walter russell mead - public pension problems
http://blogs.the-american-interest.com/wrm/2012/06/25/time-to-occupy-the-pension-funds/
The biggest scam going in American financial life may be the collusive effort by Wall Street, the political class, and public sector unions to use union retirement money to prop up Wall Street speculation.
Step One: state politicians promise big pension and health care benefits to their unionized work forces, but don’t set aside enough money to fund those benefits when the bill comes due. This makes union leaders and unions look good, because they can point to the shiny new benefits they have negotiated with the politicians. Meanwhile, it makes the politicians happy because the unions support them with contributions and volunteers at election time, but because the unions don’t insist on full funding for the benefits, the politicians don’t have to raise costs or otherwise disturb the big majority of voters who don’t work for the government.
Step Two: Make aggressive assumptions about the rate of return on pension investment funds. ...[which] forces America’s public sector pension funds into the deep end of the financial markets, leading pension funds to be major investors in hedge funds, derivatives and various other not-for-the-widows-and-orphans investments.
...
Pension funds should not be aggressively invested. Retirement funds should be conservatively managed — and that means enough has to be paid into those funds so that with moderate investment results, retirees can be sure that their promised benefits will in fact be paid.
The key to this change is stronger regulation of government pension funds, to force them to observe the same requirements that apply to private sector pension funds as well. Amazingly, the same union leaders and lefty experts who call for tough regulations elsewhere in the economy want to keep government workers chained to the roulette wheel in the Wall Street casino: they are bitterly opposed to seriously prudential regulation of government pension funds.
The biggest scam going in American financial life may be the collusive effort by Wall Street, the political class, and public sector unions to use union retirement money to prop up Wall Street speculation.
Step One: state politicians promise big pension and health care benefits to their unionized work forces, but don’t set aside enough money to fund those benefits when the bill comes due. This makes union leaders and unions look good, because they can point to the shiny new benefits they have negotiated with the politicians. Meanwhile, it makes the politicians happy because the unions support them with contributions and volunteers at election time, but because the unions don’t insist on full funding for the benefits, the politicians don’t have to raise costs or otherwise disturb the big majority of voters who don’t work for the government.
Step Two: Make aggressive assumptions about the rate of return on pension investment funds. ...[which] forces America’s public sector pension funds into the deep end of the financial markets, leading pension funds to be major investors in hedge funds, derivatives and various other not-for-the-widows-and-orphans investments.
...
Pension funds should not be aggressively invested. Retirement funds should be conservatively managed — and that means enough has to be paid into those funds so that with moderate investment results, retirees can be sure that their promised benefits will in fact be paid.
The key to this change is stronger regulation of government pension funds, to force them to observe the same requirements that apply to private sector pension funds as well. Amazingly, the same union leaders and lefty experts who call for tough regulations elsewhere in the economy want to keep government workers chained to the roulette wheel in the Wall Street casino: they are bitterly opposed to seriously prudential regulation of government pension funds.
posted by tnj at 10:38 AM
0 Comments:
Post a Comment
<< Home