Your initial statement sounded like a bit of economic and social whimsy. Is this going to be one of those discussions that's either/or - either you agree with government intervention with no provisos or you think the government has no role in businesses? I don't believe in either/or although people are pushed to one side or another on this board. I don't think the government is the last arbiter in sound business judgement, was that something you were suggesting?

 

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My statement was about a specific role the government plays in the economy which is as a check against private interests making decisions that the government has decided are unacceptable. Everyone that is not an idiot agrees that the government has this role in the economy, they simply differ in opinion on what the government should decide is unacceptable.


IMO the government should never have been put in the position to save GM the way they did. That the real reason was that it was done to try and save the retirements of thousands of workers. Pension systems help create this scenario and create a massive risk for these employees and former employees. IMO it makes more sense to prevent this from happening than to save these people once things blow up.

 

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I dont know that I buy this as 'the real reason'...but it should give the vocal anti-bailout folks pause.


Wrecked retirements create a lot of political pressure. Nobody likes the thought of wrecked retirement plans and penniless retirees....and the people closest to retirement who will have lost the most also vote the most.


A response to this might be to rethink how retirement is setup in the US. Do you create a strong national insurance program to protect people from retiring broke? This creates value (less old broke people) and it lets you avoid bailout pressures.


The vocal anti-bailouters seem to take the opposite view most of the time. Not only should we not bailout companies, we should also try to wreck any kind of retirement insurance program....and we will avoid the bailout pressure by stronger willpower in the future (and magic ponies).

http://vnboards.ign.com/outpost/b22180/116157295/p1/

IMO the problem is that the benefits are based on promises as opposed to savings. If someone works for a year they should get a wage and some money put away for retirement (annuity and health). Whatever that is worth when they retire it is worth. The problem comes down to risk. The employee is now exposed to the risk of the company failing and the company is carrying the risk of their capacity to deliver on their promises.


Economies need death and such systems make death far more difficult.


States and towns are facing the same problems. Even Medicare is essentially an example of the US over promising.


I think health care may need a drastic change in approach too. There can be insurance for most examples of care but less will be covered. This can be supplemented by secondary insurance or health care accounts. The key is to manage costs in any given time period based on the money saved for that time period. Once the amount saved and the money spent are out of whack the rules need to be remade to fir the money saved.

 

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Defined benefit pensions do involve risk for the company.


The benefit is that risk is transferred from the individual retiree to the company. Larger groups with deeper pockets and longer lifespans handle risk much better. From a compensation picture, companies should be able to absorb more risk and in return pay people less. People value risk reduction.


From a pure high level perspective, pensions are better than individual retirement accounts. Retirees are happier and earn greater returns. Companies pay less in compensation over the life of an employee. The power of transferring risk to deep pocketed entities that can potentially live forever is pretty strong.


Obviously the problem is that people on both sides can try to game the system (demanding top level pay and a 10% return on the pension plan, cutting pay in return for a nice pension plan refusing to fund the plan whild giving yourself big bonuses) for years and years because the problem will fall on someone elses lap long after they leave the company.


Governments can provide pension plans significantly better than private companies and both can provide better than individual retirement accounts. Things other than optimal economic outcomes are driving this debate and the state of things in this country.

http://am.blogs.cnn.com/2009/06/01/bondholder-furious-over-gm-bankruptcy/

I'm sure she would have appreciated a bit of that Obama love to protect her retirement too, but its ok since she's an ebil capitalist.

Oh wait, actually she's a school teacher.

 

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This thread serves as a useful lesson reminder for people who confuse or have accepted a lie about the true nature of the political spectrum.

Some people insist on claiming that fascism is political right mechanic. As can be clearly seen in this thread, that myth (lie) is once again, busted. Fascism is just another tool of leftists that they will vehemently defend, as they are doing here.

The true political spectrum is easy to understand once you boil off the noise and smoke.

I feel sorry for her. I really do. But...

Someone on a school teacher's salary should not be investing 70000 in the bonds of ANY one company. Beyond that, GM had been struggling for years and bankruptcy was looking like more and more of a possibility. She clearly should have been reducing her exposure over the years. Finally, bondholders rejected a proposal that would have given them about 33 cents on the dollar. Great? No. But better than the $200. she claims she will be getting. Though I dispute that number, too.

If I were in her shoes, I'd be blaming my broker a lot more than I would Obama.

 

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