Tuesday, March 01, 2011

"Wisconsin lie exposed" is bunk

I haven't done too much reading about the situation in Wisconsin. But, a few Facebook posts pointed to an article by Mr. David Clay Johnston that merits response if only because of the juxtaposition of the title and the actual reporting that Mr. Johnston does in the article.

The Wisconsin Lie Exposed – Taxpayers Actually Contribute Nothing To Public Employee Pensions

The article by Mr. Johnston only really makes sense in the context of defined contribution plans. In the context of defined contribution plans, saying that employees need to "contribute more" to their pension doesn't make any more sense than Gov. Walker saying that I need to "contribute more" to my 401(k) or my IRA.

However, Wisconsin is a bit more complicated than that. The pension that a pensioner receives is the HIGHER of either a defined benefit pension of 1.6% of final average salary for each year of service, or the results of the pensioners defined contributions. See page 3 from:

If the employees total contributions (including compensation deferred via contributing it to this program) are less than the defined benefit, the taxpayers of Wisconsin eat the difference. The odds are very good that the defined benefit payout level is way better than the pension managers can pull off (for a variety of reasons that are just crooked as all hell, but I'm going to ignore them for now as they're not really the point.)

I'm actually sort of annoyed that Mr. Johnston didn't bother doing some of the research that he rails against reporters not doing. Either that, or he just tacitly assumes that the State of Wisconsin Investment Board (the source of the above PDF) which manages Wisconsin's pension fund doesn't know how pensions are structured in Wisconsin.

If the current employee contributions are larger than needed to meet the defined benefit amount, then there is no legitimate reason to increase the required contribution. But, as I mentioned earlier, that seems really unlikely.

As an aside...

The level of just lousy reporting and investigation by those who should be able to do better sucks. Mr. Johnston has won a Pulitzer Prize for crying out loud! It took maybe 20 minutes of Googling and reading to find out how Wisconsin's pensions are structured. This shouldn't be a monumental hurdle that actual reporters can't clear.

A free press is key in keeping any form of representative government from devolving into tyranny. But, it isn't enough to just have the press be free. It is equally important that the press actually print the facts. Frankly, that is probably even MORE important -- if the press is not free but still prints the actual facts, then the citizens will be able to make informed decisions. But, if the free press doesn't bother with getting the facts and truth out, the key ingredient for making informed decisions doesn't exist and the citizens have a MUCH harder time making properly informed decisions.

It is the need for the the press to be able to print the facts and the truth when they are politically unpopular that is at the heart of the demand that the press be free. Sadly, like so much else in the U.S. we have preserved much of the form and lost sight of the function.

No comments: