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Civil Service Pensions – A Marker for What We’ve Lost

by Brian T. Lynch, MSW

In New Jersey, as in many other states with conservative Republican Governors, the state civil service pension systems are under attack. A friend of mine, who has followed Governor Chris Christie’s rhetoric in the newspapers, commented about how reasonable this sounded since the system seems to be going broke. But the story of the pension system in New Jersey is more complicated that the current political sound bites. Let me tell you a true story about how civil service pensions came to be a target for public ridicule.

When I first went into civil service it was a calling to serve, not a career choice for the prospect of making lots of money. I was following the inspired words of John F. Kennedy and asking what I could do for my country. I was, and am still, an idealist. Money didn’t matter as much to me. I wanted to help people. I still feel that way now, which is why I blog.Back when I started with the state, everyone in the private sector had better health care and benefits, better defined pension benefits and they made a lot more money per hour or had higher salaries. Even the state cars we drove back then had no radios or air conditioning as that was considered too extravagant for state employees. That is the way it was, so working for the State came with low earnings expectations.

But things were changing in 1979 when I began my civil service career, even though I didn’t know it at the time. Big business had begun organizing politically and started spending big bucks on lobbying government for laws and regulations more favorable to business. Industry organizations were created to raise money and coordinate anti-union marketing campaigns. Ronald Reagan came into power in 1980 and set the tone for union bashing by crushing the air traffic controllers union. Private sector wages, which up to that time always rose in to proportion to increases in hourly GDP, were frozen and have remained frozen ever since. A fear campaign and actual business tactics based on globalization made jobs less secure. Private company pension systems were intentionally dismantled by big corporations to quarterly boost profits. Profit sharing arrangements took their place initially so workers had to invest in their company for their hope of retirement income. Then Wall Street saw all this money and wanted some action. They got congress to pass the IRA laws and all that pension money went to them.

Instead of real raises, businesses only offered cost of living adjustments, which keeps up with inflation but doesn’t share the extra wealth that the growing hourly GDP created for their employers. That extra wealth went to CEO’s and wealthy stockholders, beginning the cycle of great income disparity we have today. At the same time, Reagan cut the top marginal tax rate from 70% to 28%, a windfall for the rich and a huge loss of tax revenue that the rest of us had to bear.

So while the raises, salaries and benefits I received were always sub-par compared with the private sector during the first half of my career, declining private sector wages and benefits, rather than civil service raises or improved benefits, is the reason civil service looks so good today. In fact, civil service benefits have been steadily eroding for the last 15 years but this decline is slower than the collapse of private sector benefits. Civil service salaries also have barely budged in years and actually declined when you factor in inflation. But the assault on private sector salaries and benefits makes civil service look great by comparison only.

Know this, if corporate business interests had not conspired to suppress wages in America over the last 40 years the median income for a family of four today would be over $100,000/year. Instead it is shrinking and down to $51,000/year.

My point is that people in this country who work in the private sector have to fight back to regain a fair bite of the wealth they create for their employers. Workers need to re-organize and demand their fair share of our GDP. Rather than tearing away at civil servant pensions, people should be working to recreate what has been taken from them and use civil service as the framework and model to rebuild private sector retirement security.

There are particulars about why the pension system in New Jersey is in so much financial trouble.  It isn’t because it is too generous. It is in trouble because when New Jersey was flush with money during Governor Christie Whitman’s (R) term she stopped making payments. She said she did this because the stock market was booming at that time. She said the pension system was way over-funded and didn’t need more cash. By the time she finished bankrupting the state with massive tax cuts and increased credit spending, Governor James Florio (D) didn’t have the revenue to pay into the state pension system during his entire term in office. This default model became a habit with subsequent Governors. Nothing, or only fractional amounts, were paid into the retirement system for the last 20 years. Governor Chris Christie (R) refused to put money into the system a few year back, when he had the money to pay, saying he didn’t want to put money into a broken system. This is crazy talk since it was the Executive branch that broke the system in the first place by doing exactly what he was doing.

The New Jersey State Pension system is, to a lesser extent, also in trouble because it has been abused for years by politicians bumping up the salaries of their political cronies just before retirement so they get huge pensions that they didn’t deserve or contribute towards. Politician’s take advantage of the way pensions are calculated to reward their buddies.

In New Jersey, civil service pensions are based on the average salary for the last three years. Recently the Star Ledger newspaper criticized the Governor for bumping up the salary of a political friend such that his retirement income was around $120,000 per year when his base salary had been closer to $30,000 for most of his career. Politician’s have treated the state’s pension system like it was there private cookie jar.

So when the state’s pension system, or any states fixed pension system becomes a target for political destruction, let it be a reminder instead of just how much ground private sector workers have lost. Let state pension systems be the model on which the rest of the work force rebuilds what they once had.
Photo Credit: http://ivn.us/2012/07/11/california-ignores-growing-public-pension-crisis/

New Employment and Health Care Stats Refutes Obamacare Opponents

by Brian T. Lynch, MSW

 The latest labor statistics and health care statistics refute the false claims being made against the Affordable Care Act (ACA) by Obamacare opponents. The claims and facts below are summarized from an excellent op/ed in Forbes magazine by Rick Ungar, which can be found here: 

 CLAIM: Obamacare will lead to a decline in full-time employment as employers reduce hours to below 30 per week to avoid providing health benefits.

 FACT: Numbers just released by the  Bureau of Labor Statistics (BLS), shows that part-time workers in the U.S. fell by 300,000 since the Affordable Care Act became law.  This past year, the first full year of Obamacare health coverage, full-time employment grew by over 2 million.  Part-time employment leaders who oppose Obamacare.  Fewer cops, fewer teachers, fewer folks providing essential social services in the public sector  all to make political point.

CLAIM: Millions of Americans are losing their individual health insurance policy due to Obamacare.

FACT:   A new study  by Lisa Clemans-Cope and Nathaniel Anderson of the Urban Institute found that prior to the Affordable Care Act the number of people kept their individual policy was very low with just 17 percent retaining coverage for more than two years.”  The Urban Institute conducted a survey last December that asked 522 people between the ages of 18 and 64,  “Did you receive a notice in the past few months from a health insurance company saying that your policy is cancelled or will no longer be offered at the end of 2013?” Only 18.6% said their plan was cancelled because it didn’t meet ACA coverage requirements, while the expected cancellation rate was 17% in the years prior to Obamacare. You can find the following bar graph and read more  in Health Affairs.

Obamacare Survey Bar Graph

The 18.6 percent who lost individual health insurance coverage due to the ACA requirements amounts to about 2.6 million people. According to the Urban Institute researchers over half of these folks will  be eligible for coverage assistance. Still, roughly one million people will have to replace their cancelled policy with something that may cost them more. This isn’t good but it is less dramatic than what has been reported and most of these individuals would have been in the same boat prior to the ACA.

Facts matter – The Gallup-Healthways Well-Being Index was also just released. It reveals that 15.9 percent of American adults are now uninsured, down from 17.1 percent for the last three months of 2013.  That translates roughly to 3 million to 4 million people getting coverage who did not have it before.  The the number of Americans who still do not have health insurance coverage is on track to reach the lowest quarterly number since 2008.

There are currently 5 to 8 million people who can’t access Medicaid because their political leaders oppose Obamacare. That means the number of people being denied access to Medicaid expansion for political reasons is greater than the number who have signed up for Obamacare so far.  The Rand Corporation recently analyzed 14 of the states with governors who oppose the Medicaid expansion and found their actions will deprive 3.6 million people of health coverage under Obamacare. These states will forgo $8.4 billion in federal funding. Moreover, their political opposition to Obamacare will cost these states $1 billion for programs that partially compensate medical providers who care for the indigent. (see Huffington Post: http://www.huffingtonpost.com/2013/06/03/medicaid-expansion_n_3367301.html). 

 Below is an excerpt and table of the uninsured by state that is taken from the Health Affairs Blog, which you can goto at: http://healthaffairs.org/blog/2014/01/30/opting-out-of-medicaid-expansion-the-health-and-financial-impacts/

 Clearly, if the extreme efforts underway to by politicians to derail the Affordable Care Act was instead focused towards making it work, Obamacare would be wildly successful. 

Examining the numbers. The number of uninsured people in states opting in and opting out of Medicaid expansion is displayed in Exhibit 1. Nationwide, 47,950,687 people were uninsured in 2012; the number of uninsured is expected to decrease by about 16 million after implementation of the ACA, leaving 32,202,633 uninsured.  Nearly 8 million of these remaining uninsured would have gotten coverage had their state opted in.  States opting in to Medicaid expansion will experience a decrease of 48.9 percent in their uninsured population versus an 18.1 percent decrease in opt-out states. 

Exhibit 1: Uninsured Population by State, Pre- and Post-ACA 

Dickman-Exhibit 1

Here is a link to a website where you can check out state-by-state enrollments using an inter-active map: https://www.statereforum.org/tracking-health-coverage-enrollment-by-state?gclid=COCG7ffPob0CFYt9OgodPTQALQ

 And this link is to an inter-active map showing the state-by-state status on Medicaid expansion: https://www.statereforum.org/Medicaid-Expansion-Decisions-Map?gclid=CJ_i4L3Rob0CFYuXOgod2RMA4g

Immigration Myths Hide the Benefits Says US Chamber of Commerce

From the US Chamber of Commerce: This ultra-conservative organization finally comes clean with a DATA DRIVEN VIEWPOINT support their position on immigration and how it benefits the US economically.  http://www.scribd.com/doc/179652570/Immigration-Myths-and-Facts

 Immigration Myths and Facts

Despite the numerous studies and carefully detailed economic reports outlining the positive effects of immigration, there is a great deal of misinformation about the impact of immigration.  It is critical that policymakers and the public are educated about the facts behind these fallacies. [Says the US Chamber of Commerce]  

Below I present the major points of their arguments. Please go to their website to read a detailed explanation for each of these points. 

JOBS  MYTH: Every job filled by an immigrant is a job that could be filled by an unemployed American.

FACT: Immigrants typically do not compete for jobs with native-born workers and immigrants create jobs as entrepreneurs, consumers, and taxpayers
WAGES MYTH: Immigrants drive downthe wages of American workers.
FACT: Immigrants give a slight boost to the average wages of Americans by increasing their productivity and stimulating investment
ECONOMY MYTH: The sluggish U.S. economy doesn’t need more immigrant workers.
FACT: Immigrants will replenish the U.S. labor force as millions of Baby Boomers retire.
UNEMPOLOMENT MYTH: At a time oF high unemployment, the U.S. economy does not need temporary foreign workers.
FACT: Temporary workers from abroad fill specialized needs in specifc sectors of the U.S. economy.
HIGH-TECH WORKERS MYTH: There is no shortfall of native-born Americans for open positions in the natural sciences, engineering, and computer science and thus no need for foreign-born high-tech workers.
FACTS: Job openings are expanding at educational levels where demographic data show too few native-born students, so we can expect these shortfalls to persist in the future. Moreover, relative to other economic indicators, wages are increasing in STEM jobs requiring higher education.
COMMUNITY IMPACT MYTH: Immigrants hurt communities that are struggling economically.
FACT: Immigrants have economically revitalized many communities throughout the country.
TAXES MYTH: Undocumented immigrants do not pay taxes.
FACT: Undocumented immigrants pay billions of dollars in taxes each year.
WELFARE MYTH: Immigrants come to theUnited States for welfare benefts.
FACT: Undocumented immigrants arenot eligible for federal public beneftprograms, and even legal immigrants face stringent eligibility restrictions.
INTEGRATION MYTH: Today’s immigrants are not assimilating into U.S. society.
FACT: Today’s immigrants are buying homes, becoming U.S. citizens, and learning English.
CRIME MYTH: Immigrants are more likely to commit crimes than native-born Americans.
FACT: Immigration does not cause crime rates to rise, and immigrants are actually less likely to commit crimes or be behind bars than native-born Americans.
BORDER SECURITY MYTH: Reforming the legal immigration system will not help secure the border.
FACT: Immigration reform is an integral part of any effective border security strategy.

Higher Wages – Good for Families, Good for Economy & Good for Business

Below is another graphic that speaks for itself. Not only does paying higher wages improve the US economy and the lives of every citizen, it also makes good business sense.

I have written extensively on wage history and the case for a living wagewealth distribution in America, our global business competitivenessthe dangers of our growing wealth inequality, and many other issues effecting middle and working class Americans, including and post on class warfare.


In a Labor Day message from former Secretary of Labor, Robert Reich, he, ” breaks down what it’ll take for workers to get a fair share in this economy — including big, profitable corporations like McDonald’s and Walmart to pony up and finally pay fair wages. 

 

http://front.moveon.org/how-workers-can-get-a-fair-shake-a-labor-day-message-from-robert-reich/#.UiTEGDbVCup

There is a petition that you can sign if you click on the above link.  Please consider it your Labor Day obligation to those who struggled and even died to give you the benefits we still have today.

Time to Cap the Debate on Social Security and Medicare

Social Security and Medicare are in serious financial trouble in the future because they have been under attack for so long that how we thing of them has been changed by those who wish to kill these programs.  Regardless of whose figures you believe when discussing the financial health of these programs, it could all be fixed by scraping the income cut off cap for contributions.  Right now income payroll deduction collect a fixed percent of incomes up to around the first $107,000.  This was just raised to this amount this year.  All income over that amount is not considered.

I am a reluctant proponent of eliminating the Social Security and Medicare income contribution caps.  In the short run this improve the income projects for both programs for some time to come, but it would also plant the seeds of distruction for these programs.  It is helpful to understand why there are these caps to understanding my point.

Social Security and Medicare are government run insurance programs.  Payroll deductions are really premiums to pay for them.  Only those who pay their premiums over the years will be eligible for benefits in the future.  These premiums, collected though payroll deductions, are not income taxes in the sense that they do not fund the federal budget. These programs are not the cause of our federal spending deficits or our national debt (two terms often tossed about as if they meant the same thing).  Both Medicare and Social Security are currently solvent.  They are collecting enough in premiums to cover current expenses.
Because Social Security and Medicare are insurance programs, the premiums have a cap so that the revenues collected are just enough to pay expenses for current recipients.  There is no massive bank account where your money is held until you retire. What we pay in annual premiums, in other words, pays for the benefits received by current recipients.  The cap on income contributions is the means to adjust annual collections to meet current needs.  It is like the volume control, or the valve of a faucet or a dial on a dimmer switch.  The actual percentage of our income that we pay in premiums is fixed.  It is not indexed to inflation.  So even if there weren’t more seniors collecting benefits, the income cap would need to be periodically raised to adjust for inflation.  Raising the cap is how we increase premium revenues without having to change the percentage of money taken out of our salaries.  It is designed to raise the “volume” of cash flow by collecting a little more from just the wealthiest  group of contributors.
But these government insurance programs have always had their critics who, over the years, have attacked these social programs and changed the language used to describe these social insurance programs.  They alter the language in order to frame their debate and change how we think about the programs.  Premiums became” taxes,” “wage garnishment” or “big government spending.”  Benefits became “entitlements,” or “government handouts” and so forth.  As a result, increasing the income cap is, “a big government tax increase,” on the “successful” who are “job creators,” the “makers,” so that our out of control government can give even more money to the “takers”.  We all know the rhetoric on the right.
It is true that premium revenue needs to be raised and it is always true that we need to find more efficiencies in delivering services.  But the opponents of these programs scare the hell out of everyone by conflating current debt and deficits with the potential of future insolvency for these programs if income caps are not adjusted.  So we should either raise the income cap to increase revenue as originally intended or we scrap the cap and make everyone pay a flat percentage of their salary.  This method would still require periodic adjustsments for future inflation and shifting service needs, but raising premium rates would be a much harder thing to do politically since it would affect everyone and not just a handful of people who are well off and won’t hardly notice the change.

Taxpayer Subsidized Downsizing in America

The business of quick and dirty layoffs has become a familiar feature in our culture. One  recent example involved a journalist who worked at a large news organization.  He was new to the company so he gratefully accepted the friendship of a well respected senior reporter. One Friday morning his mentor emailed him about a story idea and ended it by writing, “I’ll see you at the 10 AM meeting.” This prompted the following email exchange:

“What meeting? I didn’t get the email.”

“I’ll forward it do you.”

Then a short time later: “Forget the email.  This meeting isn’t for you.  Don’t come to this meeting!”

This is how the newsroom learned that day of the layoffs.  Many senior journalists were let go along with a few younger reporters to avoid the appearance of age discrimination.  As these “redundant” employees filed from the meeting they were handed garbage bags for their personal effects and accompanied to their desks by hired chaperones.   It was all over in an hour.

Coolly calculated business decisions and pitiless firings toss employees off company books and onto government unemployment rolls somewhere in this country nearly every week.  No notices, no outplacement services, no severance pay and no extended benefits are required.  In many cases there is no effort to treat employees with the dignity or respect they deserve.

Apart from union contracts or employment agreements, American companies have no legal obligations to citizens being fired.  They need not assume any responsibility for the impact it has on an employee, their family or their community.  The only business costs of any significance are the premiums companies pay for government unemployment insurance.  This easy, low cost ability to fire workers is called “workforce efficiency” and the U.S. is among the most efficient in the world.  We ranks 12th out of 144 nations according to  the study on global business competitiveness .

In most other advanced nations there are laws requiring companies to provide loyal employees with advanced layoff notices, severance pay and other benefits.  These structural costs for downsizing may make businesses a little less competitive, but it brings significant benefits.  It helps maintain a stable workforce and postpones government funded assistance to severed employees while they look for jobs.  Requiring larger companies to provide mandatory severance benefits helps the nations absorb minor bumps in the economy without adding to problems by throwing people out of work at the first sigh of trouble.  It also happens to be a humane way for citizens to treat one another.

Here in this country we treat our labor force as if it were a commodity to be bought and discarded at will.  In the end, big business lets taxpayers foot most of the costs for unemployment benefits and supplemental welfare services for people out of work.   At the same time the pro-business lobby pushes Congress for business tax breaks and budget cuts in the  programs that help the workers they leave behind.  Isn’t it time we stopped bowing to the pro-business lobby and stand up for the American worker?

A Flat Tax Payroll Deduction Might Save Social Security

DATA DRIVEN POINT OF VIEW: Don’t be fooled.  Discussions about raising or lowering Federal Income Taxes has little to do with Social Security and Medicare, which are separately funded by payroll deductions.  Is there a funding crisis for Social Security and Medicare?  A long term problem, yes.  A crisis, no.  Can America continue to afford these programs given the number of baby boomer retirements?  The answer is yes, of course we can.  We are the wealthiest county on Earth.  Nations with far less wealthier already provide their citizens with much more generous benefits.  The reason we feel the funding punch is that the structure we’ve enacted to pay for federal insurance benefits is so regressive.

The table below makes obvious that wealthy Americans currently share almost none of the burden for Social Security and Medicare benefits.  The problem is that wealth is concentrated at the top of the income scale while payroll deductions are disproportionately collected from the bottom of the scale.  We can continue to raise the contribution rates but this only hurts those who earn the least.  We can keep raising the income cap but this only marginally increases the number of people pay into the system.

—  OR  —

We could institute a flat tax for Social Security and Medicare.  The table below shows what this might generate in premiums at the current 7.65% rate of payroll deductions.  This plan would clearly generate more revenue than needed for current benefits.  A flat payroll tax of significantly less than the current 7.65% would be all that is needed to fully fund Social Security and Medicare. It would reduce payroll taxes for the majority of Americans.

Payroll Taxes for Social Security and Medicare
Total Income from Wages
Amount Currently Deducted
Contribution As a % of Income
Contribution if deductions were based on a flat tax
$1,000
$77
7.65%
$77
This Segment Represents 57 million households
$10,000
$765
7.65%
$765
$50,000
$3,825
7.65%
$3,825
$100,000
$7,650
7.65%
$7,650
$500,000
$8,423
1.68%
$38,250
$1,000,000
$8,423
0.84%
$76,500
There are at least 100,000 household in this segment
$10,000,000
$8,423
0.084%
$765,000
$50,000,000
$8,423
0.017%
$3,825,000
$100,000,000
$8,423
0.0084%
$7,650,000
$500,000,000
$8,423
0.0017%
$38,250,000
$1,000,000,000
$8,423
0.00084%
$76,500,000
$10,000,000,000
$8,423
0.000084%
$765,000,000

This table assumes that income from wages for the wealthy are at least $110,100, which is the income cap for 2012, and assumes they are not self-employed. Income from investments are not subject to payroll deductions.  Employers pay an additional 7.65% in payroll taxes for their employees. The self employed also pay corresponding more in payroll taxes for their Social Security and Medicare benefits. Additional payroll deductions for unemployment and disability insurance may also apply in certain states and with certain individual.

These programs exist for everyone, and everyone should contribute according to their means. Those who are fortunate enough not to need the benefits still have a moral obligation to assure a minimal level of care to those less fortunate, and a social obligation to contributed to those who gave a lifetime of labor creating the fabulous wealth that the wealthy have accumulated.

Originally posted 14th June by