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How pension promises from reckless politicians have wrecked America's finances.
There is a dirty secret about state entitlements that liberals don't want you to know: The collection of a state pension increases the chances that a pensioner will live in poverty. That's because money put aside for state-guaranteed benefits cannot be safely invested at rates that provide for more than a modest retirement unless the state subsidizes retirement benefits through taxes or if retirement savings are invested in riskier, higher yielding investments. Since governments are loath to raise taxes to subsidize a risk-less retirement, benefits are eventually reduced. It works that way in London and Moscow as well as Madison and Sacramento.
In Moscow, public pensions and social programs helped bankrupt the Soviet Union in the 1980s while "transfer to pension status greatly increase[d] the likelihood of poverty," according to Mervyn Matthews' 1986 book "Poverty in the Soviet Union." In London, former Labour Minister John Hutton's Independent Public Services Pension Commission has recommended changes that would calculate pension benefits on lifetime earnings rather than current salary -- in line with recommendations for pension reform from the Organization for Economic Co-operation and Development (OECD). Trade unions in the United Kingdom say that such changes will lead to "increased pensioner poverty." In Madison, Wis., public retirement applications have risen 73 percent, according to the Wall Street Journal, as workers try to lock in higher retirement benefits that will likely shrink for those public employees retiring in the future.
Increasingly, state governments in the United States are facing budget shortfalls over entitlements paid to public servants and those on the public dole. And like the Social Security program, the shortfalls have been wholly predictable as government makes bigger and bigger promises to a select number of citizens who then take up a bigger share of the public pie.
As Rep. Paul Ryan, R-Wis., has been warning: Entitlements could bury this country if we don't address them soon.
In a powerful and harrowing piece -- "Rates of Ruin" -- for the May issue of Townhall Magazine, Finance Editor John Ransom explains the dire consequences of politicians' pension promises if they remain unchanged.
You can find this special report only in Townhall Magazine's May issue. Here's a small taste of Ransom's warning:
There is a dirty secret about state entitlements that liberals don't want you to know: The collection of a state pension increases the chances that a pensioner will live in poverty. That's because money put aside for state-guaranteed benefits cannot be safely invested at rates that provide for more than a modest retirement unless the state subsidizes retirement benefits through taxes or if retirement savings are invested in riskier, higher yielding investments. Since governments are loath to raise taxes to subsidize a risk-less retirement, benefits are eventually reduced. It works that way in London and Moscow as well as Madison and Sacramento.
In Moscow, public pensions and social programs helped bankrupt the Soviet Union in the 1980s while "transfer to pension status greatly increase[d] the likelihood of poverty," according to Mervyn Matthews' 1986 book "Poverty in the Soviet Union." In London, former Labour Minister John Hutton's Independent Public Services Pension Commission has recommended changes that would calculate pension benefits on lifetime earnings rather than current salary -- in line with recommendations for pension reform from the Organization for Economic Co-operation and Development (OECD). Trade unions in the United Kingdom say that such changes will lead to "increased pensioner poverty." In Madison, Wis., public retirement applications have risen 73 percent, according to the Wall Street Journal, as workers try to lock in higher retirement benefits that will likely shrink for those public employees retiring in the future.
Increasingly, state governments in the United States are facing budget shortfalls over entitlements paid to public servants and those on the public dole. And like the Social Security program, the shortfalls have been wholly predictable as government makes bigger and bigger promises to a select number of citizens who then take up a bigger share of the public pie.
As Rep. Paul Ryan, R-Wis., has been warning: Entitlements could bury this country if we don't address them soon.
In a powerful and harrowing piece -- "Rates of Ruin" -- for the May issue of Townhall Magazine, Finance Editor John Ransom explains the dire consequences of politicians' pension promises if they remain unchanged.
You can find this special report only in Townhall Magazine's May issue. Here's a small taste of Ransom's warning: