Posted on 05/12/2017 5:14:22 AM PDT by Kaslin
Pension plans continue to blame poor market performance for their continuing dire straits of massive underfunding. Irrespective of all time market highs, their actuarial assumption of 8% has been impossible to achieve and continues to be way out of reach.
Municipalities around the country are entering the summer season with expectations of violence not seen in several decades. Yet many are cutting back on police and fireman, for lack of money, just at the moment they seem to need them the most.
Finally, the repairing of roads and bridges, popularly known as infrastructure, continues to be postponed by the “City Fathers” as the illusory cash seems to be somewhere in the distant future.
So what is actually going on? Why are not only most major cities but also most every municipality across the land running out of money? Is it really poor markets, misguided budgeting or lack thereof, lower interest rates, grandiose promises or just total incompetence? A case could be made for all the above. However what is most significant is the philosophy that all the “Town Fathers” cling to when laying out their budget and anticipated revenues for the year and years ahead.
John Maynard Keynes believed that all economic analysis was grounded in models. Contrary to the popular financial statement that “the past is no guarantee of the future,” he believed just the opposite. Certain conditions and actions, when repeated Keynes believed, would ULTIMATELY and ALWAYS achieve the required result.
Federal Reserve officials and their leaders from Greenspan to Yellen have worshipped at the shrine of Keynes for decades. One such example is the printing of money. The model’s premise is that the more you print the more consumers will spend. The trick is finding the right amount to print. Buried in the model is the Keynesian belief that demand and supply can be created and controlled by the government through a printing press. Also embodied is the belief that once modeled nothing should be changed. The idea is to continue doing the action over and over until the desired result is achieved. (ULTIMATELY and ALWAYS)
For decades municipalities have made their tax receipt predictions on a very simple model. Based on that model the budgets for all the social services, from police to fireman, all infrastructure spending and all promised pension contributions could be easily determined and planned.
Examining the bullet points of the model perhaps we can determine where the Keynes approach has gone awry:
1) Each year Senior citizens will die or move thus making the existing taxable home vacant for sale.
2) High school and college graduates will remain to live and work in the community.
3) College graduates will immediately marry and shortly thereafter start to raise a family.
4) The senior citizen homes will be absorbed by the graduates and additional housing will be needed to accommodate their growing families.
5) Local manufacturing and service industries will continue to add employees as job security is unquestioned.
6) Rising tax revenues from property to sales will continue to grow as the Millenials become a more integral part of the community.
This is the model that every village, town, and city across the United States has based their tax receipts upon for decades.
I could talk about the lack of marriages, lack of children, lack of jobs or even the lack of job stability as being the major flaw in the model. However all we need to know is that Keynes never anticipated a generation like the Millennials or he may have had second thoughts about modeling.
The word Millennials, unfortunately for the “Town Fathers” says it all and answers the question, what happened to all those receipts?
Isn’t this a little like the chicken-and-the-egg?
Imagine a vibrant economy, lots of good jobs and opportunities. The Millennials would (as most people have done in the American past) marry early, buy houses, and have a bunch of kids. They’d pay taxes and help achieve an 8% return on pension funds.
The pension funds are suffering because the economy is suffering. The central point seems, IMO, not that the Millennials have adopted a new and different behavior pattern, the central point is, rather, that the economy has been moribund for several decades and now young people are stuck in a world where they have fewer options than those who came before them.
Smaller government, more de-regulation, lower taxes — if you get a vibrant economy, you’ll see the other things falls into line.
I don’t think this writer has ever lived in a small town (village to him?). Our rural town of 8,000 doesn’t use any of those assumptions. We have had a balanced budget almost every year for a century. We tighten our belts when the economy is weak. We fix broken stuff when we have the money. We manage to keep a healthy reserve for disasters or other unpredicted economic maladies.
This is called being conservative. It works.
Right now, considering the way both companies and governments come and go (or at least shrink in tax paying population), I wouldn't consider any defined benefit pension plan to be safe. Only a fully funded defined contribution plan with the assets completely separate from the employer's is good. Sure, it would be nice to be guaranteed 50% of your pay for the rest of your life, but that guarantee is worthless. If I can't cash out and take the account value with me it is in danger of someone else taking it from me.
It’s a matter of priorities.
Our little city had to hire an Arborist.
The purpose of a government isn’t to provide services to the citizens.
The purpose of a government is to provide easy jobs to Democrat voters.
A pension of 50% of your pay? Governments have been promising 90% of your pay for life. And so for every employee paid for doing a job right now, they are paying 2 or 3 more.
No money for police and fireman.
It’s needed for handouts, free stuff and other social programs for the 13%.
So millennial is sitting here looking at the US economy where they can get a 10 hour job scrape by with no good path to long-term success. If there is they are facing a government that is $20 trillion in debt and $100 trillion or more of promises that the millennial’s will pay. The previous generations have maxed out the countries credit and sold their national heritage in the same people that did that are complaining why aren’t the millennial’s picking up the tab for the Ponzi scheme .
If I was a millennial I would get the hell out of the official American dream of debt, low wages, and rat race that isn’t designed to benifit them but built to pay unfunded promises of money and healt care to a large voter block (boomers, welfare rats, illegal immigrants). I would question the sanity of any millennial that did the traditional thing .
I think it’s simpler than that. I would suggest that a pension fund by definition is likely to be unsustainable and has no basis in sound economics. The idea that a government or private enterprise could support a potentially decades-long financial commitment to people who no longer contribute anything to the output of the employer (however that is measured) is ludicrous on its face.
Yeah exactly. The Millennials are getting screwed and blamed for something they didn’t do.
Millennials, you need to tip the board over. Don’t play by your elders’ rules because your elders rigged the system to benefit themselves.
Learn this lesson from Gen X. We got the crap aborted out of our generation, we got birth-controlled out of existence, and only now do the Boomers realize that by shafting our generation, they actually shafted themselves, because we were the ones supposed to fund their retirement. We can’t. The Housing bust crippled us. We are still (!) paying back student loans...and we didn’t have it near as bad as you.
They are counting on you to make good on this “promise.” Tip the board over. Tell them to stuff it.
With apologies to Freeper Boomers whom I love and respect and who didn’t do all this....and I fully admit that Gen X and Millennials aren’t guilt-free in all this either.
If the economy were healthy, the millenials would start to act like other generations, in their own way. They just don’t see any way to be secure.
Pension funds are suffering because there are fewer workers. With more automation, there will be even fewer.
At some point, we have to stop playing “Let’s pretend” and deal with reality. A huge part of the available workforce is out of labor market and on some sort of pension, 401K, or government assistance. That will not last much longer.
The god of copybook headings..
That photo shows people staring at a cell phone instead of talking to one another.
I saw a story about a tv show show called “Friends” and Jennifer Aniston said if it was made today that all the people would be sitting on a couch in the coffee shop staring at their cell phones.
I feel the article is poorly titled.
Should have been something like “Keynesian Economics: ULTIMATELY and ALWAYS a DISASTER”
Why?-—>”Keynesian belief that demand and supply can be created and controlled by the government through a printing press” Has....Never....Worked....Ever. But, maybe, if we just try it again... SMH
This guy’s knowledge of Keynes is equal to Bluto Blutarsky’s knowledge of Pearl Harbor. But he’s on a roll, so don’t stop him.
It helps to know that Keynes once attended a meeting of ‘Keynesian’ economists and later complained that he was the only non-Keynesian there.
Well said, except we had nothing to do with Griswold or Roe, and 55 million fewer Americans.
I touched on that today in my blog post, how no scotus decision can be legitimate if it harms society. As Roe has demonstrated, and Obergefell will soon show, scotus has no business violating Natural Law for the purpose of enshrining personal convenience as a right when it assaults the civil society, We the People, the foundation of our republic.
Yes, I encourage your generation to tip the board over and reform the institutions that ‘effed you over.
Article V.
Good point. Thanks for making the point that it isn’t all boomers. I’m a GenX with 3 millinneal kids. They are planning on playing the game but I honestly wonder if they would be better dropping out. It’s their call.
Well, Boomers used Roe and these other societal changes to their fullest extent. But yeah, absolutely, they were too young to really get those done politically, and it was the "Greatest Generation" an even the previous one that paved the way. I haven't quite figured out how, but I suspect the tough times of the Depression and the horrors of WWII and the Cold War made them want to go soft on their own kids.
I wasn't born to Boomers--my elders were all of the previous generation so I do see how some of their thinking went into the mess of the 1960s.
I need to remember it myself sometimes that generations are not patterns of behavior but individuals who respond with free will to the situations they are given.
Rush Limbaugh is so very like his fellow Boomers in some ways and so very unlike them in others. And I see the way some of our fellow Xers treat their kids like “buddies” and I feel very out of sync with our own generation sometimes.
Good luck with your kids, and hope they find a way forward despite all the mess. Mine are Gen Z so we have some time yet, but I’m keeping an eye on what’s going on.
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