The Wall Street Pension Scam

By Dean Baker, Truthout | Op-Ed –

pension funds

(Image: Pension funds via Shutterstock)

In recent years there has been a regular drum beat of news stories warning us about the enormous unfunded liabilities of state and local pension funds. Much of this has come from reports issued from well-endowed foundations, most notably the Pew and Arnold foundations who have a joint project on public pensions.

Ostensibly these foundations are simply providing information to allow the public to address a major policy problem. However, it is difficult not to ask whether these foundations may be pursuing a different agenda.

First, the reports tend to be focused on highlighting the size of the problem. A quick look at Pew’s pension page shows the publication “The Widening Gap Update.” The lead line in the description is that state pensions had incurred unfunded liabilities of $737 billion as of 2010. The updated version, “The Fiscal Health of State Pension Plans: Funding Gap Continues to Grow” tells readers that the size of the gap had grown to $915 billion based on 2012 data.

That sounds very scary since none of us will ever see $915 billion or anything close to it in our lifetimes. The numbers also conveys pretty much zero information, or at least no more than if Pew had written “really big number.”

Pew could have easily written this number in a way that would be meaningful to readers. For example, it could have told readers that the shortfall is equal to approximately 0.2 percent of projected GDP over the next thirty years, the period over which the shortfall would have to be filled. Alternatively, it could have told readers that the shortfall is equal to a bit less than 2.0 percent of projected state and local tax revenues over this period. Either of these numbers would have given readers a much better sense of the size of the projected shortfall, although they may not have been as effective in prompting fear as $915 billion.

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Reprinted with permission