Wednesday, November 09, 2011

What if taxpayers were garnished to pay for underfunded public pensions; Could super-committee hit current Social Security beneficiaries now?

MSN posted a blistering post from Smart Money by Jack Hough, “No Pension, You May Still Owe $30000 On One”, link here 

The writer calculates what taxpayers would owe if they had to make up the difference on underfunded public pensions.  He suggests that states and localities start collecting $1400 more per year from households now, almost like a garnishment.

The problem is that pension funds have been allowed to use default-prone investments in projecting their returns.  They should be required to use default-free investments.

Other problems include public employees gaming the system by using the highest years of earnings. 

There’s more.  Today, Nancy LeaMond, executive vice president of the AARP has a LTE on p A22 in the Washington Post about a Nov. 5 editorial “A menacing message: The Supercommittee should resist AARP’s attempts to take Social Security off the table” ( editorial copy link ), and writes (“AARP:A help or hindrance”?) “Until recently, most proponents of Social Security benefits weren’t talking about current beneficiaries, but they are a target today”.  The link for her letter is here. She goes on to talk about chained consumer price index and its effect on annual COLA and emphasizes that most seniors are relatively poor – but she doesn’t get into the biggest kahuna – that you could means test wealthier current beneficiaries right now.   Maybe unlikely, but it the current committee came up with that, there would be nothing seniors could do. This time, not even the ballot box.  

Another quote from her letter is appropriate: "The editorial said, “Social Security cannot pay all promised benefits, and a debt discussion is a useful place to make reasonable tradeoffs.” But the Social Security trust funds can pay all promised benefits until 2036."

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