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Blue Model Meltdown
Blockbuster NYT Report Exposes Public Pension Charade

America’s public pension funds, which manage trillions of dollars in retirement assets for millions of civil servants, are systematically deceiving taxpayers, politicians, and municipal bond investors with elaborate accounting sleight-of-hand. The “official” numbers show that public pension funds are struggling; the accurate ones show that the looming fiscal time bomb is so explosive that it may be impossible to defuse.

That’s the thrust of an important new piece from the New York Times‘ Mary Williams Walsh, a reporter who has done more than anyone else in the mainstream media to bring this issue to public attention, and to provide honest and analytical reporting about one of the country’s most serious problems:

It turns out that Calpers, which managed the little pension plan, keeps two sets of books: the officially stated numbers, and another set that reflects the “market value” of the pensions that people have earned. The second number is not publicly disclosed. And it typically paints a much more troubling picture, according to people who follow the money. […]

The market-based numbers are “close to the truth of the liability,” Professor [William] Sharpe said. But most elected officials want the smaller numbers, and actuaries provide what their clients want. “Somebody just should have stopped this whole charade,” he said.

Kudos to Walsh, and to the NYT for that matter, for pushing a story that discredits some of the most important assumptions behind blue model governance. The truth is that many American state and city governments are not paying their way, pension systems are not sustainable, and the conflicts of interest linking politicians to public sector union leaders are a dangerous and deeply destructive force.

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  • Beauceron

    I’m sorry, but I simply don’t trust anything coming out of the Times anymore, regardless of its alleged merit.

    If publications I trust more publish something on this topic, I’ll take a look.

    If I see a weather report from the Times, I will look outside before I believe anything they print.

    • Tom

      If the NYT is saying anything against the Blue Model, you can trust it. Kind of like Khrushchev admitting that Stalin was kind of awful.

      • Beauceron

        That’s a fair criticism. But it is what it is.

        I used to subscribe to the NYT. Then, after several instances of clear lying by its reporters and editorialists, I unsubscribed but still read it frequently. Then, after even more outrageous bias and lies, I only read it occasionally. Then after yet more blatant bias and lies and obfuscation, I pretty much stopped looking at anything they put out.

        It’s like any relationship. Sometimes your partner can so shatter the trust required that there is just no going back and you can never believe anything they say.

        I am not pretending that’s exactly rational– but it comes from experience.

      • Angel Martin

        “If the NYT is saying anything against the Blue Model, you can trust it.”

        Not a chance. It’s like Hillary Clinton’s health. No matter what she admits, the reality is worse. If she admits to being poisoned by arsenic, it is actually polonium.

        • f1b0nacc1

          From your mouth to God’s ears….

        • Tom

          Alright, that’s fair.

        • megapotamus

          Chemistry is fun!

      • megapotamus

        It is known as An Admission Against Interest. Not that such a state is dispositive but as in a deposition the Times will admit what it cannot deny while it denies what it cannot admit until everyone knows its denials are tacit admissions. Then they will play it a bit straight.

    • Nat Rev

      You can find the same information in at least 100 places. There are several links here in the comments. This info is common knowledge to anybody with even a passing interest in public pensions.

      • megapotamus

        But it is denied by those who read only the NYT. That hollow coconut sound you hear is their heads hitting their desks.

  • Andrew Allison

    As the head of the European Commission once said, “We all know what to do, we just don’t know how to get re-elected if we do it. In the case of public pensions, what needs to be done ( is self-evident. Only then will the scope of the problem become clear and action (including, hopefully, action against trustees for fiduciary malfeasance) taken.

    • Observe&Report

      The European Commission is entirely unelected, so they don’t need to worry about that.

      • Andrew Allison

        The President of the Commission is, in fact, elected by the European Parliament.

        • Observe&Report

          I may as well out myself at this point as a Brit. I’ve been following this for a while, and I can tell you for a fact that the President of the Commission is not elected, at least not in the way you or I would understand that term.

          Jean-claude Juncker, the current Commission president, started out as one of several candidates; but when Merkel backed him, all other member states’ fell in line to support him, with the lone exception of David Cameron. A qualified majority vote by the European Council is enough to make a particular candidate the nominee. Whilst the selection process pays lip-service to democratic processes by requiring that the nominee come from the largest political grouping in the EU parliament, the final vote to confirm the nominee’s appointment is little more than a formality at that stage.

          Imagine if the Supreme Court selected a lone presidential nominee by qualified majority vote amomgst the serving Justices, then sent the nominee to Congress to have their nomination approved by the elected legislature. That’s basically how the EU Commission president is selected.

          • Andrew Allison

            I repeat, the Commission President is elected by the European Parliament. We can discuss, and perhaps even agree, about the merits of election by elected officials, but the simple fact is that Jucker was elected and, like our very own reprehensatives (is a gerrymandered district “representative”?) will do nothing to endanger reelection.

          • f1b0nacc1

            I must disagree.

            In our gerrymandered districts, eventually the ‘majority’ voters do get some representation, though not what they might otherwise get in a more fair system. The Commission President is not elected in any meaningful sense, since once the inner circle has made its selection, the other candidates typically drop out or are simply ignored. This is more similar to the Iranian system, where the list of candidates are vetted by a council of experts, then winnowed based upon the opinions of the Supreme Ayatollah. Yes there is an election, but the candidates have been filtered first, so for all intents and purposes whole swathes of the voting population have been disenfranchised.

            Juncker is the result of horse-trading (appropriate since he is best described as the rear end of one),not any real democratic process as we know it. O&R’s analogy isn’t quite right (think of it as the reverse of a typical parlimentary systems, in this case the cabinet selects the leader), but his broader point is spot on.

          • Andrew Allison

            Thank goodness; our minds were meeting so often that I was afraid people would talk [grin]. I would argue that the only thing the voters of gerrymandered districts have in common is their political affiliation. This, IMNHO, goes far to explain the partisanship in Congress
            I agree, darn it, with both you and O&R that the Commission is unrepresentative of the people it’s supposed to represent (and that its actions reflect this). However, O&R is picking a nit, and he’s wrong. However much we may dislike the candidate selection processes, the President of the Commission is elected.

          • f1b0nacc1

            Depends upon which nit is being picked, I suppose. Yes, the President of the Commission is being voted upon, but realistically that is only a vote amongst a very small group (the inner cabinet, for all intents and purposes) and only after enough horse-trading is being done as to render the selection process almost completely undemocratic.
            But either way, lets agree that the process is unrepresentative and leave it at that, yes?

          • Observe&Report

            Here are the details:

            And here’s article 17:7 of the Lisbon Treaty:
            “Taking into account the elections to the European Parliament and after having held the appropriate consultations, the European Council, acting by a qualified majority, shall propose to the European Parliament a candidate for President of the Commission.”

          • Andrew Allison

            Selective quoting at its finest. The next sentence reads, ” This proposal is then put before Parliament which must approve or veto the appointment. If an absolute majority of MEPs support the nominee, he/she is elected. “

          • Observe&Report

            Selective quoting? That’s the relevant section provided by the article. Why would I provide you with the link if I was going to quote selectively? Note also that the section already includes the phrase “shall propose to the European Parliament a candidate for President of the Commission.” The part you accused me of leaving out does little more than elaborate on the ‘how’.

            If you genuinely think that a presidential candidate nominated in a backroom and given a rubber-stamp of approval by a parliament with no legislative initiative gives him the same legitimacy as a popular vote would, it is entirely your prerogative to hold that view, even if it stretches the definition of ‘elected’ to breaking point. But don’t insult me by accusing me of ‘selective quoting’ just to save face after having someone contradict you.

            No amount of quibbling over what constitutes ‘election’ changes the fact that Juncker and the unelected commission he oversees are well insulated from public opinion by the nature of their selection, and they act like it too. Proposing more and more expansion of the EU’s powers in the face of, and as the solution to, rising eurosceptism is not the behaviour of a man bent on “doing nothing to endanger reelection”. Because the people who will ‘reelect’ Juncker are people who overwhelmingly share the same eurofederalist ambitions that he does.

          • Andrew Allison

            We are in violent agreement about everything except the fact that, regardless of the selection process, Junker is elected by the European Parliament (the members of which, incidentally, are also elected).

          • Observe&Report

            Very well. But the indirect nature of his election still insulates him from European public opinion, and it shows in his push for even more powers for the EU even as European people are turning against the EU.

          • Andrew Allison

            That was sort of the point of my original comment.

          • Observe&Report

            Your original comment quoted Juncker as saying: “We all know what to do, we just don’t know how to get re-elected if we do it.” This quote actually dates from 2007, back when he was the elected President of Luxembourg rather than the sort-of elected President of the EU Commission.

            That quote only makes sense if you owe your job to people who don’t have a vested interest in pretending that the emperor isn’t naked; the people of Luxembourg did not, the EU Council and EU Parliament do.

  • Blackbeard

    Widespread failure of public pensions won’t be permitted so the next step in this charade will be federal bailouts of selected blue state and blue city programs. Then, when the federal budget situation becomes unsustainable…

    Actually there is no plan beyond that point. Just make sure someone else is in office when that day comes.

  • OregonJon

    Exposes Pension Charade? Anyone even tangentially involved with pensions understood that pensions have always had two sets of books i.e. what the actuaries say vs. calculations based on current market value. Yves Smith of Naked Capitalism explains it best re Calpers in this post:

  • Passchendaele1917

    Blockbuster report? Only if you haven’t been paying attention.

    Maybe you should start doing your homework, cucks.

  • Gringao

    Reason magazine has been on this for years. Anyone who wanted to know, knew.

    • Nat Rev

      Everyone knows. All the politicians know. They just refuse to talk about it and nobody will force them.

    • Proud Skeptic

      You are right. I have been trying to remember the first time I heard about this. There was a talk radio host in Baltimore named Ron Smith who was all over this. He died in 2011 so it had to be at least five years ago. Ron was a big fan of REASON Magazine.

  • massjim

    Two sets of books? Al Capone kept two sets of books, but at least he was not looking to the taxpayer to bail him out.

  • Robert What?

    May I predict the future for you? You know those old “retired” guys (private sector) who can’t actually afford to retire, so they have to take low paying, part time jobs to supplement their social security and modest savings? In the future, they (and we) will be paying 70% of their minimum wage income in taxes to support the six digit pensions of public sector retirees.

    • megapotamus

      Not I, said the pig. I’m on a lifetime strike.

  • champ

    Irresponsible politicians (but I repeat myself) make undeliverable promises to their union cronies, knowing full well that the bill won’t come due until long after they are retired from public office. That leaves taxpayers, and those who planned ahead and saved their own earnings to fund their retirement, to foot the bill for these overpaid public union “employees.” It will take place via raids on IRS and 401(k) savings.

  • megapotamus

    So the leech class will finally have their supply of my blood pinched off. Good. Long overdue.

  • AriTai

    No surprise her. Like the Soviet politburo publishing the truth was career ending. LIke what happens in the U.S. especially departments of labor, education and commerce. Too bad. We’re about to get what’s coming to liars who can’t stop.

  • IrredeemablyFifty DeploraVille

    People who keep two sets of books generally used to go to jail.

  • FriendlyGoat

    The public sector workers at least have enough sense to not vote against their own pensions. So many of the private-sector workers went off their bearings back in the Reagan days that—–sure enough—-they voted their own defined-benefit pensions right out the window for the most part. Now many of them are truly pissed about it, but still don’t know how they shot themselves so badly.

  • jim

    Whatever. When the time comes, does anyone doubt that the New York Times will be demanding that the taxpayers cough up for our underappreciated civil servants who could have made twice as much money in the private sector but chose to sacrifice to serve the ungrateful public?

  • klgmac

    In ten years time watch for the NYT article about how the green energy scam has ruined the auto industry and caused power shortages in America.

  • Proud Skeptic

    I find that I am troubled by the NYT’s selection of example of this pension fraud. They single out a tiny little fund in California. I’m sure it would have taken the same amount of effort to expose something bigger that people could relate to. Wondering why they did what they did.

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