The Unsustainability Lobby

“The creation of the mortgage bond market, a decade earlier, had extended Wall Street into a place it had never before been: the debts of ordinary Americans.”
–  Jared Vennett (played by Ryan Gosling), The Big Short (2015)

Along with another superbly authentic movie Margin Call (2011), The Big Short provides a vivid look into the rigged, Darwinian, ruthlessly exploitative circus popularly known as “Wall Street.” For decades, ever since the great depression, this industry slumbered along, sedately providing financial services to Americans. As always, it also was a venue for legalized gambling, but the number of players were limited, the winnings were relatively meager, and the opportunities for corrupt manipulations had not yet been multiplied by new trading technologies. Back then, the seedier aspects of Wall Street were overshadowed by the many vital services the industry provided. All of that changed starting around 1980.

In 1985, the financial sector earned less than 16% of domestic corporate profits. Today, it’s over 40%. These profits are made on the backs of American consumers who pay usurious rates for student loans and credit card debt, yet cannot earn more than one or two percent on their savings accounts. America’s financial sector is grotesquely overbuilt. It has become a predatory force in the lives of most Americans, and the legitimate services as intermediaries that they actually provide – especially given the gains in information technology over the past 30 years – could easily be delivered for a fraction of the costs. Who benefits?

The Big Short offers insights that will hopefully resonate with viewers, because when the protagonists in the film prepared to capitalize on their belief the housing bubble was about to collapse, they identified all the culprits. It wasn’t just the sellers who prepared mortgage debt securities who were to blame. It was the buyers as well. And the biggest buyers of all were the pension funds, because of their insatiable desire for high returns.

America’s housing bubble may have collapsed, but the pension funds are still with us, bigger than ever, still insatiably seeing high returns. And where do these predators go for their high returns? Along with their high risk investments in hedge funds and private equity – where we have minimal transparency – they invest in housing, once again inflated to unaffordable levels thanks to over-regulation and low interest rates. They invest in public utilities, who collect guaranteed fixed profits on overpriced services thanks again to over-regulation. They invest internationally, and they invest in domestic stocks.

In every case, the interests of these powerful pension funds, Wall Street’s biggest players, is to rack up another year of high returns. And to do this they need corporate profits, financial sector profits, rising home prices, rising utility rates – they need asset inflation fueled by debt accumulation. This is economically unsustainable, because as America is slowly turned into a debtors prison, eventually there will be nobody left to pay the interest.

The National Conference On Public Employee Retirement Systems, “The Voice for Public Pensions,” is arguably at the apex of the unsustainability lobby. This powerful trade association is ran by public sector union executives from across the nation. Their president is also the treasurer of the American Federation of Teachers. Their first vice president is a 30-year member of the Chicago Fire Fighters Union, IAFF Local 2. Their second vice president was union president of Fraternal Order of Police Queen City Lodge #69. And so it goes, officers of government unions populate their executive board officers and their executive board. Government unions run this organization.

The unsustainable pension benefit enhancements and unsustainable modifications to investment guidelines that were sold to politicians and the public weren’t pushed by government unions all by themselves. Their partners in the financial community recognized and implemented what has to be one of the biggest scams in American history, the ability to pour taxpayers money into high-risk pension funds for government workers, collecting fees every step of the way, combined with the ability to raise taxes to bail out these funds whenever their returns didn’t meet expectations. And to make sure elected officials played ball, they had the government unions provide the political muscle. Compared to this setup, Bernard Madoff was a piker.

The National Conference On Public Employee Retirement Systems has thoughtfully created a list of “foundations, think tanks, and other nonprofit entities [that] engage in ideologically, politically, or donor driven activities to undermine public pensions.” The California Policy Center and UnionWatch are both on that list. But because our organization does not advocate eliminating the defined benefit, we actually only fulfill one of their criteria for this list, “advocates or advances the claim that public defined benefit plans are unsustainable.”

Yes. We do. Most indubitably. That the unsustainability lobby has recognized our work is a distinct honor.

 *   *   *

Ed Ring is the president of the California Policy Center.

27 replies
  1. Tough Love says:

    I too would be fine with seeing the DB Plans remain, but ONLY if the Taxpayer’s contribution toward Public Sector DB Plans was no greater than what Private Sector employers contribute towards their workers retirement plans, that typically being no more than 3%-4% of pay into a 401K Plan, plus the employer’s 6.2% of pay Social Security Contribution on the worker’s behalf.

    A proper and careful analysis would show that to fully fund (over the workers career, and using appropriate and reasonable assumptions, not the low-balling “rosy assumptions/methodology employed in “official” valuations) the commonly granted Public Sector DB Plans in place today takes (from Taxpayers) 5 TIMES (10 times for safety workers) the amount that Private Sector workers contribute into their workers’ Plans.

    And THAT is the ROOT CAUSE of the problem, ….. grossly excessive DB Plan “generosity”.

  2. john m. moore says:

    Whether a DB plan, or, a DC plan, there are two critical elements to any pension plan: a limitation on salary increases and a limitation on the Agency’s obligation to make annual contributions; say 8-10% of annual salary.
    Without both of the limitations, the plan is unsustainable and willlead to cash insolvency, tax and fee increases and substantial service cuts.

    It is silly to talk about arriving at a benefit consensus, without the two safeguards. Even with the safeguards going forward, existing unfunded deficits will destroy many agencies.

  3. Smooth Moderation Douglas says:

    I think you are exaggerating but, dang; we don’t want to see any of your ersatz math. Suffice it to say that most experts in the pension field do not share your opinion.

    And this:

    “And THAT is the ROOT CAUSE of the problem, ….. grossly excessive DB Plan “generosity”.

    is just another ….opinion.

  4. Rex the Wonder Dog! says:

    Suffice it to say that most experts in the pension field do not share your opinion.
    Please define “most experts in the pension field” for us Dougie, I am curious who these “most” are

    🙂

  5. Equal Time says:

    Ed – NCPERS is holding a national conference in San Diego in May. You should attend and report to your readers what lies you hear there.

  6. Tough Love says:

    Speaking of honesty, how come you appear to also comment under the name “Fact Checker” ?

  7. Equal Time says:

    Who was speaking of honesty? You? One who on one site falsely claims to be a resident of New Jersey, and here once made a mistake to disclose your real identity while patting yourself on the back? Funny! For the record, Fact Checker is a friend of mine and we often agree and do tag team posting when agitated enough, just like you, Rex, Surf Puppy etc. Different people can use the same computer and URL ya know. Anyhow, you should go to the NCPERS conference and give us your take on what you hear and see.

  8. Tough Love says:

    Equal Time, So …..

    “Fact Checker is a friend of mine and we often agree and do tag team posting …”

    Really? Don’t make me laugh.

    Readers, take a look at this (linked below) recent blog and the comments. Clearly, one person was commentating as BOTH EQUAL TIME and FACT CHECKER.

    I called you out on you BS commentary about DB vs 401k Plans. Pasting my concluding paragraph:

    “You fool no one with reasonable math skill and good common sense. It’s not DB Plans BEING DB PLANS that you support, it’s the VASTLY greater taxpayer contributions that can be sucked out of the taxpayer due to the complicated structure of DB Plans that is the reason for your support. The Taxpayers would NEVER contribute anywhere near such outrageous amounts under a DC Plan … and you know it.”

    Care to defend your position?

    http://unionwatch.org/how-the-tax-system-favors-government-workers-and-punishes-independent-contractors/
    ———————–

    P. S. I have lived in NJ (and still do) for decades.

  9. Equal Time says:

    You plain and simply are not believable. You have previously blundered into disclosing your identity and now you try to spin it another way. As for your fixation on one element of compensation – pensions – you miss the big issue – the issue is to compare total compensation, both taxable and untaxable, between the private sector and public sector for like jobs – like accountants, engineers, lawyers, doctors, social workers, nurses, heavy equipment operators and other professionals. Focusing on but one element of total compensation is, while ignoring private sector untaxable “perks” (such as my private sector friend who just returned from Hawaii with his family from a company paid retreat for managers and sales people all expenses paid for everyone) meaningless. Get a life

  10. Equal Time says:

    Fact is, I know. In fact these fictitious names, along with Tough Love and a few others, are the same person, though the writer denies it. One can tell by the writing style, wording and common use of insults such as trough feeder, light bulb changer, GED, etc. It is a machine operation utilizing the Pension Tsunami web site to surf for articles to post. It is funny to watch because it is so predictable.

  11. Tough Love says:

    Equal time,

    I don’t “beg off” anything, often commenting that the CORRECT goal is EQUAL Public/Private Sector “Total Compensation” (Wages + pensions + benefits) in comparable jobs. Right now there is a modest PRIVATE Sector advantage in COMPARABLE JOB “wages” that swings to a material PUBLIC Sector advantage when pensions & benefits are included along with wages.

    Example, (per the AEI Study quoted here before) Private Sector workers in NJ (where I live) have an overall 4%-of-pay “wage” advantage that swings to a 23%-of-pay PUBLIC Sector “Total Compensation” advantage….. in COMPARABLE JOBS.

    Taxpayers …… how much more would YOU have in retirement funds if YOU had an ADDITIONAL 23%-of-pay to save and invest in every year of YOUR career ….. $500K, $1 Million, perhaps $2 Million?
    —————

    Go ahead …. tell your “friend” Fact Checker to join in …..LOL

  12. Tough Love says:

    Equal Time, you’re an ass.

    Mr. Ring….. you have my permission to (via checking IP addresses that accompany comments) address Equal times accusation that I post under multiple names.

    And while you’re doing so, please let us know if the comments from Equal Times and Fact Checker are coming from the same IP address.

  13. Ed Ring says:

    The IP address used by “Equal Time” has been also used by “Fact Checker,” “Clear Thinker,” “Tough Surf Dog,” “No Union Watcher, “Big Dawg,” and “Truth in Advertising.”

    Tough Love’s IP address has not been used by any other entity.

    While we won’t ban people for commenting under multiple names, it would be preferable if participants in this forum would own their remarks at least to the point of using just one nom de plume.

    Thank you also, everyone, when you keep the discussion centered on facts and logic.

  14. Equal Time says:

    You fool no one. It is easy for a person to have different IP addresses by utilizing different IP’s. As for your ass comment, your mama must be proud of having raised such a gracious person.

  15. Ed Ring says:

    It would benefit our community if everyone, especially our cherished regular commentators, might refrain from calling each other names and otherwise hurling insults. Fair enough?

  16. Tough Love says:

    Ed, Thank you.

    Equal Time (aka …. “Fact Checker,” “Clear Thinker,” “Tough Surf Dog,” “No Union Watcher, “Big Dawg,” and “Truth in Advertising.”), any excuse, rationale, justification ?

  17. Tough Love says:

    Ed,

    For clarity, I suggest that while not banning them, you quickly identity when multiple names are coming from a single IP address.

    Equal Time …. need the readers be on the alert to more aka’s ?

  18. Equal Time says:

    Since people are using ficticious names, what difference does it make if someone changes their fictitious name

  19. Tough Love says:

    EQUAL TIME (aka …. “Fact Checker,” “Clear Thinker,” “Tough Surf Dog,” “No Union Watcher, “Big Dawg,” and “Truth in Advertising.”),

    Oh please……..

    The use of a consistent SINGLE handle is simply to protect one’s identity and freely express one’s opinion without fear of potential abuse from those in power …. for example, from the Police by getting a traffic ticket for going 2 miles over the speed limit, or worse.

    The use of MULTIPLE handle … as YOU are guilty of … is to deceive and trick the readers.

    And in YOUR case, it’s VERY VERY clear. Did you NOT say in an above comment (before your use of multiple handle was exposed) …..

    “In fact these fictitious names, along with Tough Love and a few others, are the same person, though the writer denies it.”

    You were INACCURATELY accusing me (and others) of doing EXACTLY what YOU were in fact doing and (without explicitly saying such) implying that you would never be guilty of such underhanded behavior.

    Crawl back under your rock.

    ——————————

  20. Equal Time says:

    Don’t be too shocked when I tell you that I and others I know do not believe you or Ed when it comes to identification of who is posting.

  21. Tough Love says:

    Ed, did you hear that … he doesn’t believe you.

    I suspect that this lowlife will in short offer be changing his handle to distance himself from the lowlife that he has so been identified as being.

    I suggest that whenever you see his IP address used, (YES, the one that has so far been used for …. “Equal Time” “Fact Checker,” “Clear Thinker,” “Tough Surf Dog,” “No Union Watcher, “Big Dawg,” and “Truth in Advertising) ….. that you alert the readers to the new Name(S).

  22. Ed Ring says:

    Equal Time – posted below are the most recent comments by each of your identities. You know that these have come from you. This is the first time you have provided proof that you would intentionally deceive the viewers. That is a vice we do not share. The truth is good enough for us.

    While we welcome dissenting points of view, and don’t have a policy to prohibit anyone from using multiple identities when they comment, we do hope that everyone will express their points of view with integrity rather than deceit.

    Equal Time
    2 approved
    Olanchan396@aol.com
    162.236.146.178
    Don’t be too shocked when I tell you that I and others I know do not believe you or Ed when it comes to identification of who is posting.

    Fact Checker
    1 approved
    Fact@aol.com
    162.236.146.178
    In reply to Tough Love.
    Your comments are off my topic of the 401k model, but at least you do admit that DB plans are better for retirement security. You fail to address what retirement security benefit you see for individuals assigned to the 401k model and why you advocate piling more people into that model given its track record. Instead you resort to attacking the messenger rather than the message, which is a common tactic when one lacks a cogent argument. Go ahead – tell us how everyone will benefit from being put into the 401k model.

    Clear Thinker
    1 approved
    ClearT@aol.com
    162.236.146.178
    An interesting factoid in today’s local paper is that the cost of living in Orange County, California, is 46% higher than the national average. When running comparative numbers related to wages, benefits and retirement pay, a disparity like this needs to be factored into the dialogue.

    Tough Surf Dog
    1 approved
    Upland@aol.com
    162.236.146.178
    In reply to Rex the Wonder Dog!.
    Rex, have two Margaritas before bed and continue to wear that pointy aluminum hat in the daytime. You’ll be fine —-

    No Union Watcher
    2 approved
    xaltdrulr@aol.com
    162.236.146.178
    In reply to Ed Ring.
    Thanks Mr. Ring. It is nice to know you are trying to maintain civility. You might direct a little of your effort to Mr. Hill to tone it down a little.

    Big Dawg
    4 approved
    Massconfushn@aol.com
    162.236.146.178 In
    reply to Big Dawg.
    Thank you See Saw. If that is indeed one person I would categorize him or her as mentally ill. In fact, even if several people. Sad commentary. As for the link with Pension Tsunami et. al it sure looks to me like that person or persons trolls the daily Pension Tsunami article listing to then launch numerous shrill and name calling postings on many of those listed articles, coast to coast. Thus it appears Pension Tsunami is enabling such behavior. That is what I meant by saying there appears to be an association between this person/people and pension tsunami and its affiliate organizations.

    Truth in advertising
    1 approved
    TIA@aol.com
    162.236.146.178
    Lot’s of fuzzy math in this one. Beware journalists who try to do statistical and financial analysis.

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published.