Anonymous - Fed Reserve Caught Red Handed

A Nightmare on Wall Street

The Door is About to Shut for Americans

(Not saying I buy into this philosophy wholeheartedly, but it does make some decent points.--jef)

Tim Hawkins - Thursday, May 26, 2011

Anyone aware of the US Government's real financial situation knows that time is running out. The Government has $15.5 trillion in admitted debts but those debts, when calculated under Generally Accepted Accounting Principles (GAAP), or 'honest accounting', is over $70 trillion. $70 trillion divided by 300 million+ Americans works out to $233,000 per person in US Federal Government debt and obligations. Or nearly $1 million per family of four.

That does not included personal debt, state debt or municipal debt.

This debt plus an economy that has been completely hollowed out by the Federal Reserve system ensures that there is no way the US Government can ever pay off this debt. And, everyone knows it.

The indications that the US Government is moving very quickly to enact any legal measure or fine against Americans and to make it nearly impossible for any American to escape payment to pay for their sins are everywhere.

Well, the problem is, the US Government is moving very quickly to make it so almost everyone is seen as a criminal in the eyes of the US legal system.

Now We Are All Criminals

It is already said that there are so many laws, rules and regulations in the US that each person in the US breaks at least one law per day, if not much more - without even knowing it. But the US Government is becoming more obvious in how it will go about making everyone a criminal and fining them ridiculous amounts of money in doing so.

This week, an American family who said they were just trying to teach their son about responsibility and entrepreneurship was fined $90,000 by the USDA because the teenager sold $4,600 worth of bunnies in one calendar year without a license. Not only were they demanded to pay $90,000, but if they did not pay within a short period of time the fine could increase to as high as $4 million.

This one case only goes to show how easy it is, within the system, to take any small transgression and to blackmail someone for, for all intents and purposes, every penny they have - or more.

Students to be Forced into the Military to Repay Debts

We also recently commented on how the US college system draws people into large debts (Debtucation) and how student debt is now larger than credit card debt in the US. It is the US Government itself that has made college education so expensive by offering student loans to anyone who can fog a mirror but again they have shown their intentions by making student loan debt the only debt which can not be forgiven. A 2005 decree from the Bush Administration stated that student loan debt could not be dissolved through bankruptcy proceedings. The only other scenario where this “no-escape” clause exists is debt from criminal acts and debt from fraud. In other words, student loan debt is seen, by the US Government, as being similar to proceeds from crime.

What will this mean with more young Americans in student loan debt than any other time? It's anyones guess but it would not be out of the realm of possibility to force students who can not pay off their debt into the military to repay their debt.

And with the US military with 800 military bases worldwide with US military personnel in 156 countries and US Military bases in 63 countries and currently occupying or attacking Iraq, Afghanistan, Libya and with other drone operations in places like Yemen and Pakistan, the US is all but ensuring that it is screwing around in enough places to eventually draw in one of the big boys. Russia, China or Iran.

And, hey, we Gotta Support the Troops, right?

US Government Eyeing Pensions and Retirement Funds

On the other end of the spectrum, seniors and those in retirement, the US Government recently made it very obvious that funds held in retirement accounts are going to be the first to be taken when times get tough.

In the recent scuffle over raising the debt ceiling, the US Government was short of some funds after reaching the United States' $14.3 trillion debt ceiling last Monday. Where was the very first place the US Government went to find new sources of funds? Last week they dipped into state pension funds in order to make payments.

It is no great leap to think that as things worsen in the US Government's financial situation, which is all but guaranteed, that the first thing that will be nationalized will be all tax sheltered retirement accounts. After all, we all have to do our part to pay for the debts of the Government, right?

Anyone living off of US pensions should be very worried. And anyone with significant funds in retirement accounts should be running, not walking, to get any funds they can outside of the direct control of the US Government. We recommend looking at "Unleash Your IRA", a great program for diversifying your IRA internationally.

Get a 2nd Passport

There are two ways to look at the upcoming battle between the US Government and US citizens. You can stay and fight or you can run and hide.

If you plan to stay and fight we wish you good luck and will try to support your efforts in any way we can.

If you would rather run and hide then one of the first things you should be looking to do at this time is to at least get a second passport. This is still legal for Americans and there are many options.

As well, if you have the financial capability, we highly recommend buying some foreign real estate - preferably somewhere you like to live.

2011 Last Year to Get Out

Most things are still legal in the US. It is still legal to have foreign bank accounts - although you are required by law to report them to the Government. It is still legal to get a second passport. It is still legal to move assets in your IRA outside of the country. It is still legal to move money outside of the country and buy foreign real estate.

The window of opportunity is closing. If you live in the US and still have all your assets inside of the US, you likely have months, not years, to internationally diversify your assets and to get your affairs in order. Anything much after 2011 is taking a big risk of losing it all.

The Government Can

After all, we, as individuals have to live within our means and it is considered a crime if we forcibly take money from others to pay for our debts. The Government, on the other hand? The Government can take whatever they want.

The vulture funds of death

 Source: SCMP - May 21, 2011  

Goldman Sachs, Deutsche Bank and JPMorgan Chase, which bundled and sold billions of dollars of mortgage loans, now want to help investors bet on people's deaths.

Pension funds sitting on more than $23 trillion of assets are buying insurance against the risk their members live longer than expected.

Investment banks see this as an opportunity to package that risk into bonds and other securities and create a new market for those willing to bet on life-expectancy rates. If pensioners die sooner than expected, investors profit. If they live longer, investors must compensate the pension fund for the additional costs it faces.

The hard part: finding buyers willing to take on the bets that may take 20 years or more to play out.

"Banks are increasingly looking to offer derivative solutions," said Nardeep Sangha, 43, chief executive officer of Abbey Life Assurance, a London-based Deutsche Bank unit that helps pension funds manage the risk of retirees living longer than expected. "Making the long maturity of the risks palatable for investors, including sovereign wealth funds, private-equity firms and specialist funds, is the challenge."

As insurers reach the limit of how much pension-fund liability they are willing to shoulder, companies such as JPMorgan and Prudential last year set up a group aimed at establishing and standardising a secondary market for so-called longevity risks.

They are also developing indexes that measure mortality rates and securities to let pension funds pay fixed premiums to investors in return for coverage against major deviations from projections.

Swiss Re, the world's second-biggest reinsurer, sold the world's first longevity bond in December in what it called a "test case" to sell risk to the capital markets.

Goldman Sachs and Deutsche Bank have set up insurance companies that promise to pay pensions if retirees live beyond a certain age. They typically receive a portion of the pension plan's assets in return. The banks, along with Morgan Stanley, Credit Suisse and UBS, are looking for ways to offer this risk to investors.

"Ultimately, reinsurance capacity for longevity risks will run dry, and that's why it's imperative that as the market grows and develops it is able to bring in new types of risk-takers," Sangha said.
"The obvious channel is the capital markets."

Medical advances and healthier lifestyles have made predicting life spans more difficult for pension funds. Life expectancy in the United Kingdom is increasing by one to three months every year, according to Dutch insurer Aegon. Every year of additional life expectancy typically adds as much as 4 per cent to future pension requirements, Aegon said in a report in March.
Pension funds can hedge against life-expectancy risk by transferring assets to an insurer or other counterparty that promises to pay some or all of the future liabilities.

Last year, GlaxoSmithKline, the UK's biggest drug maker, became the 10th FTSE 100 firm to buy insurance on about £900 million (HK$11.3 billion), or 15 per cent, of its UK pension obligations. That means Prudential, the UK's largest insurer, rather than the pension fund, will pay some GlaxoSmithKline pensioners should they live longer than expected.

"We're seeing more and more sophisticated mechanisms being offered," said Bill Galvin, CEO of the UK's Pensions Regulator. "From a regulatory perspective, we are concerned to ensure that trustees understand the extent to which longevity risk has been passed from their scheme, and the precise shape of any residual risk."

The UK is the world's biggest market for insuring pension liabilities after a change in accounting rules in 2004 forced companies to include pension plans on their balance sheets, increasing the volatility of earnings.

Since then, £30 billion of liabilities have been insured, about 3 per cent of the total outstanding, according to estimates by Hymans Robertson, a London-based pension consultant.

Banks and insurers completed a record £8.2 billion in longevity-risk transfers last year.

Goldman Sachs-owned Rothesay Life sold the most pension-plan insurance in 2010, while Deutsche Bank's Abbey Life completed the biggest swaps deal.

Investors may be attracted to betting on life-expectancy rates because longevity trends are not linked to movements in equities, bonds or commodity markets, said David Blake, director of the pensions institute at Cass Business School in London, who has worked with JPMorgan on the derivatives.

The complexity and risk involved in longevity assets with timelines of more than 20 years means banks are looking to create bonds that offer 5 per cent to 9 per cent in annual returns, according to Guy Coughlan, former head of longevity structuring at JPMorgan. Returns as high as the "mid-teens" are possible, he said.

But not knowing whether a bet on a group of pensioners' life spans is correct for decades prevents some hedge funds, such as London-based Leadenhall Capital Partners, from entering the marketplace. Luca Albertini, CEO of Leadenhall, said the longevity market simply was not liquid enough.

Subprime mortgages sold in the past decade were the genesis of the biggest financial meltdown since the Great Depression. Investment banks passed the risk of borrowers defaulting to the capital markets by packaging, or securitising, the loans into bonds and selling them to investors and one another.

Collateralized debt obligations were sold in such volume that when mortgage holders defaulted, governments in the US and Europe had to bail out the financial system. In much the same way, banks are now looking to securitise the risk of pensioners living longer than expected.

Securities based on life expectancy do not hold the same risks as those linked to subprime mortgages because they are "fully collateralised", minimising the risk from a counterparty failing to meet its obligations, Coughlan said.

However, David McCourt, senior policy adviser at the UK's National Association of Pension Funds, said: "There's a massive counterparty risk. People say insurance companies don't go bust, but they do. We've seen AIG and investment banks going under like Lehman.

"There's a lot of pressure on the trustees to make sure they're comfortable the deal is right because there's no going back."

Rothesay Life, the biggest pension liability insurer in the UK last year, has not joined JPMorgan and Prudential in the new London-based Life & Longevity Markets Association.  Managing Director Tom Pearce said it preferred to develop the market alone and did not expect it to be easy.

"Clearly, if there was a capital market solution that would be helpful for the market generally, but there are some challenges," he said. "The biggest is selling these very long-term risks to shorter-dated investors."

How Wall Street and the Toxic Philosophy of Ayn Rand Are Destroying Our Retirements

Washington is talking about balancing the budget on the backs of the elderly, but the economic security they enjoyed at one time is already imperiled.
By Les Leopold, AlterNet
Posted on May 4, 2011

It’s tough growing old. And it’s even tougher growing old in America -- unless you’re rich.

It used to be that you could count on two pensions – social security and a pension from your employer. But now work-related pensions are an endangered species and Social Security is under assault from a lethal combination of Wall Street’s insatiable greed and the pernicious philosophy of Ayn Rand.

For much of the post-WWII period, private sector workers could count on decent, defined benefit pension funds that paid a fixed monthly amount for as long as you lived. Most also included options that allowed your spouse to receive benefits for the rest of his or her life after you died. You felt like you could survive into your golden years and provide for your loved ones.

Defined benefit plans are much more secure than 401(k)s, which end when the money runs out. The odds are that you will quickly outlive your 401(k). In fact, the average 401(k) has a balance of only $45,519, and 46 percent of all 401(k)s are worth less than $10,000.

Twenty-five years ago, 80 percent of large and medium-sized firms offered defined benefit pension plans. Today only 21 percent have them. And half of all full-time workers (and most part-time workers as well) have no workplace retirement plans at all.

The Premeditated Murder of Private Pension Funds

The birth and death of private pension funds are directly connected to the rise and decline of unions. In 1955, more than one in three private sector workers belonged to a union and those unions fought hard for pensions and health care benefits. Currently fewer than 7 percent of all private sector workers are in unions so private employers feel little pressure to provide such benefits. Corporate America has stopped offering pensions because it doesn’t have to.

But corporations do feel enormous pressure to deliver higher profits on a quarterly basis to meet Wall Street expectations. This pressure has led to more movement of facilities overseas, more efforts to keep wages down, more anti-union crusades and more cuts in benefits.

Public Employee Pensions now on the Block

While unions were being crushed in the private sector, they grew rapidly among public sector workers. Today more than 35 percent of public employees belong to unions and low and behold, 76 percent of these workers still have defined benefit plans.

So doesn’t that mean that public employees are overpaid and killing our state and local governments?

NO! Every reputable study shows that public sector workers do not receive more total compensation than their counterparts in the private sector when you compare them by education and experience – the proper way to compare workers across industries and sectors. In fact, public employees earn a little bit less in actual wages than their private sector counterparts, but, they make it up in benefits. (See the excellent report by Jeffery Keefe of the Economic Policy Institute.)

Public Pensions Poisoned by Wall Street

Unfortunately, public sector pension plans are in trouble and we can thank Wall Street for that as well. Writing for Bloomberg Markets, David Evans describes Wall Street’s systematic efforts to sell toxic assets to public pension funds. They didn’t just peddle risky mortgage-backed securities and CDOs filled to the brim with liars-loans and such. Wall Street firms actually pushed pension funds to buy the bottom slice (the equity tranche) that would be the first one to fail in case the housing market declined (which it did later that year).

How bad were these securities? They were so bad that even the whorish rating agencies, which doled out high ratings for their Wall Street johns without blushing, refused to rate these equity tranches. Nevertheless, pension funds foolishly trusted their bankers and bought 18 percent of all of these unrated slices. Today these investments are worthless, costing pensions tens of billions of dollars in losses.

But this is just tip of this toxic iceberg. For every equity tranche there were dozens of “rated” slices that were pedaled by Wall Street to state and local pension funds as well. Even those with AAA ratings have gone under. This means that even the most cautious pension funds that held to strict rules prohibiting investments in risky, unrated securities got totally screwed by Wall Street and the bogus AAA ratings.

To my knowledge, no one yet has totaled up the amount of toxic crap sold to public pensions. That’s because pension fund managers don’t want to admit how stupid they were to trust Wall Street banks and the rating agencies. But the truth is starting to leak out as many states are suing Wall Street to recover some of these losses.

I’m personally familiar with one case concerning five Wisconsin school districts that invested $200 million in synthetic CDOs to help cover retiree costs. They were told by their trusted local broker that these securities were rated AAA and AA. The school districts lost their entire investment in a matter of months. The case is now moving through court. (See the first chapter of Looting of America posted on Alternet.org.)

Not only did Wall Street deliberately push their crap onto public pension funds, but when their “innovative” securities exploded, the entire economy imploded leaving state and local government finances in shambles. Forty-two of the 50 states face fiscal crises because eight million jobs disappeared in a matter of months. Tax revenues went into free-fall and public expenditures, like unemployment insurance, skyrocketed. Also, the pain of the bursting housing bubble was felt most acutely at the local level. Housing values collapsed as did property tax revenues.

The Move to Eviscerate Public Pensions

To the delight of right-wing demagogues, public sector unions and their pension funds are now extremely vulnerable. States are under such fiscal distress that they find it difficult to pay what is owed to the public pension funds, which have lost value due to the poisonous assets and the Great Recession. The stock market crash alone caused state pension funds to lose more than $850 billion in three years since 2007, according to economist Dean Baker. There would be no public pension crisis were it not for Wall Street’s greedy recklessness that took down our economy.

But, if you hate unions and their pension funds, and have no problem lying a bit, this is the ideal time to launch a full scale attack. It’s easy to whip up public resentment against these so-called “privileged” workers and their “lavish” benefits even if the facts show otherwise. Governors just love saying: “Why should you pay higher taxes for benefits for public employees that you don’t have.”

Of course, the real answer is not to cut pensions. Rather, Wall Street should pay for the damage it created. The banks we bailed out should make the states whole and replenish the pension funds that they poisoned.

Social Security in the Crosshairs

The financial crash and the ensuing bailouts also set the stage for another assault on Social Security, the most enduring legacy of the New Deal. With unemployment still unconscionably high, federal revenues are down, leading to growing concern about deficits. Of course, the sane solution would be to put America back to work and pay for job creation with taxes on Wall Street’s renewed profits. But sanity is not Washington’s strong suit. Instead, deficit hawks want the richest country in history to take an axe to “entitlements” that supposedly are unsustainable.

Congressman Paul Ryan, a devout follower of the late Ayn Rand, is resurrecting the failed Bush-era scam to turn Social Security into private investment accounts so that everyone can play in the Wall Street casino. You would think that the recent crash would have killed that idea. But Ryan feels a moral obligation to unshackle the super rich and eliminate government support for the aged. It’s pure Ayn Rand. Here’s Joshua Holland’s chilling description of her mean-spirited worldview:

[T]he world is made up of a few virile, virtuous “producers” and the many parasites who feed off their labors. It’s the producers who create wealth and make a better world, and they do so by pursuing their own dreams of success. In Rand’s books, though, moochers and petty, visionless bureaucrats persistently bite at the ankles of her capitalist “supermen,” which has the effect of harming all of society. Therefore, freeing the wealthy from…their social contract with the rest of us is in fact the apex of morality.”

But Ayn Rand doesn’t mean diddly to Wall Street. Money talks, not philosophy. Our financial barons are on the prowl for the billions of dollars in fat fees that would come from “helping” 130 million Americans manage their privatized Social Security accounts. The big banks are lusting for something big to replace the goldmine that was the housing bubble. Social Security may be it.

Ka ching for them: Cat food for us old folks.

Owners' Lock Out of NFL Players Raises Some Big Questions

Public employees in Madison and professional football players in Green Bay both face powerful and hostile managements trying to undermine their unions.
By David Morris, AlterNet
on March 24, 2011

What do public employees in Madison earning $40,000 a year and professional football players in Green Bay earning $1.5 million a year have in common? They both face powerful and hostile managements trying to undermine their unions.

The battle between labor and management is always uneven. Up until the 1930s management didn’t even have to negotiate with its workers. Owners could fire union organizers. Courts routinely declared unions an illegal “restraint of trade” and ruled that by trying to negotiate collectively unions were violating the “contract rights” of individual employees and giant corporations to freely negotiate salaries and working conditions.

Only in 1937 did workers finally gain the legal right to form unions and bargain collectively. Corporations were legally required to bargain “in good faith”. Congress established the National Labor Relations Board (NLRB) and gave it judicial authority to enforce labor rights. The NLRB did so enthusiastically for the first few decades, modestly in the 1970s, and not at all after Ronald Reagan took office when he nominated, and Congress confirmed as Chairman of the NLRB Donald Dotson, a man who viewed collective bargaining the way 19th-century courts did, as “the destruction of individual freedom, and the destruction of the marketplace as the mechanism for determining the value of labor”.

Public service unions came of age when private sector unions were strong and the word “union” was a respected word. It was a time when Republican Dwight D. Eisenhower could announce, with widespread approval, "Only a fool would try to deprive working men and women of their right to join the union of their choice."

But even when unions were respected by society as a whole, they were rarely as respected by employers, public or private. Only in 1959 did Wisconsin become the first state to allow collective bargaining by public employees at the local level. In the South, public employee unions had to struggle for recognition, especially when they were composed largely of blacks.

We might recall that when Martin Luther King Jr. was assassinated in Memphis in April 1968 he was there to support a strike by sanitation workers. Two months earlier two black sanitation workers had been crushed to death when the compactor mechanism of the trash truck was accidentally triggered. In response to the tragedy, the city’s sanitation department gave each of the grieving families one month’s pay and $500 for funeral expenses. No one from the city government attended the funerals.

On February 12, 1968 more than 1,100 black sanitation workers began a strike for job safety, better wages and benefits, and union recognition. King's assassination did not dissipate the workers’ struggle for dignity. As Taylor Rogers, one of the strike’s organizers recalled, “If you stand up straight, people can’t ride your back. And that’s what we did. We stood up straight.”

The sanitation workers won. Their contract included union recognition, higher wages, a dues check-off, and the updating of the antiquated sanitation equipment. Another practice that had infuriated black workers—sending them home on rainy days without pay while white supervisors stayed and collected a paycheck—was also ended.

A Brief History of the Football Players Union

Professional football players also began to organize when private sector union density was at its peak. But neither the respect of neither unions nor the law convinced the team owners to negotiate. In 1956 players on the Green Bay Packers and Cleveland Browns formed an association and made minimal demands on their team owners: a minimum wage, per diem pay to cover expenses and, believe it or not, a request that the teams pay for their uniforms and equipment!

The owners never met with the players and refused to respond to any of their proposals.

As would be the case for the next 40 years, the players turned to the courts for help. The U.S. Supreme Court ruled that the NFL did not enjoy the same antitrust immunity that Major League Baseball did, opening the door to many NFL rules that limited player mobility and negotiating power to be viewed as illegal restraints of trade. Rather than face that prospect through another lawsuit, the owners granted several of the players' demands, including setting up a minimal pension plan. But the owners refused to enter into a collective bargaining agreement with the association.

In 1968, threatened by the possibility that the players would join the powerful Teamsters union, the owners said they would recognize the NFLPA if the Teamsters were rejected. The players did, but the owners reneged on their promise. The players voted to strike. The owners countered by declaring their first lockout. A few days later the owners relented, but the concessions won by the players were modest. According to Wikipedia, the owners agreed to contribute about $1.5 million to the pension fund but maintained current minimum salaries at $9,000 for rookies, $10,000 for veterans and $50 per exhibition game. The owners refused to allow for independent arbitration of player-management disputes.

In 1970, after the NFL and the AFL merger, their two players’ unions also merged. After a brief lockout, the players went on strike. They returned two days later when the owners threatened to cancel the season. The players did, however, gain the right to bargain through their own agents with the clubs and impartial arbitration but only for injury grievances. They gained some improvements in basic salaries and pensions, and dental care. Following negotiations, the owners retaliated by letting go many union player representatives from their teams.

In 1963, NFL Commissioner Pete Rozelle had unilaterally imposed what became known as the Rozelle Rule. The timing was instructive. That was the year after he negotiated the NFL’s first broadcast contract with CBS--$9.3 million for two years. Each team began the season with $332,000 in the bank, a sum greater than most teams’ payrolls at the time. Thus all teams were guaranteed a profit even before they sold a single ticket or played a single game. Flush with cash, the team owners could have started a bidding war if players were free to sell their services to the highest bidder. The Rozelle Rule all but eliminated free agency by allowing any team that lost a free agent to another team to receive something of equal value from that team. Few teams were willing to risk signing a high-profile free agent only to see their own rosters depleted.

Coincidentally but not accidentally, the agreement by the NFL owners to share national broadcast revenues equally not only opened up the specter of higher player salaries; it also raised the possibility of future Green Bay Packers---non-profit teams in small cities owned by their fans. So in 1963 the League also adopted a rule banning any further such ownership structures.

In 1974 the players again went on strike, this time focusing on the hated Rozelle Rule. The players rallied under the banner, “No Freedom, No Football” but gave up six weeks later. They again turned to the courts for help.

In 1977 John Mackey of the Baltimore Colts became the first NFL player to successfully defeat the League owners in court. Along with 35 other NFL players, he challenged the validity of the Rozelle Rule. The owners argued that the rule was part of a collective bargaining agreement and therefore exempt from antitrust law, a legal argument that, as we shall see, has played an important role in player-management conflicts. The court disagreed, concluding the Rule was not the product of good faith bargaining but had been forced upon a weak players union.

The owners reached a settlement with the union. Impartial arbitration of all grievances was implemented. Some free agent restrictions were ended. But the League’s new version of free agency was almost as restrictive as its first. Indeed, from 1977 to 1987 only one player changed clubs out of the thousands of free agents who were eligible.

In 1982, the players again took on free agency. They went on strike for 57 days. The owners refused to budge. One reason was that their TV contracts with the networks, which provided about 60 percent of the owners' income, guaranteed they would be paid whether games were played or not. The players capitulated.

In 1987 the players again tried to allow individual players to enter a true marketplace for their talents. When no progress was made in the negotiations after two weeks of regular season play, the players voted to strike. The league responded by canceling games and hiring replacement players. The strike was broken. The union voted to return to work.

The day the strike ended, the players once again turned to the courts. The NFLPA filed an antitrust suit in Federal Court. The Court of Appeals ultimately rejected that suit. You might have to be a lawyer to understand the logic, so read closely. The Supreme Court held that even in the absence of current collective bargaining agreement, as long as a bargaining relationship still exists the antitrust immunity holds. In other words, so long as collective bargaining was deemed to be continuing, the antitrust law could not be invoked. The Chief Judge presciently dissented, noting, “this court’s unprecedented decision leads to the ineluctable result of union decertification in order to invoke rights to which players are clearly entitled under the antitrust laws.”

Gabriel Feldman, law professor at the Tulane Sports Law program explains, “Essentially, players are required to choose labor law (and collective bargaining) or antitrust law (and individual bargaining and litigation). If the players choose labor law, an antitrust shield is raised that prevents them from attacking NFL rules under the antitrust laws. To lower the shield and choose antitrust law, the players must end the collective bargaining relationship.”

Forced to make this choice, in December 1989 the players voted to end the NFLPA’s status as the players’ collective bargaining agent. The NFLPA then re-formed as a voluntary professional association.

Since the NFLPA no longer represented the players in collective bargaining, individual union members were free to bring an antitrust action against the NFL challenging its free agency rules as an unlawful restraint of trade. A group of players, led by New York Jets running back Freeman McNeil filed suit challenging the restrictions on free agency. An all-woman jury in Minnesota heard the case in 1992. Pat Bowlen, owner of the Denver Broncos complained to the Rocky Mountain News that he didn’t want “eight women who are basically domestic housewives to decide the future of the National Football League.”

In 1992, they did by ruling in the players’ favor.

That verdict and the threat of a class action suit filed by Philadelphia Eagles player Reggie White on behalf of all NFL players brought the parties back to the negotiating table. Under the auspices of U.S. District Court Judge David Doty, the NFL finally agreed on a formula that permitted free agency. In return, the owners demanded and received a salary cap, albeit one tied to a formula based on players' share of total league revenues.

Once the agreement was approved the NFLPA reconstituted itself as a labor union and entered into a new collective bargaining agreement with the league. Players won unrestricted free agency for the first time and were guaranteed a higher percentage of major league revenues in return for giving the owners a salary cap on payrolls.

The NFLPA and the league have extended their 1993 agreement five times, most recently in March 2006 when it was extended through the 2011 season after the NFL owners voted 30-2 to accept the NFLPA's final proposal. In 2010 the NFL exercised its option to terminate that contract, effective March 3, 2011.

The NFL owners had an ace up their sleeve. Just as they had in 1982, in 2010 they had signed a contract with broadcasters—CBS, ESPN, NBC, and Direct TV—such that the NFL would accept significantly lower revenue in return for a guarantee that it would receive about $4 billion even if the season were not played. This was designed to give them enormous bargaining leverage.

Two days before the lockout, Judge Doty ruled that by insisting on this lockout provision as part of the broadcast contract, and by agreeing to take significantly less money in return, the NFL had breached its collective bargaining agreement with the NFLPA, an agreement that required both parties (players and owners) to act in good faith to maximize total revenues that both parties would receive. That stripped away, at least for the time being (the owners have appealed), the owners' $4 billion lockout fund.

They locked out the players anyway. The NFLPA sued, asking for the courts to issue an injunction ending the lockout. A hearing on the issue will be held April 6. Meanwhile the union has again decertified, again to allow its players to challenge the owners under the antitrust law. The owners have filed a complaint to the NLRB, arguing that the decertification is an unfair labor practice.

And that’s where things stand today.

Millionaires vs. Billionaires?

Currently the revenues are split about 50-50 between players and owners. (The net revenues, after the owners subtract some of their expenses from the total, an amount worth more than $1 billion in 2010, are split 57-43 in the players’ favor, a percentage you often read in the media.) The owners want the players to give back about $1 billion that is coming to them under the 2008 contract.

The owners argue that while the players’ percentage will decline, the amount they receive will not if they agree to another of the owners’ demands: extending the regular season to 18 regular games. The current schedule has 16 regular season games, up from 14 in 1977 and 12 in 1960.

Another issue is whether to cap the rookie’s pay scale and if so, what to do with the money saved. Both the players and the owners agree that there should be a rookie pay cap. But the players want half of the estimated $200 million in savings put toward retired players and the other half toward veteran players. The owners want to keep the money.

The media so far is describing the labor battle as millionaires fighting billionaires. And it is true that the median salary across the NFL is a handsome $1.4 million a year. The rookie minimum is $310,000.

But the length of an average NFL player’s career is only 3.6 years. And even a short career takes a heavy toll on their bodies. The owners watch from cushy seats in heated skyboxes. The players are down on a hard, cold field, engaged in a very violent game. In 2010, 350 players were on the injured reserve list for an average of nine and a half games.

At the Superbowl we watched Packer star cornerback Charles Woodson exit the game with a broken collarbone, Packers cornerback Sam Shields leave with an injured shoulder and Steeler star receiver Emmanuel Sanders sit out almost the whole game with a foot injury. Green Bay’s quarterback, Aaron Rodgers, has suffered two concussions this year. The announcers noted he now wears a special helmet.

Each professional football player now has a l0 percent chance of sustaining a concussion in a given season. Mild traumatic brain injury (MTBI), the medical term for concussions, has become the most common specified type of injury in pro football, occurring nearly twice as often as hamstring strains.

The Centers for Disease Control estimates that l5 percent of patients diagnosed with MTBI experienced disabling problems on a “persistent” basis.

The long-term health risks associated with NFL injuries include a significantly increased likelihood of Alzheimer’s or dementia.

A 1994 study of 7,000 former players by the National Institute of Occupational Safety and Health found that football linemen have a 52 percent greater risk of dying from heart disease than the general population.

Essentially, the quality of life of an ex-football player is likely to be diminished from his life on the field. Even more damning, the quantity of his life will also be diminished. The average NFL player who plays for more than five years has a life expectancy of 55 years. If he is a lineman this drops to 52 years. U.S. life expectancy overall is 77.6 years.

To my knowledge, there have been no studies of the life expectancy of NFL owners. But since life expectancy is correlated with wealth it is likely they live longer than the rest of us.

Since a professional football player’s tenure is so short and the probability of debilitating injury so high, a key issue in labor negotiations is the level of medical benefits and pension. NFL pensions are skimpy. The pensions are vested only after four years. (Recall that the average player’s career lasts only 3.6 years.) Even long-term players receive little, especially in comparison to other professional sports leagues like major league baseball. According to former cornerback Bernie Parrish, Major League Baseball pays average pension benefits three times higher than those offered by the NFL: $36,700 vs. $12,165.

Former Packers guard Jerry Kramer gets a pension of $358 per month. Willie Wood, who helped Vince Lombardi win five championships during Wood’s 12 seasons, is now in a wheelchair. He receives a pension of $2,000 a month.

Baseball’s gross income is about $4.3 billion. Last year the NFL grossed over $7 billion. As Parrish says, “There is no excuse not to have the NFL retirement benefits matching MLB’s.”

As for medical care, only in 2007, after enormous public pressure and congressional hearings about the disabilities of professional football players, did the NFL create the “88 plan”. The number refers to the number worn by John Mackey who played for the Baltimore Colts in the 1960s, was the first president of the NFLPA, and was one of those let go by his team because of his role in the 1970 strike. It is also the amount the NFL currently pays for institutional care for an ex-player suffering from Alzheimer’s or other forms of dementia: $88,000.

It is possible the issue of disability benefits and medical care will be decided, as have so many other issues, in the courts. An increasing number of NFL players are suing the NFL on these issues. A class action suit would have a powerful impact.

The football players union is not perfect. For one thing, it hasn’t represented well the interests of all its members, focusing instead on enabling ever-higher salaries for its current players. Some 50 years ago the team owners agreed to share equally the network broadcasting revenue but the players have yet to divide up their collective revenue more fairly between current players and retirees.

The NFLPA can also be criticized for not using its member’s fame and influence to assist other workers. NFL stars do not walk the picket lines when other workers strike. They do not honor the picket lines of other workers. This has been starkly emphasized in Madison. To their credit, six members of the Green Bay Packers did sign a letter of support for the public employees that maintained, in part, “When workers join together it serves as a check on corporate power and helps ALL workers by raising community standards.”

But no Packer stars or even, to my knowledge, players in the starting lineup at the Superbowl, have made public their support for other Wisconsin unions.

Indeed, the NFLPA shies away from the word, union. Instead, it calls itself an association. Probably because they believe union has disagreeable connotations in modern America where less than 12 percent of the workforce belongs to a union. Given the polls about public support of unions after the Madison uprising, they might want to reconsider that belief. The word "union" projects a strength and unity of purpose that "association" lacks. And that strength and unity will be crucial when faced with the power and influence of 32 team owners with collective wealth over $40 billion.

Why Employee Pensions Are NOT Bankrupting States

Sunday, March 6, 2011 by the McClatchy Newspapers
by Kevin G. Hall

WASHINGTON — From state legislatures to Congress to tea party rallies, a vocal backlash is rising against what are perceived as too-generous retirement benefits for state and local government workers. However, that widespread perception doesn't match reality.

A close look at state and local pension plans across the nation, and a comparison of them to those in the private sector, reveals a more complicated story. However, the short answer is that there's simply no evidence that state pensions are the current burden to public finances that their critics claim.

Pension contributions from state and local employers aren't blowing up budgets. They amount to just 2.9 percent of state spending, on average, according to the National Association of State Retirement Administrators. The Center for Retirement Research at Boston College puts the figure a bit higher at 3.8 percent.

Though there's no direct comparison, state and local pension contributions approximate the burden shouldered by private companies. The nonpartisan Employee Benefit Research Institute estimates that retirement funding for private employers amounts to about 3.5 percent of employee compensation.

Nor are state and local government pension funds broke. They're underfunded, in large measure because — like the investments held in 401(k) plans by American private-sector employees — they sunk along with the entire stock market during the Great Recession of 2007-2009. And like 401(k) plans, the investments made by public-sector pension plans are increasingly on firmer footing as the rising tide on Wall Street lifts all boats.

Boston College researchers project that if the assets in state and local pension plans were frozen tomorrow and there was no more growth in investment returns, there'd still be enough money in most state plans to pay benefits for years to come.

"On average, with the assets on hand today, plans are able to pay annual benefits at their current level for another 13 years. This assumes, pessimistically, that plans make no future pension contributions and there is no growth in assets," said Jean-Pierre Aubry, a researcher specializing in state and local pensions for the nonpartisan Center for Retirement Research at Boston College.

In 2006, when the economy was humming before the financial crisis began, the value of assets in state and local pension funds covered promised benefits for a period of just over 19 years.

At the bottom of Aubry's list is Kentucky, which would have enough assets to cover 4.7 years. Other states do much better: North Carolina local government pensions are funded to cover 19 years of promised benefits; Florida's state plan could cover 17 years; and California's plans about 15 years.

"On the whole, the pension system isn't bankrupting every state in the country," Aubry said.

States having the biggest problems with pension obligations tend to be struggling with overall fiscal woes — New Jersey and Illinois in particular. Many states are now wrestling with underfunding because they didn't contribute enough during boom years.

Most state and local employees government across the nation have defined-benefit plans that promise employees either a percentage of their final salary during retirement or some fixed amount. The Bureau of Labor Statistics estimates that 91 percent of full-time state and local government workers have access to defined-benefit plans.

Several states -- including Florida, Georgia, Ohio, Colorado and Washington -- have adopted competing defined-contribution plans, or a hybrid plan that provides government employees both a partial defined benefit in retirement and a supplementary defined-contribution plan.

Defined-contribution 401(k) plans divert on a tax-deferred basis a portion of pay, generally partially matched by the employer, into an account that invests in stocks and bonds. In 1980, 84 percent of workers at medium and large companies in the U.S. had a defined-benefit plan like those still predominate in the public sector. By last year, just 30 percent of workers in these larger companies were covered under such plans.

Defenders of the public pension system say anti-government, anti-union elected officials and interest groups have exaggerated the problem to score political points, and that as the economy heals, public pension plans will gain value and prove critics wrong.

"There's a window that's closing as market conditions improve and interest rates rise, the funding of these plans is going to look better than depicted by some," insisted Keith Brainard, the director of research for the National Association of State Retirement Administrators in Georgetown, Texas.

Critics of public sector pensions paint the problem with a broad brush.

"Unionized government workers have tremendous leverage to negotiate their own wages and benefits. They funnel tens of millions of dollars to elect candidates who will sit across from them at the negotiating table," said Thomas Donohue, the chief executive of the U.S. Chamber of Commerce, in a Feb. 24 blog post. "This self-dealing has resulted in ever-increasing wage and benefit packages for unionized government workers that often far outstrip those for comparable private-sector workers."

In a Feb. 23 radio interview, Rep. Devin Nunes, R-Calif., called federal stimulus efforts to rescue the economy "essentially a federal bailout of public employee unions." Nunes described money owed to state pensioners as a crisis "about ready to happen."

Except that two out of every three public-sector workers aren't union members.

The Bureau of Labor Statistics reported in January that 31.1 percent of state public-sector workers were unionized in 2010, compared with 26.8 percent of federal government employees. The highest percentage of unionization, 43.3 percent, was found in local government, where police officers and firefighters work. Teachers can fall into either state systems or local government.

Ironically, in Wisconsin, where Republican Gov. Scott Walker is trying to weaken public-sector unions and reduce pension benefits, he's exempted police and firefighters, who are among the most unionized public employees. And Wisconsin's public-sector pension plan still has enough assets today to cover more than 18 years of benefits.

The most recent Public Fund Survey by the National Association of State Retirement Administrators showed that, on average, state and local pensions were 78.9 percent funded, with about $688 billion in unfunded promises to pensioners. Critics suggest that the real number is at least $1 trillion or higher, using less-optimistic market assumptions.

The unfunded liabilities would be a problem if all state and local retirees went into retirement at once, but they won't. Nor will state governments go out of business and hand underfunded pension plans over to a federal regulator, as happens in the private sector. State and local governments are ongoing enterprises.

The flow of employees into retirement matches up with population trends in states, with Northeastern states with declining populations, particularly Rhode Island, seeing more stress on their pension systems than Southern and Western states, where there's been vibrant population growth.

Another misperception tied to the pension debate is that while the private sector has shed jobs during the economic crisis, state and local government employment has grown — and pensions along with it.

Since September 2008_ when state and local government employees numbered 19,385,000 and the economic crisis turned severe — the governments' payrolls shrunk by 407,000, to 18,978,000 this January, according to Bureau of Labor Statistics data.

When calculating from December 2007_ the month that the National Bureau of Economic Research determined was the start of the Great Recession_ state and local government employment has fallen by 703,000 jobs amid a downturn that cost the nation more than 8 million jobs overall.

"The down economy has had an effect, and the loss of employment outside the public sector has created a contrast" said Brainard, of the National Association of State Retirement Administrators.

Also fueling backlash is the perception that state and local workers don't contribute to their own retirement funds the way private sector workers do.

Four states have non-contribution public pension plans_ Florida, Utah, Oregon and Connecticut. Missouri until recently had a non-contribution policy for state workers, as did Michigan until 1997. Michigan workers hired before 1997 still don't pay toward their pensions, and some teachers in Arkansas don't have to contribute toward theirs. Tennessee doesn't require contributions from most workers and employees in the state higher education system.

Those notable exceptions aside, most states require employee contributions. The midpoint for these contributions for all states and the District of Columbia is 5 percent of pay, according to academic and state-level research. That contribution rate climbs to 8 percent for the handful of states whose workers or teachers are prohibited from paying into the federal Social Security program.

By comparison, private-sector workers shoulder a bit more of the burden.

In its data for 2010, Fidelity Investments, the largest administrator of private-sector 401(k) retirement plans, showed employee contribution rates in its plans averaged 8.2 percent of pre-tax pay.

Separately, the Employee Benefits Research Institution estimates that most private-sector employers match up to 50 percent of employee contributions up to the first 6 percent of salary.

The utility or burden of either type of retirement plan depends on whether the plan is measured by what it delivers to an individual, or by how much it delivers to all workers receiving retirement benefits from their employer.

"It really comes down to what you are attempting to do," said Dallas Salisbury, the president of the nonpartisan Employee Benefit Research Institute.

Viewed through the lens of an employee, defined-benefit plans are more cost-effective at providing a pre-determined level of benefits to an employee. But the shortcoming of these plans is that they reward seniority. For workers with a shorter tenure, they're far less generous in retirement.

This fairness issue is one reason why 401(k) plans have grown steadily in prominence since the mid-1980s. From the payroll perspective of an employer, these defined-contribution plans produce at least some retirement income for the greatest number of employees, and the plans can move with employees who change jobs.

Corporate America's Plan to Loot Our Pensions Is the Latest Battle in Decades-Long Assault on the Middle Class

While the safety net is being withered by attrition, record corporate profits are deemed off-limits for discussion about closing the budget gap.
By Arun Gupta, AlterNet
Posted on December 18, 2010

The severe economic crisis, now in its fourth year, is being used to batter the remnants of the social welfare state. Having decimated aid to the poor over the last 30 years, especially in the United States, the economic and political elite are now intent on strangling middle-class benefits, namely state-provided pensions, health care and education.

The initial neoliberal assault under Ronald Reagan and Margaret Thatcher reorganized the capitalist economy and hammered private-sector unions into submission. This was accomplished by putting labor back into competition with itself by off-shoring industrial production, through deregulation and with frontal assaults on labor rights, organizing and solidarity.

Similarly, the current attack is a two-pronged effort to reorganize state social services, either by eliminating or privatizing them, and decimate public-sector unions whose workers provide those services. While the safety net is being withered by attrition, police and spying agencies are getting more powers and funding, and the wealth of the super-rich and record corporate profits are deemed off-limits to taxation to close any government budget gap.

Simply put, the elderly are superfluous to capitalism. With high rates of joblessness the “new norm,” more and more people are being made disposable. This leads to an efficient if brutal logic: cutting old-age income and health care will make it easier to scrap old, useless workers. In fact, this reality is already coming to pass. One study published in 2008 found that over a 16-year period life expectancy had declined for many poor American women — precisely those who are disproportionately represented among the elderly heavily dependent on Social Security and Medicare.

Slashing social services affects everyone by increasing the pool of workers desperate for any sort of paying job, pushing down wages and benefits. This will all be pushed under the rubric of “personal responsibility,” and it will probably be successful as long as opposition is weak and divided. The main beneficiaries will be the super-wealthy who gain both from tax cuts as the social sector is chopped up and higher corporate profits as wages and benefits are slashed more deeply.

The attack on pensions is mainly occurring in the West and those countries close to its orbit. So while the United States, Greece, Ireland, Japan, France, Turkey, Spain, Poland and Latvia have been cutting or trying to squeeze state-run pensions, others such as Bolivia, China and Venezuela have been increasing funding of old-age pensions in recent years (though within these countries the picture is more complicated because social spending may be declining overall and inflation increasing).

The Right has stridently opposed Social Security since it was enacted in 1935, but the modern attack on pensions originated during the Reagan-Thatcher era. While he proposed making Social Security voluntary during the 1964 Goldwater campaign, when he reached office Reagan temporarily froze cost-of-living adjustments, raised the future retirement age to 67, taxed benefits of higher-income earners, made it more difficult for the disabled to claim benefits and forced the self-employed to pay 100 percent of payroll taxes. Then under Clinton, according to some economists, inflation was understated to suppress cost-of-living adjustments, resulting in benefits that should be 50 percent higher than the current average of $1,072 a month. Thatcher and Tony Blair formed the same one-two punch as Reagan and Clinton, but they went further by partially privatizing much of the state-run pension system.

The second historical component is the current crisis, which is severely widening the economic chasm. According to the New York Times, corporate profits “have grown for seven consecutive quarters, at some of the fastest rates in history,” hitting a record of $1.66 trillion on an annual basis. Taking advantage of Federal Reserve and U.S. Treasury monies, Wall Street has notched record profits over the last two years. And the top one percent actually increased their share of the wealth through the end of 2009.

As for the overall economic picture, industrial production is back to where it was in 2000 and the all-important capacity utilization rate – which measures how much of existing manufacturing plants are actually operating – is below 75 percent, compared to a level above 80 percent before the crash. This is like saying more than one-fourth of factories are idle. The trade deficit is at 3.7 percent of the gross domestic product. Only 874,000 jobs were created during the first 10 months of 2010, well short of the 1.2 million needed to keep up with population growth, and some 260,000 state workers lost their jobs during this period, leaving 7.5 million fewer jobs than when the recession began.

The household picture is even grimmer: family income shrank more than 4 percent in 2008 and 2009; the official poverty rate of 14.3 is the highest since 1994; 13.5 percent of home mortgages are in delinquency or foreclosure; the percentage of people receiving health insurance through their employer has dropped by 13 percent over the last decade and the real unemployment rate -- the “U6 rate” which includes those who have given up looking for work -- is at 17 percent. Household debt stands at 118 percent of after-tax income.

Most economists say there are really only four sources of potential growth in our economy: consumer spending, business investment, trade and government. As the data above indicates, the first three are on life support, while the Obama White House bungled the stimulus plan, helping the right in discrediting government intervention, which is still the only remaining option. These economic conditions prevail throughout the West, which is the backdrop for the global assault on pension plans. Thus the conclusion is stark: there is no functioning engine to drive economic growth.

With so much idle productive capacity, the bromide of giving tax breaks to spur business investment is little more than throwing away money. With American families drowning in debt, getting smacked with rising healthcare costs, having lost $15.8 trillion in wealth and fearing joining the armies of unemployed, they are incapable of pulling the economy out of its funk with increased consumption. Increased trade is one possibility, which would require a weaker dollar to make U.S. exports more competitive. But, as Paul Krugman points out, this is opposed by Republicans who believe continued economic decline will enhance their electoral chances in 2012. Despite investment money pouring into the BRIC countries – Brazil, Russia, India and China – agricultural commodities and precious metals, these markets are too narrow and shallow to form a new asset bubble, such as the ones in tech and housing that fueled economic growth for nearly two decades. And in any case, we know how well those bubbles worked out.

When business investment, consumption, trade, debt and speculation all falter, that leaves government as the only sector that can revive a capitalist economy. But, as I first pointed out in December 2008, the Obama administration knew the stimulus was almost certain to fail because the downturn was sapping a staggering $1 trillion a year from the economy at that point, while the plan offered a relatively meager $787 billion. Of that, only $600 billion of stimulus money was spent in the last two years and, according to Paul Krugman, more than 40 percent of that was in tax breaks that tend to offer the least bang for the buck. So in early 2009, faced with an economy leaking 7 percent of the GDP a year, Obama offers a plan that plugs 1 to 2 percent a year.

In the final equation, the Obama stimulus only covered some of the shortfall in state and local budgets. But that money is drying up, and that, to a large degree, is the reason state services and workers are now under attack.

But now we are in for more bloodletting of social services and government workers because the failed stimulus has legitimized the establishment hysteria over the federal debt. Debt matters but the simplest way to reduce it is by a combination of economic growth and inflation. This is what happened to U.S. debt after WW2, which peaked at about 120 percent of GDP, far more than today even with the economic depression and bailouts. Instead, the right is pushing policies that may result in a worst-case scenario. Cutting spending and taxes –which Obama has endorsed – could lead to further economic contraction and deflation. This will make federal debt payments doubly onerous because tax revenues will shrink as the dollar strengthens.

There is another solution to reviving the economy without piling on debt: tax the wealth of the elite. According to economist Rick Wolff, “high-net-worth” Americans have around $12 trillion in investable assets, which excludes the value of their homes. A 13 percent wealth tax would wipe out the entire 2010 federal budget deficit of $1.56 trillion while doing little to crimp the economy because this money is literally lying around.

Yet Obama never seriously considered even the Keynesian policy of debt-driven financing for national re-industrialization because he was the darling of Wall Street – and number one recipient of its dollars – for his unwavering support of the Bush bailout in September 2008 and by taking counsel from Larry Summers and Tim Geithner during the campaign. Once in the White House Obama shunned jobs programs on a massive enough scale to revive the economy because the indirect method of debt-driven financing would shore up benefits, wages and labor bargaining power, thus cutting into corporate profits, while the direct financing method, taxing the rich, would mean they would have to pay for programs that would eventually cut into their profits.

The Obama administration has consistently fought for policies that involve weakening labor -- such as its attacks on auto workers and teachers and the cynical gesture of calling for a freeze on the pay of federal workers– driving down wages, letting unemployment rise, and squeezing social services and benefits, all to transfer more wealth upward.

The wealthy have profited three times off the crisis: from the bubble itself, during the bailouts and from government bonds sold to them to pay for the bailouts. Putting pensions on the chopping block would give them a fourth opportunity to profit off the same crisis.

If debt is a problem, then bondholders should take a haircut because they took the risk. Of course, that’s not how capitalism works. So, in the case of Social Security, which has nearly $2.6 trillion in its trust fund and can meet ALL obligations through 2037 even assuming no changes are made, the plan is to raid it to pay off bondholders.

That’s why a crisis is being manufactured. Obama’s deal to reduce payroll tax by two percentage points will pilfer an estimated $120 billion from the trust fund that will supposedly be paid back by revenues from the general treasury. This means the deficit will increase, feeding into the fabricated panic over Social Security and debt.

For any country, cutting pensions is disastrous to long-term economic health. In the United States, Social Security accounts for 40 percent of the income of the population over 65 and nearly 50 percent for women in this group. It would also leave more people in the workforce as older workers delay retirement. Because the elderly tend to spend their benefits right away, on housing, food, transportation and medical services this means less demand and lower economic activity. And combining all this with trying to crush public workers also means more unemployed, less tax revenue and a shrinking economy.

It all adds up to a recipe for a depression. Two conclusions are inescapable: Obama is far more Herbert Hoover than FDR, and change will only come from creative independent movements instead of marching into the tomb of the Democratic Party.

How the Corporados Wrecked Retirement

Most Workers Will Outlive Their Savings
By RICHARD TRUMKA

Today's retirement security crisis is just one of the many painful consequences of the failed economic policies of the past 30 years-policies of radical deregulation and corporate empowerment.

These policies allowed -- and even encouraged -- employers to walk away from what had been a system of shared responsibility. The result? Today, fewer than 20 percent of private-sector workers have real, defined-benefit pensions.

Today only 13 percent of workers say they are very confident about having enough money for a comfortable retirement-that's the lowest level in 16 years. And this lack of confidence is justified. The majority of America's workers will face retirement with far less security than their parents.

Before the rise of the labor movement in the 1930s and 40s, elderly Americans were the most impoverished age group in our society, and only a privileged few received government or employer pensions.

With the enactment of Social Security and the growth of union-negotiated pensions, elderly Americans became the least impoverished age group.

After the New Deal, it was collective bargaining that set the pattern for labor markets-and not just for workers covered by union contracts.

These were the years that produced the three-tiered American retirement system: Government provided a foundation with Social Security, employers provided defined-benefit pensions and individuals saved for their retirement. . .

Today, all three tiers of that retirement system we built are in danger. Employers are increasingly abandoning their pension plans. Workers with lost jobs and stagnant incomes are unable to save.

In this bleak landscape, Social Security stands out as the one feature of what passes for our retirement system that works for all Americans. But too many in Washington seem bent on perpetuating the Bush administration's attacks on Social Security.

When people lump together Social Security attacks with deficit reduction efforts, we have to remind the public of this basic fact: Social Security is not contributing to our budget deficit-in fact, the buildup of the Social Security Trust Fund is financing our budget deficit.

And while the program faces a funding shortfall over the next 75 years, in pension plan terms, Social Security is 88 percent funded over that 75 year period of time and by any measure would be considered a healthy pension plan. Relatively modest adjustments-without benefit cuts-can address even this long-term issue.

Social Security is the most important family income protection program and the most effective anti-poverty program ever enacted in the United States. One-third of Social Security beneficiaries receive more than 90 percent of their income from Social Security. Two out of three depend on it for more than half of their income.

Social Security is the sole source of income for nearly one in five seniors. The average Social Security benefit is just little more than a minimum wage income-meaning a typical retiree needs almost twice the average monthly Social Security benefit for a reasonable standard of living.

And if that's not bad enough, growing Medicare cost-sharing means our seniors will need higher benefits just to maintain the replacement rate of the past 25 years. . .

If you are lucky enough to have a union, there is still a good chance that you have a pension plan. Sixty-six percent of union workers have pensions, compared with only 15 percent of nonunion workers. But unions are under increasing pressure at the bargaining table to allow employers to cut or eliminate real pensions.

In the private sector, the funding rules for single employer pension plans in the Pension Protection Act of 2006, coupled with new accounting standards, have contributed to an environment in which even healthy companies are freezing their pension plans entirely or closing them to new hires.

Our current economic downturn has made this much worse. In many parts of this country, public-sector workers have the right to form unions. Not surprisingly, state and local government workers are four times more likely than private-sector workers to have defined-benefit plan coverage. But public-sector plans are under attack through legislation and ballot initiatives.

In the private sector, over the past decade, many employers have abandoned their real pensions for 401(k) plans-plans with little or no employer money . . . plans with no protection for workers against market risk or outliving your money. . . and plans with high investment management fees.

We hear different reasons for this, but here's the bottom-line problem: Our current system lets employers off the hook. They can refuse to provide any benefits at all. If there ever was an implicit social contract, it has eroded.

Look at the data: The median account balance in 401(k) type plans for 62-year-old workers is worth an annuity payout of about $400 a month. $400 a month. That just doesn't cut it. And most workers will outlive their savings.

Don’t Cut Social Security, Double It

by Steven Hill | Saturday, September 4, 2010 by CommonDreams.org

In the aftermath of the Great Recession, a debate over Social Security, is heating up. This debate raises fundamental questions about what kind of society Americans wish to live in. So far, the debate has been between those deficit busters who say Social Security must be trimmed back to reduce government indebtedness, and others who want to maintain it as is.

But the New America Foundation just released a study that I authored that proposes a different approach: doubling the current Social Security payout, and making it a true national retirement system. Creating a more robust system of "Social Security Plus" not only would be good for American retirees, but also would be good for the greater macro economy.

Here's the dilemma that the U.S. faces. Since WWII, retirement has been conceived as a "three-legged stool," with the three legs being Social Security, pensions, and personal savings centered around homeownership. But today most private sector employers have quit providing pensions, and state and local government's public pensions are drastically underfunded.

In addition, a collapsed housing and stock market, combined with increased inequality even before the Great Recession, have drastically reduced Americans' personal savings. In short, the "retirement stool" no longer is stable and secure, and suddenly Social Security, which always has been viewed as a supplement to private savings, is the only leg left for hundreds of millions of Americans.

Studies show that people in the bottom two income quartiles depend on Social Security for 84 percent of their retirement income, and even the second richest quartile depends on Social Security for 55 percent of its retirement income. Only the richest 25% of Americans don't rely heavily on Social Security.

But the real problem with Social Security is not, as its critics say, that it is underfunded. Contrary to gloomy predictions the program is on solid financial footing, with the Congressional Budget Office projecting that Social Security can pay all scheduled benefits out of its own tax revenue stream through at least 2037.

The bigger problem is that Social Security's payout is so meager, which is problematic since it has been thrust into this new role as a de facto national retirement plan. Currently it replaces only about 33 to 40 percent of a worker's average wage from the year prior to retirement (compared to Germany where it replaces 70 percent). That is simply not enough money to live on when it is your primary -- perhaps your only -- source of retirement income.

Doubling Social Security's individual payout would cost about $650 billion annually for the 51 million Americans who receive benefits. Here are some ways to pay for it.

First, lift Social Security's payroll cap that favors the wealthy. Currently Social Security only taxes wages up to $106,800 a year, and any income earned above that is not taxed. The net result is that poor, middle class, and even moderately upper middle class Americans are taxed 12.4 percent (split between employee and employer) on 100 percent of their income, but the wealthy pay a much lower percentage. Millionaire bankers effectively pay a paltry 1.2 percent.

Making all income levels pay the same percentage -- that's how Medicare works - is popular with Americans and would raise about $377 billion.

Second, with all Americans receiving Social Security Plus, employer-based pensions would be redundant so businesses no longer would need the substantial federal deductions they currently receive for providing employees' retirement plans. These deductions total a whopping $126 billion annually.

Those two alone would provide three-fourths of the revenue needed to double Social Security's payout. Other possible revenue streams exist, such as reducing or eliminating other unfair deductions in the tax code which currently allow the top 20 percent of income earners to reap generous deductions that most low and moderate income Americans cannot enjoy. These include deductions for private retirement savings, homeownership, health care and education. For example, individuals who have enough income to divert for savings or investment are allowed considerable tax deductions for their 401(k)s, IRAs and pensions. Similarly the homeownership deduction for mortgage interest only benefits people with sufficient income to buy a home. But the poor and working class rarely can take advantage of these since they don't make enough to itemize deductions.

These personal deductions were enacted by Congress in part as a means to incentivize savings. While a certain number of moderate income Americans benefit from these, if we enacted Social Security Plus they would no longer need to rely on these deductions as vehicles for retirement savings. Instead of buying a home as part of their retirement plan -- which as we have seen is a risky investment -- they could put their money into Social Security Plus. In 2010 the mortgage interest deduction alone will amount to about $108 billion.

We also could implement this in stages, targeting first those who are most in need. We also could allow active seniors who have not yet reached full retirement age to take a half-pension and work at half-time without losing their right to a full pension upon their retirement.

An expansion of Social Security -- one of the most successful and popular social programs in American history, currently celebrating its 75th year -- would be good for the macro-economy as well because it would act as an "automatic stabilizer" during economic downturns, keeping money in retirees' pockets and stimulating consumer demand. Benefits would be portable when changing from one job to another.

It also would help American businesses trying to compete with foreign companies that don't provide pensions to their employees, since those countries already have generous national retirement plans. And it would be broadly fair, since even those higher income Americans who are losing their tax deductions would see part of it returned to them in the form of a greater Social Security payout.

In short, Social Security Plus would provide a stable, secure retirement for every American and contribute greatly toward a solid foundation from which to build a strong and vibrant 21st century U.S. economy.

***

(But rather than do something constructive along the lines of the above, they are just going to hack Social Security benefits down so that they are borderline useless.--jef)

Economists Without a Clue

Blaming Teachers and Firefighters, Not Wall Street Tycoons
By DEAN BAKER

The latest cool thing for the Washington elite is to beat up on school teachers and firefighters for their overly generous pensions. It turns out that some of these public sector employees get enough money in their pensions that they can actually enjoy a decent retirement.

This is an outrage in modern America. After all, the Wall Street boys have made it so the vast majority of private sector workers can't get by in their old age, and they plan to cut Social Security and Medicare to make it even harder. So given that factory workers and retail clerks can't count on a decent standard of living in retirement, where does a school teacher get off earning a pension of $3,000 a month? The media want the public to be outraged over this incredible injustice. Of course, the men and women behind the curtain are saying: "Pay no attention to the Wall Street people earning millions of dollars a year."

The attempt to provoke anger has momentum because most state and local pension funds are hugely underfunded. This is blamed on corrupt politicians who concealed pension fund expenses and used dubious accounting.

While this may be true in some cases, the real culprits of the underfunded pension funds are the country's leading economists. Economists from across the political spectrum told the country that we could assume that stocks would provide an average return of 10 percent a year even when the stock bubble was at its peak in 2000. This consensus included the center-left economists in the Clinton Administration as well conservative economists. It was treated as absolute gospel in all the plans to privatize Social Security. Both the Congressional Budget Office and the Social Security Administration assumed that the market would give an average of 10 percent nominal returns in their analysis of Social Security privatization proposals.

Given the consensus within the economics profession, who could blame the managers of state and local pension funds for using the same assumption? After all, were they supposed to question the assessments of economists teaching at Harvard and M.I.T.?

And, it does make a difference. If the economists' projections had been right, $1 billion held in the stock market in 2000 would be worth about $2.5 billion today. Instead, it is worth about $1 billion. In short, if the economists had been right, most of the troubled pension funds would be just fine today.

So let's give credit where credit is due. The media want us to beat up school teachers and firefighters, but the real reason that more tax dollars might be needed to meet pension commitments is that the economists were clueless.

Your Retirement Funds to Bail Out Failed Banks?

Pension Funds as Corporate Safety Nets
By JAYNE LYN STAHL

With the recent spotlight on a runaway Prius, few are paying any attention to the latest government plan to bail out failing banks with retirement money.

The Federal Deposit Insurance Corp., according to Bloomberg, now thinks it's a good idea for public retirement funds over about $2 trillion to "buy out all or part of failed lenders."

Last year alone, the FDIC reportedly shut down close to 150 banks, and it expects even more banks to fail this year. But, a quick look at how the largest companies, like General Motors, are currently investing their employees' pension funds is guaranteed to make a shiver up and down the spine of every working American. And, two things become clear: 1) your pension funds are at risk, and 2) any bank that depends upon your pension fund is also at risk.

It's not breaking news that the money we depend upon to be there in our retirement is invested by those corporations who hold it in trust for us just as it's common knowledge that money deposited into bank accounts doesn't sit there looking pretty until it's withdrawn.

But, what has changed is that corporations are now effectively "going to Las Vegas," as a Dallas investor recently told the New York Times, with our pensions. It's no longer about buying stocks, but investing has now expanded into junk bonds, commodity futures, and foreign stocks, too.

More importantly, companies may soon use public pension fund revenue that they're exposing to increasing risk to rescue failing banks and with FDIC blessing.

Okay, it breaks down quite simply like this: XYZ Corporation has a public pension fund in which John Jones' retirement savings are being kept. XYZ Corporation decides to take a bite of Jones' pension account and invest it in commodities with an eye to using the revenue from that investment to bail out Granny's Bank. XYZ can sleep easy knowing that whatever money it invests in Granny's Bank is federally insured, so if there is a loss, it will ultimately be the FDIC who will pick up the tab.

What a monstrous idea that the FDIC should be looking at retirement money as a safety net for failed lenders!

If the idea is to stabilize the lending industry by allowing corporations to gamble with their employees' savings and then, in effect, turn the pension funds over to a failing bank, who wins? It's simply risk multiplied exponentially. And, ultimately, it's not the banks, or the corporations, who are taking the risk, but John Jones because when the FDIC runs out of money, or decides to lower the amount it insures as is all but inevitable, it is the worker who will lose.

While the banks, and pension administrators, are traditionally reticent about their plans, some regulators are said to be debating whether or not letting private corporations take over failing banks is a good thing because they may not only be jeopardizing federally protected deposits, but may use the bank as collateral, or sell it for profit.

When the regulators get in bed with the risk takers, the only ones who win are the ones who hold the mortgage, and more and more it looks like, by 2050, the only question you may expect when applying for U.S. citizenship will be "Will that be Mandarin or Szechuan?"

What this plan is really about is having the FDIC bail out not banks but corporations who incur losses by making risky investments with your retirement money. Once again, it's "score one for the corporations!" Public pension funds becomes an extra layer of padding for fortune 500s in a financially cold climate, and essentially it's the individual, not the corporation, who is taking the risk.

Somebody seems to have gotten it backwards. The banks are supposed to bail us out in an emergency and not the other way around. Thomas Jefferson said it best two hundred years ago: "if the American people ever allow private banks to control the issue of currency... the banks and corporations that will grow up around them will deprive the people of their prosperity until their children wake up homeless on the continent their Fathers conquered."