Do unions and pension programs based on fantasy future earnings destroy 'state' economies?

Asked by: jakscrow
  • Unions are bad...

    Yes, 'state' economies that rely on unions and pension programs instead of personal responsibility eventually cause chaos to their state economies.

    Greece and Illinois are reminders socialism is an economic killer. Illinois pension actuaries base their future returns on 7-8% returns when the 10 yr treasury is around 2-3%. German bund is below 1% for the ten year. Mexico bonds are around 7% but mexico is far riskier than the German bund and US treasury.
    Pension funds must have at least 50% in AAA products and those have been yielding 2-3%. While the goal of major pension funds is 7-8% goal. Pension fund managers must then play very risky with the remaining allotment which inevitably leads to money destruction as is the current position of Greece and Illinois.

  • In practice, yes.

    I would not say that unions are bad, per se, but deficit-financing is, especially in the long term, and for things to be run without real-world economic sense, as in Greece and Illinois, is heinous foolishness on the part of the people in control.

    If the state would not be tied to this, then I don't see an immediate problem, i.e. pension programs that are not funded properly would eventually collapse, causing pain for those pensioners, but the state would not be dragged down, itself.

    When it is a state deal itself, then it becomes an unfunded liability, and is there ever the political will to get real and do what must be done, for the long term stability? I don't think so - people don't want to face declining benefits or higher mandatory contributions, and the politicians are more concerned with maintaining their own power and position than they are with doing what the system really needs.

    This has application to the U.S. federal government, as well. In all these cases, do we really see anything else besides a "kicking of the can" further down the road?

  • Most unions are not public

    Most unions have nothing to do with taxes: state, local, or federal. Union fees come from employees. I assume the opposition is also against social security as that is also based on future earnings. Defined benefit pensions (you work for a certain number of years, company gives specified retirement cheque for life) gives security to older folks as well as lower those that get subsidies from govt as they will rise above the poverty level.

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