When arguing for the expansion of government social programs, blue model partisans often point to the ways America is supposedly deficient relative to the rest of the world. (I.e., “the U.S. is the developed country to not offer universal paid family leave”).
And when it comes to America’s accounting for its overburdened public pension system, it turns out that America is indeed deficient—but not in a way that makes the blue social model look particularly attractive. As AEI’s Andrew C. Biggs writes in Forbes, states and localities are tallying their pension liabilities using a formula that wouldn’t pass muster internationally:
The Governmental Accounting Standards Board – known as “GASB” – recently held a joint conference with the International Public Sector Accounting Standards Board (IPSASB). Both organizations are responsible for setting accounting standards for government employee pension plans. But if GASB and the U.S. state and local pensions industry looked at IPSASB’s pension accounting standards, they might be shocked: those standards precisely contradict the loose pension accounting rules that GASB promulgates and that the public pensions industry depends on. It’s no exaggeration to say that U.S. state and local pension may not be financially viable if they were required to live under the IPSASB accounting rules that other countries follow.
In other words, U.S. state and local pensions are engaging in systematic accounting tricks—in particular, “discounting” their liabilities at a nearly eight percent rate—so as to conceal the magnitude of their fiscal shortfalls, which are likely trillions of dollars higher than publicly acknowledged.
As Biggs has argued elsewhere, Congress could help hasten a resolution to the pension crisis by mandating that pension funds come clean. But legislators on both parties are eager to kick the can down the road and keep the Ponzi schemes in place. And so the U.S. retains its the dubious distinction of being one of the only developed nations to sanction this level of fiscal dishonesty on the part of its bureaucrats.