Friday, June 17, 2011

Offer to switch public employee pensions to inflation adjusted -- but with much smaller payout

Just an idea off the top of my head:
State employee pensions unlike federal pensions are usually (never?) adjusted for inflation as the years run on -- meaning 20 years out they may not be worth very much; 40 years out forget it (NYC police and fire for instance retire after 20 years, often in early 40s). Suppose localities and states offered retirees the option to switch to inflation adjusted pensions but with a much lower pay outs now.

This could head off the looming public employee pension crisis. Then the push could be on -- plenty of time -- for all pensions, not just government employees, to become the responsibility of the federal government just like in Europe. Just an idea to play with.

As far as SS future is concerned -- even if in this economically totally illiterate country nobody knows the eighth grade math of SS -- average income doubles at twice the rate of population, meaning that 80 years out when average income has quadrupled and population has doubled our GDP will be pushing $120,000 TRILLION a (as in each and every) YEAR. So much for that $63 trillion or $75 trillion or whatever latest scare figure Republicans bandy about.

The SS trust bonds get cashed with tax money -- income tax -- instead of payroll tax. It's something like the "death tax" the Republicans are always railing about: be you alive or be you dead the IRS has to take just so much bread -- either way.

The real problem is as with everything else is with our incredibly squeezing American labor market. I made $25,000 in 1968 adjusted for inflation. My SS payout is supposed to calculate that $25,000 as if it had grown along with average wages. Since average income (not wages, but per capita income) doubled over that time I expected my 1968 income to count as $50,000 when calculating my benefit. Instead it counted only as $33,000. The wages of the people who pay the FICA tax -- what the adjustment is geared to -- on their entire income (under $100,000) only creeped up even while per capita doubled. From what I can find out that horrible trend is assumed into all the future calculation you hear about.

If America had the kind of legally mandated unionization that exists anywhere in the world where the average person gets their share of the economic pie and political power -- both of which don't exist anywhere they don't have this system -- SS at this point in time would be flooded with money. The system is called S-E-C-T-O-R W-I-D-E labor agreements.

No comments: