If you would like to submit a guest blog entry send me an email. Publishing your entry doesn't show I agree or disagree with you. I am troubled by the idea of people selling investments and then betting against those investments. Maybe it makes sense in a textbook but it seems wrong.
Here is the comic and guest blog entry explaining his thoughts:
By "David Brosterhouse"In the years leading up to the 2008 economic collapse, many neo-cons unsuccessfully urged public pension plans to enter the then-buzzing casino of individual market-based retirement plans. When the dust settled after the crash and states had to reconcile their budget gaps, Wall Street interests sitting on record profits and historically low tax rates pointed the finger at retirees. To be sure, some pension plans had been overextended and some offered generous benefits... But in most cases, blaming public employees for these shortfalls was a little like running out of gasoline on the highway and blaming your mechanic.
This cartoon nailed it! Mr Banker and his lobbyists in Congress have turned the American working people against each other, to cover up their complicity in looting the wealth of the middle class.
The guy in the red hat should have "Tea Party" on his shirt!
Amazing how easy it is to distort the truth with a few simple pictures. While I can’t speak for all public employee retirement systems let’s take a look at the largest, CALPERS.
First of all CALPERS is heavily invested in the stock market and has been since the last of the regulations limiting the amount they could invest was lifted in 1984. In the years leading up to the 2008 economic collapse CALPERS was making “tons of money”. So much so that the public employee unions went to various public agencies and said, “Look at how much money is in the CALPERS trust fund. There is more than enough there to provide an expanded retirement package to all of your employees. And CALPERS is so good at managing their fund that the money will never run out.”
This is when a few brave people stood up and said, “Look, if you are going to increase benefits based on a few good years in the stock market you should convert this plan from a defined benefit plan into a defined contribution plan. That way the people who stand to gain from a rising stock market will also bear the cost of losing should the market decline.”
Well this being liberal California, the public employees got to keep their defined benefit plan and they also got huge increases in their retirement plans.
Along comes the 2008 economic collapse and guess what? CALPER loses a “crapload of money.” So much so that now there is not enough left in their trust fund to meet the retirement obligations of current employees. But public employees needn’t worry because, thanks to their defined benefit plan, their retirement benefits are guaranteed. The public agencies that have been paying into their retirement fund since the day they were hired will have to find some way of coming up with the additional money to meet this obligation. The only way to do this is to raise taxes and /or cut services to the public.
How about explaining how the truth is distorted in this comic?
CALPERS has over $250B in assets and its outlay for pension and benefits is $12B per year. It earned over 20% on its investments last year, far surpassing the returns of any other state or municipal investment fund. How is that interpreted as "insolvent"?
Yes, there are municipalities that have voted to give large benefit packages than they should have but that's not CALPERS' fault. That's the fault of the voters. If the voters enter into a contract, they are expected to honor that contract... just as you'd expect a borrower to honor the terms of his mortgagae or a car buyer to honor her auto loan. There are also many CA municipalities that chose to stay out of the CALPERS system and almost all of them are suffering badly because of the economy. CALPERS is not.
To say that CALPERS pension funds are extravagant and not justified because they MIGHT become a burden does not mean that they will. The evidence shows that CALPERS is and will remain solvent...unless anti-union voters choose to lay off and furlough so many public workers that they all retire en masse and swamp the fund with claims. But then, those voters will have created a self-fulfilling prophecy.