Do You Think Big Government Can Fix The Looming Liabilities Of State & Local Pension Funds?

A Libertarian Think Tank Calls For The Federal Government To Fix
The Excesses Of State & Local Governments

To my surprise Mr. Carl DeMaio of the Reason Foundation thinks the US Congress could just pass a few laws and $3 trillion of unfunded, very generous pension promises for state & local public sector employees go away. Mr. DeMaio cites as one example the San Diego librarian who will receive $234,000 annual pension. Don’t we all want to be librarians?

Mr. DeMaio explained his reform proposals in an op-ed titled “Revoking the Federal Free Pass on Pensions” published on 2/7/2013.

About The Reason Foundation

In their own words:

“Reason Foundation advances a free society by developing, applying, and promoting libertarian principles, including individual liberty, free markets, and the rule of law. … Reason Foundation's nonpartisan public policy research promotes choice, competition, and a dynamic market economy as the foundation for human dignity and progress.”

I suppose this op-ed by one of their experts is nothing but an aberration.

The Wall Street Journal Opinion Pages

I am not sure what the editor, Mr. Paul Gigot, was thinking when he allowed this piece to be published on these pages.

Back To The Arguments Presented In The Op-ed

Mr. DeMaio thinks that the federal Employee Retirement Income Security Act of 1974, which “exempted the pension systems of state and local governments.” was the big mistake. He does not seem to realize that this Act itself was a big government intervention into the private sector. The first question should be why employers ought to provide any kind of pensions and if they do it is their voluntary choice? Just the name of this Act “Income Security Act” should make every serious libertarian cringe and taking into account that this law was passed during high inflationary times.

He argues that “[federal] Lawmakers could begin by imposing tough financial-disclosure rules on state and local pension systems. Without tough Erisa standards for financial accounting and disclosure of costs, too many state and local pension boards have cooked their books.” Do we really want even more centralization at the federal level? Is it not better overextended public pension funds go into bankruptcy for their lies for all to see and to learn the lessons?

He speaks of federal opportunities: “Congress's opportunity, then, is to tweak the Internal Revenue Code to discourage the use of pension obligation bonds—for example, by eliminating tax exemptions for any state or locality that issues them.” Are there not already enough “tweaks” in the Internal Revenue Code? We need a fundamental tax reform (preferably a simple flat tax) not tweaks. He is right that there should have never been any such special tax exemptions for municipalities or other government or private entities. Such tax exemptions usually create distortions.