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October 10, 2013

Another Enormous Story the Media Is Ignoring: The Trustees of Detroit's City Workers Pension Fund Depleted the Fund By Giving "Bonuses" To Workers and Even The City of Detroit Itself

This is a huge story.

Or, rather, it should be a huge story.

But it's not, because it paints government in a rather bad light. An incompetent light.

People might get the wrong right idea were they to read the facts about Detroit government workers' pension fund.

And therefore: they won't be permitted to read about them.

Let me give you the short version: Whenever Detroit's pension fund performed better than expected (as far as investments), rather than keeping that extra money in the fund, where it could grow due to compounding interest, the trustees sent out "bonus" checks to workers.

In other words, they paid them bits and pieces of their pension before, you know, retirement.

They also -- and I don't even understand this -- paid "bonuses" to the City of Detroit itself, to, you know, waste.

Even worse (as if that's not bad enough)... they also paid out "bonuses" when the fund did worse than expected.

Why I can't think of anything that could possibly go wrong with this plan, except for Everything.

Net effect? Well, the pension fund is now absurdly underfunded, because of all the money sucked out of it before actually getting to the pension years. Of the fund's $2 billion shortfall, it is estimated that half of that, a cool $1 billion daddyo, went out the door through "bonuses."

Why would the people administering the system do this?

Well, several reasons, I think.

First, they were completely incompetent, of course. They apparently didn't realize that depleting a pension of funding on the front end (the accumulation phase) would have dire effects on the back end (the disbursement phase).

It's incredible that pension administrators would not realize something so basic and obvious, but there you go.

And that is on the city workers themselves -- in a democratic system, we cannot completely ignore your freely-made choices of who to put in charge of a pension fund, even if you're destroying your future. We have to treat adults as Capable of Exercising Rationally Self-Interested Decision-Making, even if they're actually not.

Second, they officials who did this were probably protecting their jobs. Because I'm sure that people receiving "bonus" checks were pretty darned happy about that.

Happy, that is, because they didn't realize that the "bonus" checks were actually depleting the pension fund and that when they retired they'd have a very meager pension indeed.

So the officials probably were getting the benefit of job security... by completely and utterly failing to perform their jobs in any kind of responsible matter.

Now here's the kicker, of course: The workers of Detroit will now come to taxpayers to "make them whole," to pour in billions into their pension fund.

Even though they actually got a lot of this pension money once already in the form of wildly-premature "bonus" checks.

This is Democratic governance in action. This is the ultimate effect of a State which wishes to infantilize its citizens -- it ultimately will succeed in doing so.

And then the infantilized citizens, unable to provide for themselves, will, like children, seek support and shelter from the adults.






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