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Retirement Planning: Scatter Shot Solutions November 18, 2008

Posted by retirementwithaplan in Uncategorized.
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Retirement planning, no matter how you look at it, is an exercise in optimism. We want to believe that good times never end. Prosperity is not only a privilege available to all, but a right as well. What we have found out, much to our chagrin, is that these two “truths” do not hold up to the litmus test of bubbles, markets and unfettered deregulation.

Scatter Shot Economics

Scatter Shot Economics

As states begin to list their financial woes, their employees have become a target of derision, much the way the union employees of the large automakers have. Brian Sullivan suggested in a story posted at Fox News that “As states try to figure out how to cut costs and services to current taxpayers, it seems no one is talking about is rolling back the retirement age for government workers to help ease at least one part of the budget problem: massive pension burdens.”

States will need to cut services or, as the New York Times reported on Monday, they will need to raise taxes. Jennifer Steinhauer wrote that while most Republican governors oppose any increases, “In Oregon, moreover, Gov. Ted Kulongoski, a Democrat, has proposed a $1 billion economic stimulus plan centered on infrastructure improvements, which he envisions would be paid for by raising the state’s gas tax by 2 cents per gallon and increasing a host of vehicle fees.” It should be noted that Oregon still has no sales tax.

But targeting the retirement or retirement plans and pensions of state workers gives these solutions the look of a Dick Cheney hunting party.

The net result of budget shortfalls at the state level is increased taxes. The net result of less state-level services is infrastructure failure. Let’s not take the home state workers and string them up because we have failed them on a federal level.

Two things got us to where we are today. We let our financial institutions conduct themselves, as David Brooks, conservative columnist for the NYTimes, as “politically powerful crony capitalists”. That led to the demise of a trustworthy financial system and the states, many of which did not have enough funding dollars to follow-through on the mandates issued by Washington, have already trimmed budgets to bare bones.

The investments made by huge state pension funds made them now seem portray them as no smarter than we are. But to attack these workers is not the course of action we should take. Instead of cutting jobs, we should be adding them – at the state level, the county level and the city level. If many of the unemployed or future members of the jobless ranks were offered work within their own municipal jurisdiction, I doubt few would pass up the opportunity. Think of how many foreclosures would be saved, property taxes would be paid and consumer activity would return with just the creation of a single job. Now imagine the creation of hundreds of thousands of them.

Once that happens, businesses would begin to lure these public employees to the private sector and competition, as described by the free markets would once again thrive.

While we need an measure of urgent action, the best equal and opposite reaction will be to grow what works, not dismantle the whole of the system.



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