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| Home Front: Politix |
| Facing Up to a Pension Crisis |
| 2010-04-12 |
| A puzzle from Philosophy 101: If a tree falls in a forest and no one hears it, does it make a sound? A puzzle from the prairie: If an earthquake occurs in Illinois and no one notices, is it really a seismic event? Gov. Pat Quinn called it a "political earthquake" when the state's Legislature recently voted -- by margins of 92-17 in the House and 48-6 in the Senate -- to reform pensions for state employees. There is now a cap on the amount of earnings that can be used as the basis for calculating benefits. In some states, employees game the system by "spiking" their last year's earnings by accumulating vast amounts of overtime pay. An even more important change -- a harbinger of America's future -- is that most new Illinois state government employees must work until age 67 in order to be eligible for full retirement benefits. Those already on the state payroll can still retire at 55 with full benefits. The 1935 Social Security Act established 65 as the age of eligibility for payouts. But welfare state politics quickly becomes a bidding war, enriching the menu of benefits, so in 1956 Congress entitled women to collect benefits at 62, extending the entitlement to men in 1961. Today, nearly half of Social Security recipients choose to begin getting benefits at 62. This is a grotesque perversion of a program that was never intended to subsidize retirees for a third to a half of their adult lives. It also reflects the decadent dependence that the welfare state encourages: Because of the displacement of responsibility from the individual to government, 48 percent of workers over 55 have total savings and investments of less than $50,000. Because most states' pension plans compute their present values -- and minimize required current contributions -- by assuming an unrealistic 8 percent annual return on investments, the cumulative funding gap of state pensions already may be $3 trillion, and certainly is rising. For example, last Wednesday's New York Times contained this attention-seizing bulletin: "An independent analysis of California's three big pension funds has found a hidden shortfall of more than half a trillion dollars, several times the amount reported by the funds and more than six times the value of the state's outstanding bonds." It is not news that California is America's home-grown Greece, but the condition of the three funds, which serve 2.6 million current and retired public employees, is going to exacerbate the state's decline by requiring significantly higher taxpayer contributions. A recent debate on "Fox News Sunday" illustrated the differences between the few politicians who are, and the many who are not, willing to face facts. Marco Rubio, the former speaker of Florida's House of Representatives who is challenging Gov. Charles Crist for the Republican U.S. Senate nomination, made news by stating the obvious. Asked how the nation might address the projected $17.5 trillion in unfunded Social Security liabilities, Rubio said we should consider two changes for people 10 or more years from retirement. One would raise the retirement age. The other would alter the calculation of benefits: Indexing them to inflation rather than wage increases would substantially reduce the system's unfunded liabilities. Neither idea startles any serious person. But Crist, with the reflex of the unreflective, rejected both and said he would fix Social Security by eliminating "waste" and "fraud," of which there is little. The system's problems are the result not of incompetent administration but of improvident promises made by Congress. Synthetic indignation being the first refuge of political featherweights, Crist's campaign announced that he believes Rubio's suggestions are "cruel, unusual and unfair to seniors living on a fixed income." They are indeed unusual, because flinching from the facts of the coming entitlements crisis is the default position of all but a responsible few, such as Wisconsin's Rep. Paul Ryan, who has endorsed Rubio. What is ultimately cruel is Crist's unserious pretense that America faces only palatable choices, and that improvident promises can be fully funded with money currently lost to waste and fraud. By the time the baby boomers have retired in 2030, the median age of the American population will be close to that of today's population of Florida, the retirees' haven that is Heaven's antechamber. The 38-year-old Rubio's responsible answer to a serious question gives the nation a glimpse of a rarity -- a brave approach to the welfare state's inevitable politics of gerontocracy. |
| Posted by:GolfBravoUSMC |
| #8 Have we ever, in the modern history of the US, dismantled a bureaucratic entity? Yes. The Interstate Commerce Commission. (1887 – 1995) First regulatory agency established in the U.S. and a prototype for independent government regulatory bodies. An agency of the U.S. Department of Transportation, it was responsible for the economic regulation of interstate surface transportation, including railroads, trucking companies, and buslines. It certified carriers, regulated rates, oversaw mergers, and approved railroad construction. The ICC was dissolved in 1995. |
| Posted by: Nimble Spemble 2010-04-12 16:00 |
| #7 The Bureau of Refugees, Freedmen, and Abandoned Lands was created by Congress in March 1865 to assist for one year in the transition from slavery to freedom in the South. It was renewed for a few years, then terminated by Congress in 1872, the year the federal government washed its hands of freedmen's problems for a few decades. |
| Posted by: Anguper Hupomosing9418 2010-04-12 15:08 |
| #6 OTOH (and not to advocate it at this point): Some cancers just have to be cut out. |
| Posted by: CrazyFool 2010-04-12 14:26 |
| #5 Have we ever, in the modern history of the US, dismantled a bureaucratic entity? I don't know that we have a mechanism to do it. A constitutional convention may be the only way to make any meaningful reduction of the govt. Unfortunately, that would probably require a civil war at this point, and I don't know if it would be worth destroying the village to save it. |
| Posted by: bigjim-CA 2010-04-12 13:47 |
| #4 Every administration since John Adams has been promising to eliminate the waste and fraud found in the preceding administrations. With all this emphasis on eliminating waste and fraud you have to wonder why any is still around. |
| Posted by: Steve White 2010-04-12 13:26 |
| #3 Actually, eliminating waste and fraud is easy. All thats needed is to remove the government from healthcare. |
| Posted by: phil_b 2010-04-12 12:33 |
| #2 Eliminating waste and fraud...is hard! |
| Posted by: Eliminating Waste and Fraud Barbie 2010-04-12 11:51 |
| #1 gotta love how Soc Sec, Medicare, Obamacare, et al will always be made solvent by "eliminating waste and fraud", but it never happens... |
| Posted by: Frank G 2010-04-12 10:51 |