Saturday, December 3, 2016

Magic Not – California Pensions

Stanford U study says California public pensions are underfunded by $1 trillion.

If the pension plans earn 7.5% per year in the future then they are only underfunded by $282 billion, which is what is always reported.  But Calpers using 3.7% for future per year earnings rate and you get to the trillion dollars more that they need in the bank today to be able to full fill the retirement promises.  You didn’t know that Calpers uses a “market rate” which is presumably the rate of return they have actually been earning.

Here is the filthy scum lying rate of return always reported:

Here is the actual rate of return, thank you Stanford Institute for Economic Policy Research:

And this is what you get:

Sure it looks like Magic because they call it debt but it isn’t because there is no credit money created.  This is future transfer payments from some people to other people.  From tax payers to tax users.  What one gains the other loses.

Either you raise taxes and full fill your promises as a tax payer or you renege on your promises.  Or a combination of both.

An alternative is to put what cash the pension plans have into individual 401k accounts and be done ever more with public paying for other people’s retirement.  Myself, I never understood the logic of public employee privilege, including that of the heroes, the first responders.  They too should pay for their own retirement (and healthcare).

This is a political matter.  It is going to be ugly.  Where promises are constitutional amendments, the battle will be lengthy.  I have never heard of anything more ridiculous that making a constitutional guarantee for money.  But judges have and will rule that once a promise is made you cannot back down on it because it is in the constitution.  After all, judges are public employees.
I know how public employees feel from firsthand experience.  One, they have contempt for the private sector and look down upon them as people so low as to have to pay their own retirement and healthcare.  The other view is that private sector people have so much money, just look at CEO pay, and public employees should be able to have as good a deal.

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