Saturday, July 20, 2013

Chicago - the second city

Could the Windy City follow in the steps of Detroit?  Well, they just closed 11% of the public schools and laid off 1,000 teachers due to a dwindling population and budget constraints:
It’s an interesting web the union has spun for itself: its power to negotiate lavish pensions for teachers has helped bankrupt the city, which is now forced to sack teachers. And with Chicago’s budget deficit at $1 billion and revenue declining, there’s no end in sight, and no tenure and no pension is safe. How teachers react to the declining ability of unions to secure their interests in one of America’s great blue cities will tell us a lot about the blue model’s current bill of health.
The immediate impact on children and families of Chicago’s fiscal failure is obvious enough, but the long-term impact is perhaps even more grim.
Emphasis mine.  Every time I bring up the topic of reforming pensions and/or Social Security, the push back is that "oh, the stock market goes down" and "people can't handle their own finances."  Which may be true but the lousy return I get on my 401(k) is mine.  These pensions exist on the cloud of corporate and civil promises which can disappear like General Motors' profits or Detroit's fire department.

Update - Points and Figures: "Why Chicago is not Detroit, but Illinois is."


OxGoredMine said...

Which may be true but the lousy return I get on my 401(k) is mine.

Whereas the line marked "pension contributions" on many workers' pay stubs is merely an optical illusion.

Eric said...

Um, I think that's pretty clear to Delphi employees and the civil servants in Detroit.

Anonymous said...

Privating Social Security doesn't equate to putting everything in the stock market (though over the multi-decadal haul, that's the best place to be). If one were sufficiently timorous (and/or stupid), one could invest in Treasuries or money-market funds. In any case, a diversified portfolio that one actually owns is better than an institutional promise or a so-called account at Social Security that the Supreme Court has ruled is not the citizen's property.