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talkpoliticsThis current economic crisis has indeed claimed its first casualties. Millions out of work, houses too expensive to occupy but worth nothing since they're underwater on the debt that financed them and the banks in too precarious a position to forgive the loans (or so they claim). Without incurring further debt, we will continue to have a stalled or broken economy; but since the current raft of leading economists fail to see debt as it is and chose to see it as an inconsequential element, no one is talking about these factors.
In fact, I'm not going to talk about these factors today either. I'm going to rant about what people blame are the factors to our economic funk but actually aren't: Taxes. Fact: We in the United States today pay very little in taxes compared to past years of prosperity, especially those of us who make what most would technically refer to a shitload of cash. Follow-up fact: All many of us can do is bitch about how are taxes are not historically low, but too high.
When the so-called media joins in the chorus of hallucination and mendacity, though, it's time to call them on their complicity.
For simplicity's sake, I'll pick on just two examples of supposedly left-leaning media, both from a supposedly left-leaning outlet, our beloved Public Broadcasting Corporation. The first is probably the most popular PRI show out there, This American Life out of WBEZ in Chicago. The episode to which I've linked offers three "stories" of tax revolters. There are the folks in Colorado Springs who wouldn't pony up with an increase in taxes and now have to directly pay the power bill to keep their street lights on. Rather than actually add up how much the tax increase would be compared to paying directly for light, these people seem happy (according to the piece) to pay directly, since taxes be bad and all that.
Heck, the story focuses on a luxury hotel owner who thinks a city should be run like his establishment. No, no delusion there. Moving on.
It's the middle story I feel should get the most scrutiny, though. Grover Norquist sits down with Ira Glass and tells him, after Mr. Glass asked nicely, that one way to "cut" government expense is to shift from a pension-based retirement system to a 401(k) private account system. Ah, but like paying for the street lights in Colorado, would the taxpayers actually save money?
No.
PBS's Frontline addressed this very question in its show a few years ago, Can You Afford to Retire? (Link to a transcript of the show.) First of all, it turns out the 401(k) program was never designed as a retirement funding instrument. It was passed as a tax dodge for hiding excessive executive income in in 1978. (See Part 4 of the show online.) A court decision later ruled that simple employee wages counted under the terms of the legislation, allowing companies to use employer contributions as deductions.
So, is Norquist right? Will these funds keep people solvent in their later years and reduce the size of government?
No on both counts. From the Frontline transcript:
Did you get that? The traditional pension plan cost the state exactly the same amount, yet delivers better retirement funding. Better funding means fewer people in dire straits later in life when their reduced earning power makes financial dire straits especially worrisome.
I'm going to assume, as a PBS employee himself, that Mr. Ira Glass knew about the Frontline piece. Why, then, would he simply mention Mr. Norquist's strange obsession about the bad ol' "expensive" pensions and not offer that bit of long-term study from Nebraska? To not mention it, even after the interview, seems amazingly suspicious to me.
It's as if Mr. Glass didn't seem to feel Mr. Norguist needed to have his specious ideological spew debunked.
When reporters turn a blind eye to corporate raiding (as 401(k) programs are, given that huge amounts are invested privately in programs, again, designed only as tax dodges), we find the first sign of a coming collapse. Those who can are taking what they can from people who ought to be warned, but aren't.
The second bit of quite un-liberal spew from a supposedly liberal organization comes, yet again, from that most ironically named of shows, Planet Money. Robert Smith (who also reported on the Colorado Springs piece in the TAL show) tries to learn what the IRS can learn from the Mormon church. I'll save you some queasy-inducing moments and sum up. The lesson is that the Mormons are a flat-tax org. "Tithing" is giving ten percent of your earnings to the church.
What got me is not a focus on a tithing organization. Big whoop. I was more amazed at how little scrutiny the concept of a flat tax got in the show as a way to fund a government. No talk about how amazingly regressive such taxes are, tending over time to concentrate money in the hands of the upper earning echelons of any society that tries it. Hong Kong, for example, at one point had a nice flat tax. It also had an enormous number of people begging in the streets and crammed in one of the most dense cities in the world.
It also had, according to my Hong Kong college roomie, the greatest per capita concentration of Rolls Royces in the world.
But no, Mr. Smith did not address this inconvenient fact. The entire episode was him interviewing a neo-classical economist (who happened to be Mormon) about a taxation scheme that would "simplify" our country, not crank our country's already amazing gap between the very rich and the very poor to, as Nigel from Spinal Tap would say, to 11.
When reporters turn a blind eye to wealth-concentrating taxation schemes by not mentioning the inconvenient down-sides to such schemes, thus enabling proponents of such schema to tout their pet "reforms" in the public sphere without incurring the wrath and ridicule they rightly deserve, another sign of coming collapse has just been witnessed.
What has driven these "liberal" outlets to such depravities? It could be the ads. TAL now pushes online services and strange-looking cars on its shows; Planet Money currently introduces each episode with support for a bank. Gosh and golly, there couldn't be any conflict of interest in that, could there?!? Given the profits banks reap even given their misdeeds, this might be the deepest cut to reporting integrity of all.
It could be the very accusation of "librul"-ism. By avoiding being liberal, in economic theory or just about anything, they keep the well-oiled propagandists at temporary bay, especially those in Congress.
I remember a progressive PBS. It was fun. It's also quite gone, thank you very much. With very, very rare exception, if the viewpoint conflicts with the business plan of a big enough donor, or the hare-brained schemes of the CEO of a donor (*cough* Koch Bros *cough*), you won't hear about the truly paradigm-changing aspects of any given topic on PBS.
I guess a greater reason to be outraged is not the lack of actual reporting or fairness to the issue demonstrated here. It's how little outrage others seem to be exhibiting. This kind of slant to the stories have become so very common that few question it. After all, let's remember how money is actually created. Can anyone out there remember seeing this explained on the news? Anyone?
Anyone?
In fact, I'm not going to talk about these factors today either. I'm going to rant about what people blame are the factors to our economic funk but actually aren't: Taxes. Fact: We in the United States today pay very little in taxes compared to past years of prosperity, especially those of us who make what most would technically refer to a shitload of cash. Follow-up fact: All many of us can do is bitch about how are taxes are not historically low, but too high.
When the so-called media joins in the chorus of hallucination and mendacity, though, it's time to call them on their complicity.
For simplicity's sake, I'll pick on just two examples of supposedly left-leaning media, both from a supposedly left-leaning outlet, our beloved Public Broadcasting Corporation. The first is probably the most popular PRI show out there, This American Life out of WBEZ in Chicago. The episode to which I've linked offers three "stories" of tax revolters. There are the folks in Colorado Springs who wouldn't pony up with an increase in taxes and now have to directly pay the power bill to keep their street lights on. Rather than actually add up how much the tax increase would be compared to paying directly for light, these people seem happy (according to the piece) to pay directly, since taxes be bad and all that.
Heck, the story focuses on a luxury hotel owner who thinks a city should be run like his establishment. No, no delusion there. Moving on.
It's the middle story I feel should get the most scrutiny, though. Grover Norquist sits down with Ira Glass and tells him, after Mr. Glass asked nicely, that one way to "cut" government expense is to shift from a pension-based retirement system to a 401(k) private account system. Ah, but like paying for the street lights in Colorado, would the taxpayers actually save money?
No.
PBS's Frontline addressed this very question in its show a few years ago, Can You Afford to Retire? (Link to a transcript of the show.) First of all, it turns out the 401(k) program was never designed as a retirement funding instrument. It was passed as a tax dodge for hiding excessive executive income in in 1978. (See Part 4 of the show online.) A court decision later ruled that simple employee wages counted under the terms of the legislation, allowing companies to use employer contributions as deductions.
So, is Norquist right? Will these funds keep people solvent in their later years and reduce the size of government?
No on both counts. From the Frontline transcript:
HEDRICK SMITH:. . . Back at that workshop in Nebraska, I had learned that Nebraska had 40 years of experience with a 401(k)-style defined contribution plan for state employees.
Nebraska is a unique laboratory. For 40 years, it has run two different kinds of retirement plans side by side, some employees, covered by the traditional lifetime pensions, others by a 401(k)-style defined contribution plan. Both were top-notch plans, with mandatory participation and contribution levels, and a 7 percent employer match. But the state was still concerned.
ANNA SULLIVAN, Dir., Neb. Retirement System: The state legislature commissioned what is called a benefit adequacy study. They wanted to have a consultant look at all of the plans and determine the adequacy of the benefit that the state was providing.
HEDRICK SMITH: The study showed that lifetime pension plans, with professionally managed investments, did far better for employees than the 401(k)-style defined contribution plan.
ANNA SULLIVAN: We've had experience since the mid-'60s, and the people retiring from our defined contribution plan do not have the kind of an account balance which is basically what a defined contribution plan gives them, an account balance it isn't sufficient for them to live on in retirement. It's just not adequate.
HEDRICK SMITH: [on camera] Forty years hasn't done the trick. It's not a matter of time.
ANNA SULLIVAN: I don't believe it's a matter of time. I believe it's a matter of understanding what it takes for the employee to take a hold of this and utilize it and earn the kind of return that they need to have. You're talking people who are not investment professionals.
HEDRICK SMITH: [voice-over] After the study, Nebraska ended its 401(k)-style plan for new employees and allowed old 401(k) participants to shift to the lifetime pension plan.
ANNA SULLIVAN: There's nothing wrong with the traditional defined benefit plan. It works, if it's done right.
(I emphasized the emphasizable.)
Did you get that? The traditional pension plan cost the state exactly the same amount, yet delivers better retirement funding. Better funding means fewer people in dire straits later in life when their reduced earning power makes financial dire straits especially worrisome.
I'm going to assume, as a PBS employee himself, that Mr. Ira Glass knew about the Frontline piece. Why, then, would he simply mention Mr. Norquist's strange obsession about the bad ol' "expensive" pensions and not offer that bit of long-term study from Nebraska? To not mention it, even after the interview, seems amazingly suspicious to me.
It's as if Mr. Glass didn't seem to feel Mr. Norguist needed to have his specious ideological spew debunked.
When reporters turn a blind eye to corporate raiding (as 401(k) programs are, given that huge amounts are invested privately in programs, again, designed only as tax dodges), we find the first sign of a coming collapse. Those who can are taking what they can from people who ought to be warned, but aren't.
The second bit of quite un-liberal spew from a supposedly liberal organization comes, yet again, from that most ironically named of shows, Planet Money. Robert Smith (who also reported on the Colorado Springs piece in the TAL show) tries to learn what the IRS can learn from the Mormon church. I'll save you some queasy-inducing moments and sum up. The lesson is that the Mormons are a flat-tax org. "Tithing" is giving ten percent of your earnings to the church.
What got me is not a focus on a tithing organization. Big whoop. I was more amazed at how little scrutiny the concept of a flat tax got in the show as a way to fund a government. No talk about how amazingly regressive such taxes are, tending over time to concentrate money in the hands of the upper earning echelons of any society that tries it. Hong Kong, for example, at one point had a nice flat tax. It also had an enormous number of people begging in the streets and crammed in one of the most dense cities in the world.
It also had, according to my Hong Kong college roomie, the greatest per capita concentration of Rolls Royces in the world.
But no, Mr. Smith did not address this inconvenient fact. The entire episode was him interviewing a neo-classical economist (who happened to be Mormon) about a taxation scheme that would "simplify" our country, not crank our country's already amazing gap between the very rich and the very poor to, as Nigel from Spinal Tap would say, to 11.
When reporters turn a blind eye to wealth-concentrating taxation schemes by not mentioning the inconvenient down-sides to such schemes, thus enabling proponents of such schema to tout their pet "reforms" in the public sphere without incurring the wrath and ridicule they rightly deserve, another sign of coming collapse has just been witnessed.
What has driven these "liberal" outlets to such depravities? It could be the ads. TAL now pushes online services and strange-looking cars on its shows; Planet Money currently introduces each episode with support for a bank. Gosh and golly, there couldn't be any conflict of interest in that, could there?!? Given the profits banks reap even given their misdeeds, this might be the deepest cut to reporting integrity of all.
It could be the very accusation of "librul"-ism. By avoiding being liberal, in economic theory or just about anything, they keep the well-oiled propagandists at temporary bay, especially those in Congress.
I remember a progressive PBS. It was fun. It's also quite gone, thank you very much. With very, very rare exception, if the viewpoint conflicts with the business plan of a big enough donor, or the hare-brained schemes of the CEO of a donor (*cough* Koch Bros *cough*), you won't hear about the truly paradigm-changing aspects of any given topic on PBS.
I guess a greater reason to be outraged is not the lack of actual reporting or fairness to the issue demonstrated here. It's how little outrage others seem to be exhibiting. This kind of slant to the stories have become so very common that few question it. After all, let's remember how money is actually created. Can anyone out there remember seeing this explained on the news? Anyone?
Anyone?
(no subject)
Date: 22/3/12 19:57 (UTC)According to my spouse, who is an actuary for one of the Top 3 accounting firms and who is one of the top 5 experts worldwide in pension fund management wanted me to point out these facts:
1. Pension funds fail for two main reasons. The first is because the industry is antiquated and not the force in the economy it once was. Obsolete companies tend to do poorly. The 2nd, especially with 'teamster' or 'government' style were merely victims of boom/bust. (wise investing lead to fattened cash reserves, which results in demands by the contributors to increase the benefit, which, by law, they had to do. Conversely, when big companies swallow smaller ones, they also absorb the liabilities of the retirement programs. Its just an accepted cost of doing business in the M&A industry.
2. The reason pensions outperform 401(k) plans, especially in the Nebraska example, is simply due to the difference in risk taken by the manager of the account. Individuals, who have a smaller pool of money to allocate, tend to be more conservative and less savvy about investments than professional money managers. Professional pension fund managers, on the other hand, are more averse to taking risk, which can result, obviously, in better portfolio performance. They also have a bigger pool of money to work with, which is, as I am sure you agree, an advantage in the money markets.
So why do you feel it is more important for individuals to manage their retirement investment than professionals who, by the way, the entire financial services sector experts agree, as well as actuaries worldwide, that given equal management costs, pensions will always outperform individually managed programs.
(no subject)
Date: 22/3/12 20:49 (UTC)Deliver better returns to the retirees given identical contributions from the employer.
(no subject)
Date: 22/3/12 21:09 (UTC)I think it might be more a question of how much money goes from the manager to the recipient. It's a question, perhaps, of management overhead on the part of whoever manages either account. Greater management efficiency leads to fewer losses.
Your plan assumes we give you money above and beyond the employer contributions. Amusing, but moot.
(no subject)
Date: 22/3/12 21:37 (UTC)Look, the Nebraska study was done to see which was a better retirement strategy for the state. It empirically found pensions were better, dollar for dollar.
Empirical trumps theoretical. Every. Damned. Time.
(no subject)
Date: 22/3/12 21:43 (UTC)(no subject)
Date: 22/3/12 21:54 (UTC)(no subject)
Date: 22/3/12 23:13 (UTC)Essentially, each person gets a personal account that is based not on market gains but on contributions over time. Employers contribute just as they would 401(k)s, but the account are in no way market gaming systems. Each PPA is guaranteed as to defined benefits.
This solves the most pressing issue, the fact that too many pension plans are tied to the company sponsoring them. Separating that and throwing in government oversight in return for insurance for failed plans removes that anxiety.
(no subject)
Date: 22/3/12 23:48 (UTC)(no subject)
Date: 22/3/12 23:22 (UTC)But anyway...
>I mean if you take this as proof that "pensions are better", does GM, Boeing, Ford, Chrysler, and plenty of other employers provide evidence otherwise?
I really not familiar with the overall situation in the US regarding retirement provision, but in the UK, it's like this: Over recent years, there's been a decisive shift away from defined-benefit (DB) occuptional pension plans - where pension amounts are worked out by a simple rule based on salary and length of service, and keeping the scheme 100% funded is like trying to balance a pin on its tip - towards defined contribution (DC) plans, where the contributions are fixed and the employees just get whatever random amount is in their personal pension 'pot' when they hit retirement.
It's very easy to see why an employer would prefer a defined contribution scheme over a defined benefit scheme that costs them the same on average - namely, the employer's contributions are stable and predictable. (Plus it's no longer a Complete Nightmare to sort out who pays what to whom when there's a merger or a split.)
A second reason is that due to the so-called "cohort effect", life expectancies have been increasing faster than was previously predicted, creating an overall tendency towards underfunding (but this is relatively mild in size as compared to the swings of the market).
A third reason is simply that employers wanted to spend less in total on retirement provision, and an excellent way to conceal a massive cut in benefits is by having it coincide with a switch between two radically different systems. (Of course, we can easily compare them just by looking at how much the employers are contributing as a percentage of workers' salaries. It typically went down from about 15-30% for DB schemes to about 6-12% for DC. But most workers don't really know anything about pensions and don't think about how much their employers are contributing on their behalf, behind the scenes.
(no subject)
Date: 23/3/12 19:06 (UTC)Interesting detail info about the two. Thanks!
(no subject)
Date: 22/3/12 22:16 (UTC)(no subject)
Date: 22/3/12 22:19 (UTC)I'd love for her to get more involved in these type communities.
She is on LJ but only to monitor my shenanigans.
(no subject)
Date: 22/3/12 20:33 (UTC)Apple looks like a titan, but I'd still worry about tying my retirement to their long term viability.
I have a 401k, but that doesn't mean I have to manage it myself. Instead I choose mutual funds that utilize those fancy experts. And that's just because I like picking out mutual funds. I could easily get an expert to manage the whole pie.
I'd like there to be social security when I hit 65. But I am sure as hell not including it in my retirement planning.
(no subject)
Date: 22/3/12 22:30 (UTC)Also don't confuse a contribution with a benefit. 401's get a return on a contribution with one-on-one accounts. Pension holders are communal, and promised a benefit. One is based on profit, the other is a fixed annual amount set by an actuary.
http://401kpsp.com/401kdbdc.php