Those who read my posts consistently know I'm not pleased with Comptroller Liu. His union backers decided to destroy public services despite the highest tax burden in the country by getting their retirements, already richer than just about anyone gets, enriched further. But they don't want to admit that's that they have done, so Liu has used misdirection in a series of reports to pretend that isn't what has happened, hoping they'll back him for Mayor.
Today I note that the fact that the New York City pension funds are in a far deeper hole than the New York State pension funds has hit the blogosphere (if not the MSM). And New York City's Deputy Mayor is trying to pin the difference on one year's worth of returns and Comptroller Liu, who oversees the city pension funds. Well, sorry but inadequate returns are NOT the reason for the city's greater pension hole, and taking more risk in a situation in which assets are overvalued is NOT the solution. This problem has been building up for decades, and Liu just got there.
What is far more infuriating than what Bloomberg, Liu and Cuomo disagree on is what they all agree on. Those who took too much, those of their generation, should give back nothing. And those in future generations should be far worse off to make up for it — in public employment through a worse pension than Generation Greed had been promised to begin with.
No one will admit this. And it goes far beyond pensions. When will someone stand up and say "yes, we have diminished your future, in your face, deal with it?" Instead they spin fantasies.
"New York City is overweighted in U.S. stocks and should invest more of its pension funds in other assets, such as U.S. Treasuries, and must lower benefits for new hires, Deputy Mayor Robert Steel said on Thursday."
"Putting more cash into international equities and fixed income, inflation-protected bonds, commodities, currencies, and real estate could improve returns, he said, helping the city afford over $80 billion of contributions over the next decade."
"Steel, a former Treasury undersecretary and Goldman Sachs executive…"
He also said we're screwed, and it could take decades for pension assets to return to affordable levels. That part is true.
But having the city's pension funds shift to commodities and real estate, which could get killed if we enter a deflationary spiral, or long term bonds, which could get killed if we enter an inflationary spiral, is hardly a safe bet. Perhaps Goldman is looking to dump positions in these assets. And as for international, as the U.S. defaults (or de facto defaults through inflation (on its excess debts), one possible response by not quite capitalist countries such as China and Russia might be to wipe out the value of U.S. holdings abroad. Yes, it doesn't take much of an imagination to see something like that happening.
There is no magic bullet. The only fair thing to do, and thus what no one will say, is for EXISTING employees and retirees to pay drastically more for their pensions to make up for the retroactive enhancements they have given themselves, plus all the interest on all the years they claimed the cost of those enhancements was zero. And for them to work harder to make up for the fact that everyone else will be able to afford fewer of them.