Intergenerational equity in the pension system, or, stealing candy from babies

15 Mar

A popular topic among academics is “intergenerational equity”. One explanation, taken from a box of laundry detergent: “Iroquois philosophy says that the decisions we make today should result in a sustainable world seven generations into the future.”  

Here’s a good article from wikipedia:

https://en.wikipedia.org/wiki/Intergenerational_equity

An old example of intergenerational equity would be  “debtor’s prison”. 

“Since the first recorded debt issuance in Sumaria in 1796 BC,[10] one of the penalties for failure to repay a loan has been debt bondage. In some instances, this repayment of financial debt with labor included the debtor’s children, essentially condemning the debtor family to perpetual slavery.”

Can you even imagine your kids being dragged off to jail because you can’t make your house payments? Apparently it still happens in other parts of the world.

“While slavery is illegal in all countries today, North Korea has a policy called, “Three Generations of Punishment”[11] which has been documented by Shin Dong-hyuk and used as a moral paragon of punishing children for parents’ mistakes.”

You think Americans are any better? 

“Stanley Druckenmiller and Geoffrey Canada have applied this concept (calling it “Generational Theft”[12]) to the large increase in government debt being left by the Baby Boomers to their children.”

And part of that debt is the retirement system. Here they are talking about Social Security, which we’ve heard for years is failing because it is not funded adequately. “What?” you say. “Anybody who has a job pays into it, it must be funded!” Hold onto your hat for this declaration.

“The U.S. Social Security system has provided a greater net benefit to those who reached retirement closest to the first implementation of the system. The system is unfunded, meaning the elderly who retired right after the implementation of the system did not pay any taxes into the social security system, but reaped the benefits.”

Sound familiar? Well, maybe you didn’t know – our former city manager, Tom Lando, receives about $155,000/year in pension,  for which he paid NOTHING. Until 2013, when Mark Orme agreed to pay a paltry 6%, the city made the “employer paid member contribution”. Meaning, the taxpayers footed the bill for pensions in excess of $100,000 a year, for people who paid nothing. And now, those people, including Orme, only pay 9%. Their underlings – those hired after 2013 – are required to pay more. It’s a big pyramid scam – the members at the top of the pyramid get the money paid  by the bottom rung. Here’s an analogy of the Social Security system that is also true for the public pension system.

“Professor Michael Doran estimates that cohorts born previous to 1938 will receive more in benefits than they pay in taxes, while the reverse is true to cohorts born after. Further, he admits that the long-term insolvency of Social Security will likely lead to be further unintentional intergenerational transfers.”

Just substitute “CalPERS” for “Social Security” and there it is – the “intergenerational transfers“. A nice way to say “stealing candy from babies.” A nice way to say, “condemning your children to debt, poverty and enslavement to the system.” 

It’s time for young people to realize what is going on. The pension system is not only a pyramid, it’s an upside down pyramid. There are too many taking out that never paid in, and too few paying too little.  The system will collapse within the next 10 years unless older pensioners agree to take less, and younger pensioners agree not only to take less but to pay more. The taxpayers cannot sustain this system. Like ex Chico city council member Randall Stone said – this burden should be born by the employees, not the taxpayers, who have nothing to gain. Especially since all the money is going to the pension deficit, leaving nothing for services. 

But I’m not too worried – I heard about this concept from my son, who told me, the biggest problem facing young people today, “is the pensions…

Teach your children well. 

 

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