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Government Regulation We Can All Get Behind

Detroit Struggles To Re-Build A Bankrupt City Amidst Poverty And Blight

City governments around the US have been making a mess of retiree benefit funds for too long now, and in some cases the bungling is downright unethical. It’s a problem that ought to attract bipartisan concern. After all, if Democrats are serious about meaningful, competent government regulation and Republicans prioritize fiscal responsibility, both should advocate strict oversight of public pension management. An excellent piece by Mary Williams Walsh in the NYT on the “extra” pension payments sucking Detroit and other cities dry shows why:

[Detroit’s] pension system made extra payments for decades to thousands of people, on the thinking that the base pensions were too small. The pension board thought it found the money for the extra payments by skimming off “the excess” when returns on investments exceeded the plan’s target — 7.9 percent in Detroit.

But the pension fund also had years when its investments fell short of the target. And with millions of dollars being paid out each year in the extras, the fund missed out on all the investment income that money would have brought in. So the extra payments fundamentally undercut the health of the pension plan.

These “extra” payments have also set up a court battle with implications for the entire legal basis of the blue model. Michigan law, like that of other states, forbids the government to stop the extra payments, which puts the federal judge overseeing Detroit’s bankruptcy case in a bind. New York, Arizona, California, Florida, Illinois, Indiana, Texas, and Mississippi, which also have problems with these payments, are watching closely.

All this nonsense could have been avoided if the feds regulated public pensions as strictly as private plans. In a private company, such financial shenanigans would have landed the culprits in jail. Congressional hearings into public pension management are clearly needed, with an eye to legislation improving the operation and oversight of these plans. Strategists on both the right and left should work hard to find ways for public officials in both parties to make this happen.

[Remnants of Detroit’s historic Eastown Theatre are seen on September 4, 2013 in Detroit, Michigan. Photo courtesy of Getty Images.]

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  • Jacksonian_Libertarian

    “All this nonsense could have been avoided if the feds regulated public pensions as strictly as private plans.”

    Yes, because the Federal Government is so very competent, and the Constitution gives the Federal Government the authority to do anything it wants. Oh, wait, never mind.

    • Philippe David

      Did you even read the article?? If the Feds had regulated the public pensions this mess would not have happened. Your snide remarks doesn’t even address what you quoted.

      • Corlyss

        “If the Feds had regulated the public pensions this mess would not have happened.”

        Do you have even a tiny clue how the Feds ended up controlling private pensions? Find that in Section 8. I’ll wait while you look . . .

        It was a bail out of the Studebaker Co. employees (autoworkers) during the company’s bankruptcy. Except for the stupidity of the reflexively “me too!” Republicans, it would have been a wholly owned Democratic legislative appropriation of a traditionally non-governmental function. If we didn’t have such a round-bottom SCOTUS, they would have put the kibosh on that aggrandizement in a snap.

  • Corlyss

    “if Democrats are serious about meaningful, competent government regulation.”
    Well, you can forget about that!
    Seriously tho’, this is not the job of the feds regardless of how highly VM prizes the statist approach to everything. This was a mess for the voters of the cities to take in hand. They should never have voted for pols who were sockpuppets for corrupt and greedy unions. They should never have allowed those sockpuppets to inaugurate union of public employees or collective bargaining for public employees. The public employee unions carry on about both their unionization and their collective bargaining rights as tho they came over on the Mayflower. In fact, that disastrous bit of screwed up management thinking happened in the late 50s at the earliest (because older legislators were not so stupid as to agree to it) and the 60s at the latest. The two are not sacred developments. They’re public policy, and a badly defective one at that.

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