Here we are, smack dab in the middle of convention season. Cue the balloons. The Republicans had their turn last week, the Democrats come next. And there are plenty of personal finance issues being aired by the two guys who want to be president. But what are the issues voters are most interested in?

Marketplace’s David Gura recently traveled through both states hosting this year’s conventions as part of our coverage of the how all the tub-thumping plays out where it really matters: the economy.

Gura started down the I-4 corridor, which cuts through Daytona Beach, Orlando and site of the Republican Convention, Tampa. That highway has a high concentration of undecided voters. Some view it as the line between the more conservative north and more liberal south.

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South Carolina’s pension fund investments have generated far less over the past year than hoped, but officials say there’s no cause for alarm.

Preliminary numbers from the state’s Retirement System Investment Commission show a return on investments of 0.6 percent for the fiscal year ending June 30. The state assumes a 7.5 percent annual return when calculating what it needs to keep the system solvent long-term.

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Fiscal woes that have caused high-profile bankruptcies in California are surfacing across the country as municipalities struggle with uneven growth and escalating health and pension costs following the worst recession since the 1930s.

Budget crunches already have prompted Michigan lawmakers to authorize emergency fiscal managers, and led the mayor of Scranton, Pa., to temporarily cut the pay of all city workers to the minimum wage.

In a majority of the nation’s 19,000 municipalities””urban and rural, big and small””stagnant property tax revenues, less aid from states and rising costs are forcing less dramatic but still difficult steps.

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The new rules could hit pension plans in states like Illinois and New Jersey particularly hard, and even raise borrowing costs for certain municipalities, analysts say. “This could be the event that incites a bigger policy response than what we’ve seen so far,” says Matt Fabian, managing director at Municipal Market Advisors, a research firm.

The exact impact of the new rules by the Governmental Accounting Standards Board isn’t clear. According to researchers at Boston College, pension liabilities at 126 state and municipal pension plans would jump by roughly $600 billion, or about 18%. The estimate is based on 2010 financial data and doesn’t reflect the stock market’s recent rebound or moves by many U.S. states to rein in pension costs.

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Thousands of state workers could find themselves facing a life-changing decision later this month ”” whether to retire or not ”” and with less than a week to make it.

Lawmakers are poised to make major changes in the state’s Retirement Systems that would affect the more than 214,000 state and local government employees covered by that pension system.

State senators want some of the changes to take effect July 1.

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Every generation has an incentive to borrow money from the future to spend on itself. But, until ours, no generation of Americans has done it to the same extent. Why?

A huge reason is that earlier generations were insecure. They lived without modern medicine, without modern technology and without modern welfare states. They lived one illness, one drought and one recession away from catastrophe. They developed a moral abhorrence about things like excessive debt, which would further magnify their vulnerability.

Recently, life has become better and more secure. But the aversion to debt has diminished amid the progress. Credit card companies seduced people into borrowing more. Politicians found that they could buy votes with borrowed money. People became more comfortable with red ink….

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The city of Chicago is near insolvency. City workers are bracing for pay and benefit cuts. And Rich Daley, the former mayor who had his behind kissed by the powerful in this town and by much of the media for two decades, has an inside deal that should make sane people sick to their stomachs:

An eventual pension of more than $180,000 for life, according to a Tribune/WGN-TV investigation.

Daley did it on the sneak, our reporters found….

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The economic recovery has not made Americans feel more secure about their financial future. In fact, many workers fear more cuts in retirement benefits and higher out-of-pocket health care costs, according to a survey by Towers Watson, a retirement consulting firm.

As a result of their worries, more than half, 55%, of workers say they are willing to give up some of their future pay increases in order to have more guaranteed income in retirement, the survey found. And 50% say they would also trade a portion of their pay to ensure health care benefits.

“This may reflect their firsthand experience with financial market volatility, continuing worries about the economy and fears of future cutbacks to benefits,” said Kevin Wagner, Towers Watson senior retirement consultant.

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Mary Rich worked for a hospital in northern New Jersey for 25 years, first as a registered nurse and later as an executive. One of the job’s benefits was a traditional pension that she expected to receive at retirement. Now that benefit seems unlikely to be around by the time she retires.

Rich’s financially troubled former employer, the Hospital Center at Orange (HCO), shut down in 2004. The pension plan currently has $5.25 million in assets, which are being distributed at the rate of $2.7 million per year. By the time Rich reaches retirement 12 years from now, the money will be gone.

Under normal conditions, a pension plan such as HCO’s would have been back-stopped by the Pension Benefit Guarantee Corporation, the federally sponsored agency that insures most private sector pension plans. When plans go belly up, PBGC takes them over and continues to make payments; most participants receive 100 percent of promised benefits. But HCO’s case wasn’t typical. A year before it closed, HCO had declared itself to be a “church plan” ”“ meaning that it was claiming an exemption to federal pension law and PBGC coverage.

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The federal government is understating the liability for its employee pension plans by $80-billion because it does not use “real world” investment returns in its calculation, a new report says.

A C.D. Howe Institute study has concluded the federal liability for pension plans now totals $227-billion, which is $80-billion more than the government reports in its Public Accounts.

“Ottawa’s calculations do not reflect investment returns available in the real world,” says co-author William Robson, who is CEO of the C.D. Howe Institute.

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Like many middle-class American baby boomers, Linda Carmona-Sanchez is anxious about slipping into poverty and says whatever dreams she once had about retirement in her “golden years” have turned into nightmares.

“We don’t value people here in this country, and we value you less if you’re not healthy and strong,” Carmona-Sanchez, 55, said.

“To me it would almost be a welcome blessing to know that I would die rather than to be old and have to live in poverty,” she said.

Her anxiety is widespread….

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A financial transaction tax would be the wrong choice for Europe at any time; and particularly now.

To understand the impact of FTT, we need to answer four essential questions. Is it an efficient means of raising tax revenue? Would it benefit the end-users of the financial markets, both businesses and consumers? Would it enable the creation of economic growth and jobs? And would it make financial markets more stable?

First, financial services is a mobile, global and highly competitive sector. The European Commission’s suggests that Europe would lose 10 per cent of its securities market, 40 per cent of its spot currency market and 70 to 90 per cent of its derivatives market if FTT were introduced.
These are alarming numbers and economically very damaging ”” and they are not mere conjecture. Sweden’s FTT (from 1984 to 1991), resulted in between 90 and 99 per cent of traders in bonds, equities and derivatives moving from Stockholm to London. This was an expensive lesson for Sweden. Its experience should prevent Europe from making a similar mistake.

Second, what will be the impact on users of financial markets, including ordinary consumers? Economic theory suggests that a transaction tax would largely be passed on to end-users, whether they are savers, investors or businesses. The European Commission itself makes this point.

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South Carolina’s teachers and state employees are willing to pay more to fix the retirement system ”” but only if they get a raise first.

That’s the plan endorsed by the S.C. State Employees Association and the S.C. Education Association, which together represent 30,000 of the state’s 141,000 teachers and state employees.

The plan, which the groups submitted in writing to House and Senate subcommittees studying the retirement system, says teachers and state employees are willing to increase their contribution to the retirement system by 0.5 percent, but only if they receive at least a 2 percent raise ”” a “cost-of-living adjustment” for state employees and a “step increase” for teachers.

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After decades of drift, denial and inaction, Rhode Island’s $14.8 billion pension system is in crisis. Ten cents of every state tax dollar now goes to retired public workers. Before long, Ms. Raimondo has been cautioning in whistle-stops here and across the state, that figure will climb perilously toward 20 cents. But the scary thing is that no one really knows. The Providence Journal recently tried to count all the municipal pension plans outside the state system and stopped at 155, conceding that it might have missed some. Even the Securities and Exchange Commission is asking questions, including the big one: Are these numbers for real?

“We’re in the fight of our lives for the future of this state,” Ms. Raimondo said in a recent interview. And if the fight is lost? “Either the pension fund runs out of money or cities go bankrupt.”

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Like their secular counterparts, many clergy who devoted their attention to less temporal matters than financial planning now find themselves amid shrinking church budgets and a poor economy being forced to work beyond traditional retirement ages.

It is an especially critical issue in smaller churches that still do not set aside money for clergy retirement. In a 2008 study of Church of Christ clergy in Texas, just a quarter of respondents said they had plans to fully retire.

But it is also a burden for larger, mainline Protestant denominations. As memberships shrink and many older clergy find it financially untenable to retire, even fewer younger clergy are able to find work.

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The wealth of nations, the [Social Trends Institute] report says, is inextricably associated with the health of families. And, amongst other factors, the global retreat from marriage and from family has depressed economic growth and has deeply hurt two generations of children.

“Evidence drawn from Europe and North America indicates that children who are raised in an intact married home are more likely to excel in school and be active in the labour force as young adults,” the report says. “An abundant social-science literature, as well as common sense, supports the claim that children are more likely to flourish, and to become productive adults, when they are raised in stable, married-couple households.” Yet, with the global decline of these households, “the sustainability of humankind’s oldest organization, the family ”“ the fount of fertility, nurturance and human capital ”“ is now an open question.”

The report cites studies that indicate that American children who are raised outside of “an intact married home” are two to three times more likely to suffer serious social and psychological problems….

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Stocks are getting pummeled as the prospect of a global slowdown increases. The S&P 500 is now down more than 10% year-to-date. Meanwhile, already superlow bond yields are getting even lower, thanks to the Federal Reserve’s latest extraordinary easing action. The 30-year U.S. Treasury bond at one point on Thursday yielded less than 2.8%.

That is the kind of one-two punch that will worsen pension deficits while also making the contributions required to fill holes even bigger. This could crimp earnings and cash flow at some publicly traded companies while putting already strained state and local-government plans under even greater pressure. In turn, this could be another weight on markets and add to further economic uncertainty.

And, if nothing else, the market’s current malaise again highlights the lunacy of both public and private pension funds continuing to believe on average that they can generate annual returns of 8%.

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The Church in Wales will next week consider taking a further step towards equality for gay clerics by providing improved pension rights for their civil partners.

But progressive elements in the Church remain uneasy that while there is an acceptance that priests can have a monogamous sexual relationship, the same tolerance does not extend to Bishops.

During a two-day meeting starting on Wednesday of the Church’s Governing Body, it will be recommended that surviving civil partners of retired clerics should receive a pension based on the priest’s entire working life. Until now, the rate of pension has only been calculated from 2005, when civil partnerships were first allowed.

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Retirement plans and living standards for nearly half a million South Carolinians are in the hands of state politicians.

On the line are cost-of-living increases, the number of years public employees must work before they earn retirement pay and future contribution rates, all of which stand to change as the state’s top elected officials try to figure out a way to deal with the retirement system’s $17 billion funding mess.

Risky investment strategies and too-generous retirement benefits over the years coupled with the recession have been blamed by fiscal watchdogs as the reason the state’s pension plan has long-term stability problems.

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“The current situation is dire, and necessitates decisive steps to put the city back on a path to solid financial footing and future prosperity,” Governor Lincoln Chafee, who joined Flanders in announcing the bankruptcy petition today, said in the statement. “We will be exploring all options to provide quality services at an affordable cost to all taxpayers.”

Central Falls, a city of about 18,000 located about 6 miles (9.7 kilometers) north of Providence, is the fifth municipal entity to file for bankruptcy this year, compared with six in all of 2010, according to data compiled by Bloomberg. The filing followed last week’s move by lawmakers in Jefferson County, Alabama, to postpone a vote on proceeding with what would be the biggest U.S. municipal bankruptcy.

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The small city of Central Falls, R.I., appears to be headed for a rare municipal bankruptcy filing, and state officials are rushing to keep its woes from overwhelming the struggling state.

The impoverished city, operating under a receiver for a year, has promised $80 million worth of retirement benefits to 214 police officers and firefighters, far more than it can afford. Those workers’ pension fund will probably run out of money in October, giving Central Falls the distinction of becoming the second municipality in the United States to exhaust its pension fund, after Prichard, Ala.

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The major advanced economies should not just be worried about Greece, it said, they should be worried about themselves. If the huge debt levels of the major economies prompt the world financial markets to wonder if those debts will be honoured, so that the markets take a set against sovereign debt in general, the majors, too, will be in big trouble.

But as the British economist Dr Diane Coyle reminds us in her new book, The Economics of Enough, it is worse than that.

We have known for years that the major advanced economies are facing immense pressure on their budgets from the ageing of their populations. They are committed to generous pension payments and healthcare spending for their retiring baby boomers at a time when, for many countries, their populations will be falling.

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Put aside the cruise brochures and let the garden retain that natural look for a few more years. Demography and declining investment returns are conspiring to keep you at your desk far longer than you ever expected.

This painful truth is no longer news in the rich world, and many governments have started to deal with the ageing problem. They have announced increases in the official retirement age that attempt to hold down the costs of state pensions while encouraging workers to stay in their jobs or get on their bikes and look for new ones.

Unfortunately, the boldest plans look inadequate. Older people are going to have to stay economically active longer than governments currently envisage; and that is going to require not just governments, but also employers and workers, to behave differently.

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If you want to understand better why so many states””from New York to Wisconsin to California””are teetering on the brink of bankruptcy, consider this depressing statistic: Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government.

It gets worse. More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees. Is it any wonder that so many states and cities cannot pay their bills?

Every state in America today except for two””Indiana and Wisconsin””has more government workers on the payroll than people manufacturing industrial goods.

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More workers are pessimistic about their retirement future than at any time in the past two decades, according to the Employee Benefit Research Institute 2011 Retirement Confidence Survey.

The percentage of workers who are not at all confident about saving enough money for a comfortable retirement reached 27% in 2011, compared with 22% last year. When combined with those who said they are not too confident, the total reaches 50% of workers.

“That is sobering,” says Greg Burrows, senior vice president of retirement and investor services at the Principal Financial Group, a partner with the EBRI survey. “Hopefully this will spur some action.”

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Coming up with bigger contributions to pension funds will require states to make difficult choices about the size of their work forces, their commitment to public services and the viability of their employee benefits, which are often said to be irreversible and protected by state constitutions.

“The amount they have to be contributing could potentially be two to three times as much as they’re contributing now,” said Joshua Rauh, an associate professor of finance at Northwestern University, who has been challenging the way most cities and states measure their pension promises. “If you don’t want to count on the stock market to pay for all this, this is what you’re going to have to contribute.”

Mr. Rauh and a number of other analysts say the states’ biggest problem has been a failure to understand how much benefits will really cost. Instead of the states’ models, these analysts have come up with alternatives that more closely approximate those used by insurance companies.

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Lawmakers and governors in many states, faced with huge shortfalls in employee pension funds, are turning to a strategy that a lot of private companies adopted years ago: moving workers away from guaranteed pension plans and toward 401(k)-type retirement savings plans.

The efforts come as the governors of Wisconsin and Ohio, citing dire budget problems, are engaged in bitter showdowns with public-employee unions over wages, pensions and collective bargaining rights.

The new plans allow states to set a firm, upfront limit on the amount they will contribute and leave it up to the employee and the financial markets to make the money grow. In a traditional pension system, the employer promises a certain benefit, then must find a way to pay for it.

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The 401(k) generation is beginning to retire, and it isn’t a pretty sight.

The retirement savings plans that many baby boomers thought would see them through old age are falling short in many cases.

The median household headed by a person aged 60 to 62 with a 401(k) account has less than one-quarter of what is needed in that account to maintain its standard of living in retirement, according to data compiled by the Federal Reserve and analyzed by the Center for Retirement Research at Boston College for The Wall Street Journal. Even counting Social Security and any pensions or other savings, most 401(k) participants appear to have insufficient savings. Data from other sources also show big gaps between savings and what people need, and the financial crisis has made things worse.

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Ohio public school teachers would pay a larger share of their retirement costs, work until they’re older and see pension benefits cut under changes approved Thursday that aim to keep their primary pension fund solvent by saving $10.9 billion.

The State Teachers Retirement System board approved a host of changes to the benefit program that serves the bulk of the pension fund’s 470,000 members. The changes must be approved by lawmakers and the governor.

Spokeswoman Laura Ecklar said the package marks the end of a two-year effort to find a way to keep the pension fund afloat for the long haul.

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“Industrial relations” are back at the heart of politics””not as an old-fashioned clash between capital and labour, fought out so brutally in the Thatcherite 1980s, but as one between taxpayers and what William Cobbett, one of the great British liberals, used to refer to as “tax eaters”. People in the private sector are only just beginning to understand how much of a banquet public-sector unions have been having at everybody else’s expense…. In many rich countries wages are on average higher in the state sector, pensions hugely better and jobs far more secure. Even if many individual state workers do magnificent jobs, their unions have blocked reform at every turn. In both America and Europe it is almost as hard to reward an outstanding teacher as it is to sack a useless one.

While union membership has collapsed in the private sector over the past 30 years (from 44% of the workforce to 15% in Britain and from 33% to 15% in America), it has remained buoyant in the public sector. In Britain over half the workers are unionised. In America the figure is now 36% (compared with just 11% in 1960). In much of continental Europe most civil servants belong to unions, albeit ones that straddle the private sector as well. And in public services union power is magnified not just by strikers’ ability to shut down monopolies that everyone needs without seeing their employer go bust, but also by their political clout over those employers.

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