Tag: pension tsunami

Categories
national politics & policies too much government

Cliff Dwellers

When you hear talk about “the fiscal cliff,” ask, “Which one?”

This coming January, if Congress and the president fail to take action, every American who pays income taxes will pay more. Also set to increase? Payroll taxes, which every worker pays.

But even if we can avoid falling off those cliffs, another threatens.

It has been identified by finance professors Robert Novy-​Marx at the University of Rochester and Joshua Rauh at the Stanford Graduate School of Business, who summarized their recent research paper, “The Revenue Demands of Public Employee Pension Promises.”

The bottom-​line? Looking at the pension commitments state and local governments have already made to public employees, the professors “found that, on average, a tax increase of $1,385 per U.S. household per year would be required, starting immediately and growing with the size of the public sector.”

That’s only the average. “New York taxpayers would need to contribute more than $2,250 per household per year over the next 30 years,” according to their analysis. “In Oregon, the amount is $2,140; in Ohio, it is $2,051; in New Jersey, $2,000.”

Politicians have promised lavish pension benefits. And then not funded them. Plus, employees often outrageously game the system, spiking their benefits to the tune of millions over decades of retirement — like the Illinois teacher’s union lobbyist did by teaching a single day in the classroom.

If we don’t get the problem under control, this cliff keeps getting higher, making, as the professors put it, “the $1,385 per-​household increase required today seem cheap.”

This is Common Sense. I’m Paul Jacob.

Categories
insider corruption too much government

The Why of San Jose

You have no doubt heard about Obama’s recent “gaffe” about “the private sector’s doing fine.”

The private sector, of course, is not doing well, not at all — and it’s suffering from a public sector gone mad: Bailouts, increased spending, increased debt, increased regulation.

But our beleaguered and benighted president was trying to make the point that it’s our public sector that’s doing badly.Chance PENSION

And there is something to be said — carefully, with much caution — about public sector jobs. In many states and locales, government jobs are not increasing in number. Well, at least not increasing as fast as bailout mania might lead you to think.

And Josh Barro knows why. Public sector jobs are in decline because public sector compensation has been skyrocketing, depleting resources from state and municipal governments, preventing job increases.

San Jose, for instance, used to have 7.5 employees per 1,000 residents. Now the city’s down to 5.6 employees per thou, “with further cuts expected next year.” Why?

[C]osts for a full-​time equivalent employee are astronomical and skyrocketing. San Jose spends $142,000 per FTE on wages and benefits, up 85 percent from 10 years ago. As a result, the city shed 28 percent of its workforce over that period, even as its population was rising.

Blame it on pensions, grossly over-promised.

It’s a problem politicians have: They like to dole out favors. And pensions are something they can promise without funding fully, making “future politicians” (uh, taxpayers) pay (like, uh, now). It’s the scandal of the age.

But I wonder if Obama would ever ’fess up to the real nature of the problem

This is Common Sense. I’m Paul Jacob.