January 18, 2010

"Pensions as stimulus"?

Marc Comtois

Apparently, we're supposed to believe that it's a net good to be spending more taxpayer dollars on pensions because it's good for the economy:

While several speakers were telling the House Finance Committee last week that cities and towns were spending too much on employee pensions, another, representing public school teachers argued that the state and its municipalities should be concerned about spending too little.

According to Patrick Crowley, an assistant director at the National Education Association of Rhode Island, putting money into public-employee pension plans is a good investment. So good that every $1 contributed by taxpayers reaps a return of $4.56 in local economic activity.

Crowley was citing figures from the National Institute on Retirement Security, which concluded in a 2009 “Pensionomics” report that the yield was good because investment earnings and employee contributions provide “the lion’s share” of employee pensions. The people receiving those pensions then go out and spend money, helping the local economy, the report says.

Crowley’s statement led to a spirited exchange with Rep. Laurence W. Ehrhardt, R-North Kingstown, who questioned the Crowley’s logic.

“That dollar comes from someone,” Ehrhardt said. “Doesn’t it then have the same effect on the other end?”

“No, it doesn’t” Crowley responded.

Ehrhardt listened to the explanation but gave no ground.

“I have a graduate degree in economics,” he said when Crowley had finished. “I completely disagree with you.”

Well, maybe it is good for the local economy...in Florida. In actuality, the tax dollars that go towards pensions are only a piece of the problem--maybe the least. The ability to retire at a relatively young age with a generous benefit package means more money spent over a longer time. To say nothing of the penchant for retirees to embark on a second tax-payer financed career (and their pensions, benefits, etc.) and the buybacks, buy-ins, etc.

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I'm waiting for a politican to propose the typical Rhode Island Plan.

It generally goes like this:

1. Have the State announce that the reason for the budget deficit is the fact that there are too many state employees who are, due to their long-term state "service", at the very top end of the pay scale. Bury the fact that " long-term" means as little as 15 - 20 years, or that it includes state employees who were able to buy years based on summers spent lifeguarding. Also, always refer to state employment as state "service" to give the impression that the employees volunteered for hard, thankless jobs that no one else wanted.

2. Propose to buy out these top-tier state employees by giving them upfront cash bonuses to retire early. Also, to sweeten the deal, increase their already generous pension benefits. Tell the public that in the long run the state will save money because the retired workers will be replaced with younger, cheaper employees.

3. Hire a politically-connected consulting company to magically work the numbers.

4. Once the top tier workers are paid off and are retired, wait a few months and then rehire most of them back at their old salaries on the basis that you cannot find such talent and experience elsewhere.

5. Fill the other open slots with older, politically connected workers. As soon as a major news story distracts the voters, rush through salary jumps to the top tier. If caught, claim that paying these inexperienced older workers top dollar is still a bargain because they bring to their jobs "real life experience" and "real life skills". Refuse to explain just what experience and skills these workers bring other than their willingness to attend fundraisers and work the phones during elections.

6. When no savings result from the buyout, quickly but vaguely blame unforseseen economic changes. Then plead that it's time to stop looking at the past, and what should have been done in the past. Assert self-righteously that it's time to concentrate on the future and the increasing budget deficits caused by the failure to tap into all potential revenue streams.

Posted by: Timothy Mott at January 18, 2010 1:52 PM

"According to Patrick Crowley, an assistant director at the National Education Association of Rhode Island, putting money into public-employee pension plans is a good investment. So good that every $1 contributed by taxpayers reaps a return of $4.56 in local economic activity."

Like Mr. Ehrhardt, I have a degree in economics, and also like Mr. Ehrhardt, I think this is the dumbest leap of logic I have ever heard.

Posted by: Dan at January 18, 2010 3:13 PM

Ha ha ha ha ha! Crowley, you got b**** slapped by Ehrhardt! I don't know that he could have respectfully let you sound more like a dummy and then made sure you knew it.

Posted by: Patrick at January 18, 2010 9:24 PM

According to Bosun's Mate Crowley, moving deck chairs from the port side of the RItanic to the starboard side will right the ship and keep it from sinking.

Yet more quackery from Ducky.

Posted by: Ragin' Rhode Islander at January 18, 2010 11:22 PM
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