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Comment by vkou | Hacker News Reader

> It’s the easiest way to promise low taxes today and shift expenses onto future generations who have no say.

I can say the same about cities borrowing money to finance infrastructure projects, but I've yet to see a political comment grousing about how a city's budget woes come solely from billions of dollars of 10-year old debt that has to be serviced.

King county just voted to take on 1.7 billion dollars in debt to renovate a county-owned hospital. Ten years from now, nobody will be talking about defaulting on it, but I fully expect them to be talking about defaulting on pensions.

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With infrastructure, the fact that contractors and suppliers need to be paid today at least puts the debt on the books.

The cost of deferred compensation can be wildly understated for decades (and continues to be) by using erroneous investment return and mortality rate assumptions. Also, the risk of corruption remains for decades as you have a huge pot of money which many are fighting to get a piece of with little transparency.

No one actually considers the figures put out by IL/NJ/CT/Chicago and other distressed governments as accurate, and if they had to abide by the rules that non taxpayer funded entities have to, their debt would easily be 30%+ higher than stated (based on an assumption of a 1% change in discount rate moving liabilities ~15%).

I agree that politicians can also hide debt by not properly accounting for infrastructure and long term maintenance costs, and that is also a big problem.

I've given this a lot of thought and pretty much concluded government needs to get out of the retirement game. Not saying this as a libertarian or any kind of principled statement, simply looking at what happens time and again. We need to switch to 401(k)-style DC plans or something similar where the funds have to be contributed today and are beyond the reach of politics.

The incentives to game the system are just too strong. Whether incorrect discount rates, systematic underfunding, whatever, people always treat the pension assets as a "big pot of money" for today's emergency, and use it for the pet project du jour.

I even see this at my condo association. We have a replacement fund to stay on top of long-term replacement liability. We can't even balance that. What chance does a large government, with many stakeholders, have of getting this right?

You’re exactly right. If people want an an annuity when they retire, they can go buy it from an insurance company. Politicians should be forced to pay government employees in cash or cash equivalent (aka 401k/HSA/etc), but any and all compensation needs to happen immediately.

As a side note, defined benefit pensions don't have a place in the world anymore. It's the same thing as putting your money in a target date retirement fund from Vanguard/Schwab/Fidelity, except you also have to pay all those actuaries and pension fund managers so the expenses are higher.

Their purpose has been automated out of existence, but only exists due to politics in the government sector.

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