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While America Aged: How Pension Debts Ruined General Motors, Stopped the NYC Subways, Bankrupted San Diego, and Loom as the Next Financial Crisis Hardcover – May 1, 2008
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Top Customer Reviews
The author declares that pensions are perfect vehicle for procrastination; in the financial world, they are the most long-enduring promises that exist. The only rival is the federal Social Security system - but there, surprisingly, the commitment is no so airtight. Congress, if it chose, could reduce or cancel Social Security benefits tomorrow. Pensions are forever.Read more ›
However, these three stories seem to exist in isolation. He doesn't spend enough time putting them in the context of other government and private pension and 401(k) plans. Lowenstein seems to have focused on making sure the three stories are easy to read and in this he has succeeded. But in doing so, he has not provided the hard data that a reader needs to really understand the issue. There is not a single chart of table in the book. There are virtually no benchmarks in the book - it's hard to judge the appropriateness of the pay and pensions described in the book without details of the payroll and benefit costs of other American workers.
Although the stories were good, after reading 230 pages I didn't feel that I had learned anything significant that I did not know before.
Roger Lowenstein tells the fascinating story via three case studies: of the United Auto Workers (UAW), the New York Transport Workers Union (TWU), and the San Diego city pensions. Lowenstein writes that the lesson from all three is "those who mortgage the future come to rue the day."
There were some different causes for the pension crisis between the private and public sectors. But one common explanation is the human tendency to delay that which we find unpleasant . "Pensions are the perfect vehicle for procrastination." The benefits are among the most long-enduring promises that exist. It's easy to overpromise when keeping it will be someone else's obligation.
Private sector pensions gradually became established during the WWII wage freeze, when companies could help workers by giving them pensions; ergo the number of workers with pensions tripled. During the 1940s, GM and Ford started pensions for executives only. UAW President Walter Reuther said UAW wouldn't tolerate a double standard of pensions for execs but not hourly workers. In 1950, GM agreed to a pension of $125 a month, minus Social Security, funded by the company. In return, GM got a five-year contract, which meant labor peace. An initial problem was that pensions covered all existing workers for whom no money had been set aside, so firms faced an unfunded liability from the gitgo.Read more ›
The root of the problem is that the pension and health bills are paid by future generations but the benefits are enjoyed today by the current workers who receive payment, the current tax payers who temporarily dodge payment, and the current politicians that can take credit. This is a classic example of moral hazard in action.
One of Lowenstein's key themes is that "retirement" is a relatively new concept. It was never considered a guaranteed "right" that all Americans are entitled to until very recently. Is his historical recap, Lowenstein writes,
"But in the United States, until very late in the nineteenth century, pensions were almost unheard of... Most people worked on farms on in small shops or mills. As they got older they didn't stop working, they simply worked a little less. If old age did catch up with them, they turned to their families for food and shelter. The `problem' of old age was in any case not widespread.... Retirement was less one of life's standard passages, like adolescence or middle age, than it was an infrequent and brief preamble to the grave."
So what was the impetus for the creation of "retirement"?
"The man who tended a farm could gracefully age on the job; the factory worker couldn't.Read more ›
Most Recent Customer Reviews
I knew that there was a serious problem with respect to ever-increasing pension obligations, especially in the public sector. Read morePublished 10 days ago by David M
This book is essential reading for anyone negotiating a contract. It really brings home the importance of understanding both sides of the table in creating an equitable deal that... Read morePublished 4 months ago by Daniel D. Slosberg
Garbage and biased. It blames the hard working people of these companies for asking for a fare share of the pie. It sounds just like paid advertisement. Don't waste your time! Read morePublished 6 months ago by R. JORGE
EVERYONE should read this book! A recent AP report (May 2015) said that 22 states were expecting significant revenue gaps (not enough $$$) 6 years after the recession. WHY? Read morePublished 14 months ago by A. Gjeny
and look what has happened since this was penned ! This author today must be very busy if he stays on this subject.Published 19 months ago by marvin arend
Lowenstein does an excellent job in highlighting three cases which showcase the disastrous results that can occur when pension obligations go unfunded, and highlights the... Read morePublished on April 6, 2014 by PauIFAU
Roger Lowenstein has also written When Genius Failed: The Rise and Fall of Long-Term Capital Management, Origins of the Crash: The Great Bubble and Its Undoing, The End of Wall... Read morePublished on February 5, 2014 by Steven H Propp
Lowenstein has written a great book about a very complicated issue that people need to understand. I highly recommend this for anyone who is trying to understand the politics and... Read morePublished on March 2, 2013 by P. J. Mccoy
The author, Lowenstein, is a financial journalist who dedicates, basically, three sections of his book to three different pension collapses and a fourth and concluding section... Read morePublished on December 19, 2012 by Yoda