The Power of Demography to Determine Elections

Discussion in 'Politics, Religion, Social Issues' started by ElectronGuru, Nov 7, 2014.

  1. ElectronGuru macrumors 65816

    Sep 5, 2013
    Oregon, USA
    There are many theories on what's going on with our elections. Special interests, gerrymandering, low voter turnout, campaign finance. Slate has taken a big whack at demographics. Yes, 'white people are getting older', but there's much more going on. And the very future of our democracy is at stake. Click through for the unabridged, read on for the key points:

    The Disunited States of America

    The people who just elected a Republican majority in the Senate are a narrow, unrepresentative slice of voting-age Americans. They’re older, whiter, wealthier, and much more conservative than the public at large. Put another way, the midterm electorate that chose this Republican Congress is itself a Republican electorate drawn from a subset of Republican voters.

    With this seesaw of Democratic presidents and GOP congresses, we may be facing more than gridlock. We may be on the cusp of a generation of political stagnation that will be hardwired into our democracy by our country’s shifting demographics and the unwillingness of the Republican Party to compromise with those with whom they disagree.

    The Demographic Divide

    We’re at a point where one electorate—made up of young people and minorities—elects presidents and the occasional Senate majority while another—made up of older people, mostly white—elects the House of Representatives, with an occasional Senate majority as well.

    This is important. In the 1990s, a substantial number of older voters—if not most older voters—belonged to the Greatest Generation, the men and women who grew up in the Depression and fought in World War II. They were New Deal Democrats in their formative years, and they kept that affiliation through the rest of the 20th century.

    Those political ties were evident in how they voted over time. According to a massive survey on the “generation gap” by the Pew Research Center, voters who turned 18 when Franklin Roosevelt was president were 8 points more Democratic than the average voter in 1994, 1996, and 1998; 11 points more Democratic in 2000; 3 points more Democratic in 2002; and 14 points more Democratic in 2004. By contrast, the next oldest cohort of voters—those who “came of age” during the Truman and Eisenhower administrations—were substantially more Republican in most years.

    The generation gap as we know it—when the oldest voters jumped to the Republican Party and the youngest became solidly Democratic—didn’t emerge until the 2004 election. That was partially because of the circumstances of that contest—President George W. Bush was running a campaign of national unity against foreign threats. It is also explained, again, by demographics. The Greatest Generation had shrunk and was in the process of being replaced by senior citizens who were much friendlier to Republican politicians.

    As we entered the 2000s then, we had several trends coming together at once. The overall voting population was getting younger and browner, and these new voters were more Democratic; older voters, however, were still whiter and becoming more Republican. And young people continued to vote in presidential elections and largely ignore the midterms, while the older generation was consistent, voting in almost every election.

    It’s a simple dynamic that leaves us with vastly divergent electorates. In midterm elections, it doesn’t matter that Democrats run the table with young people, single women, and minorities—they’re outvoted by the older, whiter voters who actually turn out. And while we had a fleeting moment where Republican dominance with white voters was decisive in presidential elections—the 2004 contest—it’s no longer the case. Democrats are so strong with the so-called coalition of the ascendant that they can win with fewer whites than ever before: just 39 percent in the last presidential election. To put it in a sound bite, Democrats don’t have enough white voters to consistently hold the Senate or win the House, and Republicans don’t have enough minorities to win the presidency

    There’s still a lifetime of politics before the 2016 presidential election. But it’s fair to say that our demographics will continue along this path, giving us a baseline that favors Democrats and the eventual Democratic nominee. Which means that for the next two years, and the two years after that—and the two years after that—we should expect divided government.

    The Roots of Dysfunction

    The problem for our present politics isn’t ideological division; it’s that the Republican and Democratic parties aren’t ideological in the same way. The Republican Party isn’t just more conservative and more polarized, it’s polarized against basic norms of compromise.

    Part of this was strategy. GOP Senate leaders like incoming Senate Majority Leader Mitch McConnell understood that voters don’t care about congressional squabbles and exact lines of responsibility. The public judges the president on conditions like economic growth and heuristics like bipartisan cooperation. If Congress isn’t working together—if Washington seems polarized—voters don’t blame the responsible party as much as they blame the president. But part of it was also pressure from the older, white base of the Republican Party, which demanded full opposition to the president. The summer of 2009 was marked by vitriolic “town halls” where Democratic lawmakers faced a furious backlash from voters angry over the comprehensive health care bill. This anger—and these voters—gave the GOP a series of electoral wins, beginning with Sen. Scott Brown’s election in Massachusetts and ending with a Republican House majority in the 112th Congress.

    The Democracy Corps survey, published in 2013, found a GOP base that was fearful of demographic change and eager for a more confrontational Republican Party. It’s a remarkable document, in large part because it shows a deep awareness of the generational divide. These people know younger voters are more liberal and more diverse, and they want to do everything they can to protect their prerogatives before Democrats can capitalize on their demographic advantage. “There’s so much of the electorate in those groups that Democrats are going to take every time because they’ve been on the rolls of the government their entire lives. They don’t know better,” said one man from Raleigh, North Carolina. Another from Roanoke, Virginia, said: “I thank God there’s enough people getting angry now and it will have to stop. I think people realize that we’re going to have to rise up and take control.”

    You can see this on a broader scale in a 2014 report from the Pew Research Center on political polarization. Among “consistently conservative” voters, 63 percent wanted Republicans to “stick to their positions,” compared with just 14 percent of “consistently liberal” voters who said the same about the Democratic Party. Across the board, conservatives opposed compromise, leading New York magazine’s Jonathan Chait to quip that conservatives “Hate all deals.”

    This attitude is how we got the now-infamous scene from the 2012 Republican presidential primaries, where a whole suite of candidates refused to endorse a fiscal deal weighted in their favor, where Democrats offered $10 in spending cuts for every $1 in new taxes. And it’s also responsible for former House Majority Leader Eric Cantor’s stunning loss to an obscure challenger in the 2014 congressional Republican primaries. His opponent, libertarian Dave Brat, had a single charge: Cantor was too friendly with Democrats. It worked.

    All of this is to say one thing: The GOP is broken. And with its dominance in midterm elections, it’s poised to break American government for the foreseeable future. The 2013 shutdown—when House Republicans shuttered the government over the Affordable Care Act—is just the beginning. Indeed, there’s a good chance the 2014 midterm election results will worsen the ideas and factions that brought us to the brink. For extremist Republican figures like Sen. Ted Cruz (and now Sens. Joni Ernst and Tom Cotton), the confrontations of the past two years were a success. They vindicate a stance of implacable opposition. Far from cooperation, we should expect two years of even worse dysfunction.

    The Republican Remedy

    Let’s do a quick forecast of the next few election cycles. In 2016, if the economy is growing and the electorate is more diverse, we can expect—or at least, fairly predict—a Democratic win for the White House. And since that’s the year Republicans are defending Senate seats in blue states like Pennsylvania, Wisconsin, and New Hampshire, we can also expect a Democratic Senate. In 2018, however, the picture flips. Not only will the Republican electorate return en masse, but Democrats will be defending 25 Senate seats—several in red states—while Republicans will be defending just eight. We’ll likely get another Republican Senate, leading into another presidential election, where the incumbent Democratic president has a good chance of winning re-election and bringing a Democratic Senate with her. This whole time, because of the size of the Republican House majority and its base in the rural and exurban parts of the country, the House will remain in GOP hands.

    This past year, frustration with congressional inaction on immigration—and public pressure from immigration activists—pushed the White House to float the possibility of taking unilateral action to create a path to citizenship for unauthorized immigrants. The result was a primal scream from conservatives, who accused the president of flouting the Constitution. Even more moderate Republicans, like Ross Douthat of the New York Times, warned of presidential “Caesarism.” And while the Obama proposal fell within the president’s authority, it’s also true that Republicans weren’t completely wrong. There is a point at which presidential action violates congressional prerogatives. Which is to say that divided dysfunctional government can have other, more dangerous consequences.

    Next year, Republicans will have a duly elected congressional majority. But Barack Obama will still be president and will still have the legitimacy of a presidential election. Let’s say Republicans refuse to fix a legislative problem—like a fatal wound to the Affordable Care Act, inflicted by the Supreme Court—and President Obama decides to fix it unilaterally, with executive authority, rather than let his namesake law fall to pieces. By the letter of the law, this is illegitimate. But the Republican majority wasn’t elected by a clear majority of the American people, Obama was. And the president is committed to preventing an insurance death spiral or broken exchanges that could result from a full attack on the law. Whose authority is more legitimate?

    I don’t expect this to happen in Obama’s final two years in office, but it’s not an idle question. If a new Republican majority stymies a Democratic president in 2019—refusing to, for example, confirm a Supreme Court nominee—we could find ourselves in a constitutional crisis, as the president acts despite Congress. The longer the Republican Party stays on its path of anti-compromise, the more likely these scenarios become.

    There’s a chance this predicament will solve itself. Twenty years from now, midterm electorates might be so diverse—filled with people who cut their political teeth during the Bush and Obama years—that Democrats regain the momentum in these off-year elections as well. But I wouldn’t make that bet. To take us off this path, someone—and I mean the Republican Party—will have to take action. One choice is to abandon the norm against deals, or marginalize the anti-deal makers in the Republican Party. This happened before—during the 1980s and 1990s—and it can happen again. After all, the anti-compromise norm isn’t universal among conservatives.

    Often, trends don’t change political parties, individuals do. And they do so with the heft of the White House as leverage—if you follow me, I can win us the presidency. That is how Bill Clinton transformed the Democratic Party in the 1990s, and it’s how a future Republican could transform the GOP and bring it into the 21st century. A person who—through ambition for national office—uses power, patronage, charm, and coercion to modernize the Republican Party and steer it from its most destructive urges.

    The other option is for Democrats just to win. Again, however, that requires substantial turnout from groups that don’t vote in midterm elections. For now and the near future—absent an unlikely major institutional change, like automatic voter registration—the Democrats are simply the party of occasional voters.

    In some sense, our divergent electorates are just another barrier. Which means liberals will have to find some way to account for them. Whether it’s through institutional change—a national voting holiday, for instance—or something else, we have to change the dynamics of American politics. Otherwise, we can look forward to a future of dysfunction where our government will fail to do the most basic tasks. And while we can muddle through for a little while, it’s not a condition we can survive for a generation.
  2. jkcerda macrumors 6502a


    Jun 10, 2013
    Criminal Mexi Midget
    I like the way JS explains it better
  3. Scepticalscribe Contributor


    Jul 29, 2008
    The Far Horizon
    A nuanced and interesting article; thanks a lot for posting it.
  4. ElectronGuru, Nov 8, 2014
    Last edited: Nov 8, 2014

    ElectronGuru thread starter macrumors 65816

    Sep 5, 2013
    Oregon, USA
    The Power of Demography to Determine Elections

    You won't get an argument from me. Those Dems were spineless and did lose their seats in fear of standing up for their beliefs and losing their seats. In this regard, conservatives overvalue dignity and liberals undervalue it.

    The theme of this thread is that both parties suck and do because of circumstances larger than individual choice. And until and unless we fix those circumstances, we will only get more of the same.

    Sure thing. Here is the Economist's view, aimed squarely at our election system:

    Welcome back to Washington. Republicans have won a huge victory. Now they must learn to compromise

    OPINION polls before the mid-term elections on November 4th suggested Barack Obama’s party would be beaten, but this was a thrashing. Republicans captured the Senate easily (see article) and their majority in the House of Representatives is now the biggest it has been in most Americans’ lifetimes. A Republican candidate in New York was indicted for 20 counts of fraud, but won anyway.

    Close-up, the results are even worse for Democrats. They thought they could bin a bunch of tax-cutting, union-bashing Republican governors, but nearly all survived. Instead, Republicans captured governorships in solidly Democratic states like Maryland and Massachusetts.

    Mr Obama cannot escape the humiliating verdict on his presidency. He campaigned in his home state of Illinois, for a Democratic governor running against a Republican who belongs to a wine club that costs over $100,000 to join. The oenophile won by five points.

    Yet as Republicans toast their triumph, they should be careful not to over-interpret it. Their campaign did not offer voters much of a positive agenda; rather, it consisted largely of urging them to blame Mr Obama for all the trouble in the world. That was enough to secure victory, but does not give them a mandate to pursue a wishlist of conservative policies. Although more Americans than ever hold partisan views, a larger number are weary of gridlock and would prefer their representatives to compromise to get things done. For the voters to be satisfied, America will need to find new ways to run its politics.

    A mandate for moderation
    Many outsiders will be baffled by the election results. Compared with other rich nations, America is in good shape, with a growing economy, booming stockmarket, falling unemployment and robust public finances, at least by European standards. Why, they wonder, is Mr Obama so disliked that Democrats in swing states asked him not to campaign for them?

    The answer is that although the economic headlines look good, voters do not feel that way. Median incomes are in the doldrums and many households feel terribly insecure about the future. A staggering two-thirds of Americans expect their children to be worse off than they are. And when they look at Washington, DC, to see what their political leaders are doing about it, they see a circus of name-calling and irresponsibility. Last year a stand-off between House Republicans and Mr Obama temporarily shut the government down and nearly caused a catastrophic sovereign default. The outgoing Congress is the least productive since 1947. The proportion of Americans who trust it is a wretched 7%. It may be harsh, but when voters think the country is on the wrong track, the president and his party get the blame.

    There is a Republican faction that would like nothing more than to spend the next two years indulging in futile attempts to repeal Obamacare and conducting televised investigations of the president’s supposed abuses of power. If this faction prevails, America can expect yet more dysfunction and Republicans will deserve to lose the White House in 2016.

    Optimists are sure the new Congress will be better than that. Now that Republicans are in charge, voters will expect them to govern, rather than merely obstruct. Republican leaders such as Mitch McConnell and John Boehner would probably like to get things done, albeit with a bit of partisan sparring. And that means working with Mr Obama, who will remain president until January 2017 and can veto any bill the new Congress sends him. The two sides will thus have to find common ground—starting with the president. Deals are possible in plenty of areas. Republicans favour free trade; Mr Obama wants the authority, which his own party has denied him, to negotiate trade deals. Both parties want to fix the corporate-tax code, and to invest more in America’s shoddy infrastructure. Moderates on both sides also want to reform immigration law to unblock the flow of talent on which America depends.

    With power comes responsibility
    Yet, even if the optimists are right, America faces a host of ailments that seem beyond the reach of today’s politics. The personal tax code cannot be simplified without closing middle-class loopholes. Health care and pensions for an ageing population will swallow up the budget unless costs are curbed and the retirement age is raised. In each case, lasting reform will inflict pain on large groups of voters. Reforms are possible only if they have both parties’ fingerprints on them—if one side tried alone, the other would accuse it of throwing Grandma off a cliff. Cool heads in both parties know that the big entitlement programmes, which grow automatically, need fixing. Yet even in the most collaborative Congress, both sides would duck the issue, preferring instead to bicker over the mere 15% of the budget (excluding defence) that it re-authorises each year.

    America has changed since the days of Ronald Reagan and Bill Clinton. Money is splurged on elections and, many argue, this corrupts lawmaking. The parties are far more polarised and suspicious of each other. America’s political architecture is part of the problem, for two reasons. First, the electoral system rewards extremists. Many members of the House represent gerrymandered districts which their party cannot lose. Their only fear is that they might lose a party primary to a challenger who accuses them of being soft on the other side. So they pander to the zealots who vote in primaries and treat opportunities for compromise like invitations to burn Old Glory.

    Second, the federal government has so many checks and balances that it is all but paralysed. The Senate filibuster gives 41 out of 100 senators the ability to block anything except a budget (they could in theory represent just 11% of the population). Attempts to limit campaign spending tend to fail—and to infringe the constitution’s free-speech guarantee. The best one can hope for is that donors will have to reveal who they are. More can be accomplished with reforms that empower the centre and remove road blocks, without requiring a federal constitutional amendment. Here are three suggestions:

    First, scrap the filibuster in the Senate. Second, stop gerrymandering. Four states have already handed control of redistricting to independent commissions. California did so in 2010. Between 2002 and 2010 the state’s House members held on to their seats 99.6% of the time; in 2012 a quarter of them retired or got the boot. The reforms also moderated California’s state legislature. Once dominated by doctrinaire Democrats, last year it rejected 39 out of the 40 bills that the Chamber of Commerce said would kill jobs. One day, with luck, computers will design voting districts without taking party preferences into account.

    Third, other states should copy California’s open primaries. Instead of letting just registered Republicans pick a Republican candidate and Democrats pick a Democrat, the Golden State now holds primaries in which anyone can vote. The top two candidates then proceed to the general election, even if they are both of the same party. This gives candidates an incentive to pitch to the political centre from the very start.

    None of these reforms will happen soon, as they all need patient agitation in the states. But if Americans want to be better governed—which is what they voted for this week—they need to change the way they elect their leaders.
  5. Ugg macrumors 68000


    Apr 7, 2003
    Both the Slate and Economist's articles are excellent reading.

    I think there are a lot of parallels between what is happening in Yrup and the USA. Old, white peoples with the help of modern medicine are living much, much longer than their parents and are only interested in guaranteeing their pensions AND are terrified of the browning of the populace. So, they are voting their self interests first and their fear of brown people second. To hell with their children and grandchildren. I truly hunk that this is the first generation ever to feed their children, willingly, mind you, to the wolves.
  6. Zombie Acorn macrumors 65816

    Zombie Acorn

    Feb 2, 2009
    Toronto, Ontario
    Obama isn't running in 2016, is this racism at work as well? More at 6, on the liberal spin zone.
  7. VulchR macrumors 68020


    Jun 8, 2009
    Agreed. However, this is self-limiting. Eventually the older people will begin to die off, or see the impact of their selfish short-sided decisions first-hand on their families. Of course at first they'll blame everybody except themselves (e.g., the anti-immigration nonsense in the UK where pressure on public services is blamed on immigrants rather than the election of a government that believes in the austerity fairy). Eventually, however, the evidence damning their actions will become so overwhelming that even they will begin to take notice. In short, the experiment in mean-spirited winner-takes-all conservatism will have been shown to be a failure of social policy.
  8. Happybunny macrumors 68000

    Sep 9, 2010
    I must admit that is a very bleak view of the future.

    I am probably one of the older posters here, and I cannot see myself in anything that you two posted.

    Since the mortgage rules were made stricter, it's been the fact that parents and grandparents have given money so that their familes can buy houses.

    I've always had left leaning politics for social affairs, and middle of the road appraoach for the economy.

    The problem that are now facing the west is because everbody and their dog believed the "Masters of the Universe" and their "Markets always Know Best".

    Since the crisis everybody has suddenly come to understand there is no free ride.

    But the western world has been in darker days than these, the year I was born 1944. Mainland Europe was still fighting a major war, and even after the war was over the rebuilding took two decades, two decades of going without.
  9. Ugg macrumors 68000


    Apr 7, 2003
    So you don't know anyone who is more interested in guaranteeing their pension than ensuring their kids have a good future?

    There are a lot more thousand Euro type jobs in Europe than there are in the USA.

    Here though, the firefighters and police have pensions that are truly amazing. They may not earn much while they are working, but their publicly paid benefits are insane. They're he ones who are voting against their own children's best interests.
  10. MacNut macrumors Core


    Jan 4, 2002
    Obama ran on the "I am a young hip person like you" platform to get the younger generation out to vote. The problem is it only worked once. Like before Obama's campaign the younger people don't care anymore. Either they saw what Obama's policies became and felt shafted. Or Obama stopped listening to the younger people and trying to get their votes.

    So we revert back the the standard, older people vote Republican, younger people vote Democrat. And the vast majority don't bother to vote.
  11. Technarchy macrumors 604


    May 21, 2012
    Fan of Logan's Run?

  12. Happybunny macrumors 68000

    Sep 9, 2010
    Sitting here in Europe on a pension life is good.

    From an article in the NYT.

    Imagine a place where pensions were not an ever-deepening quagmire, where the numbers told the whole story and where workers could count on a decent retirement.

    Imagine a place where regulators existed to make sure everyone followed the rules.

    That place might just be the Netherlands. And it could provide an example for America’s troubled cities, or for states like Illinois and New Jersey that have promised more in pension benefits than they can deliver.

    “The rest of the world sort of laughs at the United States — how can a great country like the United States get so many things wrong?” said Keith Ambachtsheer, a Dutch pension specialist who works at the University of Toronto — specifically at its Rotman International Center for Pension Management, a global clearinghouse of information on how successful retirement systems work.

    Going Dutch, however, can be painful. Dutch pensions are scrupulously funded, unlike many United States plans, and are required to tally their liabilities with brutal honesty, using a method that is common in the financial-services industry but rejected by American public pension funds.

    "Everybody wants safety and everybody wants an affordable system, and you can’t have both. It’s become a major public debate in the Netherlands,” said Keith Ambachtsheer, a Dutch pension specialist.
    The Dutch system rests on the idea that each generation should pay its own costs — and that the costs must be measured accurately if that is to happen. After the financial collapse of 2008, workers and retirees in the Netherlands took the bitter medicine needed to rebuild their collective nest eggs quickly, with higher contributions from workers and benefit cuts for pensioners.

    The Dutch approach bears little resemblance to the American practice of shielding the current generation of workers, retirees and taxpayers while pushing costs and risks into the future, where they can metastasize unseen. The most recent data suggest that public funds in the United States are holding just 67 cents for every dollar they owe to current and future pensioners, and in some places the strain is palpable. The Netherlands, by contrast, have no Detroits (no cities going bankrupt because pension costs grew while the population shrank), no Puerto Ricos (territories awash in debt but with no access to bankruptcy court) and nothing like an Illinois or New Jersey, where elected officials kicked the can down the road so many times that it finally hit a dead end.

    About 90 percent of Dutch workers earn real pensions at their jobs. Their benefits are intended to amount to about 70 percent of their lifetime average pay, as many financial planners recommend. For this and other reasons, the Netherlands has for years been at or near the top of global pension rankings compiled by Mercer, the consulting firm, and the Australian Center for Financial Studies, among others.

    Accomplishing this feat — solid workplace pensions for most citizens — isn’t easy. For one thing, it’s expensive. Dutch workers typically sock away nearly 18 percent of their pay, most of it in diversified, professionally run pension funds. That compares with 16.4 percent for American workers, but most of that is for Social Security, which is intended to provide just 40 percent of a middle-class worker’s income in retirement.

    Dutch employers contribute to their system, too, but their payments are usually capped. While that may seem a counterintuitive way to make sure that pensions are well funded, it actually encourages companies to stick with pension plans. If the markets drop, Dutch employers do not receive urgent calls to pump in more money — the kind of cash calls that have prompted so many American companies to stop offering pensions. In the private sector, only 14 percent of Americans with retirement plans at work have defined-benefit pension plans — the ones that offer the most security — compared with 38 percent who had them in 1979. And if the markets rally and a Dutch pension fund earns more than it needs, the employers are not allowed to touch the surplus. In the United States, companies have found many ways to tap a pension surplus. The problem today is that there usually is no surplus left.

    Dutch companies, as well as public-sector employers, typically band together by sector in big, pooled pension plans, then hire nonprofit firms to invest the money. Terms are negotiated sectorwide in talks that resemble American-style collective bargaining.

    This vast collaborative process may sound too slow, too unwieldy and maybe even too socialist for American tastes. But standing guard over it is a decidedly capitalist watchdog, the Dutch central bank. More than a decade ago, after the dot-com collapse, a director of the central bank warned of a looming pension funding crisis. In response, the central bank in 2002 began to require pension funds to keep at least $1.05 on hand for every dollar they would have to pay in future benefits. If a fund fell below the line, it had just three years to recover.

    American public pension funds have no such minimum requirement, and even if they did, there is no regulator to enforce it. Company pensions are bound by federal funding rules, but Congress has a tendency to soften them.

    The Dutch central bank also imposed a rigorous method for measuring the current value of all pensions due in the future. Pensions are not supposed to be risky, so the Dutch measure them the same way the market prices very safe bonds, like Treasuries — that is, by discounting the future payments to today’s dollars with a very low interest rate. This method shows that a stable lifelong benefit is very valuable, and therefore very expensive to fund.

    Notably, the Dutch central bank prohibited the measurement method that virtually all American states and cities use, which is based on the hope that strong market gains on pension investments will make the benefits cheaper. A significant downside to this method is that it lets pension systems take advantage of market gains today, but pushes the risk of losses into the future, for others to cope with. “We had lengthy discussions about this in the Netherlands,” said Theo Kocken, an economist who teaches at the Free University in Amsterdam and is the founder of Cardano, a risk analysis firm. “But all economists now agree. The expected-return approach is a huge economic offense, hurting younger generations.”

    He explained that in the Netherlands, regulators believe that basing the cost of benefits today on possible investment gains tomorrow is the same as robbing tomorrow’s workers to pay for today’s excesses.

    "The expected-return approach is a huge economic offense, hurting younger generations,” said Theo Kocken, a Dutch economist.
    Most public pension officials in the United States reject this view, saying governments can wait out bear markets because governments, unlike companies, don’t go out of business.

    For years, economists have been calling on American cities and states to measure pensions the Dutch way. And, in fact, California’s big state pension system, Calpers, sometimes calculates a city’s total obligation by that method. When Stockton went bankrupt, for instance, Calpers recalculated and found that the city owed it $1.6 billion. Of course, Stockton is insolvent and does not have an extra $1.6 billion, but Christopher Klein, a bankruptcy judge, has said that federal bankruptcy law permits it to walk away from the debt. Calpers disagrees, setting up a clash that seems destined for the United States Supreme Court.

    But most of the time, when someone in the United States calls for Dutch-style measurements, pension officials suspect a ploy to show public pensions in the worst possible light, to make them easier to abolish.

    “They want to create a false report, to create a crisis,” said Barry Kasinitz, director of government affairs for the International Association of Fire Fighters, after members of Congress introduced a bill to require the Dutch method.

    The Dutch say their approach is, in fact, supposed to prevent a crisis — the crisis that will ensue if the boomer generation retires without fully funded benefits. Their $1.05 minimum is really just a minimum; pension funds are encouraged to keep an even bigger surplus, to help them weather market shocks. The Dutch sailed into the global collapse of 2008 with $1.45 for every dollar of benefits owed, far more than they appeared to need. But when the dust settled, they were down to just 90 cents. The damage was so bad that the central bank gave them a breather: They had five years to get back to the $1.05 minimum, instead of the usual three.

    American public plans emerged from the crisis in worse shape, on the whole, and many allowed themselves 30 years to recover. But 30 years is so long that the boomer generation will have retired by then, and the losses will have been pushed far into the future for others to repay.

    It’s a recipe for disaster if the employer happens to be a city like Detroit. The city’s pension system used a 30-year schedule to cover losses but reset it at “Year 1” every year, a tactic employed in a surprising number of places. In Detroit, it meant the city never replaced the money that the pension system lost. When Detroit finally declared bankruptcy last year, an outside review found a $3.5 billion shortfall, one of the biggest claims of the bankruptcy. Manipulating the 30-year funding schedule had helped to hide it.

    “This happening in the Netherlands is totally out of the question,” Mr. Kocken said.

    While the Netherlands has a stellar reputation for saving, that doesn’t mean pensions have been without controversy there; in fact, a loud, intergenerational debate is occurring about how to manage pensions. The financial crisis raised new calls for reform, Mr. Ambachtsheer said. Retirees were shocked and angry to have their pensions cut by an average of 2 percent after the crash. That had never happened before, and many had no idea that cuts were even possible. A new political party, 50Plus, sprang up to defend the interests of older citizens and won two seats in the national Parliament.

    But something else happened: Dutch young people found their voice. No matter their employment sector, they could see that their pension money was commingled with retirees’ money, then invested that way by the outside asset management firms. In the wake of the financial crisis, they realized that they and the retirees had fundamentally opposing interests. The young people were eager to keep taking investment risk, to take advantage of their long time horizon. But the retirees now wanted absolute safety, which meant investing in risk-free, cashlike assets. If all the money remained pooled, young people said, the aggressive investment returns they wanted would be diluted by the pittance that cashlike assets pay.

    “Now the question is, ‘How do you resolve this dilemma?’ ” Mr. Ambachtsheer said. “Everybody wants safety and everybody wants an affordable system, and you can’t have both. It’s become a major public debate in the Netherlands.”

    It’s a debate that is rarely, if ever, heard in the United States.
  13. orestes1984, Nov 10, 2014
    Last edited: Nov 10, 2014

    orestes1984 macrumors 65816

    Jun 10, 2005
    This is increasingly the belief in Australia where the young must suffer so as the existing living opulent and decadent lifestyles can mooch off of them when they can no longer work, the caveat being that the aged pension is raising to 70 years of age so most of the currently working young under 35 will be dead while the existing baby boomers and generation Xers are grandfathered into the existing aged pension.

    The young are being made to feel the worst of an economic problem created by investment bankers who have received the majority of their money back from the US money printing program. The worst of it is that those who were diversified into managed private funds copped the worst of the financial fallout with the GFC that wiped the majority of some peoples pensions out entirely meaning the young will be further left to pay the debts of a problem they didn't create.

    Of course the negative gearing and tax offset issues don't help the land affordability crisis where housing were once 4x the borrowers investment in many cases for a young person buying in now they are looking to foot the bill which is 8-12x their initial investment and with the likely upcoming downturn in Australia they may never turn a profit whilst those heavily invested in multiple investment property get to use the losses as a tax write off.

    The young pay for the decadence of the elderly and the rich and for the mistakes of investment bankers this country outside of managed funds had very little to do with. It stinks to high heavens and the current government has the hide to say the age of entitlement is over conveniently when they will all be leaving office next term on $150k a year pensions for being parliamentarians...

    The good news is the right wing party will be gone at the next election, the bad news is that they've done to healthcare education, pensions and unemployment benefits what Reagan and Thatcher did respectively to the US and the UK respectively.

    AKA... we're just as screwed up as the rest of the world thanks to conservatives while they get to bask in their own decadence.
  14. Southern Dad macrumors 68000

    Southern Dad

    May 23, 2010
    Shady Dale, Georgia
    Renew, renew… For the young amongst us.

  15. aaronvan Suspended


    Dec 21, 2011
    República Cascadia
    Great book, good movie, absolutely terrible (and short-lived) television series.

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