Detroit has become the largest U.S. city to crumble under the weight of huge, unfunded public employee benefits such as pensions and retirement health care. It is unlikely to be the last: Recent bond-rating downgrades in Chicago and Cincinnati indicate that more municipalities could be forced to seek bankruptcy protection.
A bullet point on Page 18 of President Barack Obama’s 2014 budget sounds ominous: “Prohibit Individuals from Accumulating Over $3 Million in Tax-Preferred Retirement Accounts.” That it appears in a section titled “Strengthening the Middle Class” is odd since such a proposal would seem to undermine the goal.
It’s that time of year when journalists let their creativity run rampant to produce 10-Best and 10-Worst lists, revisit the year’s biggest whoppers (look no further than the Oval Office), and offer prognostications for the coming year. With that in mind, I’ve gleaned the five most important lessons from 2013, which are all but guaranteed to be forgotten next year.
The California Public Employees’ Retirement System, the largest U.S. public pension, voted to lower its assumed rate of return for the first time since the recession dragged down stock and real-estate prices.
Whenever a free-market research or business group releases a “best and worst” list of states, my eye goes straight to the bottom: To see whether California is last or was edged out for the lowest rank by one of the other mismanaged liberal bastions. Illinois seems to exist to boost the self-esteem of Californians.
The economic recovery is fragile enough. Should we force public pension funds to cut their investment return assumptions in half in order to comply with economic theory? The move may cost taxpayers $2.9 trillion.