Huge pensions for retired government workers can be found from small municipalities to national governments on both sides of the Atlantic. There is a reason. For elected officials, pensions are virtually the ideal thing to spend money on, politically speaking. Many kinds of spending of the taxpayers' money win votes from the recipients. But...
Mr. Sowell, the primary reason, besides the risk less vote aspect, is that the Generally Accepted Accounting Principle, GAAP, for governments is different than for companies. Government's are allowed to treat future pension liabilities on more of a cash basis than GAAP for all other enterprises where you have to book the current impact of the pension liability. You can see this where companies continually manage and discuss their current liability impact of their pension (or defined benefit) plans, while governments have no clue as to their current impact of their decisions. One simple change to convert governments to GAAP as applied by companies and the muck will be shown. Thanks again for great article.
A nation's choice between spending on military defense and spending on civilian goods has often been posed as "guns versus butter." But understanding the choices of many nations' political leaders might be helped by examining the contrast between their runaway spending on pensions while skimping on military defense.
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