There are any number of ways that Generation Greed has financed its lifestyle demands by sucking resources out of the future and away from those who will live in it, with many listed and described here. (If you haven’t read that post, please do so). The generational inequity most likely to lead to an institutional collapse at the state and local level is the practice of assuming an unjustifiably high rate of return for public employee pension fund assets, using that assumption to hand out permanently vested pension enhancements to those cashing in and moving out, and then raising taxes, slashing services, and cutting the pay and benefits of future public employees when those mythical returns fail to materialize. In New York State, since the disastrous pension deal of June 13, 2000, the assumed rate of return – from the peak of the stock market bubble – has been 8.0% or more.
High returns are used not only to hand out pension deals to public employee unions in exchange for perpetual incumbency, but also to justify lower than necessary government contributions to the funds, allowing the cost to be deferred and hidden. Since the union members are guaranteed ever-sweetened pensions, not paying for it now just means more must be paid for it later. I challenged the candidates for City Comptroller to announce what they thought a fair assumption for the rate of return on pension assets is. None did so, implying that they want to continue or enhance the fraud — at the expense of younger generations they don’t care about, with the possible exception of their own children. But in case likely Comptroller Liu has other plans, I’ll answer my own question for his benefit.
