Quote of the Day
Compromise:
The art of dividing a cake in such a way that everybody believes he got the biggest piece.
Sherry Rothfield
Must Be Nice...
We Need Federal Pension Reform
I am not a regular C-SPAN viewer, but the other day I was checking on my expanded cable listings, which I accidentally stumbled the very beginning of this session on the third C-SPAN channel. I later found a C-SPAN webpage with the video, but it was not possible to link the video. Today I discovered video embed functionality through a C-SPAN archive website. In addition, you can find a relevant House hearing webpage here (with links to participant hearing documents). I have respect for the work of AEI's Andrew Biggs, whom has considerable scope of knowledge involving retirement programs (including social security: for an interesting take on his views on that entitlement, see this The Atlantic interview). Biggs' statement for the committee is available here.
I touched briefly on the federal pension system when reviewing the sorry state of the USPS. Biggs' statement cited above provides a nice historical summary. Before 1984, there was a single all-inclusive (no social security) defined benefit (pension) system (CSRS). Since 1984, there has been a hybrid system, consisting of social security, a defined benefit system (FERS) and a (401K/403B-like) defined contribution system (TPS). Long story short, on a more apples-to-apples approach, Biggs finds no comparable private sector concept to FERS (which requires less than 1% employee contribution) and the government match in TPS is significantly more generous (e.g., 5% versus 3% of salary, Table 1). Biggs compares federal and private sector retirement in Table 2; basically, social security plus TPS accounts for roughly a third of the employee's salary both in government and private sector systems; FERS accounts for another third--without a comparable private sector match. Biggs essentially argues that we need to phase out FERS for new federal employees, that we can do it without undermining comparable compensation with the private sector.
Most of the hearing I watched was very predictable: we hear populist grandstanding about the Congress' own pension plan, the Democrats bring up their cherry-picked studies preposterously suggesting that federal employees are underpaid by roughly a quarter (Biggs suggests that these are not peer-reviewed, an academic standard which, among other things, carefully reviews methodology). The problem is that the civil service system is pretty much a round peg/square hole system that has no essential connection to the dynamic labor supply/demand picture in the private sector, just like the absurd Medicare/Medicaid below-cost reimbursement schedule which bears little comparison to the real prices in the private sector. Some also note that the public sector fills comparable slots with less experienced, skilled personnel. (I'm not going to name names here, but I've worked with civil servants on a number of contracts, and if I take a first cut of about a dozen civil servants, there are only two that I would consider staffing for comparable positions in the private sector. Most I met were in over their head.)
I can already predict how this plays out. The Democrats will offer to expand the employee contribution to FERS in an effort to stave off more radical reforms, which are desperately needed. We are already running under an unsustainable budget deficit. The average civil servant retires in his or her late 50's and may be eligible for a FERS annuity supplement; given my constant criticism of state/local pension funding, Biggs argues that FERS funding is much worse. We need to act sooner than later to reform this system--before we are forced to do so in a manner similar to Greece.
Political Potpourri
It's been a mixed week for Romney: the Gallup tracking poll showed Romney drifting down to his early January share (which is not good when you consider 3 opponents have left the race), but Gingrich seems to have stalled in the low 30's. Two recent national polls have Gingrich with roughly an 8-point lead. On a more positive note, there's some evidence that Romney has found his footing on the offense in the debates against Gingrich; a number of prominent conservatives have started questioning Gingrich's conservatism; Gingrich continues to lose badly to Obama in paired runoffs; and after an initial Gingrich surge in Florida after his SC win, it looks like Romney has regained an 8 or 9 point lead.
So far Obama is benefiting from the Romney-Gingrich struggle. Romney has to bear some responsibility because he didn't seem to anticipate Gingrich's populist attacks against his wealth and involvement with Bain Capital, and the demand for his income tax records. Gingrich, of course, wasn't really interested in Romney's finances: exit polls show he was really making a class-based argument. I expect Romney is in the process of turning around his campaign.
Musical Interlude: My Favorite Groups
Queen, "We Will Rock You"/"We Are The Champions"
