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Pension Ripoff

Posts in this section are about pension issues - especially the class action pension suit against AT&T.

Tuesday, January 07, 2014

Kiss Boeing Workers Pensions Good Bye

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Boeing Machinists Narrowly Approve End to Pensions

By Jim Levitt
Labor Notes
January 6, 2014

Corporate America beat us, by a hair: on a 51 percent to 49 percent vote, BOEING’S CONCESSIONARY CONTRACT was approved Friday.

It passed by about 600 votes, in a much smaller turnout than the VOTE BACK IN NOVEMBER.

Less than 100 people were in the room for the vote-count announcement, in stark contrast to other times weve voted on a contract. The few hardy souls who came to the main Seattle hall of Machinists (IAM) District Lodge 751 seemed stunned when the results were read. Only one or two shouted anything, and within a minute the room was empty. It all ended with barely a whimper.

But the effects will be profound. Besides losing the defined-benefit pension (current employees will continue to accrue service time until September 2016, at which time the plan will be frozen; new hires will get only a 401(k)), we’ve lost collective bargaining, for all intents and purposes.

Two times now, in a three-year period, Boeing has come after us for concessions while we still had a year (in 2011) or three years (2013) left on our contract. Both times, the company has used the threat of moving the next generation of a given airplane program (737 in 2011, 777X in 2013) if we didn’t comply.

Because we are under contract, we had no strike weapon to provide leverage.

This new contract will be in place until 2024. Boeing will be looking to revamp at least a couple of other airplane programs before then guaranteeing that the company will be back for another bite of the apple.

“Take It or We Leave” is THE NEW MODUS OPERANDI.

At this point 47 percent of the IAM workforce at Boeing is 50 or older. Many of those workers will retire in the next decade. By the time 2024 rolls around, a distinct majority of the union membership will have no experience of a normal contract negotiation, or of a strike.

The question is already being raised by members: What is the union for? Whats the point?

Mood Was Grim

The atmosphere in Everett, where 17,000 union members work, was very strange on voting day. Members needed an eligibility card, sent to them by mail, to obtain a ballot to vote on the contract. A huge number did not receive the card in time. They thus needed to obtain a Œgood standing card, requiring a stop at the front desk in the union hall.

Problem: only two or three office employees were available at the Everett hall. There are only two or three computers for them to use to check the necessary rosters in any case.

Result: thousands of union members spent two hours or more waiting in line out in the cold outside the union hall. (It was tame by Midwest standards, but we specialize in a damp cold out here.) I’m astonished there wasn’t an explosion. Almost everyone just put up with it.

Very few signs, no chanting, no nothing. And it was impossible to read the mood.

When I got to the union headquarters in Seattle, the staff was as uncertain as I was. While we were waiting for the count in Everett to finish, we heard that the count in Auburn had favored passage. Auburn is where the Fabrication Division has its largest plant, with many older workers, including a large proportion of skilled machinists. These have traditionally been strong supporters of strikes.

But what I heard was that many of these guys figured that even if we rejected the contract now, Boeing was going to crunch us on the pension in 2016. So why not take the $10,000 bonus, and the boost in the monthly pension payout to $95/month per year of service that goes into effect in September 2016?

Finally, at 10 pm, District Lodge President Tom Wroblewski came into the hall to announce the results. Union spokespeople took no questions after reading the very short statement.

The union didn’t release an official vote count, but the Seattle Times reported there were about 23,900 votes altogether. Turnout was lower than November in part because this time the International deliberately scheduled the vote when many members, especially long-timers, would still be away on holiday vacations.

Will “Boeing Effect” Spread?

Boeing’s pressure and threats of the last month, aided by nearly all Washington state politicians and the media, clearly got to the membership. The public framework of the debate assumed that since workers elsewhere have been losing (pensions specifically, but wages as well), therefore Boeing workers should as well.

We were expected to sacrifice for the greater good of the region. Boeing’s extortion of the state, and of the union membership, was seen as business as usual. This was echoed in the statements of IAM International President Thomas Buffenbarger. Our efforts to defend our contract were completely undercut by the International.

Despite the verbiage in the most current edition of the IAMs publication, touting the importance of defined-benefit pensions, there is no way the IAM will be able to protect pensions anywhere.

The spillover effect on the rest of organized labor is obvious. The IAM workforce at Boeing is the largest unit in the IAM, and one of the last industrial unions with a defined-benefit pension.

I expect the rest of corporate America to mimic BoeingҒs tactics. Why wait until a contract is expiring? Just tell the union that it has to make concessions, or well do x, y, or zҒand it has to be done now, not when you will have the ability to strike.

Much of this echoes the concessionary bargaining that wrecked the auto workers and others. The difference here is that Boeing is immensely profitable.

In 2013 the company enjoyed record output, record profits, and a record stock priceup 80 percent. Plus, in November Washington state handed Boeing a package of tax breaks worth $8.7 billion, the largest any state has ever given a single corporation. Being told we had to sacrifice at the very same time Boeing handed out a $10 billion stock buyback and a 50 percent increase in the dividend (worth another $2 billion) only emphasized the unfairness of it all.

Oust Machinists President?

“Let’s put this vote behind us and go forward in solidarity,” wrote Wilson Ferguson, president of Local A (the largest local within District Lodge 751) and a strong proponent of a “no” vote both times, online. His statement was shared in a public Facebook group where members were discussing the deal. Ferguson wrote:

There is a lot of talk of pulling out of the International, that is a self defeating proposition. Our best strategy is to remove Buffy from office. That campaign starts today.

The loss of our pension is a big blow. Not only to us but to workers across the country. Maybe folks on the GUAV page [a vote yes Facebook page] are right that pensions are a thing of the past but it would have been nice to have had a good faith negotiation on the matter.

So while you may be happy that we accepted the deal, please don’t confuse a victory with the loss of something that folks fought, bled and sometimes died to win.

Jim Levitt is 35-year Machinist at Boeing.

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Friday, December 06, 2013

Pension Theft - Class War Goes to the Next Stage

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Pension Theft: Class War Goes to the Next Stage

By Dean Baker
Truth-Out
December 4, 2013

In the past two days we’ve seen a federal judge rule that Detroit can go bankrupt, putting its WORKERS’ PENSIONS IN JEOPARDY, and we have seen Illinois’ Legislature vote for substantial cuts in its retirees’ pensions. Undoubtedly these two actions are just the tip of the iceberg. We have opened up a new sport for America’s elite: pension theft.

The specifics of the situations are very different, but the outcome is the same. Public employees who spent decades working for the government are not going to get the pensions that were part of their pay package. In both cases we have governments claiming poverty, and therefore the workers are just out of luck.

Before getting to the specifics of these cases, it is worth dealing with a couple of points. First, there has been a huge media campaign to trumpet the generosity of public-sector pensions. The Washington Post once ran a major FRONT-PAGE ARTICLE on public pensions in which its poster child was a former official in a small California city who was getting a pension of more than $500,000 a year.

Of course this sounds horrible, and it is. The official had been the city manager and had assigned himself several other top jobs, all of which came with generous pensions. He also was under indictment.

This is not close to the typical pension in California or anywhere else. In the case of Detroit, the typical pension is a bit more than $18,000 a year. In Illinois it’s around $33,000 a year. It’s important to note that most Illinois workers do not get Social Security, so this is their whole retirement income.

The other item generally missing from the coverage is that these pensions are part of workers’ pay. Controlling for education and experience, public-sector pay is somewhat lower than the pay of private-sector workers. The more generous pension and health care benefits that most public-sector workers enjoy are offsetting lower wages.

The pensions are not gifts bestowed by the government on workers; they are part of workers’ pay. When the city of Detroit or state of Illinois cut workers’ pensions, they are in effect saying that they are not going to pay workers for the work they did.

Turning to the specifics, there is no doubt that Detroit is in bad financial shape. Part of this can be attributed to mismanagement and corruption. However, by far the biggest factor is the decline in the auto industry, which was the driving force of the city’s economy.

This decline has far more to do with national economic policy than any decisions made by the city government. It also didn’t help matters that the state of Michigan made it very easy to escape the problems of the city by stepping over the city line into the suburbs, which many of its middle-class residents did. 

Detroit workers might be forgiven if they thought they could count on getting the pensions for which they worked. After all, the Michigan Constitution prohibits the state from cutting pensions. And the city of Detroit is a creation of the state of Michigan, which might have led them to believe that the Michigan Constitution also applied to Detroit. However, a federal judge just ruled otherwise. Now Detroit’s workers face the prospect of a bankruptcy judge taking large chunks out of their pensions.

The story of Illinois pensions should be at least as infuriating. Unlike Detroit, the economy in Illinois is reasonably healthy. News reports often tout its unfunded liability of $100 billion without pointing out that this is an obligation that needs to be met over the next 30 years. During this period, Illinois’ economy will exceed $18 trillion in output, putting the liability at roughly 0.6 percent of the state’s future income. That is hardly trivial, but neither is it an unbearable burden.

The disturbing aspect about the Illinois situation is that the underfunding of the pension was a deliberate choice. For years the governor and Legislature approved budgets that did not make the required contribution to the pensions. (The city of Chicago, under Mayor Richard M. Daley, did the same thing.) This was a deliberate shafting of workers in which most of the state’s leading political figures acquiesced.

Among those who deserve special vilification in this story are the bond-rating agencies (yes, the folks who rated all those subprime mortgage-backed securities as Aaa). During the years of the stock bubble in the 1990s, they analyzed pension funds using the assumption that the bubble would persist indefinitely. This meant that state and local governments had to make little or no contribution to their pensions.

Unfortunately, it was a habit that stuck. Even after the bubble burst, they continued to contribute little or nothing to their pensions.

So now Illinois, Chicago and several other state and local governments have badly under-funded pensions. It would seem that they would have an obligation to raise the revenue needed to pay workers, after all this money they are owed.

But in 21st century America, contracts and the rule of law apparently don’t mean anything, at least not if the people at the other end are ordinary workers. So, rather than inconvenience all those rich folks at the Chicago Board of Trade or other highly successful businesses with a larger tax bill, the plan is to stiff the firefighters, the schoolteachers, and the people who collected garbage for 30 years.

It may turn out to be the case that the rich and powerful can just rewritethe rules as they go along. But at least the people should know that theft is now in style when it’s their property at stake.

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He is a regular Truthout columnist and a member of Truthout’s Board of Advisers.

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Posted by Elvis on 12/06/13 •
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Sunday, November 10, 2013

The Theft Of The American Pension 2

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The Pension Theft Crime Wave Rages On
Rhode Island has become a model for how to rip off teachers and firefighters and enrich Wall Street.

By Mark Brenner
Labor Notes
October 29, 2013

The nations union-haters have a juicy new target, DetroitҒs public employees, ever since the city became the largest in history to file for bankruptcy. Detroit unions will wrangle with a bankruptcy judge this fall over how to handle $3.5 billion in pension obligations for 12,000 retirees.

City retirees receive a princely sum of $19,213 per year on average. Pension obligations to these workers account for less than 20 percent of Detroits debt. But the facts haven’t kept retirees from bearing the brunt of the bankruptcy fallout.

In fact, politicians across the country are seizing on Detroits hard times as an excuse to trim public pensions closer to home. For them - and for bankers angling for a piece of the actionthis could be the breakthrough they’ve been waiting for.

Lawmakers from both parties have climbed onto the same noisy bandwagon as right-wingers who complain that public pensions are too fat, ballooning out of control because of unions run amok. They throw in the fact that retirees are living longer, and tout the soon-to-be swollen ranks of retiring baby boomers, to add some statistical cover to their judgments and finger-pointing.

MANUFACTURED CRISIS

But the fact is that the crisis in funding for pensions, both private and public, is a manufactured one. Its rooted in the Enron-style accounting and something-for-nothing financial engineering that set off the 2008 financial meltdown.

Making wishful assumptions about future stock market performance, corporate execs shortchanged pensions, diverting dollars into outsized dividends and stratospheric bonuses for themselves. Many were long gone by the time the bill came due.

The same dynamic drove politicians - hardwired to tell people what they want to hearto claim that sure, corporations and the rich could have tax cuts while public sector workers continued to receive their pensions and regular raises.

Now that state and local governments are swimming in red ink because of those tax cuts and the Wall Street meltdown, unions are caught flat-footed. Their erstwhile allies, after testing todayגs political winds, now line up to ax their pay and pensions.

Rhode Island drew the road map for politicians everywhere two years ago, slashing state and municipal workers pensions with a brutal reform that forced most workers over to a hybrid plan and froze cost-of-living adjustments.

The brunt fell on retirees like 19-year firefighter Paul St. George, whose $36,000-a-year pension turned into $24,000 overnight. He had to move out of his house into an apartment and find full-time work as a maintenance man, he told the press.

UNCOMFORTABLE ARITHMETIC

Adding insult to injury, the state handed more than $1 billion in pension funds over to hedge fund companies to manage - in exchange for an expected $2.1 billion in fees over 20 years, effectively taken straight out of the pockets of retirees, who would forego $2.3 billion in COLAs over the same period.

No wonder Wall Street has pumped $2 million into the possible gubernatorial campaign of Gina Raimondo, who engineered the Rhode Island scam, as Matt Taibbi recently reported for Rolling Stone.

Even before the 2008 financial crisis and the gaping holes it created in state and local budgets, pensions were an endangered species. In 1980, 40 percent of the workforce had traditional defined-benefit pensions. Today its less than half that.

Corporations drove this shift - axing retirement plans altogether when they could get away with it, switching to 401(k) plans where they couldnt. These programs were legalized in 1978 and were originally designed to supplement traditional pensions. But 401(k)s quickly provided a cheap escape route, costing companies about half as much as traditional pensions. Even more important, 401(k)s shifted risk off companies and onto us.

Traditional pensions were a stab at a collective solution to a universal problem - how to lead a decent life when your working years were through. Pooling retirement savings among workers at a large company, or across an entire industry, smoothed out insecurity for everyone. Now its just you and the stock market.

The research shows you’ll end up with far less in your pocket. A 401(k) typically yields 10 to 33 percent as much as a traditional pension. Half of all participants between the ages of 55 and 64 have less than $120,000 in their 401(k)s.

PRIVATE SECTOR PLAYBOOK

For union members in the private sector, todays attacks on public sector pensions have a familiar ring. Corporations spent years gaming the defined-benefit pension system in a similar pattern: First, siphon off pension contributions to pump up profits - as simple as tweaking the company spreadsheet to reflect a rosier forecast of your investment returns.

Then, once the accounting gimmicks are played out, howl about legacy costs, declare bankruptcy, and stick someone else with the bill.

Companies from steel giant LTV to Twinkie-maker Hostess have followed this pattern. And things have gone from bad to worse in the five years since Wall Streets collapse.

At the end of 2012, private sector defined-benefit plans had only about 75 percent of what they owed participants. Shortfalls this year could swell to as much as $322 billion - up from $47 billion at the end of 2007according to the Pension Benefit Guaranty Corporation.

The PBGC, a government agency established in 1975 to backstop private sector pensions, is funded by premiums paid by healthy plans, along with assets recovered from bankrupt companies. But swamped today with failing plans, the agency is operating in the red. Last year the deficit between its income and its obligations swelled to a record $35 billion.

Even before the red ink, the PBGC’s payouts typically amounted to less than half of what retirees were promised by their employers. Republic Steel is an egregious example: workers watched their pensions get cut by up to $1,000 a month in 2002 when the PBGC took over, then get cut again in 2004.

In the second round, some retirees saw their benefits fall as low as $125 a month.

The PBGCs bulging deficits could trigger even more cuts to payouts, with Washington in no mood for any emergency appropriations.

For workers in multi-employer pension plans like the TeamstersҒ ailing Central States Fund, pending federal legislation would permit preemptive cuts even without PBGC involvement (see Stealth Bill Would Allow Cuts to Current Pensions).

ONE-TWO PUNCH

Though 80 percent of public employees still have traditional pensions, more and more politicians are reading from the private sector playbook. After skipping payments into their pension funds repeatedly during better economic times, when the funds looked flush, now they are pushing for deep cuts.

The numbers speak for themselves - the pension system as we know it is unsustainable, Andrew Cuomo insisted after his election as governor of New York.

Cuomo, like politicians across the political spectrum, has pitted public employees and their unions against taxpayers - while the corporations and 1&#xer;s who benefited from decades of tax cuts quietly slip out of the spotlight.

With two-thirds of public sector pensions facing shortfallsto the tune of $700 billion in 2010חthese attacks from politicians are gaining traction.

New York, one of 10 states to push through major changes to pensions last year, added a sixth tier for new hires in its state plan. Other states took similarly severe measures, such as dropping traditional pensions for new employees in favor of defined-contribution plans, increasing age and service requirements for retirement, and jacking up employee contributions. Alabama took the controversial step of terminating its traditional pension plan.

Far from shoring up our faltering retirement system, these measures will only increase its fragmentation, putting each small slice of the population into a different leaky boat.

As unions fight to defend members pensions, itҒs worth thinking beyond our shrinking share of the workforce to measures that will benefit everyone. For half the countrys workers, Social Security is already all they have. And on the flip side, some or all public employees in 15 states don’t get Social Security, so their pensions are all they have.

What if we took seriously the fate of retirees, and strengthened Social Security so that it could actually pay for most living expenses? Whether your retirement was golden or tinfoil would not depend on the health of your particular employera radical proposition, to be sure.

Weגre a long way from a universal retirement plan that robust. Cutting Social Security is almost a bipartisan goal now. So the first step is to stop politicians from hacking at Social Security as part of a “grand bargain” on the debt ceiling, Obamacare, future government shutdowns, or anything else.

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Posted by Elvis on 11/10/13 •
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Sunday, October 27, 2013

Milking The Public Pension Cow

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4 Things You Need to Know About the Plot to Sell Off Your Pensions to Wall Street
What your state legislators actually mean when they start throwing around the Orwellian phrase pension reform.”

By David Sirota
Alternet
October 23, 2013

Less than a year ago, the Wall Street Journal ALERTED its national readership to what was happening in the tiny state of Rhode Island. In a story headlined “Small State Gets Big Pension Push,” the paper noted that the state rollback of public-employee retirement benefits has turned (it) into a national battleground over pensions. With the help of billionaire FORMER ENRON TRADER John Arnold and his PARTNERSHIP with the Pew Charitable Trusts, conservative ideologues and Wall Street profiteers who engineered Rhode Island’s big pension cuts were looking to export those “reforms” to other states. Now, after two huge revelations in the last few days, we know more about what that means in practice - we know the kind of corruption and damage the reforms mean for taxpayers and retirees, and we know what kind of new muscle is behind the effort to bring that corruption and destruction to other states.

The first set of revelations comes from a detailed forensic analysis of Rhode Island’s pension system by Forbes columnist and former SEC investigator Edward Siedle. Commissioned by groups representing PUBLIC PENSIONERS in the Ocean State, the data-driven analysis ends up reading like a criminal indictment of the speculator-turned-State-Treasurer Gina Raimondo (D), who is now cheerily touted by the Wall Street wing of the Democratic Party as a rising star. Raimondo has received such billing from corporatist Democrats in no small part because of her role in helping turn her states pension fund into a private profit center. Indeed, in 2012, this Wall Street-funded Democrat joined with Arnold to champion specific pension reforms that simultaneously slash guaranteed retirement income and give adisproportionate amount of retiree money to the hedge fund industry, thus enriching Raimondo’s old pals in the financial industry. According to Siedles report, they also potentially enrich Raimondo personally. Here are just some of his report’s key findings:

1. A sinister pall of secrecy: The report documents a “sinister pall of secrecy” about the pension funds new investments in hedge funds - a pall orchestrated by state officials and aided by key investment services providers. Siedle reports that the overwhelming majority of the information requested for this review (has) been withheld in apparent violation of state law. As Rolling Stone’s Matt Taibbi and I noted in our recent San Francisco Chronicle report, such secrecy is now the norm in states, as reformers have changed the law to prevent retirees from even seeing how much of their money is being handed over to hedge fund billionaires.

2. A transfer of retirement income to Wall Street, potentially costing taxpayers big money: The report documents a staggering, almost 700 percent planned increase in (pension) investment expenses from $11 million to an estimated $70 million - fees paid to Wall Street hedge fund and other alternative managers who control the so-called ԓalternative investments in hedge funds. In total, Siedle estimates that ԓthe projected cost to (the pension fund) of the Treasurers $2 billion alternative investments gamble over the next 20 years amounts to in excess of $3 billion.Ҕ Thats more than the total savings of the retirement benefit cuts, meaning those cuts arenҒt saving taxpayers money - they are beingused to finance a new Wall Street handout.

3. Profiting at the expense of the state: Raimondo came to the Treasurers office from a financial firm backed by billionaire hedge funder Paul Tudor Jones. According to the report, ғA significant portion of (her) wealth and income relates to shares she owns in two illiquid, opaque venture capital partnerships she formerly managed at that firm Ԗ one of which she convinced the state (pension fund) to invest in.Ӕ Siedle notes that during Raimondos time in office running the state’s pension system, the fees Rhode Island is paying to the fund she has an ownership stake in are significantly higher than the venture capital industry.Ӕ As the report concludes, “all of this means that the Treasurer may literally be profiting at the expense of the state.”

4.  Worse returns that damage the pension fund even further: If all this graft was delivering better returns to the states pension system, it might be written off as merely a necessary cost of doing business and protecting taxpayers. But as Siedle documents, at the very moment Raimondo has handed over more retiree money to her hedge fund pals, The investment performance of the Fund has lagged behind its peers, earning a mere 11.07 percent versus 12.43 percent for the median public-sector pension. In total, the New York Times notes that for all of Raimondo’s insistence that giving Wall Street more taxpayer cash will generate better returns, neither set of hedge funds she has put state money into beat the returns of simply investing the cash in a simple S&P index fund - one that doesn’t incur massive fees paid to the financial industry that bankrolls Raimondos election campaigns.

Siedle’s report is worth reading in its entirety to understand what your state legislators actually mean when they start throwing around the Orwellian phrase “pension reform” and thanks to the second piece of news this week, we know that state legislators everywhere will almost certainly be throwing that seemingly innocuous phrase around. That news came from the St. Louis Beacon, which reports that none other than the American Legislative Exchange Council has decided to make cutting pension benefits one of its top goals in the 2014 state legislative sessions. They will be pushing to replicate Raimondo’s much-hyped reforms in legislatures throughout the country.

It is difficult to overstate the influence of ALEC in state policymaking. Bringing together the largest corporations, best-connected lobbyists, and most powerful state legislators, it calls the shots when it comes to state economic policymaking. So it is huge news that it is prioritizing the Plot Against Pensions and not surprisingly, its renewed involvement in the plot is connected to Enron John Arnold. That connection can be seen in the author of ALEC֒s new report urging state legislators to convert traditional defined-benefit pension plans into 401(k) style schemes and consequently reduce pensioners guaranteed retirement benefits. It is written by none other than Utah State Senator Dan Liljenquist (R), who was not only the failed Tea Party primary challenger against U.S. Sen. Orrin Hatch (R), but more important, a paid pension reform consultant for John Arnold’s foundation.

Like Siedles analysis, the ALEC report is worth perusing - but for different reasons. While Siedles report is all about indisputable data and numbers, ALEC’s is all about a kind of misinformation so dishonest its hard to believe even the most shameless propagandists could even think it, much less publish it. As just one example, notice the section of the ALEC report telling legislators to lie to public employees by telling them “that pension reform will increase take home pay and benefits” and then citing that claim as rationale to entitle pension slashing legislation a “wage liberation” act. Of course, in almost every state that has experienced pension reform, retirement benefits have been cut, giving a far different meaning to wage liberation. Workers’ wages havent been liberated to make higher wages - workers themselves have been liberated from their wages.

Why would ALEC involve itself in the effort to cut retirement benefits and replace cost-effective economically stimulative defined-benefit pensions with alternative investments and 401(k)-style systems? Part of it probably has to do with its connections to the financial industry which, as Rhode Island proves, see huge profit potential in reforms that let them raid public pension funds and bilk them with private investment fees.

The other part, no doubt, is about protecting the corporate welfare on which many of ALECs corporate members rely. By pushing to balance state budgets exclusively through cuts to pension benefits, ALEC helps create a budget discourse that solely blames public employees for state budget shortfalls, and thus leaves corporate subsidies off the chopping block. Ultimately, pension shortfalls become the boogeyman, even though the corporate subsidies that benefit ALEC members (but that often donҒt create jobs) are far larger than those pension gaps.

None of this should be particularly surprising in a pay-to-play political system, where there is cash under the control of industry-bankrolled public officials, there will always be the potential for graft and corruption. And where there is the potential to use state legislation to institutionalize graft and corruption, there has always been ALEC. What֒s different here is scale. Public pension funds are collectively worth almost $3 trillion. Though that is supposed to be money to fulfill sacred retirement promises to public workers, a coalition of right-wing ideologues, billionaire political activists, Wall Street profiteers and bankrolled politicians sees that nest egg as a lucrative private profit center. If they are successful in hiding their rip-off schemes in the argot of reform,Ӕ they will have accomplished one of the biggest heists in American history.

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Posted by Elvis on 10/27/13 •
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Sunday, May 26, 2013

The Great Retirement Ripoff Sequel

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How America’s Retirement Crisis Is Crushing the Hopes of a Generation of Young People
We shouldn’t just worry about older workers; their kids are hurting too.

By Joshua Holland
Alternet
May 22, 2013

The crucially important but largely missing context of today’s debate over so-called “entitlement reform” (read: slashing Social Security benefits and shifting more healthcare costs onto seniors) is that we stand at the early stages of what’s shaping up to be a massively painful retirement crisis.

And while there has been a longterm project among GRANNY-BASHING “entitlement reformers” to fuel a sort of intergenerational class warfare by accusing “greedy geezers” of hurting young people’s prospects, the reality is that this growing retirement crisis is HURTING NOT ONLY OLDER WORKERS AND RETIREES, but also the newest entrants into the workforce, a generation of young Americans whose prospects are FAR BLEAKER than those enjoyed by their parents.

If you’re nearing retirement age or have a parent or grandparent nearing retirement age - you’re no doubt aware of how 40 years of stagnant middle-class wages and the disastrous SHIFT FROM TRADITIONAL PENSIONS to 401(k)-type plans has made a dignified retirement all but impossible for all but the very well-to-do. According to the Bureau of Labor Statistics, the share of private sector workers RESPONSIBLE FOR THEIR OWN RETIREMENT [local copy] savings increased nearly four-fold between 1980 and 2008.

THIS TREND has been an integral part of what Yale political scientist Jacob Hacker called the ”GREAT RISK SHIFT” in which the burden of paying for education, healthcare and retirement has been increasingly shifted from corporations and the government onto the backs of individuals and families. This graphic from the CENTER FOR BUDGET AND POLICY PRIORITIES tells the tale:

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Wall Street, and its allies in Washington, swore that this transition to private accounts would harness the awesome power of the market to make us all wealthy in our golden years. In Forbes, Edward Seidle WRITES, as a former mutual fund legal counsel, when I recall some of the outrageous sales materials the industry came up with to peddle funds to workers, particularly in the 1980s, it’s almost laughable - if the results weren’t so tragic.

There was the “Dial Your Own Return” cardboard wheel of fortune that showed investors which mutual funds they should select for any given level of return. Looking for 12%? Load up on our government plus or option income funds! It was that easy to get the level of income needed in retirement, investors were told.

Like so many promises of the vaunted “new economy” popularized by Ronald Reagan and supported by both parties since, this was a scam with disastrous consequences. According to Teresa Ghilarducci, a professor of economics at the New School for Social Research, “seventy-five percent of Americans nearing retirement age in 2010 had LESS THAN $30,000 in their retirement accounts.” She adds: “The specter of downward mobility in retirement is a looming reality for both middle- and higher-income workers. Almost half of middle-class workers, 49 percent, will be poor or near poor in retirement, living on a food budget of about $5 a day.:

Today, two-thirds of retirees rely on Social Security for more than half of their retirement income, and for more than a third, those benefits MAKE UP AT LEAST 90 PERCENT OF THEIR INCOME. The AVERAGE BENEFIT IN 2012 was just $14,760, and while talk of decreasing the cost-of-living adjustment has been all the rage in Washington, the reality, according to the Congressional Budget Office, is that the cost of living for seniors has increased faster than Social Security benefits, meaning that their real value has been falling even as people increasingly rely on them to get by.

How does this hurt younger workers? As it becomes more and more difficult to retire after busting one’s ass in the American workforce for 40 years, an increasing number of older people have no choice but to remain in the workforce. Some work part-time; because of age discrimination, others take whatever jobs they can get, even if they’re wildly overqualified. According to the Social Security Administration, “the labor force participation rates of men and women aged 6279 have notably increased since the mid-1990s.”

Consider two pictures that are worth a thousand words; they show the share of the younger and older populations in the workforce, beginning about a decade after the transition to worker-owned retirement accounts began in earnest. As you can see, regardless of the ups and downs of the business cycle, the trend has been more workers aged 55 and over in the workforce and fewer working people under the age of 25 (The decline in labor force participation for 20- to 24-year-olds also correlates with an increasing share of young people getting a bachelor’s degree, so this isn’t a trend that can be attributed to a single cause.)

This shows the participation rate for workers over 55 (note that this can’t be explained by more women entering the workforce; that shift was already largely BAKED INTO THE CAKE by the time these data begin):

labor-participation-2013.png

And this shows the participation rate for those aged 20 to 24:

labor-participation2-2013.png

Today, the unemployment rate stands at 7.5 percent, but almost 23 percent of 18- and 19 year-olds and more than 13 percent of 20- to 24-year-olds who want to work can’t land a job. (The unemployment rate for those aged 55 and up is 5.5 percent.)

Again, this is the context that’s largely missing from our endless debates about fiscal policy. It points to a rather obvious conclusion: WE SHOULD be increasing Social Security benefits, decreasing the out-of-pocket healthcare costs seniors have to shoulder, and lowering the minimum age for retirement. In short, we should be focusing on policies that make it possible for older workers who have put in their time to kick back and let some younger workers find jobs. It wouldn’t be a magic bullet for young people; it wouldn’t deflate the student debt bubble or address our crushing level of income inequality, but it would be a darn good start.

Last month, the New America Foundation’s Michael Lind, Joshua Freedman and Steven Hill offered a proposal that would go a long way toward achieving that goal. They envisioned an expanded Social Security program supplemented by a flat benefit that isn’t tied to earnings or funded through payroll taxes, and argued that shifting a greater share of the costs of retirement onto Social Security would make tax-subsidized employer plans less crucial to Americans’ retirement security. University of Texas economist James Galbraith has similarly argued for LOWERING THE AGE of eligibility for Social Security and Medicare, at least until the employment picture improves.

But aren’t these programs already costing too much? And aren’t we already taxed to death, as the Tea Partiers claim? No: that’s ideologically informed mythology. Prior to the Wall Street crash, we had the fourth lowest tax burden in the Organization for Economic Cooperation and Development (OECD). And while the “average replacement rate” for public pensions the share of a workers’ income covered by retirement benefits - is 57 percent, WE COVER just 39 percent, on average, in the United States . Americans have some of the stingiest retirement benefits in the developed world.

As for the politics, it almost goes without saying that at a time when it requires 60 votes in the Senate to name a post office after a war hero—and when the House has essentially given up on legislating in the public interest policies that help real people suffering real pain in this economy are nonstarters.

But one can be certain it won’t remain that way. Because we’re just at the beginning of this crisis, and with each cohort of Americans reaching retirement age, fewer will have pensions and more will have experienced the great middle-class squeeze than the cohort before it. So it will get worse before it gets better, but eventually our elites will have no choice but to finally recognize the severity of the crisis their neoliberal clap-trap has created.

SOURCE

Posted by Elvis on 05/26/13 •
Section Pension Ripoff • Section Dying America
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