Paul Jacob

Promises, promises.

Politicians love to make ’em. But who has to fulfill those promises, and how?

The tendency to rely upon political assurances without establishing workable, reasonable plans and follow-through has to be high on the irresponsibility list. Our politicians may promise us the stars, but what we wind up with remains of a more earthy nature.

Take pensions. There are two basic ways of setting them up. One is to sock money away, or invest it, taking it out at retirement. The other is to promise to give somebody a certain amount of money on retirement . . . and figure out how to pay for it later.

Between these two extremes lie compromise positions, of course. The government takes money from people now, for instance . . . but then immediately spends it on current retirees. That’s Social Security, and it combines the two methods in a rather fraudulent way. It’s not “our money” going into “our retirements”; it’s “our money” going into other people’s retirements. We will (if the system survives) take our retirements from younger “investors.”

It’s a dubious deal on the face of it. Like a Ponzi scheme, it tends to reward earlier participants (retirees) at the expense of later ones. Of course, the government, being government, had an advantage Ponzi did not: It forces us all into the scheme — something ol’ Ponzi could not do — and it changes the deal as it goes along, and makes us accept it. Hence the long-term “viability” of Social Security.

But Social Security isn’t the only pension system to over-rely on promises and skip the actual savings and investment part. Many a government employee pension system does the same. Not only do they unfairly shift burdens onto future retirees and future taxpayers, they also build up huge debt loads to whoever has done the promising.

Well, that’s not exactly right. Politicians make the promises. Taxpayers get stuck with the bills.

Paul Jacob

Paul Jacob is President of Citizens in Charge Foundation and Citizens in Charge. His daily Common Sense commentary appears on the Web and via e-mail.