Public Pensions

DoggerDan

Did the retirees pay into the system, or was their retirement and health care part of their work/retirement compensation? If so, then companies and government must honor those promises, period. Yanking it away because it doesn't seem fair would be the height of unfairness to those to whom it was promised.

russ_watters

Is it fair to make others pay to fulfill those obligations?

LaurieAG

It depends if it's a Pension scheme or a Ponzi scheme.

Jimmy Snyder

When they calculate that 47% of Americans don't pay taxes, do they mean that they do pay taxes, but get the money back? Or are they lying?

WhoWee

As we discussed in the Rhode Island thread - when government over-promises - tax payers are left with either the bill or reduced services. Some of those taxpayers don't have any benefits (or less benefits) from their employers - is that fair?

WhoWee

I'll defer to the Rhode Island thread again - from post number 54
http://www.physicsforums.com/showthr...=544605&page=4

http://www.wpri.com/generic/target_12/probing
Basically, the state set aside $25.5 Million to fund $3.6 Billion in retiree health care benefits. Please watch the "Target12Investigators" video.

russ_watters

It means 47% of people who fill out a 1040 come up with a zero or negative at the bottom of the form due to deductions and credits.

I'm not sure what that has to do with this thread, though...

russ_watters

So if, for example, a company's or government's pension fails due to mismanagement by the company/government, then you would say it is fair for the government to bail it out by having everyone else in the country pay for it?

Jimmy Snyder

Social Security taxes don't show up on the 1040. If you count SS taxes as taxes, then the 47% figure is a lie. If you don't count them as taxes, then you are not making others pay to fulfill those obligations.

Vanadium 50

I've split off this obviously off-topic thread.

WhoWee

The Social Security deduction is referred to as a tax because it's a payroll deduction - but it's really a retirement benefit account - similar to an annuity or a private pension fund.

Specifically, the deductions from your personal income - benefit you in the future.
http://www.ssa.gov/estimator/

The main difference between the Social Security system and an annuity or a private pension fund is the government doesn't actually invest the funds in marketable securities. The government uses the funds to pay other beneficiaries or other expenses.

If you don't pay enough in to the system to cover the amount you take out - someone else will need to pay your share - won't they?
http://www.ssa.gov/oact/progdata/taxRates.html

Vanadium 50

There is already some of that for private pensions. A private pension is insured by the federal government (PBGC). If the company goes bankrupt, PBGC pays the pension, up to a certain maximum. In principle, other companies pay insurance to PBGC (i.e. pay for others obligations) which covers the payments. In practice, they are about $25B in the hole because of some unfortunate financial decisions: they locked in losses with bonds, and then locked in more losses with stocks. This may not be surprising, as the agency bosses are political appointees, not pension fund managers. The outcome of this is that they will probably need a "one-time" infusion of funds from general tax revenues.

Things are more complicated for public pensions. These do not have insurance (states don't go bankrupt), and the people who would ultimately receive these pensions lobbied for the politicians who underfunded the pension plans.

BobG

This is the core of the dilemma.

Social Security is the perfect example. It was a promise made by the government before most of us were even born (it was signed into law in August 1935).

Is it really ethical to make promises on behalf of future people and just expect them to fulfill promises they had no say in making? (In fact, you could say the same about a national debt that "we" never intend on paying, instead deciding that's something that someone else will have to deal with after we're dead.)

It truly is unfair to force people to pay into a retirement system (whether it's via FICA taxes or by an employer promising future pay in return for lower current pay) and then to renege on that promise when the bill comes due. It's also unfair to commit people that may not have been hired or even been born yet to promises they obviously have no say in.

It's a bad situation, but, hopefully, the democratic process will prevail. Thanks to good planning, us baby boomers made sure a lot of us were born at the same time, giving us a lot of political power. We also made sure not to have so many kids that younger generations would outvote us. And then, just to make sure our political power didn't evaporate through premature deaths, we started putting extra restrictions and taxes on unhealthy things like tobacco and alcohol and started putting extra safety restrictions on things such as vehicles. We planned things well!

And for the younger generation of complainers, just remember this - paying for our Social Security benefits are the only reason we had brats like you in the first place!

If you didn't want to pay so much in Social Security taxes, you should have planned your births a little better!

Vanadium 50

Social Security is also special in that it doesn't apply to all citizens. Public employees might not have FICA withheld, and they might not get benefits. Usually these are correlated, but in some cases people who did not pay into the system can still get benefits.

russ_watters

It's not a lie. Different statistics are different statistics. We've had many discussions about the pros and cons of that particular statistic in different contexts.

And you are mis-stating the issue: no one is claiming the social security tax (the payroll tax) isn't a tax, it is just a different from the federal income tax because - as you just said - it doesn't show up on the 1040. It is collected separately, under a separate structure, for a separate purpose. Huh? The label that you put on "them" doesn't change what they are.

You're going off on an odd tangent here, since DD's post didn't mention Social Security. But regardless, Social Security is a strange hybrid of a forced retirement plan and a pyramid scheme. Depending on who'se doing the arguing, one might emphasize one aspect or the other. On the one hand, it looks kinda like a forced savings plan, where you get a retirement benefit based-on what you paid-in. Similar to a pension. But on the other hand, the pay-out is progressive, with people on the lower end getting paid-out a higher proportion of pay-in than those at the upper end. And the pay-outs overall are greater than the pay-in and the difference isn't made up with investment. So it requires a continuing pyramid-shaped pay-in/pay-out structure to sustain itself.

Now Social Security has been this way forever. Everyone grows up knowing they'll be paying for the retirement benefits of today's retirees and hoping tomorrows workers will pay theirs. But that's not what this was about. This was about private and government pensions. Entities that were never intended to be paid for by the general population, but rather funded by the workers themselves. So DD asserted it would be unfair to take away people's private and government funded pensions. I agree. But I also believe it would be unfair for the rest of the population to pick up the slack for such underfunded pensions. Someone's getting screwed either way when a big pension plan fails. I'd prefer the breadth of the screwing not be expanded.

russ_watters

Yes, and I don't think that's "fair" or more to the point, a good idea -- at least, in the absence of strict regulation to protect us from companies mismanaging their pensions (which apparently happens a lot).

phyzguy

What if the government or company made promises that it doesn't have the ability to keep? What then? There are many cases of this - Greece, many US municipalities, the US auto industry...