In my MSc in Management class today in UCD Smurfit School of Business I discussed with the students the issues of unfunded liabilities. In particular - the distinction between contractually obligatory liabilities and politically-granted ones.
The biggest difference is in the treatment of public servants' pensions as opposed to 'statutory' old-age minimum pensions. The former are contractually defined, the latter are not. And thus, the only way future European and US governments will be able to escape insolvency of their public spending systems - once the cost of ageing hits home - will be via a default on the latter.
I spoke about the same yesterday with an Austrian journalist.
And now we have this coming out of the Netherlands: http://www.independent.co.uk/news/world/europe/dutch-king-willemalexander-declares-the-end-of-the-welfare-state-8822421.html
Yes, at last, the honest Dutch blew the whistle on the Ponzi scheme that is politically-driven public financing of old age security. It. Is. A. Dream. just that... a dream. Not a contract, not a duty, not an obligation.
The biggest difference is in the treatment of public servants' pensions as opposed to 'statutory' old-age minimum pensions. The former are contractually defined, the latter are not. And thus, the only way future European and US governments will be able to escape insolvency of their public spending systems - once the cost of ageing hits home - will be via a default on the latter.
I spoke about the same yesterday with an Austrian journalist.
And now we have this coming out of the Netherlands: http://www.independent.co.uk/news/world/europe/dutch-king-willemalexander-declares-the-end-of-the-welfare-state-8822421.html
Yes, at last, the honest Dutch blew the whistle on the Ponzi scheme that is politically-driven public financing of old age security. It. Is. A. Dream. just that... a dream. Not a contract, not a duty, not an obligation.
2 comments:
" I discussed with the students the issues of unfunded liabilities. In particular - the distinction between contractually obligatory liabilities and politically-granted ones."
The illusion that they are contractually obligatory disguises the fact that they were politically granted to each other. As Michael D Higgins said in a Dail Speech 'after' he had decided to run for the presidency "you were all sitting on each other remuneration committees" ad the words "you were all sitting on each other's remuneration and pension committees and you are closer to the truth. Future generations or a major element of the current generation might well decide that there is nothing inviolable about public sector pensions. I was at an event in the Royal Irish Academy 4 years ago and none other than Colm MCarthy said that his own pension scheme was a Ponzi scheme. Why is it that insiders helping themselves to massive unsustainable pensions is deemed to be unassailable because "we have contracts"? Lots of contracts are simply torn up when the time is right. Public servants might just be told talk to the man over there the liquidator and he will tell you how much the new state can afford.
In the US, Detroit's bankruptcy has shown us that public pensions are also at risk, contractual agreement notwithstanding.
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