The Grey Lady Wrings Her Hands Over Public Pensions
23rd November 2015
The editorial contains the inevitable slash at the greed and deceptiveness of Wall Street, but that part feels tired and pro forma.Even the NYT can’t fail to observe that this dynamic involves failures of governance on the part of the trustees of public pension funds. Either the trustees are stupid and credulous, or they are “willfully blind”—they choose to ignore the risks and odds because they need to throw Hail Marys to get the kind of returns they need to meet their unrealistically aggressive growth targets.
This is another way of saying that public sector unions—and state and municipal governments—have made promises to workers about their pensions without setting aside enough money to fulfill those promises when they came due. As a result, pension managers are forced into the casinos to make risky bets. But because they tend to be among the stupidest players in the financial market, they all too often end up getting hosed.
Funny how that works.
Over and over again, the answer is large but unfunded pension promises. Union leaders can posture to their members about all the lovely bacon they are bringing home, and politicians can posture to the taxpayers about how fiscally prudent they have been. The game depends on the unions shutting up about the underfunding of the pensions. If the politicians had to fund the pensions at the real level of these promises, they couldn’t make the promises.
Oops.
The Gray Lady, to her credit, realizes that something terrible has happened, and she is doing what she does best: sounding the alarm. But she is still doing her utmost to pretend that there is no real cause for this terrible, multi-trillion dollar hole in the pension system. She sees no systemic flaw in the way that the modern progressive city and state are both designed, no structural defect that produces these terrible consequences in cities as different as Houston, New York, Chicago, and Los Angeles, and in states ranging from tiny Rhode Island to giant California, New York, and Illinois.
That would require … oh, what was the word … oh, yeah, journalism.