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June 2, 2010
Obfuscation is government’s secret weapon
Over the past couple of years, Bill King has done a great job (and see generally here) of explaining how Houston’s unfunded public pension obligation represents a horrific burden on the city government’s financial condition.
Given that such obligations are clearly unsustainable, why does the city government continue to provide them?
Edward L. Glaeser provides the following particularly lucid explanation of the dynamic that leads to such profligacy:
On Friday, The New York Times ran a front-page article about pensions that took note of a 44-year-old retired police officer who receives an annual pension of $101,333 despite never having earned more than $74,000 a year in base pay. The article reported that in Yonkers alone “more than 100 retired police officers and firefighters are collecting pensions greater than their pay when they were working” and that “about 3,700 retired public workers in New York are now getting pensions of more than $100,000 a year, exempt from state and local taxes.”
The emotional response of many people is to vilify the retirees, but that’s a mistake. The individual police officers and firefighters were following the rules. They have jobs that require them to risk their lives in service of their communities, and large pensions are one payoff for accepting those risks and accepting relatively lower wages up front. I’m sure many of them are no less impatient than the rest of us and would have preferred to get more money in their 20s and less in their 50s.
The fault lies in the political process that makes their negotiating partners — state and local governments — more impatient than their employees. State and local governments don’t want to face the short-term consequences of paying higher wages, so they structure compensation in ways that defer the costs of each new deal for years.
Politics doesn’t just favor delayed compensation; it also favors forms of compensation that are particularly hard for people to evaluate. Governments almost always love obfuscation. The appeal of Fannie Mae and Freddie Mac was that they could subsidize homeownership without appearing to cost the taxpayers anything. Of course, they ended costing us plenty, just like hard-to-evaluate pension promises.
The rest of Glaeser’s post is here.
Sort of reminds one of this, this and this, eh?
Posted by Tom at June 2, 2010 12:01 AM |
Comments
They weren't just simply following the rules, a lot of them took advantage of the rules (i.e., working lots of overtime in the final year, getting a promotion just before retirement). And while it may have been legal, it wasn't right... those who work for the government should be held to a higher standard than those who work in the private sector... and using taxpayer funds to pay for junkets, lavish renovations and, yes, boosting one's pension are things that they shouldn't do.
Posted by: steve sturm 
at June 7, 2010 8:41 AM
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