Tuesday, July 18, 2017

End NJ's Public Pension Corruption Once and For All–Replies and Responses

In response to my comments on the New Jersey Star-Ledger’s column by Paul Mulshine, Steve Sweeney wins one as the unions try to put the arm on the taxpayers, here are a couple of replies to my comments and my responses:

Paul Mulshine, the article’s author, replied to me that “Sweeney has mentioned that as a solution. The problem is that as long as the funds are out of balance, that can't be done. Obviously it should have been done by some prior governor when the funds were flush.”

I answered: I understand. I suggest packaging the under-funding solution with a process for turning the funds over to the unions. At least taxpayers would see the light at the end of the tunnel.

For What It's Worth replied: “Sure, all public sector new hires should be part of a 401k with matching taxpayer funds like in the private sector, but since those new employees will not be paying into the pension system to support others before them, then that money must come from taxpayers. This means that taxpayers will have to endure years of increased taxes until equilibrium is reached. Certainly, that's not what you want is it?

“For those of you that have children, I resent having to pay for your kids education. Makes me sick to see how much of my property taxes are for education. And please don't feed me  that nonsense that I derive a social benefit from educating your kids. All I know is it's money out of my pocket, just like your complaining about taxpayer funded pensions. They are your kids, not mine. You did not ask me for approval prior to your getting married or have to have kids. They are solely your responsibility, yet I have to help pay not only for their education but for the tax breaks you get that I don't but still must pay for. So, you see, it works both ways, doesn't it?”

I answered:

My sentiments also, except for one thing: prior tax-funded promises should be honored. This goes for the public sector employee pensions, social security, etc. People build their lives around these government commitments. But tax-funded promises are immoral and should be phased out, longer term. People should fund their own retirements, their own children’s education, etc. out of their own earnings.

True, “taxpayers will have to endure years of increased taxes until equilibrium is reached.” It’s not what I want. It’s the trap we’re in. This is the legacy of welfare statism—the dead end of politicians’ “compassion” funded by other people’s money. The sooner we recognize its immorality and stop electing politicians who support it, the sooner we can start to phase it out.

By the way, a pension is theoretically built on worker contributions (or contributions made on behalf of workers as part of their compensation) invested to grow and fund future pension payments. Pensions are not wealth transfer schemes like Social Security. Pension funds are supposed to have real money in them, not IOUs. Theoretically, new pensioners are not needed to “to support others before them,” because the pension is supposed to be fully funded according to actuarial standards. So theoretically, there should be no problem converting from a pension system to a defined contribution plan. The problem is that the politicians the majority of voters elected didn’t keep the state pension fully funded. They just dished out promises while hiding the cost to taxpayers.

[Full disclosure: My wife is a retired public school secretary of 27 years, now on promised state pension payments (though not a union member), and we are both collecting Social Security, which we see as restitution for a lifetime of FICA taxes.]

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