Friday, June 22, 2012

Fared Zakaria Calls For Public Pension Reforms

Why We Need Pension Reform By Fareed Zakaria

From The Time Article

A day after Governor Scott Walker won his recall election, the New York Times wrote, "The biggest political lesson from Wisconsin may be that the overwhelming dominance of money on the Republican side will continue to haunt Democrats." Democrats have drawn much the same conclusion. "You've got a handful of self-interested billionaires who are trying to leverage their money across the country," said David Axelrod, Barack Obama's senior campaign strategist. "Does that concern me? Of course that concerns me."
But then how to explain the landslide victories in San Jose and San Diego of ballot measures meant to cut public-sector retirees' benefits? What should concern Axelrod far more is that on the central issue of the recall--the costs of public-sector employees--the Democratic Party is wrong on the substance, clinging to its constituents rather than doing the right thing.
Warren Buffett calls the costs of public-sector retirees a "time bomb." They are the single biggest threat to the U.S.'s fiscal health. If the U.S. is going to face a Greek-style crisis, it will not be at the federal level but rather with state and local governments. The numbers are staggering. In California, total pension liabilities--the money the state is legally required to pay its public-sector retirees--are 30 times its annual budget deficit. Annual pension costs rose by 2,000% from 1999 to 2009. In Illinois, they are already 15% of general revenue and growing. Ohio's pension liabilities are now 35% of the state's entire GDP.

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