In one of her very best articles, AFT President Randi Weingarten names the real retirement crisis. Many American workers, having paid into pension funds, will retire into a life of poverty because of a campaign to wipe out defined benefit pension plans.
Randi writes:
“America has a retirement crisis, but it’s not what some people want you to believe it is. It’s not the defined benefit pension plans that public employees pay into over a lifetime of work, which provide retirees an average of $23,400 annually (although some public officials fail to make their required contributions to these and then claim they are unaffordable). It’s not the cost of such plans, which may ultimately cost taxpayers far less than risky, inadequate and increasingly prevalent 401(k) plans. It’s not Social Security, which is the healthiest part of our retirement system, keeps tens of millions of seniors out of poverty and could help even more if it were expanded. The crisis is that most Americans lack the essential elements of a secure retirement–pensions and adequate savings. They’ll depend on Social Security to stave off poverty once they stop working, and it will not be enough.
“The crisis is that the economic collapse that started in 2007, triggered by fraudulent and risky financial schemes, wiped out many Americans’ personal savings and decimated many state and city pension investments. And while the stock market and many pension investments have rebounded, for numerous Americans the lingering economic downturn, soaring student debt, diminished home values, the responsibility of caring for aging parents and other financial demands have made it hard, if not impossible, to save for retirement.
“The crisis is that the median retirement savings for all working-age households–according to the Federal Reserve–is $3,000, and only $12,000 for those near retirement. And that retirement insecurity is made worse by state-sponsored pension theft in places like Illinois, where public employees are being robbed of pension funds they earned and contributed to over decades of public service.”
Matt Taibbi and David Sirota “have written about the vast sums spent to undermine the retirement security of ordinary Americans. John Arnold, for example, a former Enron executive who walked away with a fortune from the bankrupt company, has spent tens of millions in his crusade to deny public employees guaranteed benefits at retirement. This, after public pensions reportedly lost more than $1.5 billion as a result of their investments in Enron.
“Their investigations have exposed the hypocrisy of some Wall Street hedge fund managers like Dan Loeb, who seek to profit from public employee pension funds at the same time they support abolishing such benefits. The problem is the hypocrisy–not hedge funds or Wall Street per se. And it’s their disconnectedness from the economic pressures regular people face every day just to meet their basic needs, pressures that only grow once their working years are over.”
We must muster the will to protect retirees and workers so that they do not consigned to a life of poverty, courtesy of billionaires who are whipping up a public frenzy against their fellow citizens.
Diane Ravitch's blog 
An extraordinarily important post. Thank you, Ms. Weingarten.
How will we treat our elders? Does not the answer to this question reveal who we really are?
Much middle-class wealth has been wiped out. Most of our citizens now approaching retirement age are destined to live out those last years in desperate poverty. And this at a time when wealth and income inequality in the United States are at all-time highs and the paltry limits we had on spending by the wealthy and by corporations on elections have been decimated. This at a time when we have spent, in the last decade, some 6 trillion dollars in taxpayer money on phony wars in Iraq and Afghanistan, in a time when our “defense” expenditures equal those of the rest of the world combined.
Years ago, when I was just a kid, I picked up the paper one morning to read of a fellow in his mid eighties who had, in my state, frozen to death because his local utility company had shut off his heat in February. He was found frozen in his bed. The only food in the house were a few cookies in a single package on his nightstand, also frozen. The investigators said that the old man had been trying to use Vaseline to get the cookies down. (His pipes were frozen, and he had no water.)
This in one of the wealthiest countries in the world.
So, I joined a group of students belonging to the Indiana Public Interest Research Group, or inPIRG, and together we publicized this and lobbied the legislature and got a law passed forbidding shutting off elderly people’s heating utilities in the dead of winter.
Here’s my favorite line from the Bible:
“And the King shall answer and say unto them, Verily I say unto you, Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me.” Matt 25L40, KJV
cx: The only food in the house was, of course. Oh, for an edit feature on WordPress!
I don’t see how you can claim that defined contribution retirement systems are more risky for taxpayers than defined benefit plans. The risk risk for taxpayers with a defined benefit plan is that the funds will not generate the assumed return (7.5% for most public pensions) and whoever is left inside the taxing authority of the government entity that has made the promise will be required to make up the shortfall. With a defined contribution plan, the risk (actually I suspect the certainty) that the funds will not generate an average 7.5% return falls on the employee, not the taxpayer.
Certainly.
To me, the big problem with defined benefit pensions is that they create a bunch of incentives that work against transparency. Every interested party — politicians, unions, taxpayers, pension fund boards — has a powerful short-term incentive to understate or hide the true cost of pensions. The most transparent system would be one that did away with deferred compensation entirely, by increasing today’s salaries by the net present value of the retirement benefit. A system like that would spur fierce arguments about what the present value of the deferred compensation actually is, arguments that defined-benefit systems currently allow all the parties to avoid. There may be downsides to this kind of transparency, but it would immediately end the problem of under-funding and “pension-fund raiding.”
Design of the retirement system matters. Wisconsin is in solid shape due to a design that distributes risk and reward across stakeholders.
http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4614&
Click to access WRSsustainability.pdf
Only 20% of Americans have defined benefit pensions today… and most of them are in the public sector… The Scott Walkers, Paul Ryans, and Mitt Romneys of this world, who decry the Democrats call for addressing inequality as “class warfare” are not at all reluctant to use the politics of resentment to call for an end to defined benefit pensions. The benefits the public sector has today mirror the benefits in place in the private sector when the initial collective bargaining contracts were negotiated in the 1970s. In that era, defined benefits pensions and health insurance were commonplace. Today, not so much. Here’s a link to a post I wrote a few years ago on this topic called “Broken Covenants”:
http://waynegersen.com/2011/12/15/broken-covenants/
My father had most of his retirement wiped out in the 2008 stock-market. Luckily he had his military pension, his social security, and a paid off house. I often wonder about my pension being there.
If you are concerned about the risk in the stock market, I suggest inflation indexed government bonds are the least risky way to invest your funds. The trade off of course is lower expected returns on that investment.
The money owed pensions is still much less than cities and states pay out in corporate welfare– subsidies, loopholes, and tax breaks. This link has a state by state chart.
http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/30/state-pension-obligations-can-be-crushing-but-corporate-welfare-costs-more/
I am working on a doctoral research project inspired by Diane’s book, Death and Life of the Great American School System (2011). If the public school system–as many of us knew it, at least–is dead or near death, it would stand to reason that public school teachers who remember the system as it was prior to No Child Left Behind (2002) have experienced loss and grief. If you remember what it was like to teach prior to No Child Left Behind, if you feel as if teaching completely changed when No Child Left Behind was implemented, or if you ever felt saddened by some of the changes that resulted from educational reform, then you may be interested in taking my survey.
https://ndstate.co1.qualtrics.com/SE/?SID=SV_5nCLnPAFadWZX93
To quote the owner of this blog:
“A promise made is a debt unpaid.”
😎
Here in Christielandia, our governator is working overtime demonizing teacher pensions and benefits. He never passes up an opportunity to blame teacher pensions (all the public pensions, actually) for the economic woes of NJ or for anything else he can think of. He recently implied that pension obligations are stealing funds for cancer research. Gee, what a nice guy. He has purposely roiled the class warfare between working people with pensions and those without pensions. How dare teachers have defined benefit pensions. Christie has eliminated and wiped out the COLA for current and future retirees. 401(k)s are a pathetic joke, they were never designed to replace traditional pensions but as a supplement to pensions. During the Great Recession, many people had their 401(k)s wiped out and decimated while Social Security did not fail to make its payments.
Defined benefit plans are deferred compensation that the employer owes to the employee in the future for work that the employee has already done in the past.
In a rule-of-law legal system such answer have in the US, the employee has an ironclad contractual right to those already-earned pension benefits. The only way that an employer can lawfully refuse to pay those benefits is if the employer ceases to exist or, in some circumstances, goes bankrupt.
In the case of private employers, the risk that the employer will cease to exist or will go bankrupt is a significant real-world risk. And it’s fair to argue that employees who accepted a promise of future $ in lieu of higher immediate salary knew or should have known the risk that the employer would cease to exist or would go bankrupt.
By contrast, in the case of public employers, the chance that the employer would cease to exist or would go bankrupt would have been (and still should be) virtually zero — there will always be a government and that govt will always have the tax power to raise $.
The recent trend of local and state govt officials seriously proposing even partial default on accrued pension benefit obligations therefore borders on theft. The local and state govts have the power to tax; so long as they have the power to tax, they have the ability to pay. In these circumstances, any default on accrued pension benefits would be a fundamental violation of the rule of law or, in constitutional terms, a taking of property without compensation — no different than if the city said, for example, “we want to use your land to build a road but we cannot afford to raise taxes to get $ to pay you for your land, so we’re just going to take your land for the road and you lose”.
That any elected officials or newspaper editorial boards can even contemplate this kind of theft in the name of “reining in govt spending” is a sad commentary on the political sophistication of the citizens.
Municipal bankruptcies are still exceedingly rare, but they do happen sometimes, and a municipality’s ability to raise additional money through increasing taxes is not unlimited.
Municipalities are not responsible for our state funded pensions.
The recent trend of local and state govt officials seriously proposing even partial default on accrued pension benefit obligations therefore borders on theft.
exactly
it seems to me that defined benefit retirement plans are better viewed as differed longevity bonuses than differed compensation. A teacher that leaves the jurisdiction before being vested looses any differed compensation.
Why not just give all teachers all their compensation in the year that they teach?
teachingeconomist: Do you mean deferred?
I take it that I am using it in the same way that labor lawyer was using it: future payment in exchange for present work.
Because they couldn’t pay the wage up front? Now the state is trying to steal it. We do not get social security and we cannot fund an IRA if ANY money (random subbing) goes into the retirement fund. Sounds like a recipe for disaster. It would be very interesting to investigate the pensions of the legislators who are so gung ho to dismantle them for public employees.
TE — Once the teacher passes the vesting point (in total years worked), there is no longer an element of longevity bonus in the defined benefit plan. All of the teachers — literally millions of teachers — who are concerned that their already-vested benefits will be cut fall in this group. For these teachers, it is completely incorrect to analogize the D-B pension benefit to a longevity bonus.
Even if we were looking only at the not-yet-vested teachers (for whom the vesting point is, as you suggest, a kind of longevity bonus), the teacher has a contractual right to an expectation of that bonus. The teacher who works during his vesting period receives, in addition to his salary, the promise of the “longevity bonus” of his pension vesting at the end of his vesting period so long as he continues working for the school system. The school system can, of course, discharge or layoff the teacher short of the vesting point, but, if the school system allows the teacher to continue teaching to the vesting point, the system must pay the D-B benefit. Eliminating or cutting that benefit (or even extending the vesting period) would still be a taking of deferred compensation — the “compensation” being the entitlement to the D-B benefit if/when the teacher reached the vesting point.
The point at which the teacher vests is the point that the bonus is paid. Many teachers never reach that point, so the bonuses those teachers accumulated will go to pay someone else. Many teachers who post here are concerned that administrators have an incentive to terminate a teacher just before they vest, that is just before the bonus is to be paid. My posts have pointed out that under a defined contribution plan all teachers would be paid what they earn in a year and there would be no incentive to fire a teacher before they become eligible for this large bonus because there would be no year that the large longevity bonus is paid.
The district doesn’t get money back if they fire a teacher before vesting, so worrying about getting fired before vesting is silly.
It may be silly, but several posters here have worried about it.
teachingeconomist,
You refuse to acknowledge (1) Pension costs are a small
percentage of state budgets. (2) It is desirable to encourage employees to stay with institutions, long term. (3) There is financial value to pension spending in communities, etc.
I’ve concluded that the overarching theme of your comments is an individual’s selfishness, rather it is the Tea Party anti-tax rhetoric or trumped up arguments about private sector plans.
Your posts don’t reflect anything about the human desire to be about something bigger than themselves, making contributions to the greater good. Those sentiments run through the comments of the majority of frequent commenters’ posts. The Tea Party’s compelling need to bring people down to their level of misanthropy debases us all.
Linda,
1) The size of pension liabilities relative to the size of state budgets is not relevant to my posts concerning the relative merits of defined benefit and defined contribution plans, 2) I have in fact said that it is in the interest of the employer to make it costly for an employee to leave, 3) the financial value of spending does not change if the spending comes from a defined contribution retirement plan or a defined benefit retirement plan.
My posts concerned the relative merits of defined contribution and defined benefit retirement plans. The list of things that they do not reflect is very very long.
TE — Agree that defined contribution plans are better for everyone (employer, employee, and the economy generally). The main reason that we have had defined benefit plans rather than defined contribution plans is that employer officials (public and private) have from Day 1 preferred to move the costs of today’s labor into the future when the benefit-granting officials will have moved on to greener pastures on the basis of artificially reduced current labor costs artificially enhancing current profits or artificially reducing current tax rates.
The problem that I and many commenters have is not with D-C plans but rather with the current movement to reduce the already-earned vested benefits in the D-B plans. That movement is simply advocating theft by another name.
I think you will find many commenters do object to defined contribution retirement plans. My posts were directed at them, pointing out the advantages that a defined contribution plan has over defined benefits.
Labor lawyer, thank you for your post. Reneging on the pension promise is theft. The only reason that there is a problem with pensions in NJ is because multiple governors refused to fund the pensions over more than 20 years, not because the pensions are defined benefit. The governors used the pension fund to balance the budgets and to give tax breaks to the rich. Over the same period of time, the teachers and other public employees paid billions into the pension funds. If the politicians had done their fiscal duty and paid into the pension funds each year, then there would not be any shortfall, there would be no public pension problem. Instead, the politicians were too busy giving tax breaks to the rich, too busy giving tax breaks, tax abatements, tax holidays and subsidies to the big corporations that set up shop in NJ.
In order to know how much funding is needed you have to assume a rate of return on your investments. The real question is if the assumed rate of return was realistic or did the political system just seek to kick the can down the road to future taxpayers. See the comment by FLERP!
Detroit may have the power to tax its residents but taxing them sufficently to pay its pension obligations may not be feasable. If they attempt to do so anybody left in Detroit who can actually pay the higher taxes may simply leave. Government services in Detroit have already collapsed to an amazing extent.
I agree that there is nothing inherently wrong with defined benefit plans. But of course there is that little detail about actually funding them.
@laborlawyer.. enjoyed reading your comment. My heart bled when reading about what happened to teacher’s pensions in Detroit! You end your comment with, “That any elected officials or newspaper editorial boards can even contemplate this kind of theft in the name of “reining in govt spending” is a sad commentary on the political sophistication of the citizens…” I would change “political sophistication of citizens” to “Supreme Court overreach” that reveals what one can buy with one’s money – POLITICAL ACTIONS, JOURNALISTIC “RESEARCH AND PUBLICATIONs”… and worse yet OUR DEMOCRACY.
What happens when there are no taxpayers left within the reach of the government that is obliged to pay the pension?
teachingeconomist (post 4/14- 7:40)
You refuse to hear that the amount of the state budgets, designated for pensions, is small.
State giveaways, based on promises of jobs, that aren’t delivered, enrich big businesses.
The large corporation business model, bankrupts small businesses, leaving hollowed out shells of communities.
Read Picketty’s book then, try to claim state tax cuts for the wealthy aren’t going to destroy America.
Linda,
Please tell me where I made any claims about state tax cuts having any particular impact on anything? I get into enough trouble here without taking the blame for things I have never said.
Here is a nice graphic presentation of unfunded state obligations by state. It would have been more useful if they had presented with information about state government expenditures.
The link: http://www.pewstates.org/research/data-visualizations/fiscal-50-state-trends-and-analysis-85899523649#ind4
teachingeconomist,
First, relative to Pew pension data. Their work was a collaboration with the anti-pension, Arnold Foundation. Unfortunately, the press did not report on the connection, until after the “research” roll-out to the state capitols.
Secondly, the wealthy were “taxpayers within government reach”, during Eisenhower’s administration.
As one can infer from Pecketty’s book, many poor people are beyond reach because their poverty wages position them below the level where taxes could reasonably be levied. On the other hand, the wealthy devised a system that provided them with a disproportionate share of the benefits of labor’s productivity. Since our government was founded on the principle of “by the people and for the people”, we can alter the system and return it to the conditions when all of society grew richer when GDP grew. The first place to grow GDP, is to dismantle the financial firms that are a persistent drag on the economy. It will require a viewpoint change. The alleged plantation-thinking of sports franchise owners, as an example, will need to be quashed.
If the U.S. congress taxed the carried interest that hedge fund owners earn, like they tax ours, it would provide a revenue source. And, if the state law fetchers, lowered the limit on inheritance taxes from the recently increased, $5,000,000 (Ohio), the added taxes would support our local communities.
Linda,
My points about defined contribution plans have been that 1) they transfer the riskiness of the rate of return on investment from the government entity to the employee, 2) they remove the political risk associated with the underinvestment into the pension funds that you are concerned about, 3) they allow employees that do not spend enough time working for the organization to become vested in the pension system to enjoy their full compensation for the time that they did work for the organization, and 4) it increases the transparency concerning the cost of hiring an employee by forcing the organization to pay for all the costs when the employee does the work, not at some later date.
“it increases the transparency concerning the cost of hiring an employee by forcing the organization to pay for all the costs when the employee does the work, not at some later date.”
Just how is it going to force school districts to pay teachers upfront? Do you know a magic source of money that I don’t know about?
If districts can’t pay up front, why on earth would you expect that they would be able to pay thirty years down the road?
Their contribution is invested. Duh! It has worked very well, thank you very much. It is the state that decided they wanted to use our money to pay for other services so they could give tax breaks and other “favors” to corporate friends. Now they scream that pension costs will drag us under. BS! If they stop the corporate welfare, there is more than enough to cover pension costs.
And the contribution to a defined contribution plan is also invested. If the district can afford to invest the proper amount today, it is no more or less costly to give that money to the teacher that earned it than to give it to a financial advisor to manage as part of the pension fund.
TE, you know the arguments for a defined benefit plan. You know the arguments for 401Ks. While all those institutions that caused the financial meltdown have more than recovered from their own malfeasance (at tax payer expense), the little guy with his life savings in their 401Ks have not. Doesn’t it irritate you in the least that corporate pirates benefited from your tax dollars and did nothing to help the people they destroyed but in fact did their best to take what they had left?
Who do you think manages state pension funds? They are managed by those corporate pirates that you condemn.
You have not figured out where the extra money for defined benefit retirement programs comes from. It is the deferred earning of the teachers that leave the system before they become vested. The differed compensation for those teachers goes not to support them in retirement, but to support those who become vested. That transfer between teachers would not happen in a defined contribution plan, so it is easy to see why those that benefit from the contributions meant to help other teachers would be in favor of the current system rather than a system that allowed those teachers to keep their differed compensation.
So very many people don’t realize that teachers are not eligible for social security! I probably talk to someone every week who goes on and on about teachers’ pension being a drain on the IL economy, their logic being ‘why do teachers get pension and SS’…I just want to yell ‘we don’t get SOCIAL SECURITY’! I don’t know who told them we do but they don’t seem to realize that if we get rid of our pension system and put every teacher on 401k type plan, we all stand a good chance of losing everything and as this article says costing the government soooo very much more in aid!
It’s as though states just can’t stand to see that money sitting there..it is way too tempting. They could take a lesson, from the CCSS they so love, and re-read the grasshopper and the ant fable, then compare and contrast it to their current pension system and write a 5 paragraph essay about what they learned. We expect third graders to do it, why not them? Better yet let’s grade the colleges they went to, to see if they actually learned anything about economics or politics, because at this point I’d give them a big fat F.
cary444, sorry to hear that IL teachers don’t get Social Security. Here in NJ, I do collect SS and a pension. I paid into SS and the pension fund all my teaching career; actually, I paid into SS before I went into teaching and worked at other jobs. I’m not sure but I think that in 14 states, teachers are not eligible for SS. It’s a travesty.
I don’t know that travesty is the right word. Here is an explanation about the situation in Illinois: http://trs.illinois.gov/press/reform/ss_why.htm
I paid in to Social Security for over 20 years. If I take a pension from Nevada I will receive nothing from Social Security. I could understand a lack of eligibility on the part of those that never paid in, but the rest of us should still draw what we are entitled to. Just a reminder, entitlement means what is justly earned, not a handout!
If I understand the explanation of the policy from the state of Illinois correctly, the concern about teachers collecting both a state retirement based on the teacher’s income from teaching and a social security benefit based on non-teacher employment is how to add up the two incomes.
Social security replaces the 90% of your average monthly earnings for the fist $816 of monthly earnings, but replaces none of your average monthly earnings above the maximum taxable levels of earnings ($113,700 in 2013). If a teacher participated fully in social security and earned $113,700 from teaching and $30,000 from an outside job, the teacher’s outside job would not increase the social security payment because it is all earnings above $113,700. If the two incomes are treated separately and the outside job is used to calculate the social security payment, the $30,000 would increase the the social security benefit.
If your interested to see the mechanics of calculating the social security benefit, here is a useful worksheet:http://www.ssa.gov/pubs/EN-05-10070.pdf
TE,
“earned $113,700 from teaching”
I wish.
Just an example to make the math work out easily. You would see the same kind of thing happening if teachers earned $50,000 from teaching and $30,000 from a covered occupation. The arithmetic would just be a little harder to work out.
liverson@lewistonpublicschools.org
OH teachers are also prohibited from collecting Social Security.
And yes, TE, I consider it a travesty. All those weekends and summers I spent working to support my teaching habit will give me nada in retirement.
The question is how you would like your benefit to be calculated. Should we treat it the same way that we do people who earn little during their lifetime and nearly match (90%) your part time earnings or should we calculate your benefit based on your total income, but only provide you with 15% of your part time earnings as a social security benefit? Another option would be for you and your employer to pay full social security taxes on all your income so we can calculate in the normal way. The latter seems more equitable to me, but I am just an economist.
What would be easier is unimportant now. Not to contribute to social security (SS) was not the decision of the teachers. Pay me my teacher pension based on wages for which I contributed to the pension, and pay me my social security pension based on the wages for which I paid SS taxes. What is so hard about that? I am being paid what I earned and believe me I will have no trouble staying well below the max.
The concern with your solution is that social security benefits have an income redistribution component in them. While taxes are a fixed percentage of your labor income up to the maximum, your benefit is a smaller percentage of your earnings as your income increases. If we ignore your income from teaching we would be paying you the benefit level that we expect to pay to someone who had much lower lifetime earnings.
Randi Weingarten is as phony as RI’s Gina Raimondo saying to teachers- you deserve your pensions..
Yet Weingarten stayed away from the RI hot pension issue. She and the AFT-R with the RI NEA believed in the Settlement Agreement as the alternative to RIRSA 2011. The 14 month secret back room deal with a gag order imposed by the judge should have been protested against by Weingarten and the nationals…but instead as union leadership does, they throw their rank and file retiree members under the bus…
The deal was rigged as well as the ballot and she did nothing. She stood by the leadership- not willing to make waves…no integrity..The one sided ballot should have been one of many things Ms Weingarten should have objected to but did not…and now she comes out with this “too little, too late” commentary on a teacher’s pension…She lost a lot of prestige in my state and by many teachers who are not happy about the pension situation and the AFT ‘s stance on the pension agreement prior to the Settlement Agreement blow up. The RI pension case is being looked at all over the country. There should be labor lawyers willing to help and if so please call 401 615 8584
It’s amazing that Randi simply thinks no one will notice, keep track of, or gauge her actions. . . . .
In our community, we all need shelter, food, education for the young, care for the sick, clothing, food, RETIREMENT, entertainment, transportation of all of the above. For millennia, we’ve specialized and traded, and use this money stuff to grease the wheels. Our current system rewards people who mess with money and who take the community’s money, NOT people who best figure out how to increase efficiencies & allocate resources in order to have more for unmet needs.
The little I skim of teachingeconomist reminds me of why I got a math degree and not 1 of the snake oil salesman degrees, like ‘economics’, where success is dependent upon justifying theft from the community.
One thing which fascinates me about math is how many charlatans take a few formulas and can convince the world that their voodoo is more than voodoo, and their lips puckered on rich pig butts isn’t just butt kissing.
There isn’t money for retirement cuz those entrusted with managing that sector of the community’s wealth have turned into lying, thieving bandits. YAWN.
Why is Randi trying to burnish her rep with us lowly know nobodies?
rmm.
I am not sure what your point is here. Could you be more specific with your criticisms of a defined contribution retirement system?
teaching economist,
I understand why “rmurphy12” is frustrated with you
In a prior post, titled with David Sirota’s name, I read a couple of paragraphs, posted by a commenter, about what was wrong with defined contribution plans. You were among the commenters in the thread so, if I remember it, you must, too?
I certainly talked about defined contribution plans, but i don’t remember making any claim about the efficacy of any state tax changes.
teachingeconomist,
Surely, on the job, you’re not still teaching the Laffer Curve and the Reinhart-Rogoff study?
The Laffer curve is obviously true, but the tax rate at which higher taxes reduce tax revenue is far above what we currently pay. I generally teach microeconomics, so I don’t teach a lot about debt levels and economic growth, though I do have my students read some things about the impact of income distribution on growth, primarily in the context of poor countries.
Reblogged this on Learning and Labor and commented:
The Baby Boomers–including many university staff and even some faculty members–will be retiring into poverty. Think about the implications of that for health care, nutrition, etc. over the next few decades. I am especially calling on Our Beloved Legislature to think about the disaster they have created for the state by cheating retirees out of the pensions they have earned.
Faculty retirement plans are often defined contribution plans and thus do no depend on any politician keeping a promise.
te,
Defined contribution plans depend on financial firms, from the same stable as the people who brought the U.S. to the brink of disaster in 2008. If I was in a life boat, I would prefer to be with the state pension boards rather than hedge fund owners.
75% of college faculty are part-time. Their ability to cobble together a teaching load that allows for retirement payments, doesn’t seem very likely.
Quantify “often”, excluding both the 75% and the faculty in state pensions.
Linda,
Who do you think invests the pension funds? Where do you think the funds are invested? Both depend on the financial markets.
The only way for you to avoid the financial firms that you so distrust would be to have a defined contribution plan.
I seem to remember that your in Connecticut. Here is how your retirement fund is invested : http://www.state.ct.us/ott/pensiondocs/fundperf/fundperformance..pdf
Bad link. This should work
Click to access fundperformance.pdf
If you were uncertain, JPM is JP Morgan, Barclays is a large British bank, MSCI is Morgan Stanley. Citigroup I am sure you recognize.