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Public Pensions Fail Simple Math

Phil323 Wrote: Jul 26, 2012 4:27 PM
The current public pension system is a disaster. Deals are being brokered on completely ridiculous economic assumptions (http://on.wsj.com/qB3BON), and it was only a matter a time before a number of them totally ran out of money. However, it’s not just unions to blame. Politicians who gave out these deals, fearing the lobbying weight that unions hold (http://bit.ly/HcCfwK) deserve as much blame too. These cities had opportunities to fix things, but chose not to risk the political fallout (http://bit.ly/PSZq4W). It’s easy to negotiate a contract you know you can pass off to the next wave of politicians. It’s not all that surprising to see the wave of bankruptcies that are starting to sweep the nation considering these circumstances.

There is a dirty secret about state entitlements that liberals don’t want you to know. The collection of a state pension increases the chances that a pensioner will live in poverty. That’s because money put aside for state-guaranteed benefits can not be safely invested at rates that provide for more than a modest retirement unless the state subsidizes retirement benefits through taxes or if retirement savings are invested in riskier, higher yielding investments. Since governments are loath to raise taxes to subsidize a riskless retirement, benefits are eventually reduced. It works that way in London and Moscow as well as Madison...

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