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alstry (35.99)

What % Of The Stock Market Support Comes From Pension Funds????

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March 24, 2010 – Comments (3)

A decade ago, the city contribution rate for firefighters was 15.7 percent of payroll — meaning that for every $100,000 the city paid in salary, an additional $15,700 went toward retirement benefits. That rate has climbed to 28.31 percent in the current year and will be 44.61 starting in July.

For police, the city contribution rate has risen from 15.7 to 26.89 percent since 2000 and will be 45.03 percent in July.

With the private economy crashing, tax receipts are evaporating..........

Government is now running a $2 trillion dollar deficit.  Government is borrowing simply to pay the salaries and MASSIVE benefit packages of governmet workers.........

The question now is what percentage of our capital market flow of funds is simply the result of government borrowing money and funding retirement plans?????  Could you imagine what would happen to a private citizens if they did that?

3 Comments – Post Your Own

#1) On March 24, 2010 at 9:39 AM, alstry (35.99) wrote:

Mish has some nice visuals on the growing gap between public and private benefits packages.

Growing Gap between Gov't and Private Sector Benefits

The problem is if we cut public benefits...do we cut off the lifeline keeping our economy moving?

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#2) On March 24, 2010 at 12:57 PM, jdlech (< 20) wrote:

Here's the rub.  When pensions are part of a company plan, all the company has to do is file for Chapter 11 and get a judge to allow them to raid the pension.  It's happened many times already.  The airline industry made it a habit.  But if it's a union held fund, companies can't touch it.  That is what the machinist and aerospace workers union did.  But until then, thousands of people lost everything they had outside social security.

Now, people are calling for municipalities and even states to do the same thing.

It's an ethics issue as much as a finance issue.  Yes, new hires should get less pensions.  But to take away from those who already paid in (or even those already retired) is unethical, no matter how expensive.

The moral of the story is: never promise the moon unless you're sure to deliver.  Private company or municipality!!

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#3) On March 24, 2010 at 1:08 PM, jdlech (< 20) wrote:

Sorry for double posting.  But I wanted to share my own experience.  The union I was in had negotiated a buck and a half from our wages to go into their pension fund.  This was great for us.  But then when we asked for more of our wages to go into the fund, the company owner said no.

It turns out, the union would charge him years worth of our contributions if he ever had to close the shop.  That would already cost him nearly a quarter million dollars.

So although our union provided us with a tremendous (and relatively safe) vehicle to invest for our retirement, the union also set up a barrier to our own investment wishes.  None of us were happy about our union doing that.  We even petitioned for an exemption; to no avail.   As you can see, we have a better relationship with the company owner than we do with our union.  But the union does offer certain benefits that the boss cannot.  So we tolerate the union and love our boss.

Such an odd thing to hear from the labor trenches.

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