Piper: How to Live Under an Unqualified President

Joeb, the pension is funded by the government entities with money that could have been given to the employees. Plus pension fees for management are absurdly high. Had that money been given to the employees and invested, I daresay most of them would be better off today for a number of reasons, not least of which is that they would have more money and it would all be theirs that they could pass on to their children.

[Larry]

Joeb, the pension is funded by the government entities with money that could have been given to the employees. Plus pension fees for management are absurdly high. Had that money been given to the employees and invested, I daresay most of them would be better off today for a number of reasons, not least of which is that they would have more money and it would all be theirs that they could pass on to their children.

I’m pretty sure a lot of the problem in a lot of places—this is certainly the case in California with Calpers, a lot of municipalities in Minnesota, and in Illinois—is that the pension was more or less a “bait & switch” where a good pension was promised, but funding was left to the taxpayers of the future. It’s the government equivalent of funding the pension program with corporate bonds—just with the exception that bonds haven’t even been issued. So it was a way unscrupulous politicians of both parties got public works done now but saved the bill, or at least a big part of it, for later.

The rub is, of course, that a lot of people aren’t sticking around to pay the bills their parents scheduled for them. Ask anyone who lives in the mountain west about Californians, for example.

In dealing with state and local pension issues, a big part of the problem is watching for politics. For example, we had a state auditor who did a great job documenting severely underfunded pensions….most of which were in cities run by Democrats. So the Democrats pulled out all the stops to get their own person there…and hide the problem. Ignoring the actuaries is big business, sad to say. One could also argue that this has happened at the federal level with Social Security and Medicare….it’s held up as a third rail that will electrocute anyone who dares say “maybe….we ought to review our actuarial assumptions and listen to the actuaries for once.”.

(my view; both parties are guilty of hopelessly optimistic actuarial assumptions and under funding pensions, but the Democrats are more guilty of saying “let’s ignore the actuaries altogether”)