Category Archives: Pensions

Lightfoot wants state taxpayer bailout of Chicago pension debts, by Ted Dabrowski and John Klingner

Posted on July 2, 2019 | Leave a comment

The new Chicago mayor wants the rest of the state to pay for Chicago’s profligacy. From Ted Dabrowski and John Klingner at wirepoints.org

It didn’t take long for new Chicago Mayor Lori Lightfoot to propose a plan that would wash her hands of Chicago’s pension crisis altogether. According to a recent report in Crain’s, Lightfoot wants the state to take over Chicago’s pension debts and merge them with the other pension plans throughout the state. The move would make all state taxpayers responsible for paying down the city’s debts.

The plan to shift city debts to the state would bail out the mayor from having to raise about $1 billion in additional taxes to pay for increasing pension costs by 2023. A massive tax hike is something she’s desperate to avoid.

But while Lightfoot may think the cost-shift is a solution, it will only make things worse for Illinois. She should expect significant pushback from many sides.

Start with downstate and suburban residents. Sure, their public safety pension funds would get consolidated under the state, too, but it’s the Chicago funds that are some of the biggest and worst-funded in the state. The four city-run funds are collectively funded at just 27 percent and face an official shortfall of $28 billion.

In contrast, the 650 downstate pension plans are 55 percent funded and have a shortfall of nearly $10 billion. The end result of any statewide pooling of pension funds will be a net bailout for Chicago.

Non-Chicagoans aren’t going to just accept yet another bailout of the city. Downstaters’ most recent bailout of Chicago came when the state’s new education funding formula locked in special subsidies for Chicago Public Schools. That included hundreds of millions in hold-harmless funding as well as $200 million-plus annually to pay for the district’s pension costs.

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As the wealthy flee New York, poorest will be most affected, by Kristin Tate

Posted on June 24, 2019 | Leave a comment

New York City and State are becoming anti-magnets for younger people seeking opportunity. From Kristin Tate at thehillcom:

Are you a young person thinking of moving to a happening city? Chances are New York is not even on your list of potential hotspots, and if you are already living there, then you are looking for a way out. The last dividends of 20 years of leadership under Rudy Giuliani and Michael Bloomberg are being squandered by well intentioned but increasingly radical policies.

Dragging business practices, skyrocketing taxes, telecommuting, and loss of special status is a toxic mix for New York. Among young people, New York is becoming passe. During recent years, both the city and the state of New York have lost residents, as waves of educated and high earning millennials have fled. In fact, more than 46 percent of New Yorkers of all ages moving out of the state are in the bracket earning above $150,000.

The Empire State budget is in near freefall, in no small part due to lower revenue from middle class and upper class workers, while growing stateslike Texas and Florida are in surplus. Governor Andrew Cuomo noted a $2.3 billion hole in the state budget earlier this year, caused largely by oppressive policies that have gutted the local population and economy. More than 450,000 people moved out of New York in the last year alone.

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Yikes! Japan has more people over the age of 80 than under the age of 10, by Simon Black

Posted on June 22, 2019 | Leave a comment

There is no way Japan will be able to continue to fund the present level of old-age benefits. From Simon Black at sovereignman.com:

Earlier this week the United Nation’s Department of Economic and Social Affairs released its 2019 world population report… and there were a number of very interesting findings:

1) World population continues to grow slightly, but the rate of global population growth is at the lowest level since at least 1950.

 2) Global population growth rates are unevenly distributed. Developed nations (including the US, Japan, Western Europe) suffer from alarming declines in fertility rates, while developing countries are experiencing rapid population growth.

The 47 least developed countries in the world (mostly in Africa) are the fastest growing, and just NINE countries are expected to make up HALF of global population growth over the next three decades.

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Complain But Remain, by Jeff Thomas

Posted on June 17, 2019 | Leave a comment

Only a small percentage of people will do anything before the super-crisis headed our way finally hits. From Jeff Thomas at internationalman.com:

economic crisis

All countries have a “shelf-life” of sorts. Generally, they begin when an old, top-heavy government collapses from its own weight. The end of the old regime is characterized by civil unrest, revolution, secession, economic collapse or some combination of these conditions.

The new country generally has minimal government and little or nothing in the way of entitlements. It’s “sink or swim” for the people, and the recovery generally begins when a portion of the population rolls up its sleeves and creates an economy based upon production.

Over time, often a century or more, the population gets better at production and the country becomes wealthier. Along the way, whatever limited government existed has done all it could to expand itself. Governments, by their very nature, are parasites, living off the productive class, and eventually that parasite has the power to dominate those who produce, by promising largesse to those on the lower levels – who are in every society, the majority of voters.

This pattern has been followed for millennia. A nation establishes its freedom; it begins a productive economy; it develops wealth; it is taken over by a parasitical government; it goes into decline; it collapses, and the cycle begins anew.

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Meanwhile, over on Planet Japan, by Simon Black

Posted on June 13, 2019 | Leave a comment

The Japanese government is in massive denial about its pension crisis. From Simon Black at sovereignman.com:

It was only a few days ago that the Japanese government’s Financial Services Agency published its oddly-titled “Annual Report on Ageing Society”.

(Like everything in Japan, English translations often hilariously miss the mark…)

This is a report that the Ministry of Finance puts out every year. And as the name implies, the report discusses the state of Japan’s pension fund, and its future prospects for taking care of its senior citizens.

Bear in mind that Japan has the oldest population in the world; Japan ranks #2 in the world for average age (46.9, just behind Monaco), #1 in the world for the greatest percentage of citizens over the age of 70, and #1 in the world for life expectancy.

In a nutshell, this means that Planet Japan has more people collecting pension benefits, for more years, than anywhere else.

Yet at the same time, Japan’s pension fund is completely insolvent. There simply aren’t enough people paying into the system to make good on the promises that have been made.

At present there are only 2 workers paying into the pension program for every 1 retiree receiving benefits in Japan.

The math simply doesn’t add up, and it’s only getting worse. Planet Japan’s birth rate is infamously low, and the population here is actually DECLINING.

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Chicago’s Pension Nightmare Is Wreaking Havoc On The City’s Housing Market, by Tyler Durden

Posted on June 2, 2019 | 1 comment

When you make promises you can’t keep, it has consequences other than the broken promise. From Tyler Durden at zerohedge.com:

As a result of high taxes and government debt, combined with a nightmarish looming pension liability, Chicago’s housing market continues to collapse, according to a new write-up in the City Journal.

Average home prices in Chicago have still not recovered from the downturn that started in 2009, despite the fact that property taxes continue to climb. This is part of the reason Illinois ranks highest among states losing people to other areas of the country. Chicago homeowners are also taking big losses when they sell their homes.

Ball State economist Michael Hicks said last month: 

“Taxes are high, the services [that taxes] pay for are terrible, and the debt load is so high, so palpably unsustainable that people have no belief that the resources can be found to turn it all around.”

“You won’t recruit a business, you won’t recruit a family to live here,” Chicago mayor Rahm Emanuel said in 2012, warning about the city’s pension problems. And that looks to be the case: Realtor.com predicted that Chicago would have the weakest housing activity this year among the nation’s top 100 markets.

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Posted in Business, Debt, Economy, Government, Pensions, Taxes

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The Social Security Fiscal Black Hole Has Arrived, by Andrew Moran

Posted on May 16, 2019 | 1 comment

The fiscal doomsday so many of us have warned about for so long is at our doorstep. From Andrew Moran at libertynation.com:

The fiscal black hole surrounding Social Security and Medicare had been talked about long before mankind got its first glimpse of the interstellar phenomenon. Like the particles and electromagnetic radiation absorbed in the galactic monster’s path, the American people face an event horizon, a point of no return. Unless drastic actions are taken by good folks in the swamp, the only hope for the next generation of retirees is that scientists discover a wormhole connecting this reality with an alternative universe that practices prudence and responsibility.

Social Insecurity And Medican’t

According to the Social Security Administration’s trustee report, the cost of maintaining this entitlement program will exceed the revenue it generates next year. The last time this happened was in 1982.

Last year, SS received $1.003 trillion in income, including $885 billion from the payroll tax, $83 billion in interest, and $35 billion from taxing benefits. At the same time, it spent about $1 trillion: $988.6 billion on benefits, $6.7 billion on administration, and $4.9 billion on retirement expenses.

With the 1.8% cost-of-living adjustment (COLA) later this year, SS expenses will exceed the money it receives. Based on current trends, SS will exhaust its reserves by 2035 and officially be insolvent. The other disappointing takeaway is that the projected bankruptcy date is one year sooner than previous estimates.

Medicare also faces a gaping budget hole. The overseers of this government benefit say it is slated for bankruptcy by 2026. This would result in hospitals, nursing homes, and other medical care providers receiving only a portion of their payments.

It isn’t all bad news. Social Security’s disability program is expected to remain in the black for an extra 20 years to 2052.

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Unlike Real Insurance, Social Security “Insurance” Creates Greater Risk for the Future, by Gary Galles

Posted on May 4, 2019 | 1 comment

Social Security is not insurance. From Gary Galles at mises.org:

Every time the Social Security trustees issue their annual report, some people notice that the system’s huge unfunded liabilities (currently, a $42.1 trillion cumulative shortfall) are inherently unfair to future Americans. That threatens its status as the “third rail” of politics, which electrocutes anyone who tries to touch it.

So Social Security’s army of defenders go on the attack. And one of their greatest weapons is that the program has been promoted as insurance program ever since it started and taking away insurance sounds like a bad idea.

In a sense, Social Security does act as a form of mandatory old age insurance for participants. However, rather than paying off with earnings from investments, as with private insurance, its taxes provide only promised future government benefits (though the Supreme Court long ago ruled in favor of the government’s claim that it did not need to provide the benefits promised).

However, for Social Security to really be insurance, a group’s “premiums” would have to finance the benefits they receive. But that has not even remotely been true of Social Security. Older generations got far more in benefits than they paid. They may believe they deserve a massively subsidized deal (especially when it is falsely presented as if early recipients actually paid all the costs of their benefits), but that deal is dramatically unfair to younger generations forced to pick up the multi-trillion dollar bill to make good on program promises.

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Chicago’s pension funds looking more like a collapsing Ponzi scheme, by Ted Dabrowski and John Klingner

Posted on April 24, 2019 | Leave a comment

Soon Chicago’s pensions funds will have more beneficiaries than working contributors, which will be their absolute death knell. From Ted Dabrowski and John Klingner at wirepoints.org:

You can’t help but call it a Ponzi scheme. Not if you look at Chicago’s collapsing demographics and consider how they’re threatening the solvency of the city’s government-run pensions. Chicago households are on the hook for more than $145 billion in state and local retirement debts and there are fewer and fewer people left to pay them.

Consider first Chicago’s falling population. The city’s metropolitan population has fallen four years in a row. It’s the only top-ten city to shrink like that. In all, the Chicago MSA lost 66,000 people between 2014 and 2018.

A falling population means the city’s massive pension debts are falling on a smaller base of taxpayers. That’s bad news enough.

But another key demographic – the ratio of active government workers to pensioners – is even more concerning.

That ratio, which equaled 1.4 actives for every pensioner in 2005, has collapsed to nearly 1.05. And if the trend continues, in just a year or two there will be more pensioners draining money from the pension funds than active workers putting money in.

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Just released: Social Security earned a pitiful 2.8% on your money last year, by Simon Black

Posted on April 23, 2019 | 1 comment

Social Security is broke and next year expenses will exceed revenues. Medicare is broke, too. From Simon Black at sovereignman.com:

Hot off the presses: The Board of Trustees for the Social Security and Medicare programs in the United States just released their annual report a few minutes ago.

And if you want to read all of its gory detail, check it out for yourself here.

Both of these programs are massively and terminally underfunded. And not by a little bit.

The Board of Trustees itself calculates Social Security’s long-term shortfall at a mind boggling $43+ TRILLION.

Simply put, the trust funds don’t have enough money to keep the programs going, at least under the current promises.

They admit right at the beginning of their report that, starting 2020, Social Security’s cost will exceed the money it earns in from interest and taxes.

That’s not some far out date decades into the future. That’s next year. And every year after that.

By 2034, just 15 years from now, Social Security’s primary trust fund will be fully depleted. And one of Medicare’s trust funds will run out of money in 2026.

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