[quote=ucodegen]What I find annoying is that these same teachers, etc want the pensions instead of having the money go to their own 401Ks.. that they control. (use low fee index funds)
The taxpayers end up paying for this though, because the pensions are a form of ‘defined’ benefit, and the taxpayers have to close the gap.[/quote]
If you study the history of these public pension funds, you’ll see that they originally invested only in VERY safe Treasuries (typically the largest allocation) and highly-rated bonds. It was the lobbying done by Wall Street that enabled the funds to put more and more of the pension money into riskier and riskier assets. It was the PRIVATE sector (the financial industry) that wrecked the pensions, not teachers, firefighters, cops, etc.
This is what I’ve been trying to explain for all these years.
[edited to add]
As for the bolded part, those employees are smart enough to know that a large, well-managed pension fund will be better able to maximize returns while keeping risks low…and that these large pension funds will be better able to weather the periodic storms because they have a much longer horizon.
And taxpayers would bear very little risk if those funds were managed wisely and well by **in-house,** salaried managers who have rules that strictly prohibit outsiders from influencing where these funds are allocated (no corruption).
Always keep in mind that taxpayers bear many risks in this world…from FEMA incidents to wars to tax cuts for the rich, etc., etc. It’s silly to pick just one type of risk and harp on that. Of all the people we should want to bear risk for (and minimal risk at that, if we keep the privatizers out of it), I’d think that the people who do the work that give us a safe, educated society in which to live would be high on the list.
