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Pensions Aren't the Problem, cont.

3:27 PM, Mar 28, 2011 • By DANIEL HALPER
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Second, Biggs and Norcross appear to have misunderstood my points about constitutional provisions. States can, and should, change benefits for future beneficiaries but the need to pay already accrued benefits means that the these changes will simply have a smaller consequence than changes in other benefits. As a tactical matter, it's simply better to focus energy and political capital on the "weak points" of plush public employee benefits. In some states, at some times, pensions may be the "weak point" but, in general, changes to pension policy are much more subject to challenge than just about any other modification of employee benefits.

Finally, I can't do much more than restate my case that governments are indeed superior to the private sector, on average, when it comes to providing pensions. Quite simply, private sector firms are transitory whereas governments can be expected to last forever. Private sector defined benefit pensions are almost always a bad deal because all firms—even very large and successful ones—almost always enter periods of decline. (Personally, I'd eliminate all tax advantages that encourage private firms to offer defined benefit pensions.) State governments, on the other hand, are permanent entities that, once created, never go out of business and almost never fail to pay their bills. No firm can or should act with an absolute assurance that it will still be in business and (at least) the same size in 40 years: every state government can do so. When it comes to providing pension benefits, this is a huge advantage.

In closing, I would add that I agree with the Biggs and Norcross's fundamental point that states can and should do more to rein in pension liabilities. But, despite the scary looking, headline grabbing numbers pension liabilities provide, it's current pay, benefits, bargaining, and job protections—not pensions—that lie at the root of states' overgrown public employee compensation costs.

Eli Lehrer is vice president of the Heartland Institute.  

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