Host joining us from new york city is doug henwood, a contributor to in these times. He is here to discuss his piece in the february issue on the and howpension crisis the cities reliance on wall street is adding to the shortfall. Thank you for joining us today. Guest thanks for having me. Host what spurred you to focus on the Retirement Crisis right now . Guest for one thing, the magazine asked me to look at it. But this is something i have been following a long time. I wrote a book about wall street a little over 20 years ago. I have been following the Financial Markets and the pension crisis for a long time. A lot of people talk about the problems of the Social Security system, which i think are grossly exaggerated. But there are people who do not want to admit problems around the Pension System because People Associated are looking to cut back up with engines or eliminate them. It does no good to deny there is a problem. Pension funds have made assumptions about returns they will get which seem unrealistically optimistic to me in an economy that has a longterm Growth Potential of under 3 . You think you will get 7 or 8 returns on 3 Economic Growth forever. I dont know how you do that unless the stock market gets more detached from reality. We have had a few dips and reality the last few weeks that reminds us that it does not always go up. Host explain exactly how the Pension System works. Guest there are basically two weeks to organize the Pension System. One is like Social Security which is the payasyougo plan. That means todays taxpayers a for the people drawing pensions on the assumption that when todays taxpayers retire, there will be people in the future that pay their bills. It is a payasyougo plan. Money comes in, money goes out. As anelt sold it Insurance Program to make it seem like it was not welfare. It is a payasyougo scheme. The other way to do it is funded, where you are saving money either in your own or in the account wherec defined pension your employer makes contributions to a plan. The money is invested in the stock and bond market and you are hopefully guaranteed a pension in the future. The savings are an important part of it. Words, you are supposed to set aside enough money today to cover your obligations tomorrow. If you are going to make money in the markets along the way, you dont have to put in dollar for dollar the requirement for the future. The big question is how much you have to put aside, what kind of interest rate, what kind of return are you going to get over the 20 or 30 years someone might be in the pension plan . That is a big, difficult question. In order to reduce their contributions, a lot of governments, states, cities, and independent agencies have been assuming quite high returns of 7 or more. The higher the return you assume, the less you have to contribute today. A more realistic scheme which would be something lower in the neighborhood of 2 or 3 . If you assume that, most of todays Pension Plans are badly underfunded and will have trouble paying their bills in the future. They might get through the next five or 10 years, but after that, there will be serious problems. We think about that and the for me resolution of the problem will take we think about that and the resolution of the problem. Sayingoug henwood is pension fund reliance on wall street is a problem. I want to read an excerpt from your piece and talk to you on the other side of that. You write that governments have promised joins of dollars to present and future billions of dollars to present and future retirees. Host you paint a very grim picture here. How did we get here . We were doing fairly well into the early part of the 2000s. The bull market of the late 1990s made a lot of Pension Funds look very healthy. Those high returns we got spoiled people. We had two very good decades in the stock market, the 80s and 90s, so people started thinking the stock market is a perpetual money machine. With the recession of the early 2000s and the recent recession said maybevernments we do not have to contribute as much. It is always an easy way to balance a budget by cutting back on pension contributions. You dont have to worry about cutting taxes or Cutting Services so it is an easy way to kick the can down the road. The Pension Funds took a big hit during the financial crisis of 2008 and 2009. They recovered some but they have not closed the gap the Great Recession opened up. We need to look at another issue which is that in the pursuit of higher returns, Pension Funds have invested in hedge funds and private equity. These are pools of private capital not traded on the Public Markets like stocks but run by Money Managers. They buy up companies, do some financial magic on them, and hopefully make some money. These funds do are quite antiworker. One of the private equity funds a lot of Pension Funds are invested in our run by blackstone, blackstone run by steve schwarzman, a friend of president s trump. The financialover crisis buying up homes and evicting people. They were involved in buying companies and busting unions. A lot of these publicsector pensions are owed to Public Workers but a lot of the investments are used to pursue an antiunion agenda, including actual unionbusting. We not only need to look at the returns. We also need to look at what is being done which is not always good for the average walker. Host goahead from georgia. Caller thank you. I have been calling your network for 30 years, super network. David perdue is a good friend of mine. He is a friend and confidant of president trump. David has a successful business background like donald trump. I predict a team of trump and purdue will give america the best economy and world history. He says we can get 4 to 5 growth and that would go a long way toward solving the debt crisis and everything else. I would vote for david purdue for president. I think the purduetrump team is the best team in history of the world for hardworking american taxpayers. Host what is your reaction . Guest i imagine we could have a long conversation about donald trump and the people around him. The country in many ways is falling to pieces. The physical infrastructure is falling apart. We have immense social pensions. Wall street got freaked out because workers were starting to get into a rise. We are thinking about investing in the social infrastructure of our country. I dont see that coming out of this administration. Its in for Structure Plan is very thin. I dont see how we will get 4 to 5 growth. If i turn out to be wrong, i will admit i was wrong. I think we are more likely to see 2 to 3 growth. I hope i am wrong, but that seems to be what is in the offing. We have very low productivity growth. You will not get 4 or 5 Economic Growth with those two things that make Economic Growth possible with them ambling along in a halfhearted fashion. Host the president talks a lot about the stock market. We have seen a dip in recent weeks. How does that impact the Pension System . Guest what we saw the last couple of weeks was pretty minor stuff. But if it continues, if this is , andnd of a long bull run it has been a long run that started in 2009. The stock market has tripled over the last several years. That is not going to last forever. Even if we are not on the verge of a bear market now, we will see one soon. I think what we saw in the last couple of weeks is a reminder that the market is very vulnerable. It is extremely, highly valued. The market relative to underlying corporate profits or the size of gdp is is highly valued as it has been in history. Depending on which measure you use, it is as close to as high as it was in the 1990s and also 1929. The market is very stretched. It is unlikely it will rise dramatically from here. Whether it falls apart, if i knew that, i would not be sharing that information. A weak stock market would be very bad for the Pension System. Host john is a pension recipient from manchester township, new jersey. Good morning. Caller good morning. When the 401 k was made, it was not meant to be a primary pension plan. It was so companies could cut back on what they contributed. He told a magazine it was not meant to be primary retirement. Changed it to where people can dip into the Pension Plans. You have to remember, jimmy half a to jail for dipping into the pension plan. But reagan changed that. We had a governor here that polarized pension planning. Oute, when they take money for infrastructure, are they going to put the money back into it like they took out of Social Security and said the money is gone . Thank you very much. Host goahead. Guest that is a big worry. Christie whitman cut back pension contributions in the to fund acut a tax tax cut that was mostly for rich people. A classic case of reverse robin hood economics. Symbol k is sort of the of what has happened to our Pension System over the last couple of decades. They have been trying to shift the risk away from employers onto employees. The private sector, very few people have these generous Pension Plans anymore. Most people have very small retirement accounts. Only about half of americans have a retirement account. Of those who do, the average balance is 60,000. That will not last too long in retirement. We do have a serious retirement problem. The publicprivate pension crisis is one part of it. The other part is a lot of people are on the verge of retirement or younger people who have to look forward to it in years do not have enough money to do it. The onlyly people left seen their income go up our people over 65. We have more people over 65 working because they cannot afford to retire. We have of in these times magazine and also the host of a Weekly Radio Program in berkeley, california. I want to read this excerpt from your piece as well and get your reaction on the other side. Host talk more about the impact of hedge funds and private equity on the Pension System. Guest private equity in particular, private equity funds are pools of money managed by a small group of professional Money Managers. They raise their money from Pension Funds and other Institutional Investors and rich individuals. They look for what they think are undervalued companies, invest in them, and hopefully sell them to other buyers in the future. The model depends upon cutting costs. That means almost always speeding up the pace of work, putting the squeeze on wages and benefits. Kind of package we have seen over the last 35 years in which workers seem less secure, wages are stagnant, benefits are , are all things that have come to characterize the labor market over the last 35 years. A lot of that has come from wall street, shareholders in the public stock market, and a lot of private equity funds. A lot of the great increase in wealth we see at the very top of society has come through these financial mechanisms which have been extracting value from workers, taking their wages, cutting back on public spending, cutting taxes for rich people. All these things have great mechanisms of upward wealth transfer. The stock market and private equity have been at the core of all of that. People start identifying with the interest of their pension like it is good to see the stock market go up. If you are cheering the rise in the value of a retirement account, youre basically cheering a rise for the rich getting richer. For most people, what really matters is there wage and salary earnings. Anything the stock market does is just a sideshow. But it is unfortunate the stock market attracts so much attention as some kind of barometer of the health of the overall economy. It is not. Host j. P. Is on the line from alabama. Caller thank you. It is wonderful to see a guest on from such a phenomenally great application publication. The American People are not being told the truth. As wellral government as the states have trillions and trillions of dollars in assets, some estimates as high as 16 trillion. When you calculate in the landholdings, the mining operations, intercoastal waterways, buildings underutilized, that stretches vast stretches of land around the west, very lucrative assets. As these Pension Funds go bust, you are going to see what you have seen already across the country and increasingly across the world, tragically. Sou will see the government attempt to default on the promised pensions to firefighters, police officers, truckers, and others. They will use their lackeys in the federal court system, as they already are, to make laws that around allow them to get around paying the pension benefits they promised for 40 years rather than sell the very rich assets they hold. Host i want to give doug a chance to address that. Do you agree with his assessment . Guest i think there are two points that are important. I think it is quite likely a lot of governments will try to renege on these promises. I think it is very likely. In the next recession, i think we will see a lot of pressure to do that. We have to be prepared for that. The other point is yes, the government is very rich. This is an extremely rich country. It is just the wealth is not spread around very effectively. It is very concentrated in the upper reaches of society. We constantly hear the Public Sector is broke, we cant afford to do x or y. We can, it is just rich people do not want to pay taxes. Offshore tax shelters have sheltered money which may be brought back. The idea that the Public Sector is broke is a delusion. My solution is we need a more generous Public Pension Fund system, Something LikeSocial Security but much bigger and more generous. We can afford it. Building up these Pension Funds run by professional Money Managers on wall street is not the way to go. The way to go is to expand the public system. The Social Security system is not in crisis. We can afford a civilized Pension System generous enough to allow everyone to have a comfortable and dignified old age. I am getting there, so im speaking from my own interests. But i am also speaking for people in the future. A lot of young people think there will not be Social Security when they get old. I want to fight against that. We can a 40 much more generous public system that can cover everybody in a generous and humane fashion. Host sandra is on the line from wilmington, north carolina, a pension recipient as well. Good morning. Caller good morning. I have noticed north carolinas pension fund has also been negatively affected by hedge fund and private equity investment. There is lotsme, of transparency in the investment system. I wondered if you could speak to this and any notion about how it can be reversed. Host go ahead. Guest there is a great lack of transparency. You can look these things up on websites. You look at a line. What are they invested in . What does this mean . If you know what you are looking at, you can figure it out. If you dont really know, you dont really know. It is not easy to know where this money is going or any assumptions involved. You really have to do a lot of work. It is certainly not transparent. Hedge funds and private equity with the kind of restructuring they impose on corporations that displays a lot of workers, there is also the issue of their fees. They make enormous fees for their management. That comes out of pension benefits. It is not clear that they earn these fees at all. How they compute the rates of return and such on these funds is also not transparent. We really need to get to the bottom of how much these guys are getting paid and what kinds of returns they are delivering. The current state of disclosure for a lot of people is quite poor. Host mary is calling from ashland, kentucky. Good morning. Caller can you hear me . Host yes, go ahead. Caller my questions have to do with the public Pension Plans. I think they dont have people working long enough before they start drawing pensions. I am a baby boomer. Unfortunately, i am disabled now. I am 60. I was planning on working into my 70s because of Different Things that had gone on with pensions throughout time. I think there has been a lot of mismanagement of pensions. I know of Many Companies in this kentucky. In ashland, companies would run off with the pensions. This was in the 1970s that this happened. I guess my question is, do you think it is on the public level like the state and stuff if they would make them work longer for the pensions . I know many places let you retire after 20 years. If you start when you are 20 or 25 and hit 40 or 45, i can see why these pensions to not have enough money. With todays age expectancies, you have a lot longer Life Expectancy and more time to have to pay them out. Host i want to give doug a chance to respond. Guest i dont think many people are retiring at 45. A lot of people are working much longer, having to work much beyond the age of 65. We spend a lot of time at work. Withcans work more hours fewer vacations than anybody else in the rich world. We worked plenty. I would not say we need to work harder, but we do need a more , stable, and reliable Pension System. I will say that. Expectancy,out life the Life Expectancy rate in america has declined. That is not supposed to happen in rich countries. That happened in the soviet union before it collapsed. Alarming. T rather are all thed cuts rage in government no. That is not the way to reverse declining Life Expectancy. Host john is calling from kent, washington. Just a few seconds left with doug henwood. Go ahead. Caller i like your show, but sometimes it gets me a little excited. Potus. Mended it to washingtonsestern Laborers Pension fund. In 2009, we lost 100 million. We have never had any problem with the government. The government requires us to make a certain amount of contributions. We are like 92 all the time. How come the public unions are not required to do the same thing that the regular private unions have to do . Host go ahead, doug. Guest i am not sure exactly what he means. The companies are the ones who make the contributions to private plans, as do workers. The employers are supposed to make contributions to the Pension Funds. Private Pension Funds have been cutting back like crazy. They have virtually disappeared, the traditional pension. It is almost all your own account and your own responsibility. Governments do not want to make contributions because it is an easy way to avoid a political problem. They dont have to talk about raising taxes or Cutting Services in the present. They can kick it down the road and hope they can worry about it in the future. Nobody really wants to talk about it, but it is a problem. The governments need to contribute. Host doug henwood, contributor for in these times, thank you for joining us today. Next, we will be taking more of your phone calls on the line for republicans, democrats, and independents. We will be right back. Cspans history series, februaryo, beginning 22 with a look at the case heard in 1819. Exploring this case with us are Sarah Peterson from the university of virginia and markkula back mark killenbeck. Cases february 26 at 9 00 eastern on cspan. For background on each case, order a copy of the companion book. , goan additional resource to the link on our website for the interactive constitution. Monday, president s day, at 6 00 eastern on cspan, the launch of landmark cases live from philadelphia with a review of the 12 historic cases to be featured in the series. Then, the portrait unveiling ceremony for president obama and mrs. Obama. And then, the panel comparing watergate to today. He 2018 savannah book festival p. M. , the Pulitzer Prize and National Book award winner. On American History tv on cspan3, historians on world war i and the legacy of president woodrow wilson. Six 30 p. M. , scholars explore the relationships 6 30en president s at p. M. , scholars explore the relationships between president s and gorbachev. Watch monday on the cspan networks. Live coverage of the savannah book festival starts this morning and includes future war. Scott shapiro with how a radical plan to outlaw war we made the world. And Celeste Headley with her book on how to have conversations that matter. Watch live coverage this morning beginning at 9 00 eastern on cspans book tv. Washington journal continues. Host we are taking your calls from republicans, democrats, and independents. Some, a quick look at front pages from across the country courtesy of the museum newseum