Thursday, March 17

What do SS and California's state retirement system have in common?

If you're over 40 or so and have been reasonably hard-working and prudent, you probably have some money in stocks or similar.

And you probably have a good idea of the rate of return those investments have been getting for the last couple of years. For most stocks and funds, maybe 3 or 4 percent or so.

So if you heard that the corrupt bureaucrats running the nation's largest state retirement system were basing their contribution calculations on a rate of return of 7.75%, what would you conclude?

The 'crats in question are running California's state system, and the reason they've kept the ludicrously high rate projection is that reducing that projection would require Cali cities and the state to increase their immediate contributions to the pension fund--something no politician wants to do.

And while reading this story I was struck by the similarity to the crisis facing the Social Security fund: Decades ago, congresscritters bent on spending more money (thus ensuring their perpetual re-election) hit on the idea of counting the SS system's then-excess tax revenue (and back then the system had a LOT more revenue than payouts) as income to the federal government--thus allowing more federal spending.

The congresswhores tapped this revenue by grabbing the cash and leaving "special obligation bonds"--in effect, IOU's from congress. But as the population ages and Social Security starts paying out a LOT more each year than it takes in, it will have to start exchanging these IOU's for cash.

But with virtually all administrations mentally wedded to deficit spending already, where does congress (lower-case intentional) expect to get the money to do this?

Oh, that's right: We'll borrow it from China.

So...the common thread between the goofy unreality of CalPers' forecast return rate and SS? Politicians--none of whom are math whizzes--will always choose the option that lets them spend more of your money today, regardless of any negative consequences in the future.

And ironically, the Founders knew this would happen. They warned us, in the Constitution itself.

But when liberals started controlling education they stopped teaching the Constitution. So very few people younger than about 40 have much idea what's in it.

Hmmm.....

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