Pension Case Study: If It’s Broke, Don’t Fix It

Published on
February 13th, 2020
Duration
27 minutes


Pension Case Study: If It’s Broke, Don’t Fix It

The Expert View ·
Featuring Thomas Healey

Published on: February 13th, 2020 • Duration: 27 minutes

$80 billion – that was the size of the hole in New Jersey’s state pension just 5 years ago when they empowered a commission to investigate its underfunding problems. Since then, the hole has ballooned to almost $130 billion. Thomas Healey, former Goldman Sachs executive and Assistant Secretary to the Treasury under Reagan, chaired a commission that found that politicians incentivized to provide new services and disincentivized to raise taxes were using the pension system as a piggy bank – perpetually kicking the can down the road and leaving pensions serially underfunded. Fortunately for New Jersey, there was light at the end of the tunnel and the commission was able to find a golden goose in the form of its generous health care benefits… Unfortunately, the same problems which led to the underfunding reared their ugly heads again, and the state failed to act on the findings of the commission. Healey reveals the reasons why New Jersey is still underfunding its pension today, and the $130 billion number is only set to grow. Filmed on January 28, 2020 in New York.

Comments

Transcript

  • DM
    Daniel M.
    8 March 2020 @ 23:36
    If you can't handle the truth, don't read this. I found it shocking that this person never considered the taxpayer who gets No ever-escalating public pension but gets reamed by the ever-escalating taxes to pay for these absurd "teacher's" pensions. Have you ever looked at the scores ranking the US vs The World test scores in education? The US ranks number 35, right up there with Moldova. The US public school system has failed, as the student's scores have fallen off of a cliff. This scam is going to blow up way before the 12 years this "expert" stated because people are leaving these failed, corrupt states for greener pastures. I wouldn't live in New Jersey if you gave me a home for $0.00 and no taxes for 20 years. Americans are voting with their feet and NY, CT, NJ, IL, CA are being deserted and they are taking their tax money with them. They are being replaced by Salvadorans, Africans and Mexicans who have their hands out as victims and demand more gimme-dats. If you can't handle the truth, don't read this.
  • KT
    Kai T.
    21 February 2020 @ 02:53
    To AUSTRALIAN Real Vision viewers: who can recommend an Australian Super Fund that I can research? Just the name as a lead is fine, but if you can say why you think they are good that would be helpful. I'm in the UK and I'd like to be able to help my brother in Australia who is ignoring this issue. Thank you. 🙏
  • BS
    Bill S.
    13 February 2020 @ 16:38
    ok - so all this info says the system is failing - so what are the options? This becomes a financial planning exercise at some point at the the individual level and a political one at another. The latter frankly is like pushing on a string.
    • NB
      Nicolas B.
      16 February 2020 @ 10:52
      Ee
  • TE
    Thomas E.
    13 February 2020 @ 17:03
    What will happen is all those states with under-funded pensions will vote for Federal bailouts. Since they out-number the states that have acted responsibly the legislation will most likely pass. Once again, the government rewards bad behavior while punishing good behavior. This is evident in many welfare programs as well. The government hardly ever solves any problems. It just creates new problems or shifts the problem to someone else.
    • AW
      Andrew W.
      16 February 2020 @ 01:28
      @Thomas Of course everyone will agree on the moral hazard gov't creates, but I hope you're right about the outcome. I'd much prefer the entire shortfall be funded by a zero-coupon 100 yr note bought by the Fed, essentially debt monetization, than trying to use property/wealth/income taxes. For the simple greedy reason that I know how to protect myself and profit from the former but not the latter. I pay an insane amount of taxes, will be funding my own retirement, and I need a mechanism by which I can fight back.
  • NI
    Nate I.
    14 February 2020 @ 15:39
    I worked for State government for many years and I went back to the private sector because I didn't want to be defrauded when the State inevitably reneged on the pension (which was grossly underfunded). That was the deal. Accept a poverty level paycheck (I tripled my salary going back to the private sector and there were literally people who qualified for food stamps working in my agency because the pay was so low) in exchange for a pension and a modicum of job security, but the crooks in the legislature had no intension of honoring their end of that contract. There is a name for that. It's called fraud. In that regard, I see this problem as far bigger than pensions themselves. It's calls into question the very nature of whether or not an employment contract means anything in the US. Apparently the answer is no. We can argue about whether government is too big, how much civil service should pay, what things need to be cut, etc., but everyone should be able to agree that it's not ok to intensionally enter into fraudulent employment contracts.
  • NR
    Nathan R.
    13 February 2020 @ 13:34
    Public sector unions: worst fiscal idea to come along in the past century...
    • EK
      Edward K.
      13 February 2020 @ 18:25
      Even FDR was against the notion of public unions but apparently labor momentum was so strong they became inevitable. Like the scenario presented here and, ultimately, avoid bonds of riskiest states. Insightful, actionable, and credible.
    • JB
      John B.
      14 February 2020 @ 02:55
      I'm all for allowing private citizens to organize and advocate for themselves, freedom of association and such. But public sector unions are an entirely different story. Public unions have the ability to deny the public basic services and are completely insulated from scrutiny. Its essentially legal racketeering.
  • BS
    Bill S.
    13 February 2020 @ 16:42
    There are ways - but the political will isn't there.
  • BS
    Bill S.
    13 February 2020 @ 16:40
    Not accurate about corporations - they fund to the "minimum"...which with a little manipulation of assumptions drives the required funding to ZERO - the airlines did this for 30 yrs, went into BK and eventually terminated them.
  • NR
    Nathan R.
    13 February 2020 @ 13:31
    Demographics and longevity. Bring back smoking! Pushing up the age to receive benefits, means tested benefit amounts, and, frankly, fire government employees.
  • DS
    Darryl S.
    13 February 2020 @ 09:06
    A wise man with a firm and practical grip on the extent of the underfunding problem and pension plans in the broad. "Intergenerational unfairness" is dyed in the wool here and in so many other areas of the financial markets e.g housing.