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Old 01-22-2011, 07:33 PM
 
Location: Maryland
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Recent media reports note that there is discussion of changing the rules to allow states to go through a form of bankruptcy to discharge debts, especially retirement obligation (pensions & medical) and bonds.

What are your thoughts on this new scenario?
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Old 01-22-2011, 08:17 PM
 
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Not going to happen. For any state that did this it would mean disaster.Can you imagine a forced settlement like GM and Chrysler did. Bascially the debtors cannot own the state like they did with thosee two.The court cases would be never ending and obligations make it hard to do anything except on a cash basis really.I don't see the feds bailing out any state like they did GM and chrysler anyway.It would eman much the same as many coutries have foud themsleves and that would ean cuttig service to the qucik by the time actuaries got thru.

Last edited by texdav; 01-22-2011 at 08:40 PM..
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Old 01-22-2011, 08:25 PM
 
Location: Los Angeles area
14,018 posts, read 17,740,386 times
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Default I can see both sides on this one.

On the one hand, it seems unfair to make a promise, and a promise that so far has been legally binding, that if a worker makes X contributions from his salary and works Y number of years, then he is entitled to Z pension for life, and then withdraw the promise. What is an 80-year-old retiree on a public pension (for example) supposed to do if it gets yanked?

On the other hand, some of the specific numbers in "Z" (the pension) were wildly generous to the point of being unsustainable and the taxpayers are now bearing a terrific burden because the "X" (contributions) were just not enough. And these same overloaded tax payers often have no pensions at all in their private sector jobs. I understand the resultant bitterness perfectly.

As I have pointed out in other threads, it is also good to keep in mind that there are many, many public pension systems in this country (state, county, city, police, fire, school teachers, etc.) and that their sustainability varies considerably. Some systems include health benefits and some do not, for example. Not all these pensions are terribly generous, but we sure do read about the ones that are.

Personally, I cannot claim to know where fairness and justice would fall here. Reasonable reductions in the most egregious cases (the ones we read most about) would be fair, probably, but eliminating people's pensions would certainly not be.
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Old 01-22-2011, 09:20 PM
 
Location: Great State of Texas
86,093 posts, read 72,515,954 times
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It would cause a domino effect far beyond pensions.
Municipal bonds for example; they are not like stocks that become null and void unless they pull a "GM" type of bankruptcy. Then who would ever buy another muni bond ?

PBGC would become overwhelmed. They are already operating in the red.
One state then 50 states all doing it to shed their debts. Then all the cities within the states.
That's trillions upon trillions of underfunded pensions. And that's JUST pensions.

It's very hard to imagine..

And as I read about this I then read that somewhere in CA some pensioners got a nice COLA raise while their pension funds get a deeper shade of red.
Are they looting the treasury before it goes bust ?
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Old 01-24-2011, 08:53 AM
 
Location: Tennessee
34,691 posts, read 33,695,295 times
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Quote:
Originally Posted by Pilgrim21784 View Post
Recent media reports note that there is discussion of changing the rules to allow states to go through a form of bankruptcy to discharge debts, especially retirement obligation (pensions & medical) and bonds.

What are your thoughts on this new scenario?
The threat of state bankruptcy would force state government union leaders to bargain with their governors since bankruptcy would be much harder on union benefits than whatever deals the governors are proposing, now. I think it's a good thing.
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Old 01-24-2011, 09:26 AM
 
8,086 posts, read 4,421,113 times
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I don't believe this will come down to bankruptcy for states, or even municipalities that are over obligated. I do think it will come down to higher taxes to pay for the promises, fewer services to cope with obligations that can't be met and won't be paid (higher taxes) for by the people, and or renegotiated contracts to lower the future obligation size. Probably some combination of all three. We did not have enough 'replacements' to support all of the 'this'.

This is a whole different discussion, but part of the solution would be some type of fast tracking of citizenship for the millions of 'guests' who live in the good old USA, to 'manufacture' the 'replacements' we did not have, to pay for the services and retirement benefit obligations that we face as a country. We need more tax payers. I have no political bent in saying the forgoing. It is, after all, just a numbers game.
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Old 01-24-2011, 09:41 AM
 
48,516 posts, read 83,943,432 times
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What I see happenign is that all retiremnt of new hires will be under goig a change with the problem we are facing in the future. The biggest change i see both companies and government empoyers makig is to healthcare contributions with new hires thru terms of employment really.The same is true benefits of pension with new hires in government positions.There also will be a scale back in nmbers of governamnt employees.States have already done much more than federal governamnt which is always behind with privte empolyers always ahead of states and local.
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