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Mon, July 22

Editorial: Government needs to re-think pension model

Americans love to point to the former Soviet Union as the classic example of the ultimate failure of Socialism.

Recent history parallels the economic meltdown of the former USSR. Greece's socialist economy is in shambles. Ditto for France and Argentina. Sweden has restructured its government from a socialist to capitalist system.

The United States and even Arizona are also feeling the pinch of an economic model that is not far removed from that of a welfare state.

The Cottonwood City Council learned last week that the state pension system for police officers and firefighters has less than half the money it needs to fund current and future retirement payments.

The shortfall comes to about $7.78 billion.

Cottonwood's share of the debt totals about $9 million.

This is not just an Arizona problem. Time Magazine has called government pension shortfalls a "Time Bomb in America." Illinois is facing bankruptcy. One columnist says California is facing "Death by Pension."

The typical government solution to this pension crisis is to perpetuate the problem. Rob Peter to pay Paul by cutting funding in other programs across the board and/or by raising taxes. At all costs, keep the pension program alive, even though it is spending money at a rate that far out-paces the funding mechanism to balance the books. No surprise there as the very people searching for a solution to the problem hope to one day reap its bounty.

Businesses realized the futility of pension programs years ago. Today, typical private business retirement programs are anchored in the philosophy of personal responsibility. The government's role in such programs is through tax-deferred incentives that encourage personal saving and wise investment.

Americans who roll the dice with programs such as a 401k learn that there is no such thing as a guarantee in life. Personal investment is a gamble, a roller-coaster ride through the hills and valleys of economic volatility. You make wise decisions, stay the course, and hope for the best, but there are no guarantees.

Government pension programs promote the entitlement premise that there are guarantees in life.

It's a lie.

When you spend more money than you take in, the chickens ultimately come home to roost.

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