell back on the European welfare state, smugly assuring Americans that we would be so much better off if we were more like our cousins across the Atlantic. But the Great Recession has triggered a sovereign debt crisis across Europe. It turned out that the continent’s welfare states were borrowing money to paper over the fact that they have committed themselves to benefits more generous than they can ever hope to pay for.”
There is more meat in the article, and it is one explanation for the virulence (extreme bitterness or malignity of temper : rancor) of the commentary and vituperation (verbal abuse or castigation; violent denunciation) shown here at AB.
The wheels are coming off the Progressive ideals, here as they have in Europe. Running out of other peoples’ money can be painful when your ideal is based upon spending it.
Ah well Corev…this explanation leaves a lot unsaid and unexplained that is rather important, and doesn’t even try to answer the question in the post, which is the usual function of a post and comment.
And then the authors make things up.
Dan, that’s an argument by assertions, and incomplete assertion at that. Please add some details to your claims.
My contention is that this article explains much of what’s going on for those on the right. Your’s is …?????
A public union employee, a tea party activist, and a CEO are sitting at a table with a plate of a dozen cookies in the middle of it. The CEO takes 11 of the cookies, turns to the tea partier and says, ‘Watch out for that union guy. He wants a piece of your cookie.
Still incoherent I see. Not even bothering to understand the main post much less address it.
I realize this fairy tale about progressive utopias is relevant to the topic of managerial incompetence in your head. But that is sort of the problem Co Rev.
Have you asked your doctor about a daily fiber supplement? I only ask because i care.
murosgroup, Well put.
Understanding the space limits in a blog post, this is rather like the “business people are evil” kind of writing my left wing professors loved to read.
Also, public employee unions are totally different creatures from private sector unions, so any useful discussion must separate the two.
Anyway, it appears the comments by Ken are directed primarily at large public companies, although that is not clear. I certainly have criticised much about the American public stock sector especially at the larger end. They are easy targets.
Economists are, however, much like sports writers. Sportwriters sit in a warm press box eating free food watching other people bust their guts, and then criticise the results.
The intentions of the messenger are always important when evaluating the message. The who, what and where of the source of an analysis is important in helping to understand the intention of that analysis. From the sites “About Us” page we learn,
“RealClearPolitics (RCP) is an independent, non-partisan media company that is the trusted source for the best news, analysis and commentary. Founded in 2000 by John McIntyre and Tom Bevan, Chicago-based RealClearPolitics covers all aspects of the U.S. political process including policy, elections and government.”
On the other hand, from Wikipedia we learn, “The site was founded in 2000 by former options trader John McIntyre and former advertising agency account executive Tom Bevan. Forbes Media LLC bought a 51% equity interest in the site in 20o7″
That certainly sounds like an organization with close ideological ties to business and the corporate world. It is interesting to note the inocuous description that the site, RCP, owners give in their description. “Oh, we are so non-partisan that we’d rather not share that we are closely tied to Forbes Media, which might imply that we are not exactly non-partisan.”
One more point, the feds’ ham fisted efforts to regulate the large defined benefit plans forced most smaller businesses to shut down their DB plans because the regulatory burden was crazy bad. See IRS Form 5500.
The other side of the coin is that from the center to the left people seem to think that fair pay and open negotiations is the better way to proceed. The article you cite is so extremely right-wing that the site owners’ denial of the ideological intention of the site and the articles appearing there provides sufficient face validity to reject the idea that the article is fair and balanced, though it may b e so in the FauxNews tradition of “fair and balanced.” In other words CoRev, a fair minded person would reject the content of the article that you cite as being ideologically biased. A crock of shit as it were.
“Also, public employee unions are totally different creatures from private sector unions, so any useful discussion must separate the two.” str
That statement alone would require a dissertation worth of validation and explanation before being accepted on its face. Unions represent the interests of their members who are generally a defined class of workers both within and across businesses and business sectors. The issue for a right of center interpretation of any such difference wetween public and private industry unions would have to take into account the rights insistence that public services should be run like private businesses. Free men are free to organize for any legal purpose. Or does one give up their right to free association when deciding to dedicate one’s life to public service? Oh my, that simply slipped out. We used to think of such work as public service. You know, firemen, policemen and teachers, etc. all working for the good of their communities. Now the elected leaders of some of those communities want to say thanks for your efforts, Go F— Yourselfves!!!!! As murosgroup points out so cleverly, the bosses are still trying to eat everyone’s lunch. Breakfast and dinner weren’t enough.
“Also, public employee unions are totally different creatures from private sector unions, so any useful discussion must separate the two.” str
That statement alone would require a dissertation worth of validation and explanation before being accepted on its face. Unions represent the interests of their members who are generally a defined class of workers both within and across businesses and business sectors. The issue for a right of center interpretation of any such difference between public and private industry unions would have to take into account the right’s insistence that public services should be run like private businesses. Free men are free to organize for any legal purpose. Or does one give up their right to free association when deciding to dedicate one’s life to public service? Oh my, that simply slipped out. We used to think of such work as public service. You know, firemen, policemen and teachers, etc. all working for the good of their communities. Now the elected leaders of some of those communities want to say thanks for your efforts, Go F— Yourselves!!!!! As murosgroup points out so cleverly, the bosses are still trying to eat everyone’s lunch. Breakfast and dinner weren’t enough.
Ken – I’ll take a shot at Mr. Dorman’s observations.
1) The business and regulatory climate of the 1940-70 are far different from the current one. On a meta level the US and world economies between 1945-1973 are not really comparable with say 1980-present. 401Ks did not exist until the ’80s (I think). Not with standing all that, the difference between the two are pretty obvious for the company = Defined benefit lays a burden on the company in the future. This requires the company to have funds laying around, plus all the regulatory oversight and management of these funds. And you actually have to fund them reguardless of how the markets are going. All of this translates into cost and risk. Defined contribution eliminates future risk and cost. You pay more up front, but then your done. All the risk is pushed onto the employees and you’ve eliminated future costs – plus get rid of the regulatory burden (which may make it cheaper also). Also the big pension funds laying around lead to his second point.
2) Underfunded pensions are evil idea is based on the fact that the company may not be able to actually meet its contractual obligations, especially in default. Thus the pension benefits fall onto the US government – usually at a lower payout to workers that they expected. That’s why its evil – the US Gov takes on a lot of risk (suppossidly covered by Pension Insurance but in the breach its not) and ends up paying. Workers usually get the shaft in this case. I know when one of the airlines went under pension benefits for some were cut by over 70% from what was promised.
As for over-funded. An over-funded defined benefit plan literally pays people to take over the company. The raiders can at the very least harvest all the excess funds, and in some cases close the company, sell all the assets, harvest the entire pension fund, dump the pensions on the US Gov (take the fine if any) and make BIG bucks. The original Wall Street movie was premised on just this type of action. You once again avoid this with defined contribution plans since there is no big pot of money laying around. A takeover of my company cannot grab my 401K – Its mine not my company’s. Which also gives me flexibility to move – I don’t give a crap about vesting, I take my earned retirement with me if I move. This gives workers lots of flexibility which I consider a big plus.
3) I’m not familier with this action but it sounds like GM was trying to find a way to keep from placing that $1B into its pension funds. Looks like congress let GM off the hook for political reasons – just like they kept them afloat with the bailouts recently.
The bottom line is that CEO/CFOs are reacting rationally to the environment. Just like they did after WW II when the US had the bulk of global production capacity. To answer his larger question – I would answer YES, managers usually make the right decisions on running their organization. Otherwise they tend to go out of business.
Unlike our political class who may lose their individual jobs, but the organization will continue on reguardless.
Islam will change
Nicely done, Buff!
Jack,
If you read the article you can tell it is ideological. You don’t have to do a bunch of sleuthing and research to come up with an expose’.
Sammy
CoRev likes me to back up what I have to say with references. I try to be factual and to point out inconsistencies. CoRev is certainy entitled to cite what ever sources he prefers. I think that the cite owners at Real Clear Politics are less than real clear about the ideological slant of their web site. I thought it worth while to point that out.
Jack,
You don’t appear to understand how the Real Clear Politics (RCP) website is structured. The article that CoRev cited was one of 17 articles pulled from various sources and posted to the Real Clear Politics Sunday Morning Update. Then they posted more articles in the Afternoon Update. And so on. All of the articles are identified by author and publishing source. This article was not written by a RCP staffer.
In addition, RCP provides sections for political news and analysis, transcripts and speeches, and best of the blogs. Then they roll up the page with highlights from their other areas of coverage which have separate main pages: markets, world, religion, science, and sports.
Take a look:
http://www.realclearpolitics.com/
Jeffrey Immelt, Gereld McEntee and a regular taxpayer are sitting around a table with a plate of a dozen cookies in the middle of it. The CEO/Obama Administration member takes 11 cookies and turns to McEntee and says, “Watch out for that taxpayer. He wants at least one of his cookies back.”
Is anybody here an ERISA lawyer?
Jack,
Real Clear Politics listed Erza Klein’s Newsweek article, Union Are Worth Fighting For, this morning. http://www.realclearpolitics.com/
Do you want them to pull it off of their website?
Oh, there’s that communism scare rhetoric again. Oh No! It’s Red China coming to get you! AHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!
Ken – 1. Why all those great managers of the late 1940s through the mid-1970s ran defined benefit contribution plans, but their successors—who supposedly are more capable—are only capable of offering defined contribution?
Ken probably knows the answers better than most.
Rust and Buff have covered the basics very well. I’ll add:
Everything began to change after the 1963 termination of Studebaker’s defined benefit plan. By 1974, the handwriting was on the wall from the ERISA regulatory perspective. The defined benefit plans were headed out the door in private industry and the transition to defined contribution offered a few advantages for employee mobility, a consideration not lost on workers as the industrial base began to collapse. The transition from DB to DC was not limited solely to U.S.-based employment, rather it was an international shift thereby affecting global competitive positions.
A BIS report states:
Factors Contributing to the Shift to DC Plans in Private Sector Pensions
A. Regulatory and tax changes
B. Increasing Costs of DB Pension Plans
C. Changes in the Industry Composition of Employment
D. Increase in Labour Mobility
E. Introduction of 401 (k) plans
F. Increasing Familiarity with the Stock Market
G. Actual or Proposed Changes to Pension Accounting
http://www.bis.org/publ/wgpapers/cgfs27broadbent3.pdf
A U.S. DOL working group in 1997 cited these factors:
There appear to be a number of reasons for the movement away from defined benefit plans, but little consensus on the relative weight of each cause. Among the reasons cited by witnesses were:
a change in employer attitudes toward employees;
a shift in jobs from the manufacturing sector, where defined benefit plans are common, to the service sector, where defined benefit plans are uncommon;
a higher level of job mobility which encourages defined contribution plans with their perceived portability and discourages traditional defined benefit plans which reward long service employees;
the simplicity and transparency of a defined contribution plan where benefits are expressed in lump sum balances vs. the perceived complexity of defined benefit plans where accrued benefits are more difficult to understand and appreciate, particularly by younger workers;
the attractiveness to employees of keeping investment gains in a rising stock market vs. the perceived value of a guaranteed monthly income at retirement;
the option for an active employee to withdraw or borrow funds prior to retirement, which is permitted in a defined contribution plan, but is not in a defined benefit plan<21>;
the more predictable annual employer costs in a defined contribution plan;
the obligation to pay PBGC insurance premiums for defined benefit plan but not for defined contribution plans;
the opportunity for employees to make contributions to defined contribution plans before taxes (i.e., 401(k) plans), but not to defined benefit plans;
the higher costs of administering a defined benefit plan which, in recent years, has increased dramatically due to additional regulation;
a desire by employers to provide a retirement plan at a reduced overall cost, which tends to favor a defined contribution plan which, not only have greater cost certainty, but also do not have open-ended long term liabilities; and
a lack of understanding by employees of the relative advantages and disadvantages of different types of plans and plan features.
Ken – 1. Why all those great managers of the late 1940s through the mid-1970s ran defined benefit contribution plans, but their successors—who supposedly are more capable—are only capable of offering defined contribution?
Ken probably knows the answers better than most.
Rust and Buff have covered the basics very well. I’ll add:
Everything began to change after the 1963 termination of Studebaker’s defined benefit plan. By 1974, the handwriting was on the wall from the ERISA regulatory perspective. The defined benefit plans were headed out the door in private industry and the transition to defined contribution offered a few advantages for employee mobility, a consideration not lost on workers as the industrial base began to collapse. The transition from DB to DC was not limited solely to U.S.-based employment, rather it was an international shift thereby affecting competitive positions globally.
A BIS report states:
Factors Contributing to the Shift to DC Plans in Private Sector Pensions
A. Regulatory and tax changes
B. Increasing Costs of DB Pension Plans
C. Changes in the Industry Composition of Employment
D. Increase in Labour Mobility
E. Introduction of 401 (k) plans
F. Increasing Familiarity with the Stock Market
G. Actual or Proposed Changes to Pension Accounting
http://www.bis.org/publ/wgpapers/cgfs27broadbent3.pdf
A U.S. DOL working group in 1997 cited these factors:
There appear to be a number of reasons for the movement away from defined benefit plans, but little consensus on the relative weight of each cause. Among the reasons cited by witnesses were:
a change in employer attitudes toward employees;
a shift in jobs from the manufacturing sector, where defined benefit plans are common, to the service sector, where defined benefit plans are uncommon;
a higher level of job mobility which encourages defined contribution plans with their perceived portability and discourages traditional defined benefit plans which reward long service employees;
the simplicity and transparency of a defined contribution plan where benefits are expressed in lump sum balances vs. the perceived complexity of defined benefit plans where accrued benefits are more difficult to understand and appreciate, particularly by younger workers;
the attractiveness to employees of keeping investment gains in a rising stock market vs. the perceived value of a guaranteed monthly income at retirement;
the option for an active employee to withdraw or borrow funds prior to retirement, which is permitted in a defined contribution plan, but is not in a defined benefit plan<21>;
the more predictable annual employer costs in a defined contribution plan;
the obligation to pay PBGC insurance premiums for defined benefit plan but not for defined contribution plans;
the opportunity for employees to make contributions to defined contribution plans before taxes (i.e., 401(k) plans), but not to defined benefit plans;
the higher costs of administering a defined benefit plan which, in recent years, has increased dramatically due to additional regulation;
a desire by employers to provide a retirement plan at a reduced overall cost, which tends to favor a defined contribution plan which, not only have greater cost certainty, but also do not have open-ended long term liabilities; and
a lack of understanding by employees of the relative advantages and disadvantages of different types of plans and plan features.
MG,
Thanks for fleshing out my point. And I could not remember the PBGC for the life of me!
Islam will change
Jack – “The issue for a right of center interpretation of any such difference between public and private industry unions would have to take into account the right’s insistence that public services should be run like private businesses.”
The “right of center”? You don’t appear to understand what happened when President Clinton, a Democrat, obligated the U.S. to member participation in the WTO. The GATS provision of WTO mandates that a large number of public services will be open to competition from commercial interests. That fight has been underway for some time.
There should be no question that public services in the future will be operated much like those under private commercial interests and greater operational cost efficiencies will be achieved. It’s either that approach or be prepared for more public services to be contracted out to global private interests.
Jack – “The issue for a right of center interpretation of any such difference between public and private industry unions would have to take into account the right’s insistence that public services should be run like private businesses.”
You don’t appear to understand what happened when President Clinton, a Democrat, obligated the U.S. to member participation in the WTO. The GATS provision of WTO mandates that many public services will be open to competition from commercial interests. That fight has been underway for some time. The WTO GATS list of public services for such mandated competitive inclusion will grow.
There should be no question that public services in the future will be operated much like those under private commercial interests and greater operational cost efficiencies will be achieved. It’s either that approach or be prepared for more public services to be contracted out to global private interests.
Buff,
Ken should consider posting the entire PBGC list of failed pension plans that it is now supporting and state the dollar value obligations.
MG,
We pretty much destroyed Mr Dorman’s comment (as posted he may have more, but I did not go to the link). Personally I would hate to be graduating from college right now into a defined benefit plan – most companies requrie a 5- year stint just to get to vesting. And that amount isn’t mush. Better to have mobility (and your 401K getting a 50% match!) and not feel like you glued to a job.
The DB plans are mostly a union thing from way, way back. I watched that idea, 40 years with 1 company, die in the rust belt as I grew up. The new way is far better.(IMHO)
Islam will change
Dan – “Ah well Corev…this explanation leaves a lot unsaid and unexplained that is rather important, and doesn’t even try to answer the question in the post, which is the usual function of a post and comment. And then the authors make things up.”
I found it a bit difficult to take Ken’s post seriously in light of the volume of information that has been published on the shift from defined benefit to defined contribution retirement plans. The transition has been underway for over 35 years and most of the reasons have been explained previously.
I am not convinced that CoRev’s cited article is totally irrelevant to Ken’s loose discussion and certainly not Peter Dorman’s original post which Ken cited as the basis for his post. This portion of the article appears to be relevant: “No one has to worry about making a profit. Generous health-care and retirement benefits are provided to everyone by the government. Comfortable pay is mandated by legislative fiat. The work rules are militantly egalitarian: pay, promotion, and job security are almost totally independent of actual job performance. And because everyone works for the government, they never have to worry that their employer will go out of business.”
Thus far, I have only observed what appears to be a one-sided presentation in main posts regarding the State budget issues and the public union positions. Are the public unions totally right? Is that the bottom line? If that’s the case, what will be the positions of the public unions around the country when the next round of public employee layoffs begin as any municipal to state budget revenues fall short?
If U.S. individual taxpayers in all local communities, counties, and states want public employees to receive defined benefit retirement plans with minimum cost participation by public employees, then why don’t the same taxpayers press the Administration and Congress for a Federal law requiring all U.S.-based businesses to provide defined benefit retirement plans to all employees? Why aren’t all of the public unions representing roughly 36% of public employees naationally pressing for the passage of the same law? I expect that U.S. individual taxpayers and public unions aren’t pressing for such a Federal law because it would drive up the cost of commercial goods and services, and/or could result in more offshoring of goods production and services thereby further reducing U.S. employment.
In all of the states I am familiar with the vast majority of government services are still provided by government employees, and will likely continue to be so for some time.
And whatever the case, public employee unions are still considerably different than private sector unions.
And efficiency and effectiveness would be welcome in some areas of government service (some areas of government service as inherently not all that subject to efficiency).
AHHh, MG, hit the point of relvance to the article! The last major bastion of DBs is …. wait for it… the public sector. And, even there they have been shifting.
And, finally, perhaps the largest remaining DB might very well be SS, for which Bush proposed a partial shift to a DC. One which most Fed workers are now under.
rust,
WTO GATS was launched in 1995 and focused on 12 primary areas of services. It’s an inclusive list. GATS jumped the ditch from private enterprise competition and pursued opportunities in government services. A number of U.S. governors have voiced their objections and filed paperwork to avoid compliance with specific provisions of GATS. Each round of WTO negotiations involves some discussion of changes to GATS (translation: expansion), so it’s a slow moving process of expanding GATS compliance requirements.
There is no reason to expect that the majority of U.S. public services will necessarily be performed by government employees in the long term future. That may or may not occur. Water supply, waste water treatment, and solid waste collection have already come under fire with many communities and even counties contracting out such services. The list will grow. Education and healthcare are already on the list. I have no doubt that fire fighting will go contract in many communities as will certain in-house services in support of the local government.
Every time you drive on a toll road highway that was previously maintained by public employees and direct government funding, that’s an example of the effects of GATS related changes. Note which firms (primarily foreign) are buying up the contracts.
WTO GATS will affect the government services sector of the economy. It is not an issue that is going to disappear from the scene. Once the commercial interests close out their GATS initiatives in the third world, a higher concentration of effort will be applied with the tougher targets within the developed nations. Plenty of public services will be provided under contract eventually or will be stripped away from government. It’s just a matter of tiime under the WTO.
There are very few local government services that cannot be contracted out.
CoRev,
I don’t think my last paragraph has sunk in yet.
I expect it’s just a matter of time before states, counties, and municipalities switch to defined contribution plans. The U.S. Government should finish switching its retirement systems over to defined contribution as well.
Public unions or not, this appears to be the direction that states, counties, and municipalities will undertake. It will boil down to budget cost management. The alternative will be to curtail or contract out some government services.
I’m not saying that the site never publishes an alternate view. For all I know thwy might publish Franz Fanon to help us understand circumstances in North Africa. It would be helpful. To simply throw up an article with the lead in, “This article explains for many of us on the right what is going on in the union/Wisconsin fight. “Public Unions & the Socialist Utopia” required more complete disclosure. Does the light of day hyrt your eyes?
In addition to which I wouldn’t suggest that Ezra Klein is a progressive alternative to an anti union screed in a conservative/corporatist web site.
Well heaven forbid that the governing process might be propelled by planning for the needs of all citizens and then taxation would follow according to those plans. We certainly don’t want the skewed end of the income distribution curve to be threatend by taxation in the name of good government. Or is good government only that kind of government that satisfies the wealthiest citizens and those pensioners who already have their portion of the pie?
In addition to which, “Comfortable pay is mandated by legislative fiat. The work rules are militantly egalitarian: pay, promotion, and job security are almost totally independent of actual job performance.” there is virtually no truth to that statement.
And none of the bull shit that CoRev’s lead comment generated has anything to do with Dorman’s question regarding management competency. Strawmen, straw houses, straw arguments and straw deals seem to be the grist for a right wing view of the world of work and the compensation it may generate. And what is most disgusting is that some have their government funding now guaranteed and sit and fling their crap about what that government can afford for its other citizens.
In addition to which, “Comfortable pay is mandated by legislative fiat. The work rules are militantly egalitarian: pay, promotion, and job security are almost totally independent of actual job performance.” there is virtually no truth to that statement.
And none of the bull shit that CoRev’s lead comment generated has anything to do with Dorman’s question regarding management competency. Strawmen, straw houses, straw arguments and straw deals seem to be the grist for a right wing view of the world of work and the compensation it may generate. And what is most disgusting is that some have their government funding now guaranteed and sit and fling their crap about what that government can afford for its other citizens
MG, the Federal DC Plan, Thrift Savings Program, is well underway. Since its inception in 1984, all new employees have entered, and many of the olders CSRS types opted in. Some are in both, but those are pretty much all retired by now.
If you are pro public service union you wanted Mao to beat Chiang.
Read Halberstam’s book on Korean War.
The Red Scares were a political red herring to bring isolationists, imperialists, militarists, the China lobby, anti new dealers and Joe McCarthy (Wis R) together to get the military industrial complex moving and into a kluge for perpetual mobilization and endless war, in support of every kind of useless unpopular puppet for Luce’s pire, supported by the Time syndicate.
If you were against supporting Chiang whom Stillwell felt was useless against either Mao or the Japanese, you were a subversive. Same for supporting Diem, Thieu, Ky, Karzai, the Shah…………………..
“Fanaticism is pursuing the objective long after the reason or sense of the struggle is forgotten.” Or something like what George Santayana said.
How does one deal with an ideological diatribe?
And the military, and the federal civil service…………………..
When do they go after the folks in digital camo?
The diatribe on civil service unions goes for the uniformed services as well.
Only they need to think the digital camo uniforms will fire on the people…………………
Come on CoRev, the defined part of the new civil service retirement system (1984) will pay out several times what SS pays at only what 2% contgribution. And the thrift plan is 5% on 5% one for one much better than real 401k’s.
Although I will attest the old system is better.
The military still 50% at 20 and not a dime contributed by the member, and the federal civil service…………………..
When do they go after the folks in digital camo?
The diatribe on civil service unions goes for the uniformed services as well.
Only they need to think the digital camo uniforms will fire on the people…………………
“There should be no question that public services in the future will be operated much like those under private commercial interests “
A little substantiation.
Look at the privatized arsenals.
In my experience managing privatized arsenals, the profit motive does not exist. The revolving door and the patronage from the Hill break down any chance of getting much more than waste fraud and abuse, see GAO reports 11-394t. Some links to other GAO stuff which is a story to be told.
The first year or two the ‘buy in’ is evident. From then on the private sector pillages the taxpayer.
Privatizing public goods is adding profit to the costs and as the profits accumulate the lack of competition erodes servcies and increase cost.
Just relating the DoD experience.
Explain!
The non sequetors.
Defined benefits worked fine before the Reagan folks decided to apply modern monetarist theory and toss deficits under the bus.
From then on no one dared run a pension fund as Wall St went “native”, and the fed printed like hell for the borrow and spend republicans, and their fellow traveller pillaging the US for perpetual war, eroding real economy replaced with the wall st casino.
Jack,
Yes!! Because Wall St imploded, the economy is plundered and the fed is printing like crazy, hurting them that might still have theirs’ we gotta get the state and local civil service unions and workers to pay!!
Looking through a fine prism, us guys pulling down traditional federal civilian retirements and/or retired military officer pensions sure know how to deal with the state and local pension problems, indeed.
Who can depend on a pension system where the boss cannot print money, and/or can have their plan decimated by Wall St shinnanigans? Heck, it is like the Irish against the Germans in the Euro.
How about taking some from hungry, poor kids and pregnant poor women, too?
MG, buff, CoRev,
Failed pension plans………………
The audit of the public debt shows: around $800B in intragovernmental instruments held by the OPM ‘retirement system”. It shows somewhere near $430B held by the two military retirements funds.
You knew I would ask “what is the difference between the OPM and military retiremnt trusts?”
and I will tell you:
The military one is an accopunting dream, not a cent of real money went into it, and it grows by paper each year.
The OPM one was started with 7% of civilian salaries over the years, and now getting 3% from the new system.
Neither are solvent, the OPM far more sovent than the military which has many times the fictional balance in potential outlays.l
You guys are lucky your pension plan knows how to print money.
You guys are holding a circular…………………
Oh my goodness. WTO and GATS!!! What am I thinking? Because an elected Democrat in Name Only signed a trade bill a dozen years ago we should all fall on our knees and beg for crumbs. Have you noticed that the rewards haven’t been much and what little there is hasn’t made it into general distribution. The philosophical keep telling us that it has to get worse before it gets better. When the cork finally pops whose side will you be on?
MG, I’m not a GATS expert, so I’ll ask you: doesn’t it apply only to services that a government has decided to provide through contractors? Does WTO require use of contracting in the provision of government services? If not, the relevant policy question is whether these services should be provided via contracting or by government employees.
PJR,
I think you’re correct, other than if such services are sold. Utilities, for example.
On the front end, the GATS provisions apply to those services in a nation’s economy that the members of WTO agree on. The commercial competition for services is straightforward, open your business and go to work. The list of government services subject per WTO to commercial competition is far shorter than the commercial competition list. The government services that GATS covers is limited to contracting unless the service is sold. But some very long government service leases are already in place around the world.
Nothing, of course, prevents the contracting out of many public services to domestic suppliers without consideration of WTO GATS. That option exists at any time.
Jack,
You haven’t disproven anything that CoRev stated in his opening comment. Besides, how would you know what conservatives really think about the article or CoRev’s follow on remarks?
Aside from demonstrating your usual vile hatred of Republicans and conservatives once again, you have now decided to attack anyone who is supported by a public source or government pension. Of course, you’re only whining about those individuals who are not big supporters of unions and keeping the status quo of State support for public unions including State collection of union dues. You’re pretending that those individuals aren’t entitled to personal opinions.
Your target list of hatred continues to grow, Jack.
Jack,
Why don’t you try to answer these two questions:
If U.S. individual taxpayers in all local communities, counties, and states want public employees to receive defined benefit retirement plans with minimum cost participation by public employees, then why don’t the same taxpayers press the Administration and Congress for a Federal law requiring all U.S.-based businesses to provide defined benefit retirement plans to all employees?
Why aren’t all of the public unions representing roughly 36% of public employees nationally pressing for the passage of the same law?
Jack,
If you had been on this blog during its early years, you would know that I led the fight against WTO and subsequent U.S. trade policy. Stormy joined in on the threads long before he began to provide main posts on international trade. Others were involved as well once the fight was launched. Back then, WTO was weak subject matter for econ blogs and that situation hasn’t improved much since then. I raised the issue of GATS on AB. The trade policy fight was expanded to a number of other econ blogs, some of which no longer exist.
I have always opposed WTO membership and U.S. trade policy written since 1992 which has led to the extensive offshoring the nation has witnessed since the mid 90s and its subsequent ramp up after China was granted most favored nation trading status and admitted to WTO membership.
We were voicing fact supported, detailed opposition to WTO and U.S. trade policy long before most liberals at AB and elsewhere pushed away from the pro global trade kool-aid bar. It took years for some to wake the hell up. By 2005, most of the damage had been done to the U.S. workforce as over 40,000 plants had been closed since 2000. And, of course, there is the matter of lost related production and subseqent products production, all of which results in a large hit on U.S. value added production and tax revenues. Meanwhile, the liberal and conservative economists were preaching about how the service industry would magically fill the gap. Priceless BS. And here we are.
What you don’t understand is that U.S. trade policy, trade deficits, and plant closures brought me, Stormy, and a number of other bloggers to the econ blogs. Most moved on from AB to other blogs as the matter of trade fell off the radar. That was our issue, not most of this other stuff discussed today. We focused on the meat of the U.S. economy. The other stuff merits attention, but it’s still a side show compared to impact of trade policy.
ILSM, I just don’t understand youtr point. You describe the military pensions, zero front end participation Defined Benefit, and the civil service, limited front end participation Defined Benefit, plans as: “Neither are solvent…”
CORRECT!!!! Now what? That is the case for most DB plans, and they mostly remain in the other public sector venues.
Dorman’s and Houghton’s obviously snarky articles are meaningless drivel, by implying it was a management issue. They failed to recognize that single point, unsustainablility and insolvency.
Sammy made the point that well funded private sector plans were also unsustainable and in some instances made the private entity targets for take over.
DBs are ponzi schemes that eventually run out of other people’s money. What we are seeing is the deeper pocketed public sector plans are now reaching the same point the private sector plans did decades earlier.
Now go back and read the article which I provided.
ILSM, I just don’t understand your point. You describe the military pensions, zero front end participation Defined Benefit, and the civil service, limited front end participation Defined Benefit, plans as: “Neither are solvent…”
CORRECT!!!! Now what? That is the case for most DB plans, and they mostly remain in the other public sector venues. The private sector moved away from them decades ago.
Dorman’s and Houghton’s obviously snarky articles are meaningless drivel, by implying it was a management issue. They failed to recognize that single point, unsustainablility and insolvency.
Sammy made the point that well funded private sector plans were also unsustainable and in some instances made the private entity targets for take over.
DBs are ponzi schemes that eventually run out of other people’s money. What we are seeing is that deeper pocketed public sector plans are now reaching the same point the private sector plans did decades earlier.
Now go back and read the article which I provided which describes the ongoing fight to protect the unsustainable insolvency of the remaining public sector DBs.
AS, I see you have been following the discussion and have decided to provide what is in your mind a cogent and relevant comment. Sigh!!!!
ilsm,
You really need to spend a little time on your posting. You writing is incoherrent and not related to the topic at hand. No oone can figure out what your talking about… I know you can do better.
Islam will change
Jack,
And what is most disgusting is that some have their government funding now guaranteed and sit and fling their crap about what that government can afford for its other citizens
Does this also apply to SS recipients and WI teachers?
The reason behind this is simple. Once upon a time, the best educated, most qualified candidates would be our leaders in management. Today, the most connected, best friend of senior management are now the managers. Experience and skill had nothing to do with their position so when these managers have to make decisions, their lack of experience and skill to perform their job is non-existant, which makes the decisions they make uninformed and illogical.
I do not at all disagree that “globalization” is just another name for screw American working people. Shop the globe for the cheapest labor and you’ll get all the helo you need from American financial institutions and, if I recall correctly, you even got some US government loans guarantees.
I did not read much on the web at the time. I do recall that reports in the news did not suggest that there was unanimity of opinion regarding the fruits to be gathered from WTO and GAT though the BS about service industry jobs was out there. How stupid are Americans? “Let us ship the manufacturing base of our economy over seas and we’ll see that you get jobs cleaning Walmart stores at night.” And they bought that, or maybe they didn’t even have a clue.
And if started long before Clinton. Remember that Tricky Dick went to China to “open” its door, so to speak. He had Peter Peterson and Henry Kissinger in tow to help with the talks. I guess Henry and Peter made some useful contacts while doing government service. Now there were two public employees that knew how to feather their nests, or beds as it were.
No Sammy, it only applies to those who are insisting that others are not entitled to a decent income and eventual retirement.
MG, You’re reading into what I’ve said and giving my words your own unique spin. No I do not hate Republicans and conservatives as a class of people. I do think that the level of greed being displayed by some who already have a great deal is obnoxious, and that their hold on our government representatives is problematic to the health of our economy. Our political economy has been commandeered by a small group who with their great wealth have been ab le to control to a large extent the public discourse on too many issues. Wealth buys fealty and the sycophants abound among us. These are the people that I see as doing us all a great disfavor. I don’t hate anyone in this regard. It is more a matter of recognizing an enemy of the people and a desire to see their power and influence abated.
And this sums up my feelings about comments made on this blog and on this very thread. It is from a comment I made on a similar thread wherein the same selfich attitude seemed to be in evidence as this comment addresses:
“Are you satisfied to have your pension, paid for by the tax payers? You took part in a work program that made you an agreement in the past. Now that agreement is being upheld to your benefit. Why do you continuously argue that retirement benefits promised to others are subject to revision? Are other working people not as entitled to their expected benefits as you have been?”
Jack said: “Our political economy has been commandeered by a small group who with their great wealth have been ab le to control to a large extent the public discourse on too many issues. Wealth buys fealty and the sycophants abound among us. These are the people that I see as doing us all a great disfavor.”
and, I agree with Jack. Here’s the list of visitors to the WH in the early months.
“One thing is clear: Service Employees International Union President Andrew Stern holds sway at the White House, where he’s listed for 22 visits—the top number on the logs. Visitors in the top 10 also include former Clinton White House Chief of Staff John Podesta, former Senate Majority Leader Tom Daschle, National Organization for Women President Kim Gandy, and NARAL Pro-Choice America President Nancy Keenan.” From here: http://blogs.wsj.com/washwire/2009/10/30/seius-stern-tops-white-house-visitor-list/
To the andy Stern name we should add Richard Trumka who claims daily contact.
Note: high volume would indicate some power and influence. Single visits are more appropriate of cordiality and perhaps minor influence.
That’s your list of power brokers? That’s the best that you can offer as the influencers of White House policy. You’re joking, aren’t you? You’re giving us a handful of individuals who’s control of assets is less thyan nothing in comparison to Peterson, Koch, Scaife, Bloomberg, Walton, etc. etc. How many public relations mills do you suppose may be attributable to the two groups? A couple of labor leaders, a couple of NGO leaders and two ex politicos. That’s the balance of power? They are goiing to influence the President? You have got to be kidding. The comment is so absurd as to be an insult to any reasonable conversaation concerning the distribution of political power in this country.
Jack, M’lad, you’re losing it. Maybe I missed them, but I don’t remember seeing that list of names on the WH list of visitors. Perhaps, they are not influential with Democrats because they do not have access. Or more likeley could it be because they are not interested in Democratic policies.
BTW, since I brought up policies, how are those Dem policies working out? Can you point to any Obama policies that have been wildly successful?
Jack, M’lad, you’re losing it. Maybe I missed them, but I don’t remember seeing those names on the WH list of visitors. Perhaps, they are not influential with Democrats because they do not have access. Or more likely could it be because they are not interested in Democratic policies.
BTW, since I brought up policies, how are those Dem policies working out? Can you point to any Obama policies that have been wildly successful?
Jack,
You don’t know what you’re talking about anymore than ilsm. I don’t draw a public pension of any kind. No Federal, state, county, or municipal pensions. None. I will never draw a retirement pension from any public source of employment. I proudly served my nation, but I didn’t wait around to retire from active duty in the military or civil service. That wasn’t my goal and money wasn’t the issue. I had other opportunities and challenges to pursue.
You just make dumb assertions and pretend they are facts. Some individuals you attack don’t fall into your little category boxes. If anything, arrogance is your downfall. Every American citizen is entitled to his or her opinion, and you’re way out of line to pretend otherwise.
I know plenty of government workers who are still working and others who are retired who disagree with some of the salaries provided for certain positions and many of the retirement programs in general. Plenty of people work for government for reasons other than to suck down a retirement pension.
You still haven’t tried to answer either of my two questions:
If U.S. individual taxpayers in all local communities, counties, and states want public employees to receive defined benefit retirement plans with minimum cost participation by public employees, then why don’t the same taxpayers press the Administration and Congress for a Federal law requiring all U.S.-based businesses to provide defined benefit retirement plans to all employees?
Why aren’t all of the public unions representing roughly 36% of public employees nationally pressing for the passage of the same law?
Maybe you don’t know how to respond to these two basic questions…