Thursday, April 09, 2009

We're all Billy Joel now

Here's Megan McArdle with "The incredible shrinking public pension funds"

America's public sector pensions have been a scandal for years. It wasn't that long ago that they finally got around to doing their accounting the way that normal pensions do: by showing how likely their assets were to generate enough revenue to pay for future benefits. When they did, we found out what critics had long been claiming: many pension funds for state and local governments were disastrously underfunded. Politicians had gotten into the habit of promising generous pensions as a "cheap" giveaway to powerful unions.
There's a story on VH1's Behind the Music about how Billy Joel went to his safe-deposit box at the bank to get some cash and it was stuffed to the brim with IOUs from his then-manager Frank Weber. (Joel would sue Weber and his own lawyers for breach of fiduciary duty.) That's exactly what's going to happen in about thirty years when Social Security goes bankrupt, pensions implode, and tax rates soar to cover universal health care. And when Generation X asks where the money went, Washington will shrug and stammer: "Dude, it's long gone."

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