Funding Social Security vs. Public Pensions

In a previous post “Social Security vs. Public Pensions,” source data is presented to document the following reality in America today: Given a similar salary history, a non-safety public sector employee will collect a defined benefit pension approximately triple what they would have collected under social security, and a “safety” public sector employee will collect a defined benefit pension approximately 4.5 times what they would have collected under social security. This post is to explore how feasible it is to fund social security vs. public sector pensions.

As will be shown, the notion that social security is on the verge of insolvency, or will ever be on the verge of insolvency, is complete nonsense. In stark contrast, however, based on quantitative facts that are relatively easy to extract and analyze, public sector pensions are glaringly unsustainable and they are already grossly insolvent. To compare public sector pensions to social security in order to justify federal deficit spending to bail out public sector pension funds – rather than dramatically reduce their benefit formulas – is entirely fraudulent. Here’s how we get to these sweeping conclusions:

The social security fund has been described as a “ponzi scheme,” suggesting that it can only remain solvent if the new entrants who work and pay into the system fund the retiring beneficiaries who collect payments from the system. But this ponzi scheme metaphor quickly breaks down. First of all, a ponzi scheme typically implies an eventual return of principal […] Read More