Regardless of where you live you should read this full article because it affects the taxes you pay and the services you receive from your government. This is a good summary of mismanagement by politicians and short-sighted thinking by public unions. This is not a Republican or Democratic thing; they all do it … mismanage your money and make promises they can’t keep while passing huge obligations to future generations.
The mismanagement goes well beyond pension funds and largely results from politicians seeking to garner short-term favor with voters; voters who fail to ask the hard questions … like how are you going to pay for that and what are the possible long-term consequences?
The crisis has many elements but a few stand out. First, contributions to employee pension funds are often well below the levels needed to ensure the payment of the benefits that are contractually or constitutionally guaranteed, let alone those that past trustees and legislatures added on a discretionary basis. Sometimes the contributions are not made at all for years at a time. Everyone with a role in determining these contribution levels has an incentive to keep them as low as possible. Politicians don’t like to raise taxes to meet future obligations, while public unions would rather take the long-term risk of underfunding rather than face immediate layoffs or benefit reductions.
via Richard Ravitch: More Detroits Are on the Way – WSJ.com.
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