Economy Unfunded liabilities

[HockeyBjj]

The government pension crisis looms close.
In the city of LA the city workers pension unfunded liability is already about 30%

Chicago/Illinois pension crisis is so much worse. They have 214B in obligations, and only the ability to pay 85B. So 61% unfunded

What remains to be seen is truly, does government debt matter? Or can the can be kicked down the road literally forever?

 

[Last Samurai]

Chicago/Illinois pension crisis is so much worse. They have 214B in obligations, and only the ability to pay 85B. So 61% unfunded

What remains to be seen is truly, does government debt matter? Or can the can be kicked down the road literally forever?

You can continue to kick the can down the road

However, as you accumulate debt over time the interest payments get bigger and bigger. So instead of tax money going back to the community, more and more of it goes towards servicing the debt. That means there is less money left over for other things, which means they will be forced to either cut benefits or borrow more money (kicking the can even further down the road).

Cutting benefits is political suicide, so would I imagine they prefer to keep it going until there is no choice but to declare bankruptcy.

 

[fishNjits]

I'm not going to watch a 21 minute video, but for anybody who has watched it...is the "unfunded liability" discounted back to a present value basis? Failing to appropriately discount the "unfunded liabilities" would create a huge disparity between what the speaker is suggesting and actual economic reality (economic reality would be significantly better).

 

[pinger]

Your government pension system is crazy and archaic.

It builds unsustainable recurrent expenditure into budgets,well, forever.

A person's 401k should be their retirement, not a never ending annuity.

 

[Cuzcatlan]

Great interview on a guy that's a pension fund strategist.

 

[djacobox372]

Compare SS funding to the rest of the government:

SS
44 billion surplus in 2017, 3 billion surplus in 2017
3 trillion in reserves

Rest of federal government:
728 billion deficit in 2017, and a 779 billion deficit in 2018
22 trillion dollars in debt

Sure, SS is the problem. LMFAO

 

[Doodies]

Great interview on a guy that's a pension fund strategist.

Good video, I like one of his solutions, or inevitability of having all these defined benefit pensions all switched over to defined contribution. That switch has been slowly happening in the private sector for the past couple of decades but nothing much in the public sector. It was interesting seeing how these pension plans have been propping up the credit market or the junk credit market as he put it, I had no idea they were that leveraged into that kind of thing.

The generational thing will be interesting to watch in the future boomers vs younger demographics. Will the younger generation be okay with bailing out all these pension plans to help support the boomer generations retirement. He seems to think that they will get bailed out and most people will be okay with it because they are mostly blue collar workers, he might be right...

 

[7437]

You can continue to kick the can down the road

However, as you accumulate debt over time the interest payments get bigger and bigger. So instead of tax money going back to the community, more and more of it goes towards servicing the debt. That means there is less money left over for other things, which means they will be forced to either cut benefits or borrow more money (kicking the can even further down the road).

Cutting benefits is political suicide, so would I imagine they prefer to keep it going until there is no choice but to declare bankruptcy.

You seem to be confusing personal debt with government debt.

 

[Last Samurai]

You seem to be confusing personal debt with government debt.

No, I'm talking about CBO budget forecasts
which show interest payments growing
as a percentage of the total budget

As more money goes towards servicing debt
there is less money left over for other things

 

[Last Samurai]

As Debt Rises, the Government Will Soon Spend More on Interest Than on the Military

The federal government could soon pay more in interest on its debt than it spends on the military, Medicaid or children’s programs.

Within a decade, more than $900 billion in interest payments will be due annually, easily outpacing spending on myriad other programs. Already the fastest-growing major government expense, the cost of interest is on track to hit $390 billion next year, nearly 50 percent more than in 2017, according to the Congressional Budget Office.

Finding the money to pay investors who hold government debt will crimp other parts of the budget. In a decade, interest on the debt will eat up 13 percent of government spending, up from 6.6 percent in 2017.

https://www.nytimes.com/2018/09/25/business/economy/us-government-debt-interest.html

 

[superpunch]

Your government pension system is crazy and archaic.

It builds unsustainable recurrent expenditure into budgets,well, forever.

A person's 401k should be their retirement, not a never ending annuity.

We should simply switch over to 401K plans. I see 2 ways of solving this problem:

1) Require all 401K plans to have a minimum % of their portfolio invested into federal treasury bonds. These bonds can be used to fund the unfunded pension liabilities. These bonds are also provide a safe, stable investment for the 401Ks. So, this policy both funds unfunded liabilities and stabilizes 401Ks at the same time.

2) Billionaires don't need that much money. No one does. Just implement a small wealth tax. Say 2% a year. That should go into funding pensions for the blue collar workers who make their vast wealth possible.

 

[Quipling]

I'm not going to watch a 21 minute video, but for anybody who has watched it...is the "unfunded liability" discounted back to a present value basis? Failing to appropriately discount the "unfunded liabilities" would create a huge disparity between what the speaker is suggesting and actual economic reality (economic reality would be significantly better).

No.

 

[fishNjits]

We should simply switch over to 401K plans. I see 2 ways of solving this problem:

1) Require all 401K plans to have a minimum % of their portfolio invested into federal treasury bonds. These bonds can be used to fund the unfunded pension liabilities. These bonds are also provide a safe, stable investment for the 401Ks. So, this policy both funds unfunded liabilities and stabilizes 401Ks at the same time.

That's a kicking the can down the road solution. Issue more debt to pay down debt now.

As for mandating the use federal treasury bonds in 401k's, the 10 year T-note currently yields just 1.75%. Nobody can build a retirement on the returns offered by treasuries. The situation would be even worse if treasury yields actually went negative like in much of Europe (and as the President keeps demanding). Low interest rates help the economy but totally fuck savers.

2) Billionaires don't need that much money. No one does. Just implement a small wealth tax. Say 2% a year. That should go into funding pensions for the blue collar workers who make their vast wealth possible.

A wealth tax is likely unconstitutional as direct taxes can only be applied if apportioned by state population. The income tax is exempted due to the 16th Amendment.