Connecticut Set to Join Illinois, Puerto Rico in the Bankruptcy Choir?

The Coffee Shop
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Another aspect of the local government pension issue is that pension increases in lieu of current employee pay represent a way of keeping a lid on the current budget. States and localities that are strapped for cash but think that things will be better in the future will frequently try to defer costs. When the returns on pension funds are strong, contributions are made as planned, and the actuarial assumptions are not unreasonable, this approach can be successful. This may just be a more optimistic view of the same point Ranger makes, however. The problem is when the assumptions are not in line with actual returns, or when the political pressure on elected officials to increase pension benefits is so great that the assumptions and funding plans just become unreasonable.

If you like this stuff (and I do), it’s worth comparing the Mercatus rankings in Tri-Banter’s earlier post with the recent Pew Trusts report on state finances, which includes the credit ratings for all the states (table starts on page 10). The outcomes are very different. For example, it shows Maryland (#46 according to Mercatus) as having a higher rating than North Dakota (#2). Looking at the Mercatus methodology briefly, the rating agencies seem stronger to me. Mercatus seems to overweight cash on hand and budget surpluses, which are always nice to have, but they also mean that tax receipts are significantly exceeding spending.

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Another aspect of the local government pension issue is that pension increases in lieu of current employee pay represent a way of keeping a lid on the current budget. States and localities that are strapped for cash but think that things will be better in the future will frequently try to defer costs. When the returns on pension funds are strong, contributions are made as planned, and the actuarial assumptions are not unreasonable, this approach can be successful. This may just be a more optimistic view of the same point Ranger makes, however. The problem is when the assumptions are not in line with actual returns, or when the political pressure on elected officials to increase pension benefits is so great that the assumptions and funding plans just become unreasonable.

If you like this stuff (and I do), it’s worth comparing the Mercatus rankings in Tri-Banter’s earlier post with the recent Pew Trusts report on state finances, which includes the credit ratings for all the states (table starts on page 10). The outcomes are very different. For example, it shows Maryland (#46 according to Mercatus) as having a higher rating than North Dakota (#2). Looking at the Mercatus methodology briefly, the rating agencies seem stronger to me. Mercatus seems to overweight cash on hand and budget surpluses, which are always nice to have, but they also mean that tax receipts are significantly exceeding spending.

I think in the civilian sector, employee pensions are considered a liability on the books of the companies offering them. I don’t think that applies in government accounting, though. At least, I’m pretty sure it doesn’t at the federal level, simply because the feds can always print more cash.

Government accounting is a bit different than the generally accepted accounting principles set by the Financial Standards Accounting Board, so perhaps the methodologies used to gauge a government entity’s fiscal health, such as a state’s fiscal health, are inadequate to the task? All I know is that if I had unfunded promises, or liabilities, related to future pension payouts that loomed as far as the eye could see I’d be a bit worried.

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''The ‘inheritance’ I was referring to is a ‘societal inheritance’ in the form of a stable Social Security system, the opportunity to do better than one’s parents did, a non-crushing national debt load and so forth. All the things that were passed from generation to generation right up to the Baby (“Me Generation”) Boomers (disclosure, I’m a late-generation Boomer), who all apparently seem fixated on acting as young as possible and on not doing much to pass along something of worth, societally speaking, to later generations.

I suppose that I’m an example of whom you are whining about. I’m a 67 year old, life long Heavy Construction Carpenter. I worked up and down the East Coast and spent the last 20 work years as a foreman for one of the biggest companies in NYC. I made a lot of money and maxed out my social security payment almost every year. My wife made twice what I made and stopped working at 57. We took care of our money and we have a bundle. Right now my wife has no income and we live on my pension, ssi, and our savings. In three years she will get ssi and at the same time I will have to start taking annuity pay-outs.

So, as I see your complaint, you think I’m taking something from you. How is that? Everything I have, I’ve worked very hard for. Are you expecting me to give up my ssi because I saved my money?

Also, you have every opportunity to live as well as you are willing to work for. Weather or not that is better than you parents is up to you. I think it’s a problem of perception. Your parents are living well in their 50’s and 60’s, once they got rid of you. They started out just as broke as everyone else. Today’s young people seem to expect to start out at that high level at their first job. A lot of them think an entry level job is below them and that the American Dream is dead. I don’t hear that from the children of immigrants. They go to work and find the American Dream

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''The ‘inheritance’ I was referring to is a ‘societal inheritance’ in the form of a stable Social Security system, the opportunity to do better than one’s parents did, a non-crushing national debt load and so forth. All the things that were passed from generation to generation right up to the Baby (“Me Generation”) Boomers (disclosure, I’m a late-generation Boomer), who all apparently seem fixated on acting as young as possible and on not doing much to pass along something of worth, societally speaking, to later generations.

I suppose that I’m an example of whom you are whining about. I’m a 67 year old, life long Heavy Construction Carpenter. I worked up and down the East Coast and spent the last 20 work years as a foreman for one of the biggest companies in NYC. I made a lot of money and maxed out my social security payment almost every year. My wife made twice what I made and stopped working at 57. We took care of our money and we have a bundle. Right now my wife has no income and we live on my pension, ssi, and our savings. In three years she will get ssi and at the same time I will have to start taking annuity pay-outs.

So, as I see your complaint, you think I’m taking something from you. How is that? Everything I have, I’ve worked very hard for. Are you expecting me to give up my ssi because I saved my money?

Also, you have every opportunity to live as well as you are willing to work for. Weather or not that is better than you parents is up to you. I think it’s a problem of perception. Your parents are living well in their 50’s and 60’s, once they got rid of you. They started out just as broke as everyone else. Today’s young people seem to expect to start out at that high level at their first job. A lot of them think an entry level job is below them and that the American Dream is dead. I don’t hear that from the children of immigrants. They go to work and find the American Dream

I understand what you’re saying, and you make good points. I’m 57 years old and I’ve been working since I was 10 (when I shined shoes in front of pool halls that were fronts for a bookie, and in front of old Tiger Stadium during baseball season, delivered papers, swept out movie theaters, pushed burgers at Mickey Ds, gas jockeyed at a full-service gas station, etc.). I went into the military after high school and stayed there for a full, and very physically demanding (and sometimes hazardous), career. Retired from that, and then went straight to work in the civilian sector, saving and planning for the day when I finally retire.

I also came from a blue-collar household where both parents were union members (my father was a journeyman construction ironworker for more than a decade before securing an electrician’s apprenticeship and advancing to master electrician, including in the UAW (GM) and then IBEW (for the city of Detroit. ). There’s a strong ethic in our family towards doing all the things you describe yourself as doing. So I can confidently say that I’m not “whining” about my (and yours, apparently) lot in life and what awaits me at retirement.

However, there’s almost no argument that Boomers – as a generational cohort – are largely responsible for creating a set of circumstances that are going to negatively impact later generations (Gen X and Millennials and, possibly, millennials’ progeny) mostly through fiscal imprudence and wasteful habits across the board. Not for nothing are Boomers (and you are I are one of those :wink: called the “Me Generation.” Even the Washington Post has said in the past that Boomers “have been a disaster for America.” Read the article. It’s partly a lament from a Gen Xer about Donald Trump being the greatest mistake of the Boom generation but it’s also about the profligacy and wasteful spending Boomers, once they grabbed the reins of power, engaged in.

Baby boomers have been a disaster for America, and Trump is their biggest mistake yet - The Washington Post

What’s funny is that Boomers probably inherited a historic amount of wealth from previous generations – something like $11.6 TRILLION by some estimates. But where has much of it gone? Not really all that sure, speaking on a generational basis. Individually? Of course there are bright spots – sticking out like a 75-watt bulb, glowing brightly within a 10-square-mile expanse of darkness – but overall? We’re in trouble. And much of that trouble can be laid squarely at the feet of our generation, unfortunately.

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I’d argue the problem isn’t the Boomers, and I think I’m in the last “Boomer” year group. I think the problem is comfort, leisure time, decadence, that sort of thing.

Until the 50’s, almost all Americans lived a pretty hard-scrabble existence. Our current relatively comfortable and safe environment is a new creation. We reacted to this by obsessing over all sort of (mostly) worthy projects that, prior to the 50’s, few had the spare mental/emotional bandwidth for.

We told the government to spend itself into debtors prison funding those worthy projects. Entitlement spending, nanny-state, regulatory nightmare, world’s policeman, all of that.

So now we’re learning what happens when humans get comfort, safety, and leisure time. They pull out their credit card and ruin themselves.

The Boomers deserve the blame because, presumably, their “Greatest” parents taught them thrift and personal responsibility. That said, the later generations escape blame only because they’ve not yet had a chance to finish our destruction. Be patient.