Public Finance – Page 5 – Actuarial News

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China has one of the lowest retirement ages among major economies. Under a policy unchanged since the 1950s, it allows women to retire as early as at age 50 and men at 60. Now, local governments are running out of money just as a wave of retirees hits. That is leaving Beijing with little choice but to ask people to work longer—a move economists say is long overdue but one still likely to meet with resistance.

China’s version of “baby boomers”—those born after China emerged from devastating starvation in the early 1960s—are retiring in droves. Even with government subsidies, by 2035 China’s state-led urban pension fund will run out of money accumulated over the previous two decades, leaving it to rely entirely on new workers’ contributions, according to projections made in 2019 by the Chinese Academy of Social Sciences, a government think tank.

Former central bank Gov. Zhou Xiaochuan warned in a February speech that China must address its pension shortfall and communicate that many Chinese may need to rely on private pension savings

Author(s): Livan Qi

Publication Date: 11 April 2023

Publication Site: Wall Street Journal

Riots erupt across France as Constitutional Council validates Macron’s pension cuts

April 19, 2023April 19, 2023 Mary Pat Campbell

Link: https://www.wsws.org/en/articles/2023/04/15/mwio-a15.html

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https://twitter.com/ClementAgostini/status/1646927984928907278?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1646927984928907278%7Ctwgr%5E75aaeb79c11e244c2303bd011418b6ddb22ac1c8%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fwww.wsws.org%2Fen%2Farticles%2F2023%2F04%2F15%2Fmwio-a15.html

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At 6 p.m. yesterday, France’s Constitutional Council ruled that President Emmanuel Macron’s pension cuts are constitutional, removing the last legal obstacle to their adoption as law. The Elysée presidential palace announced 15 minutes later that Macron will promulgate the pension cuts as law within 48 hours.

The Council’s predictable approval of a law opposed by 80 percent of the French people, which Macron rammed through without even a vote in parliament, again tears the “democratic” mask off the capitalist state. It imposes the diktat of the banks, which plan amid the NATO-Russia war in Ukraine to massively divert social spending into strengthening the military-police machine. The struggle against the pension cuts can only be waged as a political struggle directed against the entire capitalist state machine.

The Council’s decision also exposes the forces in the union bureaucracy and the pseudo-left parties who, warning of “violence” by protesters, told workers to place their hopes in trade union “mediation” with Macron. Everyone involved, including masses of workers and youth, knew very well that Macron would ignore the “mediation.” On the other hand, two-thirds of the French people supported a general strike to block the economy and bring down Macron.

Author(s): Alex Lantier

Publication Date: 14 April 2023

Publication Site: World Socialist Web Site

NJ Actuarial Reports – The Believable Numbers 6/30/22

April 12, 2023April 12, 2023 Mary Pat Campbell

Link: https://burypensions.wordpress.com/2023/04/03/nj-actuarial-reports-the-believable-numbers-6-30-22/

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The June 30, 2022 actuarial reports for the New Jersey Retirement System are now all out and there are a few numbers therein that can be taken seriously (none involving liabilities or even the market value of assets considering all those self-valued alternative investments). The main purpose of these official actuarial reports is to determine the ‘required’ contributions which practically all parties have a vested interest in understating so we get a bunch of fanciful numbers where possible. However, these numbers you can’t pretty up:

Author(s): John Bury

Publication Date: 3 April 2023

Publication Site: burypensions

ILLINOIS CASINO REVENUE DOWN $200M SINCE 2012, AS CHICAGO BETS ON CASINO

April 12, 2023April 12, 2023 Mary Pat Campbell

Link: https://www.illinoispolicy.org/illinois-casino-revenue-down-200m-since-2012-as-chicago-bets-on-casino/

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Chicago is in line for casino gaming soon, but its success is dwindling as video gaming machines and sports betting rise.

The casino industry for decades has been a significant contributor to the Illinois economy, but from 2012 to 2022 its seen a $200 million decline, according to data from the Illinois Gaming Board.

One of the reasons for the decline is the emergence of other forms of gaming which weren’t available to Illinoisans in 2012. Video gaming terminals, for example, have nearly doubled from $395 million in revenue during 2019 to $762 million in 2022.

They allow players to place bets on video poker and slot machines in local bars and restaurants, providing a more accessible and convenient experience than casinos.

Author(s): Dylan Sharkey

Publication Date: 11 April 2023

Publication Site: Illinois Policy Institute

Big City Pensions and the Urban Doom Loop

April 12, 2023April 12, 2023 Mary Pat Campbell

Link: https://manhattan.institute/article/big-city-pensions-and-the-urban-doom-loop#new_tab

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Pension spending increased in all of the 10 largest American cities over the last decade, with a few cities experiencing a doubling or even tripling of their expenditures in 2021 dollars.
Almost all cities saw an increase in pension spending per employee.
There is large variation in the amount per employee that American cities are spending on pensions.
To respond to rising pension demands, some cities have reduced employment, often in the area of public safety.
A worsening market environment for pension funds will necessitate increased pension expenditures by cities in 2023 and beyond, exacerbating pressures to limit or reduce employment and, thus, city services.

Author(s): Daniel DiSalvo, Jordan McGillis

Publication Date: 6 April 2023

Publication Site: Manhattan Institute

The Sustainability of State & Local Pensions: A Public Finance Approach

April 11, 2023April 11, 2023 Mary Pat Campbell

Link: https://crr.bc.edu/briefs-state-local-pensions/the-sustainability-of-state-local-pensions-a-public-finance-approach/

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Key findings:

Many experts favor full prefunding of state and local pensions to maintain fiscal sustainability, which means big contribution hikes.
This analysis explores an alternative: stabilizing pension debt as a share of GDP.
Under current contribution rates, baseline projections show no sign of a major crisis in the next two decades even if asset returns are low.
Yet, many plans will be at risk over the long term of exhausting their assets, so action will be needed.
Plans can reach a sustainable footing by stabilizing their debt-to-GDP ratio, with much smaller contribution hikes than under full funding.

Author(s): Louise Sheiner

Publication Date: 11 April 2023

Publication Site: Center for Retirement Research at Boston College

I Gave Myself Severe Diarrhea for Science. Don’t Tax Me for It.

April 6, 2023April 6, 2023 Mary Pat Campbell

Link: https://reason.com/2023/04/05/i-gave-myself-severe-diarrhea-for-science-dont-tax-me-for-it/

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I drank the bespoke pathogenic cocktail as part of what’s known as a “human challenge study” run by the Center for Vaccine Development at the University of Maryland, Baltimore. In a human challenge study, adult volunteers are exposed to a pathogen. The study I was involved in was intended to test an experimental vaccine. The process may sound somewhat medieval, but these studies are critical scientific tools that prioritize participant safety. From 1980 to 2021, over 15,000 volunteers have been exposed to one of dozens of diseases in such studies, and not one has died.

Dysentery can be fatal. While Shigella is treatable with antibiotics, resistance is evolving at a worrying pace, and tens of thousands of children still succumb to it every year in the developing world. Those it does not kill are often left with stunted growth.

….

For my assistance in the development of a potentially lifesaving vaccine, I was paid $7,350. My motivations were altruistic to a degree: I wanted to pay my privilege forward. As I told Business Insider, however, I am not a complete saint and would not have done it for free.

As far as the Internal Revenue Service (IRS) is concerned, the compensation for my bout of dysentery has zero charitable component; it’s just regular old income, indistinguishable from, say, freelance writing or mowing lawns. If, God forbid, I am ever audited, I hope the IRS agent believes me when I say that’s just my diarrhea money.

I maintain, though, that I should not be taxed on that $7,350 at all: Treating clinical trial compensation as taxable income is just bad policy.

Author(s): JAke Eberts

Publication Date: 5 April 2023

Publication Site: Reason

Can France Escape Its Pension Overhang?

March 29, 2023 Mary Pat Campbell

Link: https://www.city-journal.org/can-france-escape-its-pension-overhang

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In 2021, government spending accounted for 59 percent of GDP in France, compared with 45 percent in the United States. Spending on public pensions accounts for much of that gap: it’s 15 percent of GDP in France, but only 7 percent in the U.S. This greatly inflates associated payroll taxes, which alone took 28 percent of workers’ incomes in France, compared with just 11 percent in the U.S.

President Macron argues that the cost of financing pensions is dragging down the whole economy, and that reform is necessary to make France an attractive venue for investment and employment. Whereas workers’ incomes in 1975 were 46 percent higher than those of retirees, by 2016 they were 2 percent lower. Many economists see it as senseless to redistribute so much from the young to the elderly, who seldom have childrearing expenses and whose mortgages are often paid off.

Pension reform is seen as necessary by 61 percent of French voters, but only 32 percent support raising the retirement age. Macron argues that the only alternatives to his reforms would involve cutting benefit levels, hiking taxes, or cutting public spending on other items such as education, health care, or defense. France already has close to the highest taxes in the developed world.

Median incomes for French residents aged 65 and over ($20,116) are little different than those for Americans ($19,704). The main effects of France’s extra pension spending are to crowd out private savings for retirement (which amount to 12 percent of GDP versus 170 percent in the U.S), and to cause French citizens to retire much earlier (at an average age of 60.4, vs 64.9 in the states).

Author(s): Chris Pope

Publication Date: 28 Mar 2023

Publication Site: City Journal

A new wave of pension protest breaks out in France as police brace for violence

March 29, 2023March 29, 2023 Mary Pat Campbell

Link: https://www.npr.org/2023/03/28/1166436439/france-protest-strike-pension-retirement

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Protests and strikes against unpopular pension reforms gripped France again Tuesday, with many thousands marching and the Eiffel Tower closed and police ramping up security amid government warnings that radical demonstrators intended “to destroy, to injure and to kill.”

Concerns that violence could mar the demonstrations prompted what Interior Minister Gérald Darmanin described as an unprecedented deployment of 13,000 officers, nearly half of them concentrated in the French capital.

After months of upheaval, an exit from the firestorm of protest triggered by President Emmanuel Macron ‘s changes to France’s retirement system looked as far away as ever. Despite fresh union pleas hat the government pause its hotly contested push to raise France’s legal retirement age from 62 to 64, Macron seemingly remained wedded to it.

Author(s): Associated Press

Publication Date: 28 Mar 2023

Publication Site: NPR

The federal budget outlook

March 21, 2023March 21, 2023 Mary Pat Campbell

Link: https://www.brookings.edu/research/the-federal-budget-outlook-2/

PDF of report: https://www.brookings.edu/wp-content/uploads/2023/03/20230313_TPC_Gale_FiscalOutlookFINAL.pdf

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The basic story is familiar. Low revenues coupled with rising outlays on health-related programs and Social Security drive permanent, rising primary deficits as a share of the economy. Net interest payments also rise substantially relative to GDP due to high pre-existing debt, rising primary deficits, and gradually increasing interest rates. Unified deficits and public debt rise accordingly.

Under current law for the next 10 years, the CBO’s projections imply that persistent primary deficits will average 3.0% of GDP. Net interest payments will rise from 2.4% of GDP currently to 3.6% in 2033, an all-time high. The unified deficit, and even the cyclically adjusted deficit, will exceed 7% of GDP at the end of decade. Debt will rise from 98% of GDP currently to 118% by 2033, another all-time high.

Over the following two decades, the projected trends are even less auspicious. Primary deficits rise further as spending on Social Security and health-related programs continue to grow faster than GDP and revenue growth remains anemic. The average nominal interest rate on government debt rises to exceed the nominal economic growth rate by 2046, setting off the possibility of explosive debt dynamics. By 2053, relative to GDP, annual net interest payments exceed 7%, the unified deficit exceeds 11%, and the public debt stands at 195%. All these figures would be all-time highs (except for deficits during World War II and in the first two years of the COVID-19 pandemic) and would continue to grow after 2053.

Author(s): Alan J. Auerbach and William G. Gale

Publication Date: 14 Mar 2023

Publication Site: Brookings

The End Is Near for Outdated Government Financial Reporting

February 14, 2023February 14, 2023 Mary Pat Campbell

Link: https://www.route-fifty.com/finance/2023/02/end-near-outdated-government-financial-reporting/382747/

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By way of a few paragraphs inserted into the recently enacted 4,000-page 2023 National Defense Authorization Act, Congress mandated that state and local governments prepare their annual financial statements in a standardized format that is electronically searchable. The provision effectively drags state and local governments kicking and screaming into the 20th century, if not the 21st.

As worthy an accomplishment as this appears to be, it was resisted mightily by the state and local government financial community. Most prominently, they argue, the measure can potentially result in a major transfer of accounting and reporting regulatory authority from states to the federal government, thereby undercutting what many consider a fundamental principle of federalism. Moreover, state and local officials see it as one more costly unfunded mandate imposed upon their governments.

The opposition by state and local governments is understandable. But they have no one to blame but themselves. To this day they are wedded to a technological past. In a perverted way, they may be getting their just desserts. The act requires them to do little more than what they should have done years ago on their own for the benefit of their investors and other stakeholders.

Implicit in the act is that governments will have to prepare their financial statements using XBRL (eXtensible Business Reporting Language) or some comparable reporting framework. This is the format that the Securities and Exchange Commission, which would be charged with implementing the new provision, currently demands corporations use in their financial filings. XBRL requires all entities to classify each of the elements of their financial statements (e.g., assets, liability, revenues and expenses) by identical rules and in machine readable form.

Author(s): Michael Granof and Martin J. Luby

Publication Date: 8 Feb 2023

Publication Site: Route Fifty