They Still Don’t Get It

From Bloomberg/Business Week: "New York’s 8 percent assumed rate of return on its pension investments is so unrealistic that the city may have to spend even more than the $1 billion it has in reserve for its retirement plans, Mayor Michael Bloomberg said." I can't argue with that. "Officials are waiting for chief actuary Robert North to recommend how much the city can expect to reap on its pension assets, which were valued at $120 billion as of June 30. North hasn’t issued a recommendation in more than a year." Waiting for a miracle.

"Each quarter-point drop in the assumed rate of return would cost New York at least $350 million to be set aside to pay benefits, said Marc LaVorgna, a mayoral spokesman." Wrong! The cost to the city depends on the cost of benefits. Inflating the presumed future rate of return doesn't change the actual cost one cent. It just changes the extent to which you can cover up the cost and shift it to a future you don't care about. Which, along with retroactive pension enhancements in deals between unions and politicians, are the reasons we got in this mess to begin with.