Reading the News with Meep: Biden nominees ruffle feathers, retirement age to rise in China, and pension news roundup
Still waiting for a bailout....
Howdy, new readers! I noticed I’ve picked up some new subscribers after recent COVID mortality posts. Just an FYI: I also post a lot about public pensions and finance.
Today I’m mainly doing a news link dump with minimal commentary. I build these up over time for finding patterns, and I like to catch the news stories and commentaries as they pass by.
Knives come out for Biden picks
In specific, a lot of people seem to dislike Neera Tanden a lot. She is supposedly being nominated for a budget-related position that requires Senate approval.
I personally focus on the finance/economics-related nominees, for obvious reasons, but there are plenty of critiques flying around, many of them coming from the left. But not only from the left.
David Sirota’s Daily Poster: Biden Picks Budget Director Who Pushed Social Security Cuts
President-elect Joe Biden will reportedly nominate a White House budget director who has been one of the country’s most prominent critics of U.S. Sen. Bernie Sanders and who has previously backed Social Security cuts.
Biden — who has repeatedly pushed for Social Security cuts throughout his career — announced his selection of Center for American Progress president Neera Tanden as his choice to run the powerful White House Office of Management and Budget. A longtime aide to Hillary Clinton, Tanden touted her think tank’s 2010 proposal to reduce Social Security benefits in 2012, as Biden was pushing for such cuts in the Obama administration.
Of course, there is a push to reduce Social Security benefits – at least for some people. The program is going to have a tough time sustaining itself, though tax increases alone can cover the benefits. But the tax increases it would require… well, let’s leave that for another time.
Tanden’s Social Security push followed the 2010 midterms, during the deficit reduction negotiations between the Obama administration and the new GOP Congress. Republicans drew a hard line but Obama sought a middle ground. Central to the administration’s efforts, which were led by Biden, was a plan called the “chained CPI” that would have slowed the rate at which Social Security benefits increase over time.
OH. One of those “calling slowing the growth of benefits is benefit cuts” things.
The Center on Budget and Policy Priorities, a liberal think tank, found that the chained CPI “would cut Social Security retirement benefits by about 2 percent, on average.” The organization, nevertheless, said it would support the concept under certain conditions.
I assume that 2 percent is on a present value basis.
While it’s nice to reduce Social Security benefits by 2 percent, I can think of all sorts of ways to make for bigger reductions.
Tanden has plenty of Republican opposition, but it seems to me I’m reading loads of Biden nomination objections from lefties. Obviously, Republicans aren’t going to be happy with Biden nominees from a policy perspective, but Biden gets to choose his cabinet, etc.
More cattery over Biden nominees:
Petition: Tell the Biden Transition: Do NOT Give Rahm Emanuel a Cabinet Position – the objection has to do with the death of Laquan McDonald – supposedly, Emanuel is being picked for Secretary of Transportation
National Review: Biden’s Cabinet: The Return of the Blob
Ken Vogel on Twitter: thread mentioning nominees that have private equity connections
As a Republican, this is all just theater to me.
At least we shouldn’t be hearing any blather about how there’s “no drama” surrounding Biden. I mean, they can try, but there are multiple subgroups who really don’t have the same goals (or experience). Better co-opt some of the “activist” crowd by inviting them to fancy parties. I bet that will make them get in line!
Retirement age issues
A decision by the Communist Party of China to raise the retirement age under a long-term economic and development plan has sparked anger on social media in fast-greying China.
In 2018, nearly 250 million of China’s 1.4 billion people were aged 60 or over. That is 17.8% of the population and it may exceed 33% by 2053, a prominent think-tank has said.
Authorities will “implement postponing the retirement age in a gradual manner”, the official Xinhua news agency said in a report this month, citing government targets by 2035.
For more than four decades, China’s retirement age has remained unchanged at 60 for men and 55 for women civil servants and white-collar workers.
China’s retirement age is lower than in many other countries. In Japan, it’s 65. Former Prime Minister Shinzo Abe’s government said last year it was considering raising it to 70 or even 75.
In South Korea, where 25% of the population may be 65 or older by 2030, workers retire at around 68 for men and 67 for women.
I have a news alert on “retirement age”, and it usually is picking up changes outside the U.S., as we’ve already boosted retirement ages all over the place, especially right after the financial crisis of 2008-2009.
Some of the weird things one comes across: very low retirement ages, and women have lower official retirement ages… though most countries have been changing that.
Australian Financial Review: Leaked KPMG email warned retirement age covered by discrimination law – they were forcing partners out at age 58
Economy Next: Sri Lanka to raise retirement age for EPF to 60 years for men, women — EPF is the Employees Provident Fund, equivalent to Social Security. The current retirement age, evidently, is 55.
The other thing that people need to realize is that the retirement age in many places isn’t just when you’re allowed to start retirement income from official plans, but it’s also an age at which it’s legal to push people out. We don’t have such a legal regime in the U.S.
Illinois pension and finance containment area
As of 8 am, November 30, 2020, the Illinois bill backlog stands at almost $7 billion.
Yes, with a B.
Mind you, fiscal year 2020 had about $200 billion in revenue. So that’s merely a rounding error!
…except they’re just about to borrow $2 billion more from the Fed. That won’t even cover half the backlog.
Wirepoints: Illinois to borrow billions from the Feds AGAIN, only state in country to tap government lending program – Wirepoints – note that Illinois is doing this, but New Jersey isn’t. Hmmm.
Yvette Shields: Chicago’s $3.9 billion bond plans advance to the City Council
Joe Cahill at Crain’s: This pension tab just keeps growing
Public finance stories
Pension & Investments: Half of Moody’s public-sector ratings actions cite ESG factors
ESG factors were a material credit consideration in half of public-sector ratings actions by Moody’s Investors Service in the past 15 months, the rating agency said Wednesday.
Compared to 50% of the more than 6,900 ratings actions for public-sector issuers, Moody’s found in a separate analysis that 33% of private-sector rating actions cited material ESG factors in 2019.
For public-sector rating actions citing ESG factors, roughly 19% were negative and 12% were positive, with the remaining 69% neutral. The distribution of negative rating actions varied across the three ESG issues, with social considerations having a larger percentage, 27%, related to negative rating actions compared to 18% for governance and 20% for environmental issues.
For public-sector issuers, the most frequently cited factors were governance considerations, while social factors were the most prominent issues in U.S. regional and local government rating actions, particularly those issues related to labor and income.
And by “income”, they mean how much revenue can these local governments actually raise?
It seems odd to me to lump ES with G — environmental & social factors are those goody-goody things that don’t say much fiduciary-wise, but governance structures are very important for fiduciaries to consider. There can be a tie between governance and E/S concerns, but I’ve often seen good-sounding E/S messages from corporations where their governance was hugely lacking, in terms of oversight by boards of directors as well as shareholder interests being reflected.
Governing: Washington State Leaders Push for COVID Relief Package Before Deadline – the deadline is December 30, apparently
Republican in waiting for Senate Finance chair has been attuned to muni issues – the Republican is Sen. Mike Crapo of Idaho
Marc Joffe at The Hill: The fuzzy math behind state and local bailouts
City & State New York: With federal elections undecided, state aid hangs in balance
The Daily Beast: These Blue States Are Screwed—Even Under Biden
amNY: Red state bailout? New York gets 91 cents back in fed aid for every tax dollar it pays, DiNapoli says – this is dumb. The state doesn’t pay taxes to the fed. Individuals living in NY pay taxes… and other people get Social Security, Medicare, etc. It’s not the fed’s fault if retirees move out of NY.
NY Comptroller: DiNapoli: State Tax Revenues Down $3 Billion, total at $43.8 billion. That’s a 6% decrease.
I have no idea what Congress thinks it’s doing post-election and post-Thanksgiving. I went looking around, and I’m not seeing anything about doing yet another stimulus bill. It could happen, I suppose.
But as I mentioned to many people re: state bailouts, the federal government may be able to shove about a year’s worth of revenue at states…. but they can’t fill the gaping holes that are underfunded public pensions, not to mention unfunded retiree health benefits.
Public pension stories
Most of the stories have been about assets and investment policies — you will see the ESG stuff all over the place. As I said above, it seems to me many public pension funds are adopting ESG for investments… to provide good PR against their lagging funded ratios.
National Public Pension Coalition: THREE REASONS WHY PUBLIC PENSIONS ARE CHEAPER THAN OTHER RETIREMENT PLANS LIKE 401(K)S – one being that closing DB plans magically makes the liabilities larger (a lie, but carry on)
Arnold Ventures: Pension Bonds Are a Short-Term Strategy That Carry Long-Term Risk
Nevada Policy Research Institute: Paying for other people’s retirement: half of PERS costs now go to debt
Manhattan Institute: Reforming New York City’s Public Retirement System
Center for Retirement Research at Boston College: Internal vs. External Management for State and Local Pension Plans
Pennsylvania: Legislation to reform pension systems heads to Wolf
Yale Climate Connections: California’s state pension fund pushes companies to cut their carbon pollution
Mackinac Center: Michigan Lawmakers Make Progress on Pension Debts
City Journal: With legislative supermajorities in Albany, Democrats look poised to push the state even further leftward. – As a NYer, I say whee.
World Socialist Web Site: Meet the Censored: Andre Damon
Net Interest: Where Did All the Rogue Traders Go?
The Hill: The spectre of pension failures haunts this election – this is about multiemployer pensions
$4 Billion SAG Pension Plan “In Good Financial Health,” Officials Say – the plan has a 75% funded ratio; it’s a multiemployer plan
This last item annoys me. Let me excerpt:
(Reuters) — One of Australia’s largest pension funds on Monday agreed to settle a landmark climate risk litigation filed by a 25-year-old member who alleged it was failing to protect his retirement savings against climate change.
REST acknowledged in a statement that climate change would lead to catastrophic economic and social consequences and that the phenomenon was a “material, direct and current financial risk” to the superannuation fund.
“If investors are legally required to apply a climate risk lens to their portfolios, this could, for example, result in a significant reduction in investments in fossil fuels, many of which are already being viewed as stranded assets in a low-carbon future,” he said.
And if it leads to underperforming the market…. then what?
Energy companies were hard-hit this year because of a huge drop in transportation, more than anything else. But also because all sorts of productive activity requiring energy did not occur, not just transportation.
The main thing that annoys me about all this is that it posits a knowledge that investment managers (and others) just do not have.
And then that holding a stock for a few years will have any appreciable effect on climate change. This is absurd.
I don’t see anything in the article that says what happens when the fund underperforms targets. Do the retirees have to absorb the losses? We’ve seen above that California pensions have been adopting these approaches… and really, their portfolio performance has generally been okay.
But their pensions haven’t been fully-funded for about 20 years now.
Might want to take a little look at that, y’all. Don’t assume there will be sufficient tax revenue, or even contribution from later employees, to fill the pension hole.