Latest Casualty in the War on Arithmetic: Public Pensions
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  • Last thing I knew, raiding the pension fund of a private company and throwing it into bankruptcy earned you a fat bonus at a private-equity firm such as Bain capital, rather than a jail term. Has the law changed under president Obama?

  • gooch mango

    “We need laws to stop public pension fraud and to force states and local governments to provide accurate, honest and externally audited statements that clearly show where things stand.”

    No, we don’t. We need all citizens, whether in the public or private sector, to be in one, single retirement plan. Period.

    As long as we allow the public sector to carve out their own retirement system, they WILL use their insider status to make themselves a privileged class — with better benefits and stronger guarantees than the rest of us could ever get.

    No set of rules will ever change that.

  • Stuart Wilder

    You all should be pleased to know that many of the fathers of Pennsylvania’s 2002-04 pension increases which made the risky investing seem necessary are in or on their way to jail for various forms of malfeasance. Ed Rendell claimed signed the increases into law in return for school reform legislation that his successor dismantled in one year. Too bad the same republican legislators who voted for the pension increases, as well as Republican Governor Corbett, did not dismantle them too, even though they had to revoke their own increases in 2005 and 2006 when the electoral equivalent of a turkey shoot took place, when most of those who insisted on the pension increases lost their jobs.

  • “We need all citizens, whether in the public or private sector, to be in one, single retirement plan. Period.”

    Ein Volk, ein Reich, ein Pension Plan

  • Andrew Allison

    Isn’t it time we started calling public pensions (except, of course, those of our esteemed Congress) what they are: a gigantic Ponzi scheme?

  • I’ve been worrying about collusion between pension fund managers and hedge funds of late, not on the basis of any evidence but rather because they are basically birds of a feather, elite financial guys (and a few gals?) moving in big money circles with little real contact with the beneficiaries whom they supposedly represent.

    As for the size of pension benefits, public employee wages and benefits, etc.., these obviously should be tied to prevailing wage rates for similarly qualified employees in the private sector — which are headed down, unfortunately, thanks to our elite trade and immigration policies in no small part.

    The blue model fails because our elite governing circles don’t give a hoot about the welfare of the American people. The treason of the clerks as the French used to call it. I support OWS in principle for that very reason.

  • Alf

    The public pension plans should be converted from defined benefit to defined contribution plans similar to 401k’s. It would make the true costs of the pension commitments transparent and properly accrued, align the interests of the public sector workers with the private sector and the public sector employee can make their own risk – return decisions.

  • R McDonnell

    “… 1. Make unrealistically high pension promises to your employees.
    2. Fail to set enough money aside to honor your promises.
    3. Cover up that failure by making unrealistic assumptions about your rate of return.
    4. When trouble looms, make riskier and riskier bets in hopes of a big payoff.
    …”

    I applaud my state of residence on the job it’s done to keep gamblers from drifting across the border to Atlantic City

  • M. Mullins

    In addition to their war on math, these pension funds engage in a lack of transparency, awarding of management contracts based on campaign funding, and outright fraud. A couple of examples:

    http://www.forbes.com/sites/edwardsiedle/2012/02/16/public-pension-suckers-for-private-equity/

    http://www.forbes.com/2010/01/19/public-pension-fund-personal-finance-siedle-returns.html

  • Jordan

    I have a recurring conversation with a friend who works for a (large) municipal govt. He prefers his defined benefit pension because he believes it is safe compared to having a 401k plan. For some reason, he associates a pension as safe guaranteed money and a 401k plan as a risky, stock-market investment.

    When I tell him I can invest my 401k plan in anything from stocks to bonds to stable-value money-market type funds in any allocation I want, it does not seem to change his mind. Is this some sort of political philosophy-motivated cognitive dissonance? I don’t know.

  • Kris

    [email protected], I wish I could suggest the argument that his defined benefit pension is less safe than your 401k because it is dependent on the good will of the taxpayers. Unfortunately, if his pension is seriously threatened, politicians will start taking liberties with your 401k.

    “Is this some sort of political philosophy-motivated cognitive dissonance?”

    What a fancy way of describing the following attitude: “Free lunch!!!!!!!!!!!!!!!!!!!”

  • Yisroel Markov

    One thing I’ve learned over the years is that the NY Times financial reporting isn’t that reliable. E.g., their numbers indicate that PA paid over 5% in fees. That’s ridiculous because the most expensive private equity funds charge 2.5%. Here in MA, private equity is the best long-term performer in its state pension fund, easily beating everything else.

    Good point about unrealistic return assumptions, though.

  • Jordan

    [email protected], I was actually suggesting his pension is less safe than my 401k because of the investment decisions being made by others not accountable to him, whereas the investment decisions in my 401k are made by…. me. At any moment I can switch from an index fund to a stable value fund investment. I like having that control, I don’t see why others don’t. But you are correct, he likely considers it safe because it has been “promised” to him from taxpayer money.

    But at times it has crossed my mind that the govt could steal my 401k and put it in a govt-run annuity all in the sake of fairness or something like that. I don’t quite see how the govt can simply confiscate private property like that. And I can’t possibly see how there wouldn’t be a armed revolution in such a case. Or at least enough time to withdraw the money, pay the penalty and stuff the money oversees.

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