Politicians Doing More Harm than Good
Sometimes in the annals of things-that-strike-us-as-mind-boggling, an example comes along that is so clearly mind-boggling—no matter what an observer’s age, politics or religious beliefs might be—that it requires no commentary on our part to highlight how very mind-boggling it is.
Today’s example comes about three-fifths of the way through a front page New York Times story titled “New Jersey Diverts Billions, Endangering Pension Fund,” and if you ever thought your tax dollars were spent wisely, or, at the very least, not incompetently, you ought to read the entire hair-raising piece—not just the following excerpt.
And, no, I am not making this up.
…Mr. Beaver and Mr. Megariotis recounted a bit of history. In 2001, the Legislature voted to increase teachers’ pensions by 9 percent, raising the plan’s total cost by an estimated $3.1 billion. Because New Jersey’s Constitution forbids creating debts without creating a funding source, the lawmakers needed to pay for it. They looked back to June 30, 1999, the height of the bull market.
Records showed that the pension investments were worth $5.3 billion more on that day than the plan’s actuary showed, because actuaries phase in gains and losses slowly to avoid sudden swings in market value. The lawmakers seized on this paper gain of $5.3 billion, and voted to channel it as an actual windfall into a new reserve in the pension fund, to pay for the new benefits.
I.R.S. officials said that a company would not be permitted to do this with a pension fund.
By the time the Legislature did this in 2001, of course, the stock market had tumbled and much of the $5.3 billion had melted away. That appeared not to have concerned the Legislature. An election was looming, and the teachers’ union was complaining bitterly about past failures to put money into their pension fund.
Too bad the 2005-2006 batch of sub-prime home buyers can’t set their home’s current value at its peak a year and a half ago… Jeff Matthews I Am Not Making This Up
© 2007 Jeff Matthews
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