The Economist on the U.S. Pension Crisis

This week’s Economist features a report on the crisis in U.S. state pensions, with special reference to New Jersey and the recent study authored by Andrew Biggs of AEI and myself. The piece begins with a view of the municipalities, in this case, San Jose, California which has seen its pension costs triple in the last ten years. San Jose offers workers its own muncipal plan and according to Robert Novy Marx and Joshua Rauh, their unfunded liability is about $4 billion, or 321% of the city’s 2006 revenues.

4 thoughts on “The Economist on the U.S. Pension Crisis

  1. Benjaminb

    Could we present this issue in the light of more rigorous economic (not just accounting) analysis. Present typical pensions – not those at the extreme. Examine the average wages and benefits for local public service and I suspect you will find that wages for similar skill levels are below the private sector and that steady, good benefits and modest but dependable pensions are the trade off.

  2. Irfan Khawaja

    My comment isn’t specifically on pensions but on a related topic: I wonder if you could blog soon (before the election) on the NJ State Public Question for 2010–the “Constitutional Amendment to Dedicate Assessments on Wages By the State to the Payment of Employee Benefits.” I’m curious how your view on pensions (and benefits generally) would translate as a vote on that question.

  3. Irfan Khawaja

    Could you delete my last comment? I wrote it just reading the previous blog entry, not realizing that the report itself addresses my question.

  4. Larrythelen

    I suggest you’re all going in precisely the wrong direction. The goal is secure retirement, both for the employee and so that the state will not have to provide for poor elderly. A defined-benefit program is far more likely to achieve these goals than a defined-contribution plan precisely because the retirement fund is then managed over decades by professionals, instead of by random and amateurish efforts of the employee himself, not to mention his being prey to unscrupulous vendors.

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