All across the country, states and local governments are promising benefits to public workers on the basis of numbers that make little economic sense.Oh, what the hell; it's only our money mismanaged - we'll just bail them all out one day. It would be so easy to take this into a foaming rant about public employees' unions . . .
Two big problems are being laid on actuarial doorsteps: overly aggressive investing and overly rich benefits. Benefits can go off the scale because widely used actuarial methods tend to make them look inexpensive. And this tends to encourage aggressive investing, because the greater the risk in the portfolio, the less costly it can seem to provide the benefits.
“Actuarial assumptions based on misinformation are a recipe for disaster,” said the Texas attorney general, Greg Abbott.
21 May 2008
The Next Looming Crisis?
You remember Enron? That might be nothing if this beocomes a trend, my fellow taxpayer.