Public Pensions: An Economic Time Bomb | 5 Minute Video
Who cares about public pension liability? Well, you should – after all, it’s the reason entire cities and even states are facing bankruptcy. Joshua Rauh, professor of finance at Stanford and Senior Fellow at the Hoover Institution, paints a startling picture of just how broken the public pension system really is, and what will happen if we continue to ignore it.
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Script:
I want to talk to you about three words that should scare the heck out of you, especially if you’re young: public pension liabilities.
Okay, I know you probably have about a hundred things you’re worried about, and public pension liabilities likely aren’t one of them.
But that’s the reason this is so scary—because almost no one is paying attention.
Unless you’re okay with your city going full Detroit and giving more of your hard-earned money to pay off someone else’s debts, stay with me.
So what is a public pension liability?
A pension is a guaranteed, lifetime payment to someone after they retire. Pensions used to be a big deal in the private sector. Every major American company had them. But they became too expensive, and companies have taken steps to phase them out.
However, pensions still live on in the public sector—among employees of the government—and they’re eating city and states’ budgets alive. More and more money that could go to tax cuts or better services is instead being shoveled aside to pay for these benefits.
Why is this happening? Over decades, politicians have promised trillions of dollars in pensions to government workers. That includes police, firefighters, teachers, and city and state officials. You name a government job, and there’s a pension associated with it.
Now, you may be wondering, “How big are these payments?” Many pensions are quite large. In California, more than 62,000 retired public employees are receiving pensions of over $100,000 per year. Sometimes, it’s even crazier. A retired New York City sanitation worker is getting $285,000 per year. A retired county administrator in California receives over $400,000 per year.
Remember, these are guaranteed lifetime yearly payouts.
Now, we love our public employees. They do vital work for our local communities and the wider society. They deserve competitive pay and retirement benefits. But currently, many cities are, in effect, paying for multiple public departments at the same time: the department that’s working now and, because people are living longer, a generation or two of retirees.
The system amounts to a self-perpetuating, corrupt merry-go-round. Public-sector unions give large donations to candidates, who are then responsible for negotiating how much of your money goes to public sector workers. These arrangements not only promise high salaries in the short-term, but they also hide the payments that will be due down the road when it will be much too late.
The results are predictable.
State and local governments across the U.S. openly admit to 1.4 trillion dollars of unfunded pension liabilities, or $11,000 per household. “Unfunded” means dollars that have been promised, but there’s no actual money in the bank. And that’s just the amount they admit to. The real number, according to the Federal Reserve, is much larger—around 4 trillion dollars, or $32,000 per household.
Pensions have already thrown California cities like San Bernardino and Vallejo into bankruptcy. And the entire state of Illinois is teetering on the edge.
So how do politicians get away with this? They use a time-tested political strategy: they lie.
For the complete script, visit https://www.prageru.com/video/public-pensions-an-economic-time-bomb
source
Moving to a 401k is not the answer… That forces government workers into putting their money into the risky stock market. Its entering into a different ponzi scheme. Government workers putting money in the system every month makes stock prices go up all the while the big wigs get to sell stocks. Sounds like a suckers bet to me.
This is why democracy doesn't work.
Maybe if public pensions stop throwing their money into unprofitable woke ESG funds, they'll actually be able to meet the measly 7.5% return
How Tough Train Operators Retire after Working for 30 Years
Wow..bravo prager for touching this topic
Conservative thievery. Let’s give all the money to the mega rich.
Well, I cant speak to much for public sector pensions, but there is absolutly no way either myself, or the majority of people who served as enlisted in the military would do what we did for 20+ years, for the peanuts we got, if it wasnt for the military retirement waiting at the end.
On paper it doesn’t sound good but the individual receiving the government “defined pension plan” is left off with the best plan their is.
Just a lowly self employed carpenter here, but a “pension” sounds like a lottery to me.
the language used in these videos is weird
You got to be kidding, they will do nothing at all, they will run everything into the ground and the politicians will take off with their money and taxpayers get screw.
Don't worry, covid fixed this. They FOCUSED on getting all those pesky pensioners sick and dead. If you were wondering why multiple states, cities and countries all did the exact same bizarre move of putting covid infected patients INTO old age homes….. it was to cull them.
"We love our public employees?" Not that much!
There are no guarantees only guarantors.
Who made the virus kills the elderly
I have a master's degree in ICT. This crypto craze just doesn't make sense to me. I think crypto is the next big scam like the housing crisis. I'm betting pension fund managers are dumping tons of their firms money into crypto. Crypto they mined at home and bought using their firm's money. In the end the crypto currency will collapse leaving investors high and dry. But that's Ok. The government can just print more money or raise taxes to fill the hole.
Defined Benefit Plan (Pension) employees to contribute a set percentage toward their retirement. For instance, I have been paying into my pension account between 5% and 8% of my earnings for many years and this money goes right into the stock market etc…. Nobody in private sector is required to do this. People can take the same percentage and invest in IRA or other investments, and possibly, be better off. Moreover, in my case, the percentage I'm required to contribute gets adjusted regularly (up), to address some of the concerns raised in this video.
So, please don't make it sound like it's some kind for subsidized income at retirement.
Can someone explain why a pension may fail? If you adjusted the contribution of workers and claim of pensioners according to the liability every couple of years in order to have a portfolio over 100% why would it fail? Everyone reaps the rewards and burden because they all take the risk. I'm trying to figure out why a pension may be better than a private personal plan or vice versa? I can see fees reduced in pensions as good, but I can also see how I have to take less or freeze my pension after retirement if there is a shortfall in order to maintain the pension for the current contributors.
[CENSORED] the public pensions !!!!!!!!
This isn't based at all..
End all public liabilities. You don't get to promise away other people's money. This is slavery.
HOw many people pay into a pension for year and years and then either leave and dont get to collect or who die and dont get to collect? The government keeps all their money. Thats why pensions take up a fraction of a percent of most cities budgets.
A COUNTY RETIRED ADMINISTRATOR DOES NOT RECEIVE 400,000 A YEAR! THATS A COMPLETE LIE.
Teachers do not get that big of a pension.
Good than we need to remove pensions for all COPS!
Now time for the public to go wild lol.
Public Pensions are ponzy schemes devised by socialist swindlers in 19th century europe. It's time to scrap this shit worldwide before it's too late. We need to educate the public about this stuff and stop this swindle
Very good presentation!!!! I learned a lot!!
People living longer is a crock of shit! 1/2 my friends are dead before I hit 50. And people dont need 400,000 a year but a decent living wage. Thats where their screwing up. But hey! Screwing up is all mankind does right?
Wasn’t that money they get as pension deducted from their salary during the time they worked? Where I’m from it’s like that,..don’t know about the US..
In Switzerland pension (AHV) is obligatory for everyone.. the amount of money someone gets per month equals the amount he payed so far divided by the number of month of the remaining current average life expectancy of the population. There are some issues caused by inflation and raising life expectancy, but overall it works well.
In case you don’t understand what im talking about, here the simplified version for Americans::
you get the same money back you payed when you where working. if you live longer than normal, you will be happy because you get more then you payed. And if you get shot and die before that, you won’t be able to care about getting less.. so everyone is happy. people just get their own money back, not someone else’s money.
https://youtu.be/l2g0jEdu8qk
Covid-19: hold my cough
How's the 401K any different from all other pensions none of them are guaranteed by the Constitution, neither is borrowing money from the Federal Reserve to create sustainability I'm which there is no sustainability on that path but only hyperinflation. Yeah it's all bankrupt cuz it's all fraud call Mom on the phone fraud because it's all Monopoly, economic and monetary Monopoly, creates boom-bust cycles and economic super Cycles like we are in now, and perfect use the covid-19 skews for causing this grand old exit from the super economic cycle. It's game over folks
Defund the Government and start with the pensions.
Go To Transparent California see all salarys unbelievable !!!
https://transparentcalifornia.com/salaries/all/?s=-total&page=1
Wait until we can pay to prolong our lives…
Illinois. 1/3 of our state operating budget is pension liability.
In Atlanta, Georgia the Police Officers took over their pension after the City decided to do away with the pension and go with a 401k type deal (The older officers were "grandfathered" in on the old pension). When the "grandfathered" police officers took over the pension, they invested it right and it increased significantly. But the City of Atlanta took the pension back over so that they could "look after it better" (read: steal from it).
Honestly, people should be responsible for their own retirement(s). But not too many people understand self responsibility.
Youtube unsubscribed me yet again.
I am not an economist, but some simple math associated with this occured to me a long time ago. A friend of mine who was an elementary school teacher in VA retired at a pay level of $55,000. per year plus MASSIVE benefits- keep in mind he was only working 180 days per year, so his salary was over $300. per day, plus probably another $80.-$100. per day he worked in health care (including dental- 100%) at the time of retirement. Good, not fantastic but not bad. But here is the problem- he retired after 30 years in the school system at age 55. He can reasonably be expected to live another 30 years. With the Guaranteed annual increases in his pension, he will ultimately get more money as a retiree than he did when he was working. With everything combined, it costs the public roughly $700. per day for him to have been a 5th grade teacher. I'm sorry, but that is too much money for that level of employment. And before someone mentions that he must have a degree- here is the scoop on that- he went to school on a full ride football scholarship. He flunked out of engineering curriculum and went into education courses because they were easier. So he neither paid anything much nor had to endure some hellish study to become a teacher.
Just another can that gets kicked down the road. Another ostrich with its head in the sand. When its time to face reality, no one wants to be putting in. The real crooks have cashed out- long ago.