Arnold Kling  

The Triumph of Organized Labor and Government Experts

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Jay Heflin writes,

An August report by the Kellogg Graduate School of Management at Northwestern University found government pension programs in as many as 31 states are headed for financial disaster by 2030 and that taxpayers will likely wind up paying for unfunded liabilities.

Robert J. Cristiano writes,

Orange County's CEO, Thomas G. Mauk, predicted that pension requirements in 2014 will take 84% of the county's law enforcement payroll. It is already 50% today.

The whole idea of making pensions a government function is to take the responsibility away from households and insurance companies and instead giving it to government. That way, instead of incompetent individuals making saving decisions, experts will make those decisions. As it turns out, the only way that the experts will be able to keep their promises is to confiscate wealth from those households who otherwise would have competently saved for their own retirement.

General Motors and Chrysler lost their economic viability because they could not support workers' pensions. Now the same thing is happening to state and local government.

Have a nice (labor) day.

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CATEGORIES: Fiscal Policy

COMMENTS (5 to date)
Hyena writes:

Actually, pensions looked really good both for employers and the government when they were implemented. Every pension program meant, in essence, forcing workers to reinvest in the company for extremely long terms. Likewise for the government.

It was a really good way to push all the costs into the far future where discount rates cloud your vision and you cease to care about the consequences.

Tracy W writes:

Ironically, it was Roger Douglas in NZ who put the NZ public pension system on a sustainable footing - by upping funding and cutting it off to new members.

Jeremy, Alabama writes:

"With every grant of security to one group the insecurity of the rest necessarily increases."

Hayek, Road To Serfdom.

Skee, WCU writes:

The worst part is that people treat the topic of public pensions (along with Medicare and Social Security) as if nothing is wrong and that these types of systems can last. In reality, current pension payers and taxed citizens (current and future) will fund the pension deficit without a choice in the matter. I suppose people have funded these "government expert's" ideas for so long that they don't really think much about how backward the ideas may be.

As described by Arnold Schwarzenegger in a Wall Street Journal article, most Californians are very unlikely to have $1 million saved up for retirement. However, public employees who decide to retire at 55 are essentially entitled to this amount through inflation-adjusting monthly payments of $3,000 ( It seems obvious that this situation is impossible to preserve for long.

The world deeply reprimanded Bernie Madoff and thoroughly scrutinized his scam. As I have pondered the subject, his extortion doesn't differ largely from these types of government programs, the largest Ponzi Schemes of all.

ThomasL writes:

"It was a really good way to push all the costs into the far future where discount rates cloud your vision and you cease to care about the consequences."


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