Liberal Fareed Zakaria:Public Sector Unions single Biggest threat to Fiscal Health.

Discussion in 'Politics' started by Max E., Jun 17, 2012.

  1. Max E.

    Max E.

    Fantastic article, from an honest liberal Fareed Zakaria, Wonder how long it is before he gets "Bookered" :D

    Why We Need Pension Reform
    By Fareed Zakaria

    A day after Governor Scott Walker won his recall election, the New York Times wrote, "The biggest political lesson from Wisconsin may be that the overwhelming dominance of money on the Republican side will continue to haunt Democrats." Democrats have drawn much the same conclusion. "You've got a handful of self-interested billionaires who are trying to leverage their money across the country," said David Axelrod, Barack Obama's senior campaign strategist. "Does that concern me? Of course that concerns me."

    But then how to explain the landslide victories in San Jose and San Diego of ballot measures meant to cut public-sector retirees' benefits? What should concern Axelrod far more is that on the central issue of the recall--the costs of public-sector employees--the Democratic Party is wrong on the substance, clinging to its constituents rather than doing the right thing.

    Warren Buffett calls the costs of public-sector retirees a "time bomb." They are the single biggest threat to the U.S.'s fiscal health. If the U.S. is going to face a Greek-style crisis, it will not be at the federal level but rather with state and local governments. The numbers are staggering. In California, total pension liabilities--the money the state is legally required to pay its public-sector retirees--are 30 times its annual budget deficit. Annual pension costs rose by 2,000% from 1999 to 2009. In Illinois, they are already 15% of general revenue and growing. Ohio's pension liabilities are now 35% of the state's entire GDP.

    The accounting at the heart of government pension plans is fraudulent, so much so that it should be illegal. Here's how it works. For a plan to be deemed solvent, employees and the government must finance it with regular monthly contributions. The size of those contributions is determined by assumptions about the investment returns of the plan. The better the investment returns, the less the state has to put in. So states everywhere made magical assumptions about investment returns.

    David Crane, an economic adviser to former California governor Arnold Schwarzenegger, points out that state pension funds have assumed that the stock market will grow 40% faster in the 21st century than it did in the 20th century. In other words, while the market has grown 175 times during the past 100 years, state governments are assuming that it will grow 1,750 times its size over the next hundred years.

    Why has this happened? It's democracy at its worst. Public-sector unions, powerful forces in states and localities, ask for regular pay increases. Governors and mayors can dole out only so much in salary hikes because of requirements for balanced budgets or other constraints. So instead, they hand out generous increases to pension benefits, since those costs will hit the budget many years later, when current officials are themselves comfortably in retirement.

    The net effect of these retirement benefits is to starve state and local governments of funds for anything else. Last year, California spent $32 billion on employee pay and benefits, which is up 65% over the past 10 years. In that same period, spending on higher education is down 5%. Three-quarters of San Jose's discretionary spending goes to its public-safety workers alone--police and firefighters. The city has closed libraries, cut back on park services, laid off many civil servants and asked the rest to take pay cuts. By 2014, San Jose, the 10th largest city in the U.S., will be serviced by 1,600 public workers, one-third the number it had 25 years ago.

    The system as it is evolving is highly regressive. Current workers will have their salaries cut, their numbers thinned and their benefits slashed, all to maintain relatively comfortable benefits for retirees, who are on average richer than the people who are being asked to make these sacrifices. Current residents will watch their services dwindle, so that retirees--again, who are richer on average than they are--can have guaranteed generous cost-of-living increases year after year.

    Public-sector unions are strong supporters of the Democratic Party, so their clout has drowned out the voices of the poor, the young, students and average citizens. That is why real credit for courage should go to those few Democrats who are taking on these issues, even at the cost of losing support from one of their key constituencies. That includes mayors like Rahm Emanuel and Chuck Reed as well as governors like Andrew Cuomo and Pat Quinn. Sadly, they are too few and too isolated. Democrats should take note: the ideals of liberalism are now being sacrificed for the interest groups of liberals.

    Read more:,9171,2117244,00.html#ixzz1y735HZvB
  2. Max E.

    Max E.

    In unrelated news, the L.A. teachers union just approved a plan to shorten the school year down to 175 days...... Must be nice to work 6 hours a day, and less then half the year, for 60k+ on top of a million dollar+ pension after 25 years..... When you do the math if you become a teacher you probably only end up having to work like 17-18 years of your life, when compared to a job anywhere else.......

    Those of us who choose to work hard in the private sector are the real suckers.....

    L.A. teachers approve deal that reduces pay, shortens school year

    The vote tally was 58% in favor of the contract and 42% opposed. Roughly two-thirds of all union members cast ballots. UTLA represents nurses, librarians, counselors, psychologists and psychiatric social workers in addition to classroom instructors.

    The school board approved the one-year pact last Tuesday. Under the agreement, teachers would forfeit up to 10 days of pay and the 2012-13 school year could be reduced from 180 days to 175. It would be the fourth straight academic year shortened because of budget cutbacks. More than 1,300 UTLA members still would lose their jobs because of declining enrollment, reduced state and federal funding and program cuts.
  3. That is a good one Max. It's essentially a good follow up to Michael Lewis' Vanity Fair article from last year..that specifically addressed San Jose and another town in California that did declare bankruptcy for the aforementioned reasons.
  4. Max E.

    Max E.

    Yeah, i remember that article, if you do the math on San Jose its goddamn scary.

    They say in the article that it will be serviced by 1600 people by the year 2014........ San Jose is a city of `1,000,000 people, so break that number down, if you were to say 1/10th of the million people are school age then if you had 1600 school teachers servicing 100k students you would have 1 teacher for every 63 students...... and then you have no one left to do anything else..... they are completely fucked.....

    The other way you could look at these numbers, take 1600 public sector workers and multiply that by 100,000, per year, and it equals 160 million, if you take 160 million and divide it by the 1,000,000 people who live in San Jose, that means for only 160 TAX DOLLARS PER CITIZEN, you could afford to pay every single government employee a 100k per year wage, and thats still not even close to being enough to cover the budget.....

    Just allow those numbers to sink in for a second, Every single public sector Employee in San Jose could have a 6 figure (100k/yr) living with no benefits/retirement, for 160 dollars a month in taxes per citizen, yet 160 dollars pet citizen would not even come close to paying the annual bill.....

    How could liberals possibly argue that there isnt a massive fucking problem here?
  5. It is lunacy, I agree...The strawman in every debate on this topic are the banks and the bailouts, the excessive CEO compensation, etc, etc...Not once have I heard one of these sloth's discuss the burden it puts upon their neighbor, the guy who isn't feeding off the public sector largesse. It's always this mythical battle with a fraction of one percent of the population who somehow warrant these absurd pension and healthcare plans which are increasingly bankrupting municipalities (even if they can move the numbers around for another few years to "prove" otherwise).

    btw, read some of the comments in the teacher's union strike in Chicago with their demands for a 30% raise. I've never seen such a completely delusional group of people try to justify this sort of's just groupthink gone wild.
  6. achilles28


    The majority of expenditures (>50%) in state and muni budgets are salaries and pensions. When you consider the average teacher makes 89 grand a year, or the average firefighter > 100K, or the average cop >70K (+ retirement), it's easy to see how our tax dollars don't go very far. Awareness is definitely the first step. Breaking up public sector unions/collective bargaining, a second. Even though this is a national issue, it really comes down to states and counties forcing the issue and breaking contracts. I don't know. I hate this as much as you guys. The entitlement/parasite class is so big in the West, I'm not sure we can ever route this scourge, before it kills the host. Bankruptcies needs to happen and entire cities thrown to the wolves. People need to learn the hard way, and I guess this is no exception.
  7. Max E.

    Max E.

    Yeah, We could actually afford to pay 1 person who works really hard, really well for doing the job properly, this is what pisses me off about the people who support this non sense, what we cant afford, is having to pay 3-4 people (through pension/medical benefits/disability) for doing one persons job.....

    Public sector Employees need to make a choice, they cant have "all of the above," we cant afford an obscene salary, AND an obscene retirement/medical package, while they only work HALF the hours, for half as many years.......... it just doesnt fucking work.....

  8. achilles28


    Agreed. In my perfect world, government comp is 20% LESS than private sector counter parts. And no unionization. You hit the nail on the head. There's so much waaaaaste in gov staffing... One of my buddies did GIS for a municipality in Toronto (Peel Region). He said he spent half the day checking email and fucking around on the internet. Earning 55K, at that point. Just now, I read TTC workers, on average, make 30 bucks an hour..... 62K a year. For driving a bus. + benefits + pension. I would seriously love to be that guy to axe all these fuckers. Break the contracts, let them strike, then fire their asses. *Beautiful*. Oh ya, one more thing. The province of Ontario has a debt-to-GDP of 40%. California and Illinois are only ~7-9%. Either I can't do math, or there's some serious timebombs ticking up here.
  9. achilles28


    Max, I hear ya. I literally hold public sector workers in CONTEMPT. Nearly hatred. They are the ultimate parasitical class. Hey, if "the Government" is gunna shovel this cash down my throat, why shouldn't I take it? That's their mentality. My sister in law used to work for OHA. Cousin at WSIB. I've got many friends who are teachers. Teachers... the ultimate profession for humanities undergrads who can't get a real job lol My step mom is a private piano teacher but contracts at a local public school. The stories she tells me from the teachers there....they all have that same opportunistic, entitlement attitude.
  10. Max E.

    Max E.

    HAHA, funny you should mention Toronto, as I grew up there, I had this asian ex girlfriend who was a big time liberal,(though she didnt know it) and she obviously never understood, the exact same concepts that everyone working for the government doesnt HOW DO YOU PAY FOR SHIT?

    She worked in some bullshit bureacracy, and i cant remember what her job title was, but one day she came up to me and told me she was taking a week off cause she had banked her EDO'S.

    Does anyone here know what an EDO is? Its called an "Earned Day Off" so if you work for the government, every day you work, just for going there and doing your job, you earn days off.

    NOW..... THIS HAS TO BE THE HEIGHT OF INSANITY, who was the cocksucker that negotiated that concept, and how the fuck could a reasonable person come to the conclusion that they should be entitled to extra pay, and extra days off, on top of vacation pay, just cause they showed up for work?

    EDO? Kiss my ass.... needless to say this relationship didnt last long.....

    As a side note, next time im back in T.O. visiting my family we should go for a beer, I always like meeting people off elite.... :D
    #10     Jun 18, 2012