Pension Crisis

Brazil's Pension Crisis Is Like America's on Steroids

Unsustainable and yet seemingly unstoppable


It's hard to shake them down for money when they're always at the beach in swimwear!
Credit: leakytr8 / photo on flickr

Government employees retiring early and then getting plum pensions for the rest of their lives? Check. Loopholes and corruption allowing government employees and their spouses to rack up six-figure annual retirement payments at the public expense? Check. Executive branch leaders trying to contain the problem while legislators beholden to government employees actually increase the size and scope of pension obligations? Check. An obviously unsustainable, growing massive government debt? Uber-check.

But this isn't Illinois or California. It's Brazil. The New York Times today has a piece exploring Brazil's disastrous pension plan. It should sound familiar to any American who has been following our various domestic pension crises:

Brazilians retire at an average age of 54, and some public servants, military officials and politicians manage to collect multiple pensions totaling well over $100,000 year. Then, once they die, loopholes enable their spouses or daughters to go on collecting the pensions for the rest of their lives, too.

The phenomenon is so common in Brazil's vast public bureaucracy that some scholars call it the "Viagra effect" — retired civil servants, many in their 60s or 70s, wed to much younger women who are entitled to the full pensions for decades after their spouses are gone.

Brazil's president is trying to restrain the growing fiscal crisis, but its congress is refusing and actually making it worse. Part of the problem, reporter Simon Romero notes, is that Brazil's demographics are getting more modern, which in turn highlights how unsustainable the concept of a public pension is. Even setting aside corruption and abuse of pension rules, Brazilians are living longer and having fewer children. These are all positive developments indicating improving quality of life. But it necessarily means there are going to be fewer young people to milk to make up any debts from pensions.

And of course, there's the familiar sense of entitlement among those who have cashed in on the pension program, which is helping keep appropriate solutions—like scaling back benefits or increasing the retirement age—from being implemented:

"Making retirees pay the price is just not fair," said João Pimenta, 63, a former director of a shopkeepers' association who retired at age 49 and regularly leads protests against pension cuts in Brazil's capital, Brasília. "Why isn't the economic elite being called upon to sacrifice? I'm sick of hearing that normal people need to pay the price with their pensions."

As a result, Brazilian states have had to cut back actual government services in order to make up their pension costs. Rio de Janeiro is going to have to set aside more money for pensions than it will be paying for schools and health.

What is odd about this story is that it makes absolutely no references to the various government employee pension crises across the United States. Instead, there's a comparison to Greece. But the fact is, there's very little about this story about Brazil, except for maybe the pension-fed gold-digger wives, that cannot be seen in places like Illinois and California, and elsewhere in the United States. Romero even notes the economic "inequality" that results from government employees getting absolutely outrageously large pension benefits that are divorced from economic realities. If only we were willing to talk about our own public employee pensions the same way.

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      (*what is remarkable is that a google of the the above phrase yielded hundreds of articles all asserting this same headline-fact from different angles. Its something of a “given” assumption of the youth today = that society needs ‘fixing’ – i.e. one can only assume by-some-‘fairness’-committee – to rectify the injustices created by this democratic/meritocratic delusion.)

      1. That is probably partly the result of whatever they call JournoList these days….

        1. There’s really no need for a coordinated, conspiratorial progressive-journalistic cabal in the modern world

          (contra the claims of the “psychopathic-juvenile-gamergaters”)

          I don’t doubt that it is a convenient thing in narrowly-focused segments, like gaming, where it did exist, or in political journalism

          but in the wider world of “internet writing” overall…. which includes the twittersphere and all its trending trends….generic rhetorical tropes become “memes” (in the proper Dawkins-esque sense) almost instantaneously, and everyone repurposes the same basic argument to their specific story-target

          (noted = the ‘hundreds’ of stories about how “Meritocracy is a Lie” covered topics ranging from economic inequality & social mobility, to public-school standardized test performance, to the disparity in CEO pay by gender, to fucking MATT DAMON DDUUUUHHHH)

          One doesn’t necessarily need talking points handed out by the elite narrative-shapers. They can in theory emerge organically from the septic-tank of proggy echo-chambers.

          That said… to your point…..i suspect most of them cribbed it from Chris Hayes recent book, “Twilight of the Elites

          Of course, idiots like him conflate “wealth” with merit. They’re just selling socialist class-struggles under new brand-names.

          1. I don’t disagree, but I think I do detect some behind-the-scenes coordination on some stories, including that rash of “Gamers are dead” stories all that appeared within a week or so and helped kick off GamerGate.

    2. I stopped reading at San Fran

      1. Should have kept reading a little. Cisco makes decent networking gear.

        1. Cisco makes decent networking gear.

          Except for the rebranded NSA stuff.

          1. No! That is the best part, because it’s just more confirmation that the NSA specifically and government in general is out of control.

    3. My senior year of high school I was elected class president on the platform of abolishing the student government. After I won, the school’s guidance counselor voided the election results on the grounds that some cheerleader girl filed her paperwork late and really “deserved” to be able to run for student council too. Voter turn out was about 80% lower in the second election and my apathetic electoral base didn’t turn out to vote very well the second time.

      At the first student council meeting I called it a coup and likened the guidance counselor to the Ayatollah Khomeni and the new class president as a puppet. I, and my political party, got thrown out of student council altogether and I spent almost a week’s worth of school days in a little broom closet they used as solitary confinement. In retrospect I guess it actually was a very good government simulator after all.

      1. You should have tried flashing your crotch to the crowd at football and basketball games. It tends to win votes.

  1. “What is odd boringly predictable about this story is that it makes absolutely no references to the various government employee pension crises across the United States, because – duh – *i said* New York Times already

  2. “Making retirees pay the price is just not fair,” said Jo?o Pimenta, 63, a former director of a shopkeepers’ association who retired at age 49 and regularly leads protests against pension cuts in Brazil’s capital, Bras?lia. “Why isn’t the economic elite being called upon to sacrifice? I’m sick of hearing that normal people need to pay the price with their pensions.”

    Retires at 49. Bemoans the “economic elite”. Seems legit.

    1. There’s this idea that “Normal” (aka the person speaking and his/her peers) people are “normal” because someone somewhere is much wealthier than they are, therefore they’re “more deserving” of handouts.

      Never do they compare themselves to the millions of people in the favelas who live in crushing poverty and say, “my endless free paychecks are depriving these people of opportunity”

    2. It’s simple: when you are grifting, you point the finger at someone else to keep the mob off your back. It’s sort of the foundation of class warfare, if you think about it.

    3. Here’s a question: Why would a “director of a shopkeepers’ association” be eligible for a public pension?

      Awwww never mind. Socialism, that’s why.

  3. Pensions are just money we owe ourselves.

    1. Pensions are just money we you owe ourselves me.

    2. All they need is a $1 trillion platinum coin! Seigniorage for the win!

  4. “Making retirees pay the price is just not fair,” said Jo?o Pimenta, 63, a former director of a shopkeepers’ association who retired at age 49 and regularly leads protests against pension cuts in Brazil’s capital, Bras?lia. “Why isn’t the economic elite being called upon to sacrifice? I’m sick of hearing that normal people need to pay the price with their pensions.”

    Dude, you STOPPED WORKING at 49! How is this the fault of the economic elite?

    Such people are parasites and they don’t even know it.

    1. Oh, they know it. They know it well. Why do you think he’s trying to draw attention away from himself and focus it on someone–anyone–else?

  5. WTF is wrong with simple attrition? Give the geezers their outrageous pensions. Just don’t offer the fucking pension plan to new hires. The worst is the new hire can tell you to get bent, but guaranteed, there’s another warm body that would be willing to fill the seat without a pension.

    1. How are politicians going to get re-elected if they can’t purchase votes by bribing voters with MOAR?

      Silly girl.

      1. The most recent election in Brazil was seen as a crucial crisis-test to see if voters would accept reality and elect someone who’d start to put their fiscal house in better order

        Reality lost

        “Brazil needs to exit the funk of no growth and high inflation, running at 6.7% a year. In order to do that, [Dilma] should take on board Mr Neves’s economic ideas, which she roundly dismissed on the campaign trail as responsible for high unemployment, prohibitive interest rates and stagnant wages during the PSDB’s tenure in 1995-2002. These include less government meddling in business, fiscal rectitude and Central Bank independence, as well as reforms of Brazil’s impenetrable bureaucracy and tax code. In the 1990s, far from wreaking havoc as PT propaganda would have it, they helped stabilise an economy plagued by hyperinflation and lack of competitiveness…..”

        There were some mild hopes in 2014 that the election might signal a change in economic policy… which were consequently dashed, leading to the continued parade of suckitude for EM investors.

        1. Reality plays the long game – and always wins in the end.

          1. This. Roussef has basically adopted much of Neve’s platform.

            1. Your insight is as valuable as always.

              “Mr Levy said he could achieve [fiscal sanity] merely by trimming discretionary federal spending (on things like student and housing grants) and by abolishing some tax breaks. But he underestimated the severity of Brazil’s recession?the economy is set to contract by 3% this year?and the consequent fall in tax revenues. Fatally, instead of announcing stiffer spending cuts, Mr Levy loosened his targets. The economic team made a complete mess of next year’s budget, saying at first that it would involve a deficit and backtracking only after the downgrade.”

              If there had been any real effort to implement reforms, you wouldn’t see the Real in collapse and their bonds being reduced to wallpaper

              Dilma facing impeachment for cooking the books and trying to hide a growing deficit doesn’t help

              Dumping the problems on a former IMF finance minister, the will screech “austerity” while deck chairs are re-arranged and then resume business as usual. Its a decades-old latin-american political dance. Even the ‘opposition’ party offers the same B.S. excuses for keeping the public-spending taps on full blast. The place is fucking disaster.

    2. But that would eliminate the pyramid scheme and all the personal and political advantages that come along with it.

    3. Hard to get buy in from the current group if you make it explicit that they are paying for benefits they will never get. If the current crop of worker don’t get the promise they too will get to retire at 50, then they are likely to cut benefits for the pensioners. The pensioners organizing the protests are smart enough to recognize this.

      1. Yeah, the problem with the “cut-off date” resolution to pensions (and Social Security, for that matter) is that you need the money from the still employed to pay the pensions of the retired. This is why every time you hear a liberal whine about the USPS having to “prefund” its pensions, you should punch them in the face. Any system that isn’t “prefunded” isn’t funded at all and is just a temporal pyramid scheme.

        1. My pension is prefunded. Once a year I get statements with regards to the accumulated value of my contributions plus fund roi and the estimated payout rate at retirement (hint – it’s still a pittance)

          I wouldn’t have it any other way (Cause there’d be no money in the pot when it came to be my turn)

    4. The real problem is spouses. It’s one thing to pay a lavish pension to someone who’ll simply die off, cutting the pension off. But in this situation, the pensioner can create more pensioners on his own. It’s the very definition of fiscal insanity.

      1. Do they pay out to any spouse? Or just to one who was married to the employee during the time of his employment?

        1. Good question.

          It is my opinion that no spouse should get the pensioners pension. It’s not 1954.

          1. Agreed, but “my young trophy wife gets my pension for another 50 years after I die” is a bit more onerous than “my similarly aged spouse gets my pension for another few years after I die”.

            1. I agree, but that’s what the article said: older pensioners married to younger wives (and in Brazil, I say ‘bravo’ to that) who extend the payouts– then it mentions ‘daughters’ as well.

  6. Scott, I’d like to personally thank you for covering this subject. Reason needs more of it.

  7. What is odd about this story is that it makes absolutely no references to the various government employee pension crises across the United States.

    It’s actually not that odd. You know, just sayin’.

  8. But this isn’t Illinois or California.

    We figured that out here:

    Executive branch leaders trying to contain the problem

  9. Why isn’t the economic elite being called upon to sacrifice? I’m sick of hearing that normal people need to pay the price with their pensions.”

    Uh, douchebag, you are the economic elite.

    1. If eating foiegras&truffle;-stuffed kobe steaks only twice a week is Elite, I might as well just kill myself now.

  10. O que me importa
    -Que o mundo se acabe,
    -Que a casa desabe,
    Se eu tiro o domingo pra sambar?

  11. Brazil made one Fundamental Mistake when it comes to public pension.
    Absolutely no one should receive a pension that is above the median income within that demographic regardless of skillsets, tenure, or past salary/benefits.

    If one wants more than the median income upon retirement, one can always save or invest.

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    ————– http://www.HomeJobs90.Com

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