I will protect your pensions. Nothing about your pension is going to change when I am governor. - Chris Christie, "An Open Letter to the Teachers of NJ" October, 2009

Friday, March 16, 2012

Your Moment of Sanity: Pensions

Believe it or not, pensions save taxpayers money. So we should expand them:
In response, in late February California State Senator Kevin De León and Darrell Steinberg, the Senate president pro tempore, introduced legislation that would allow private-sector workers in California to enroll in a modest, state-operated retirement program financed by the workers and their employers — at virtually no cost to taxpayers.
This would increase coverage because employers would put every worker into a plan, either their own or the California plan. In the California version workers could opt out; some will, but most workers once in a plan will stay in.
Also in February, John Liu, the New York City comptroller, called for a similar plan for New York City residents. His program would pool employee and employer contributions into a professionally managed, citywide retirement fund.
Both plans would use the same professional staff and institutional money managers that invest the state and city pension funds to manage contributions made by participating employers and employees in the private sector.
This is a vital step: public pension plans usually outperform 401(k) plans and individual retirement accounts, because instead of a single worker managing a single account, large institutional plans pool workers of all ages, diversify the portfolio over longer time periods, use the best professional managers that aren’t available for retail accounts and have the bargaining power to lower fees and prioritize long-term investment.
By some estimates, costs for public pensions are over 45 percent lower than for individual 401(k) plans. Of course, since these plans would be financed by workers and their employers, there would be no cost to taxpayers. [emphasis mine]
Why, you may wonder, haven't we done this yet? Look at my last bolded sentence. Then consider that "The financial sector is far and away the largest source of campaign contributions to federal candidates and parties..."

If you were the financial sector, would you want to give up that 45%? Wouldn't you demand that the politicians you bought off support write legislation to make sure you keep getting those fees?

Teachers - and other public workers - pay a lot of money into their pensions. Wall Street looks at that pile, licks its chops, and writes another check to its favorite reformy think tank.

It's all about the kids, you know...

No comments: