The
main problem of public pensions is, unfortunately, hardly ever explained by the media. If it were, the taxpayers
would be truly aroused.
If
the employer, or locality, funded by taxpayers gives a 5%
contribution toward pensions to a union member and does it as a 401
(k), as would most private employers offer today, that employee would invest
it. That same contribution is given to the public employee, but with
a major difference. He gets a defined benefit. He does not invest it.
The state or locality must do it.
And
because of one-sided, pressured negotiated terms, the negotiator is
in a position of getting favors from the union he is dealing with,
that is, political contributions.
But
that is not the whole story. The taxpayers’ side must also assume
the defined benefit; the need to earn as much as 8% on those retirement funds,
when that is impossible and will be, perhaps for the next
50 to 70 years. (See the Earl J Weinreb NewsHole® comments.)
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