poor folks don't care about the stock market rally

[ProSense]

17. What about the

"I fit in with the other 40 percent of Americans who really and truly don’t give a fuck about the S&P 500 and Dow Jones both hitting all-time record highs this month....In the last 40 years, income for the bottom 90 percent of Americans only rose by $59. Income for the top 10 percent rose by more than $116,000."

...other 50 percent in that 90 percent? Do they care? A lot of pensions were affected by the economic crisis.

The Origins and Severity of the Public Pension Crisis

February 2011, Dean Baker

There has been considerable attention given in recent months to the shortfalls faced by state and local pension funds. Using the current methodology of assessing pension obligations, the shortfalls sum to nearly $1 trillion. Some analysts have argued that by using what they consider to be a more accurate methodology, the shortfalls could be more than three times this size. Based on these projections, many political figures have argued the need to drastically reduce the generosity of public sector pensions, and possibly to default on pension obligations already incurred.

This paper shows:

• Most of the pension shortfall using the current methodology is attributable to the plunge in the stock market in the years 2007-2009.
  
  
• The argument that pension funds should only assume a risk-free rate of return in assessing pension fund adequacy ignores the distinction between governmental units, which need be little concerned over the timing of market fluctuations, and individual investors, who must be very sensitive to market timing.
  
  
• The size of the projected state and local government shortfalls measured as a share of future gross state products appear manageable.

http://www.cepr.net/index.php/publications/reports/the-origins-and-severity-of-the-public-pension-crisis

Public Pension Shortfalls Misrepresented in Budget-Crisis Debate

WASHINGTON, DC: With many state governments facing budget shortfalls this year along with dwindling federal assistance, some policy-makers have begun to call for drastic reductions of public sector pensions as a way to ease state budget woes. A new report from the Center for Economic and Policy Research puts this issue into better perspective, clearing up many common misconceptions about these funds.

The report, “The Origins and Severity of the Public Pension Crisis,” shows that the main reason public pension shortfalls exist at all is the downturn in the stock market following the housing crash in 2007-2009, not inadequate contributions. The paper demonstrates that if pension funds had just earned returns equal to the interest rate on 30-year Treasury bonds since 2007, their assets would be more than $850 billion greater than they are today.

“Much of the recent discussion of public pensions is misleading,” said Dean Baker, a co-director at CEPR and author of the report. “The shortfalls represent a small percentage of each state’s economy and, barring another sudden reversal of the stock market, are manageable.”

- more -

http://www.cepr.net/index.php/press-releases/press-releases/pension-shortfalls-misrepresented-in-budget-debate