Streams

Episode #95

Pensions. Be Afraid.

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Friday, February 28, 2014

From San Jose to Detroit, from Illinois to Rhode Island, cities and states across the country are grappling with how to pay for pensions and retiree health care costs. In New Jersey, Governor Chris Christie is proposing a $34.4 billion budget that includes more than $2 billion in pension payments, the largest outlay yet to shore up a retirement plan for public workers that the governor calls a "looming crisis." Joe Nocera of the New York Times and Rana Foroohar of Time magazine discuss why cities and states are facing pension crises and what they can do to solve the problem. And bitcoin: Entering a new phase or on the verge of collapse.

Hosted by:

Charlie Herman

Produced by:

Daniel P. Tucker

Contributors:

Rana Foroohar and Joe Nocera

Comments [2]

Michele McMorrow

Perhaps I missed something in the presentation, but I felt like there should have been some attention paid to how NJ, in particular, found herself in such a terrible financial state with the Public Employees Pension.

As the economy went into recession in the 1980s, then-Governor James Florio suffered slings and arrows for ensuring that the state budget was balanced and that NJ's Triple A credit rating remained intact. That meant tax increases--political suicide--but he did it.

Not surprisingly, Christine Todd Whitman was swept into office trumpeting the promise of no new taxes--and "deferred" the tax monies intended for the Pension Plan to shore up the rest of her budget. "Deferred", in this instance, is another word for "raiding"--or, if you prefer--"stealing". I do not believe investment plans for those funds is an issue if you have not set them aside to begin with. (We have a similar problem in Washington, D.C. with those who have "borrowed" from Social Security.)

While I have no argument with the rest of the examples given in this Public Employee Pension report, I feel that a great disservice has been made in not devoting at least one sentence to the actions that set this into motion.

No, I am not and have not been a public employee (or married to a public employee). I have argued long and hard against certain public employee contracts that do not reflect the times and the ability of the taxpayers' ability to pay their servants. In most instances, but not all, the pay scale of the public servant reflects the current salaries by which private industry pays their employees. In these cases, the public employees should be required to contribute to their health and retirement benefits as their taxpaying employer's do.

See: http://www.nytimes.com/1995/02/22/opinion/in-america-whitman-steals-the-future.html
NY Times
February 22, 1995
In America; Whitman Steals the Future
by BOB HERBERT

Feb. 28 2014 10:16 AM
T.Hopkins from New York

Rana Foroohar is incredibly articulate and she really sounds like she knows her subject matter well. This is particularly troubling because some of the what she said in this story was not fact based. Specifically:

1. Accusation that corruption of US public pension adminstrators is a large contributor to this crisis: Certainly there have been a handful of public servants who have been corrupt but for the most part the issue is that the most talented public servants in this field are paid multiples less than what they are paid in the private sector creating a brain drain of top talent. Be clear - there is no pay for performance in this sector. In addition, the rules for banks around entertaining public officials are incredibily strict -- bankers cannot buy public servants a cup of coffee without permission from their compliance officers.

2. Linking of "wall street bonuses" to this crisis and made the erroneous comment that wall street has not had to make any changes to their pay structure. Thousands of people in finance (including myself) are no longer offered a pension since the financial crises. In addition, all banks have completely revamped their pay structure and most have cut benefits. Ms. Foroohar's assertion that the public sector is alone in having to make sacrifices and change their retirements plan is simply false. If you want to know how federal/private pay stacks up ask the congressional budget office:

http://www.cbo.gov/sites/default/files/cbofiles/attachments/01-30-FedPay.pdf

Feb. 28 2014 06:56 AM

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