Comment by dragonwriter
2 days ago
You’ve already benefited from them, by getting government services at a lower up front cost by acquiring labor with the promise of them on the backend.
(And, barring those promises not being fulfilled, plenty of people your age and younger have already been working in jobs that qualify them for pensions when they reach a certain age, or have a relative with such a pension with survivorship benefits, and will benefit from them as beneficiaries.)
Most of today is the result of stealing from the future, and that strategy is running out of steam.
> Most of today is the result of stealing from the future, and that strategy is running out of steam
If you "calculate the net present value (NPV) of benefits received minus taxes paid for US generations born 1850 to 2090," you find "all generations 1950 to 2050 are net gainers, while many current elderly are losers" [1].
("There are two peaks in net benefits. The first peak was centered on the cohort born in 1908 which experienced the large windfall gains from the start-up of social security but missed much of the windfall losses from the expansion of public education funding. On net, the 1908 cohort received net transfers amounting to 5.7% of lifetime earnings. The second peak in net benefit is centered on the cohorts born in 1993-94 which experienced the positive benefits of the educational expansion funded by previous generations and which are projected to avoid the looming net costs of paying the social security and Medicare implicit debt. On net, these cohorts are forecast to receive net benefits amounting to 5.6% of lifetime earnings.
There are three sets of cohorts which experienced net losses through the transfer systems. Those born before 1880 experienced net losses due to the expansion of the public education system. Those born between 1930 and 1947 also experienced net losses. While these cohorts did receive large windfall gains associated with the start-up periods for Social Security and Medicare, these were more than offset by windfall losses from the expansion of the public education system. Cohorts born after 2060 are expected to incur increasingly large net losses via the public transfer systems as Social Security and Medicare overwhelm the gains through education.")
[1] https://pmc.ncbi.nlm.nih.gov/articles/PMC2840408/
I would like to see an update, as this paper is ~15 years old. I also don't see it accounting for real estate costs outpacing wages, requiring younger cohorts to devote arguably unreasonable amounts of their current cashflows to housing. My statement does not scope solely to public transfer systems, but the economic system as a whole. Today wants returns, while issuing as much future obligation as possible (in various ways, debt instruments, higher future taxes, etc) for someone in the future to pay.
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NPV of deferred payment being less than the equivalent payment is not sufficient to demonstrate savings. 1) you must know the market clearing rate of the up front payment. 2) This sidesteps the difference in payer.
$100 today and $100 is cheaper than $200 today, but not if the alternative is $101 today. Similarly, you might not agree is a good deal if I offer $100 today instead of $200 and leave you the $100 debt. Beneficiaries are not the same as the debt holders.
Lastly, deferred payment is a good deal if I invest the present savings. If I dont, the NPV calculation benefit calculation isn't applicable.
Now financial instruments like pensions are stealing? In what way? Those workers worked for that pension. It’s funny how the top wealth owners have vacuumed up more and more wealth and you’re mad at the regular Joe working a 9-5.
My city, Chicago, is one of the ones mentioned in TFA. We had about 15 years of pension holidays, where contributions were not paid and the the catch up payments were scheduled far into the future. It is now the future and the people who had their taxes artificially lowered have long ago retired to Florida. The workers are owed a pension but it's being paid by current workers not those who got the tax breaks.
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pensions are defined benefits. if they truly worked for that pension, it'd be defined contribution.
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Let me expound so I can be exceptionally clear. I fall firmly in the "billionaires should not exist" bucket. They are a bug in the economic system. Bernie Sanders is my North Star from a policy and nation state social system perspective (its also more financially efficient, but I digress). I do not blame workers for our current fiscal crisis predicament.
Pensions are not stealing from the future. When done properly, invested prudently, and managed to a fiduciary standard, they are an effective mechanism to invest those worker capital earned at that time into productive investments to provide returns in the future when those workers approach retirement. Through the 401k attempt, we have shown this policy to be a failure. The human cannot be relied on to financially prepare for retirement, this must be done with systems and at scale.
When I say "stealing from the future," I mean where pensions were promised and now they're being marketed as "too expensive" when what would've gone into pensions over the last 40 years was vacuumed up by the very wealthy through management compensation and shareholder returns. I mean sovereign debt that has been issued, to be paid back by future workers who in no way consented to having to work to pay that debt back. I mean infrastructure and climate expenses that will rapidly approach $1T/year in costs, because we did not have the will to pay for these things today.
Capitalism stole from the future, and it will never be enough. Someone is going to be left holding the bag, and everyone is going to be unhappy the future is not as bright as the past was.
(i am once again asking you to think in systems)
McKinsey: Dependency and depopulation? Confronting the consequences of a new demographic reality - https://news.ycombinator.com/item?id=42052544 (401k failure citations)
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The person that worked for 25 years starting at 18 for a full pension benefited me? Nah, I think they benefited far far more.
They're beneficial to younger generations, provided that there's enough value generated by the younger generations to cover the cost of the pension.
The problem is, this new wave of retirees - the Baby Boomers - did not have enough children. Their children's generation - the Millennials - can thus charge more for their labor. The Millennials also aren't having enough children.
This means that the people generating the value are taking more of the value for themselves to live on (though not relative to inflation, but that's a different conversation), and there's fewer of them contributing to pensions through various government revenue schemes.
Also, anecdotally, my parents have far more expensive plans for their retirement than my grandparents ever did.