I was invited on a local Chicago radio show to talk about teacher pensions.
The morning show is called Stocks and Jocks.
Luckily they didn’t ask me any jock questions.
Or any stock questions, for that matter.
Stocks and Jocks is a radio show that is aimed at the small investor. The host, Tom “The Chief” Haugh, has a certain populist approach to investment issues. At one point he even offered to join me in hanging some of the giant corporate types and crooked politicians from the nearest tree.
I decided not to take up the offer on the radio.
Tom thought the underfunding of state public employee pensions had to do with investment performance.
I said the problem was the failure of the state to meet their pension payment obligations for 40 years and the General Assembly’s use of the public employee pension system as a no-interest credit card.
In the end, I’m not sure we agreed on this. Certainly Tom “The Chief” Hough is interested in encouraging investments in 401Ks. But we both agreed that promises by the state should be kept.
He was a considerate host.
Can’t ask for more than that.
Fred Klonsky 
You did a great job explaining the pension issue in good and plenty language. Susan and I actually listened to the whole show. I’m not lying. You can ask her. Even if you had agreed to hang all the crooked politicians, I believe “The Chief” would have found a way to sell you the rope in quantity, lease you the tree for 75 years, and then recommend his cousin, the defense attorney.
Hi. This is Tom Haugh. Fred was a terrific guest, if I just picked guests who agreed with me neither I nor the listeners would learn much. I think he is correct when he says that the biggest share of the current shorfall is due to funding, but do not ignore the parts that poor assumptions about projected returns, poor investment performance, or outright fraud have also contributed. The main discussion point is what do we do now? People who have this “contract” for these pensions feel “not at all surprisingly” that no matter what the state and “by definition” the remaining taxpayers somehow have to right all these wrongs and make the contract good. Normally I would agree, except a lot of the remaining people have had similar “promises” either implied or explicit gone awry for them. In short, it may not be the lack of willingness of the rest of the taxpayers to essentially make up for underfunding, bad management, or outright fraud in these programs, but the ability. It is quite a stretch to ask someone with no pension or a broken 401k, or underwater house, to pay a serious tax increase so others can live the American contract (or dream) that they will never see. It is a bad deal for everyone right now.This problem, I believe, can be mitigated if sane people want to do something (current political leadership doing this is a joke), but economically it may be past the ability to totally make pension funds and people totally whole. If so, they should at least be told so they can plan accordingly.
Thanks again Tom. The system can be made whole by taxing those who can most afford to pay. This would require a progressive tax system to replace the flat tax that Illinois now has, a corporate tax rate that no longer offers Illinois corporations the lowest effective tax rate in the Midwest, and a long term plan to pay back what the state owes the employee system.
Well, said, Fred. The Chief is a tad right wing for me but seems like a nice person.
Yada, yada, yada, Tom. We heard it all before. Good for all the people like yourself who believe your misery loves company theory. You’ll be glad to know our union leaders believe the same thing.
The outrage is that when I talk to my local legislators and they tell me that they are ready, right now, to over-haul the pension system because (because our union leaders told them they’d approve) of the very reasons you speak of, then I ask them when we will see any change in the tax code (what Fred speaks about above) and their response is in a couple of years, in other words, never. It makes me want to tear the legislature a new one!
Teachers have suffered in this economy too, Tom. We also have underwater houses, our spouses have lost jobs or closed businesses, and our kids also owe thousands of dollars in student loans with no decent jobs in sight. Others of us actually hope to be able to afford to send our children to college. The individuals with the broken 401Ks or no pension at all can at least currently collect Social Security. Teachers cannot.
True, Lill. I know many retired public employees who are just keeping their heads above water, financially. No money for new things or weekend trips. ‘Just trying to stay well so they don’t get sick and caught up in a mess of medical bills.
I think maybe Tom just knows the few Richie RIch retirees – not the ordinary, non-political plain old CIvil Servants.
Oh, please! Stop the whining and bashing your own leaders. Sure, you were promised a pension. You’ll get it. If you want your COLA compounded you will probably have to get your health insurance elsewhere, at least temporarily, until the courts rule otherwise. No union has endorsed this false choice. In fact, no union leader has endorsed any scheme. They are willing to negotiate to mitigate the damage somewhat. That’s seems like a pretty smart move to me. Something is going to happen and it ain’t gonna be a progressive income tax. Get ready. Support your leaders. Hope for favorable court rulings. There are constitutionally acceptable solutions available. You are not a protected class and are not immune to the realities of American life in this century.
Bill, to quote you “Something is going to happen and it ain’t gonna be a progressive income tax.”. First of all, we have a progressive income tax system, in case you have not notIced. The top marginal rate currently stands at 35%. There are of course two problems with this. The first being the top income tax rate from 1940 to 1981 was well over 70%, I believe in those 41 years, despite three wars, the United States did quite well. It would seem that this tax rate did not impose a “horrendous” and “undue” burden on the “job creators.”. The second problem from a tax perspective are those who earn the majority of their income from investments only pay 15% capital gains tax. This is well below the percentage that the average citizen pays in taxes. It would seem that the wealthy are the protected class in this country, in this century as you say.
I personally do not mind paying taxes. I do not believe government is the problem, as many conservatives (who are oddly enought seeking public sector employment) would tell you. I like that there are people that will willingly drag me out of a burning building, teach my children, enter my recently burgaled home guns drawn, and plow the snow during a blizzard. All of this is only possible when we all pay our fair share,
It me sickens me that we have become a country that values the well being of the rich and powerful, while punishing the average american citizen. Is the reality of American life in this century? Are you happy with that Bill? I am not.
the last thing anyone who listens to the show would say about tom is that he is a right winger it is one of the few shows that shows balance
Just to be clear. My conversation with Tom on his show was not a problem for me. I thanked him for the invitation to talk. I thought our conversation was lively and we agreed far more than we disagreed. I have no idea what Tom’s political views are. We focused on the fairness of the pension issue, which I do not believe is a right-wing versus left-wing issue.
The state’s broke, the public sector unions made deals not with the correct counterparty (the body politic) but politicians in the classic corrupt bargain: you give us pensions, healthcare, etc and we’ll give you votes.
So, your issue is that public employees made contractual agreements with their employers. We received compensation, pensions, health insurance and other benefits, and somehow this was wrong? “A classic corrupt bargain,” you say. We should have negotiated instead with…who, exactly?
I said that Tom is a tad too right wing FOR ME.
I repeat his views on public employees and their pensions is very right wing.
Exactly, Bill, we are not a protected class and obviously we are not “immune to the realities of American life in this century.” That’s what I said in my previous post. Why is it that so many people are beating up on public employees and cutting assistance for the poor who most need it? Taxes have been cut to the bone and the lion’s share of the burden has been placed on the middle class. Increase taxes to the level of the pre-Bush era for the rich, and things will look a whole lot brighter for the entire country. And by the way, health insurance is not “free” when a teacher retires. We pay for it just as if it were an individual policy.
Now that is awesome,considering the years of expertise in the Business,You really are the experts when it comes to Investment and Stocks,and experienced people like Ed Butowsky are known to be the best when it comes to analysis.
Sometimes I just have no idea what a comment means. This is one of those times.