patrick.net

This thread isn't about my feelings on Anne Coulter or Canada even. The Canadian issue was a fair comparison to the US system in regards to support for honest and open discourse and the lack of with Fox, and I tried to keep the above post to that line of thinking. I think its best to keep the discussion on that tack and not get side tracked by the Anne Coulter freakshow.

So why hasn't the reporter who lied apologized on air? If they refuse to why haven't they been fired?

One can only assume it's because lying is encouraged and supported there.

duxbury001 says

The market chooses the rates

Wrong. The market doesn't get to choose the CEO rates... It's actaully no different than the teachers' union or firefighters' union. They get their buddies on the board to go along with whatever pay and benefits that they want.

Do you honestlly think that if a CEO job were made available that you'd need to offer a $25M salary to attract worthy candidates?

duxbury001 says

really am not your econ professor

Thank goodness. I don't think you are nearly qualified to be anyone's Econ professor.

shrekgrinch says

Super Vallejo here we come.

I think you misunderstood my question. How much of current deficit is due to pensions? Not Vallejo, the state of California.

duxbury001 says

Housing mortgage /interest costs shot through the roof in the late 70’s because of inflation.

Yes, it was the inflation that was causing lenders to insist on higher rates.

And speaking of economics degrees, if I were pursuing one now I'd love to write my thesis on the 1960s-1980s inflation event. I think I've got a pretty good handle on it -- the baby boom entering adulthood -- that I haven't seen much other analyses go into.

The front rank of the baby boom turned 20 in 1966. At the same time we were drafting and sending 400,000+ men to SE Asia every year. Inflation started heating up in the late 1960s:

YOY Inflation

and I think Vietnam pulling a LOT of people out of the workforce -- there were only 1.8 million men turning 18 in 1968, so a draft of 500,000 from that is just an immense drawdown of the labor pool -- had a lot to do with it.

The late 1960s inflation was only killed by both the end of the US commitment to the war (which came mid-1970) and the general draw-down from our military and space spending in general in the 1970s (I was in the Bay Area as a kid in 1974 and while I don't remember anything I do think Silicon Valley aerospace and military contracts got slaughtered that year) were deflationary.

All the while 4 million baby boomers were turning 18 every year. The boomer bumrush peaked ca. 1975 when 4.3M people turned 18.

This demographic rush put immense pressure on housing stocks. Rents went up in response. Wages went up in response to rents going up. People getting credit for the first time as adults spurred consumption, which pulled in jobs, which grew the economy.

Apparently the US had the economic potential to absorb the baby boom, like I said we saw 20 million jobs being created that decade . . . comparing that to the two million jobs the economy LOST 2000-2010 should be instructive.

As graphed above, real wages kept up with inflation, which shouldn't be surprising since real GDP was growing at 5% for much of the decade. The 1970s recessions were clearly caused by credit contractions:

this chart

shows that remarkably clearly -- credit tightening (red line) prompted each ensuing recession (shaded area).

Limited wage flexibility during recessions makes matters worse..

The recessions of the 1970s were very short and sharp. This is because they were CREATED by the PTB to slow down inflation, to keep the system from inflating out of control.

The 1969 and 1974 recessions were piddly things compared to now:

three years into the current recession, things are still TWICE as bad as the worst of the 1974 recession.

And things are going to get a lot worse here, since everything is MUCH more out of control now than in the 1970s.

I'd take living in the 1970s to the 2010s anyday. Vida Blue, Kenny Stabler, Bubble Yum costing 25c a pack, the baby boom turning 20 and not 60 -- great times.

shrekgrinch says

marcus says

That is, if people are interested in actually understanding the approximate value/cost of the pension plan per person.

Who says that is what people are interested in? Most taxpayers don’t care. They only care about what services they get for their taxpayer buck, like most consumers do for anything.

It would seem understanding one leads to understanding the other.

shrekgrinch says

The actuarial facts are what you are having problems with, I think. There is no ‘ulterior agenda’.

Actually I am hoping that the actuarial facts, and the impact of California's finances are what rules the day.

I liked many of their suggestions and "ulterior motive" was an over reaction to two of their recommendations But here were my issues.

1) Their suggestions down play the idea of increasing contributions of members and the state

2) This wording is troubling - "The Legislature should give state and local governments the authority to alter the future, unaccrued retirement benefits for current public employees."

and most troubling

3)Their suggestion of a hybrid plan that decreases the defined benefit part. This is really where I question motive. If they do this, then money payed into pension funds drops dramatically, destroying the chance of the funds and the states making good on these obligations.

Sure that saves money, but there is a reason why the word obligation is used.

Think about it. On the one hand, tweaking contributions, adding caps, and following many of their suggestions, along with (eventual) inflation and economic growth could make it possible for these commitments to be honored.

If on the other hand, some time soon, payments in to the funds are greatly reduced, because of many new workers (or all) going with hybrids with 401ks. Then the unfunded liability situation changes. Then it does indeed become impossible to honor the commitments.

I don't really expect you to understand what I'm saying here, but some might. Still my language was maybe a little over the top, and maybe this aspect of it didn't even occur to them.

shrekgrinch says

And as for bias, well…you are definitely more biased than the rest of us non-state employees on here — not that anyone can blame you. Please consider that.

I am biased. But also my self interest might motivate me to analyze more deeply than you would. I don't think I "want to believe" one way or the other as much as you do.

I had to correct number two, immediately above - it was the wrong quote.

shrekgrinch says

MarkInSF says

And note that the probably of the funds actually showing a surplus are 30ish percent, nearly triple the odds of the $500B shortfall.

What? With more fantasyland, Maddoff rates of return? I bet it does.

If you want to quote the conclusions of the report, you don't get the cherry pick which of their numbers you use. This is exactly what has been going on in the right-wing echo chamber with that "half a trillion" number.

Vicente says

So if you completely ROBBED all public employee pensions, and used it to fill your budget hole…. then what? How big of a hole in the dike do you need to fill and does that fill it?

There is some truth to this, but the vast majority of the underfunding is due to the investments not performing at the high rate of return as assumed. Some of it was even by design, since governments did not have to pay in when the fund was considered "fully funded".

A pension fund has no business investing in stocks, IMO. Their liabilities are fixed, and so they should invest any surplus funds that are left after transfer payments in safe fixed income assets. Social Security doesn't make assumptions of bold investment returns. They "invest" any surplus the lowest yielding investment possible: treasury debt.

It's completely absurd that a pension fund should have full reign to invest in risky investments, with the backing of the taxpayers should the 8% returns not come about. If you want to take higher risk, and get higher returns and risk losses, fine, but don't ask taxpayers to back it up.

If CalPERS, etc. had invested surplus in safe low yield investments, your contributions and the contributions of the state/local governments would have been MUCH higher in order to meet obligations. And that's exactly the way a defined benefit program should be run.

This whole fiasco shows the absurdity of the efficient market hypothesis, which "proved" that over the long haul you will get better returns just for taking more risk and accepting more volatility. Just take a set of risky high-yield investments, throw a bunch of darts at them for diversification, and you're practically guaranteed a high return. Turns out... not so much.

Vicente says

shrekgrinch says

Super Vallejo here we come.

I think you misunderstood my question. How much of current deficit is due to pensions? Not Vallejo, the state of California.

The best figure I've seen is that the funds are $240B underfunded assuming historical returns on the assets they invest in. Just eyeballing the charts is looks like one standard deviation is even more than that, so could be in surplus, or could be $400B.

Who knows? That my whole point. What in the world is a pension fund doing in the casino of the stock market, with taxpayer backing?

It's heads pensioners win, tails taxpayers lose.

State spending was $159B in 2009, so at $240B you're looking at well over an entire years worth of state spending just to make up the shortfall for pensions over the next many years. Obviously local goverments also contribute, and state plus local spending was $429B, but the local governments all have their own pension underfunding problems and a lot more 3% at 55 promises. I'm not sure the exact math here, but it's a whole lot of money that will be going in to make up these underfundings.

MarkInSF says

It’s heads pensioners win, tails taxpayers lose.

this pretty much nails it, yes. I don't begrudge the 10%+ CalSTRS is getting from the state and local government, that can just be considered part of their pay.

It remains to be seen how much real growth is left in equities, now that the baby boom is turning 60 and all their retirement contributions are going to start reversing soon.

But, also, Norway has tons of money invested in global equity, their SWF owns 2% of nearly every Fortune 500 company. That's not a bad inflation hedge I guess.

It also cannot be denied that the 80s and 90s were very good decades to be buying equities. Putting $150,000 in the stock market in 1981 and just leaving it be was a MUCH better investment than buying a $150,000 house . . .

I have to admit, that there is one thing I don't understand about so called "unfunded liability" or "underfunded liability."

This term refers to the negative difference between the net present value of future payouts from the fund verses the net present value of contributions by member and the employer and the state.

But here's what I don't know. If you were to increase contributions by members and the state for a total of say a $250 per month increase. Let's take California teachers (approx 300,000 teachers), that would be an additional 75 million per month into the fund. To take the net present value of how much it decreases that unfunded liability, how far in to the future do I go ?

That is, the net present value of 75 million per month payed in for 30 years is much less than the net present value of 75 million payed in for say the next 100 years.

I think the answer lies in how it changes the time that the fund can pay all beneficiaries, which tells me how far I can go. If you think about it enough, you realize that the "unfunded liability" as defined isn't really relevant. The relevant number is how far out do you go before the fund decreases too much. This is always based on assumptions.

As for the question of what the funds invest in. I disagree about not allowing stock market, but I think there does need to be oversight of risk, and that is a tricky business.

I see calstrs has more like 441,000 active members. So that number for the $250 increase per month (from members and state) would not be 75million. It would be 110 million per month more going into the fund. Or an additional 1.3 billion put in per year.

This article:

http://m.ocregister.com/news/pension-290279-state-budget.html

"The California State Teachers Retirement System needs nearly $4 billion annually on top of the $1.35 billion budgeted by Brown this year in order to be fully funded in 30 years."

Also:

"CalSTRS has been seeking an annual increase in employer-employee contributions of 14 percent of payroll, about $4 billion, nearly doubling the current contribution of more than 18 percent from schools, teachers and the state.

"Milliman said a quarter percent reduction in the earnings forecast amounts to 3 percent of payroll, which would boost the increase needed to fully fund CalSTRS obligations over the next 30 years to 17 percent of payroll."

http://calpensions.com/2010/03/05/calstrs-funding-gap-may-widen/

Part of the problem is that CalSTRS is being lumped in with CalPRS and the UC system all the time, which isn't helping them:

http://articles.ocregister.com/2011-03-04/news/28656663_1_calstrs-public-pensions-pension-spiking

The average term of the existing liabilities is 16 years. marcus says

This term refers to the negative difference between the net present value of future payouts from the fund verses the net present value of contributions by member and the employer and the state....

to take the net present value of how much it decreases that unfunded liability, how far in to the future do I go ?

The average liability has a term of 16 years, so clearly there is a lot of time to make up the shortfalls, but if it does turn out to be in the 100's of billions, even divided by that maturity it's still a hell of a lot of money.

Actually the shortfall is net present value of future payouts from the fund verses net present value of contributions by members and the employer and the state + net present value of the current assets of the funds.

In an ideal mature pension system it's mostly self paying, and amounts to a transfer payment. In other words essentially 0% return on investment beyond the growth in the overall economy. Like social security. Contributions roughly equal payments. A significant portion of the CA pension system as it stands now is their investment assets, as opposed to contribution assets.

marcus says

As for the question of what the funds invest in. I disagree about not allowing stock market, but I think there does need to be oversight of risk, and that is a tricky business.

The Stanford report recommends 80/20: An 80% chance that they will be able to meet 80% of liabilities. The asset allocation as it has stood was wildly astray of that.

meanwhile, no welfare cuts, no section8 cuts, no relocation of invaders and their spawn to their land of origion .... only less cops, less teachers, and more gangsters and dope smokers. Califantastico

welfare cuts are coming bap. Good luck with your doomstead in the valley. I'd start trashing it up so it doesn't look like an inviting target if I were you.

Troy says

“The California State Teachers Retirement System needs nearly $4 billion annually on top of the $1.35 billion budgeted by Brown this year in order to be fully funded in 30 years.”

Okay then, let's say we do just enough to have it 75% funded in 30 years. That would be better than where we are now.

The next thirty years is the most expensive time for payouts (to the baby boom retirees) so worrying about having it 100% funded thirty years from now doesn't make sense. Not that it wouldn't be nice, but that's asking too much.

Even if it was 70% funded 30 years from now, and 80% funded 30 years after that and so on. Actually, even if it held steady, at the level it is now (relative to the next thirty years) that's sufficient. This was the reason for my question about how far out you go to take the net present value of increases in contributions.

The real problem is making sure that the funding level doesn't significantly decrease. But this is also one of the reasons that getting hung up on little fluctuations doesn't make sense. We don't have to totally freak out every time there is a recession or a big drop in the stock market (it's an investment fund). But at the some time, yes assumptions matter.

hey...the ignore button does actually work...!

400 pound Michael Moore says we have plenty of money. According to him, the federal government isn't broke and the states aren't broke. It must be very easy to be a liberal: See a problem, deny it exists, it therefore magically disappears.

709hannah says

you bring nothing of importance to the discussion. i can remember when i started reading patrick.net but many years ago there was a core group that were extremely smart and relevent….there seem to be a handful of idiots that have taken over most of the threads….too bad.

Another genius. Instead of trying to learn something, it's far easier to put anyone who disagrees with you on ignore. Wonderful. And people wonder why it's impossible to have a civilized debate anymore...

Maybe this is what the Duck Dude was looking for:

http://www.youtube.com/watch?v=wgNuSEZ8CDw

RayAmerica says

400 pound Michael Moore says we have plenty of money. According to him, the federal government isn’t broke and the states aren’t broke. It must be very easy to be a liberal: See a problem, deny it exists, it therefore magically disappears.

Ray, you can't prove a point by simply insulting people. Your argument has both logical and factual errors.

Mr.Fantastic says

That’s nothing. I got elliemae to go off the deep end by simply using the word “faggot”, not even directed at her (though I did much later).

Congrats. Did you feel like a big man afterwards?

Mr.Fantastic says

I was pleasantly surprised at my skills, and continue to be. The fact that you’ve been following me around for 3 months ever since I exposed you for lying about your income further proves the point.

I'm laughing. Hate to break it to your obvioulsy fragile ego, but I've mostly ignored you after your trolling because painfully obvious.

So the question still stands. How much of the "imports" are parts from overseas that assembled together into something that become "exports" or domestic consumption and is this "manufacturing"? It's your post nomo, how about it? Why do you keep dancing around this? You keep making the claims, where's the beef?

bob2356 says

So the question still stands.

And its a good question. In my opinion the methods employed today are outdated and dont capture actual production made domestic. If HP production went up, it is assumed its all US domestic only and not international operations which it is.

Here is something off the headlines...

Medtronic resolves FDA warnings over 2 factories
FDA lifts warnings against 2 Medtronic plants, clearing way for new product approvals
The FDA cited the company in November 2009 and June 2009 over problems at facilities in Mounds View, Minn., and Juncos, Puerto Rico.

For all intend and purposes, Meds offshore Puerto Rico factory is an extension of US manufacturing and gets reported as part of US numbers. Had this been a third party, not owned by Meds, the inventory numbers (COGS) whould still be assumed to be US based, because it is assumed to be Meds production and not a third party.

Additionally, there arent any Govt reporting requirements which would provide dissecting such data. Mfg has changed over the past 10-15 years and Govt has not kept up with the changes. Supply Chain software has radically changed everthing. What you see today in the media are surveys and studies. But nothing is real time real data.

Mr.Fantastic says

tatupu70 says

I’m laughing. Hate to break it to your obvioulsy fragile ego, but I’ve mostly ignored you after your trolling because painfully obvious.

Yet in the past 2 weeks, you’ve come into FOUR threads where your first post was to try and get my attention. I thought you were happily married and straight.

Every post on here is trying to get your attention in your mind, isn't it? And I looked at my posts over the last two weeks and it showed that your were full of crap. Again.

ChrisLA says

Ray, you can’t prove a point by simply insulting people.

Insult? Just stating a fact. Michael Moore does tip the scales at 400.

People here have attributed the pension problem to various causes, but I will tell you another, and this is as interesting and major an economic phenomenon as some of the ones we have discussed recently regarding the seventies and eighties.

What this is really about is the population growth and economic growth leveling off. It is much easier to have a pension fund relatively well funded when the number of members is rapidly increasing and the economy is doing well (meaning tax revenues easily support the benefits).

But everyone is so myopic, they don't stop to think: When you have an economic system/model that basically requires population growth to work, you are in trouble when that growth slows down. To call it a ponzi scheme is overstating it, but it is a big factor here.

The public sector work force was growing for the past many decades but now the baby boom is about to go in to retirement, and the generations following it aren't much bigger (as was always previously the case), I'm sure there were many bright actuary types who saw this coming. But of course the politicians didn't want to plan long term.

But now that we are here, and also in a serious recession (relative to state tax revenues). Shrek and and his small hateful friends, hope that we just totally fuck the public workers over. I think there are solutions to this, and I hope that Brown and the government are up to the challenge of making the tough decisions. Part of the solution comes from contribution increases, part comes from small increases on the employer and state side contributions and part comes from implementing several of the reasonable suggestions from the above report.

Nomograph says

Don’t try to send people on wild goose chases all over the Internet because *you* want to know the ratio of domestic vs. imported parts in U.S. manufactured goods.
Don’t be so intellectually lazy. Go get the data, construct an argument, and then we’ll talk. I’m not here to prove your point for you.

Translate: They dont know but have a vested interest in pumping any misinformation that comes their way for their benefit. If you have a question, they say get lost.

A swindler by any other name is a swindler....

Nomograph says

I have a vested interest in manufacturing?

your vested interest is in RE.

According to your chart, SF county is already below 2009 for sold/sqft.

Obviously 2009 wasn't the bottom. I seriously doubt this year will be either.

So what is your explanation to the current sold $/sq.ft lower then your 2009 sold $/sq.ft?

http://www.redfin.com/city/9927/CA/Lafayette

bubblesitter says

So what is your explanation to the current sold $/sq.ft lower then your 2009 sold $/sq.ft?
http://www.redfin.com/city/9927/CA/Lafayette

According to the graph: the trend is still down. The tax credit sticks out like a sore thumb. We're going down for a while - no getting around that.

joshuatrio says

The tax credit sticks out like a sore thumb.

As was easily predicted - and obvious when prices started shooting up in Spring 2009. Obvious if you're not a duck:)

Mr.Fantastic says

It still pisses me off to this day that our administration spent that much money propping up the market, for THAT result.

That was the campaign promise of change. The biggest bail out in US history, if I am not mistaken.

What about inventory? In all three markets posted (SD,SF,LA) existing inventory is FAR lower this spring than in 2011. Supply is low, and demand is not necessarily going to be good this year, given the ongoing oil spike, dithering employment returns from last fall's faux recovery, and another round of tightening for lending standards coming up.

My guess is that fewer houses for sale = fewer home sales period. And we all know what that means in the long run...

Mr.Fantastic says

It still pisses me off to this day that our administration spent that much money propping up the market, for THAT result.

Yep, it didn't do much. Most of the homes on MLS now have "Price Reduced" next to every listing. The ship is sinking again and a lot of people don't like it.

So what if we had peak foreclosures in 2010, but when will that inventory hit the streets? Remember the subprime crisis and how every how was foreclosed on? According to Nomo's graph:

I remember all the inventory FOR SALE in the 2008-2009 time frame, but looking at the graph, where is all the inventory from 2009-2010?

Thank you for correcting the thread title.

Sorry for that oversized graphic, I can remove it if it's fucking up anybody's mobile device.

Here's a zoomed in version: