Commentary: Facing a pension crisis
WASHINGTON -- A puzzle from Philosophy 101: If a tree falls in a forest and no one hears it, does it make a sound? A puzzle from the prairie: If an earthquake occurs in Illinois and no one notices, is it really a seismic event?
Gov. Pat Quinn called it a "political earthquake" when the state's Legislature recently voted -- by margins of 92-17 in the House and 48-6 in the Senate -- to reform pensions for state employees. There is now a cap on the amount of earnings that can be used as the basis for calculating benefits. In some states, employees game the system by "spiking" their last year's earnings by accumulating vast amounts of overtime pay.
An even more important change -- a harbinger of America's future -- is that most new Illinois state government employees must work until age 67 in order to be eligible for full retirement benefits. Those already on the state payroll can still retire at 55 with full benefits.
The 1935 Social Security Act established 65 as the age of eligibility for payouts. But welfare state politics quickly becomes a bidding war, enriching the menu of benefits, so in 1956 Congress entitled women to collect benefits at 62, extending the entitlement to men in 1961. Today, nearly half of Social Security recipients choose to begin getting benefits at 62. This is a grotesque perversion of a program that was never intended to subsidize retirees for a third to a half of their adult lives.
It also reflects the decadent dependence that the welfare state encourages: Because of the displacement of responsibility from the individual to government, 48 percent of workers over 55 have total savings and investments of less than $50,000.
Because most states' pension plans compute their present values -- and minimize required current contributions -- by assuming an unrealistic 8 percent annual return on investments, the cumulative funding gap of state pensions already may be $3 trillion, and certainly is rising. For example, last Wednesday's New York Times contained this attention-seizing bulletin: "An independent analysis of California's three big pension funds has found a hidden shortfall of more than half a trillion dollars, several times the amount reported by the funds and more than six times the value of the state's outstanding bonds." It is not news that California is America's home-grown Greece, but the condition of the three funds, which serve 2.6 million current and retired public employees, is going to exacerbate the state's decline by requiring significantly higher taxpayer contributions.
A recent debate on "Fox News Sunday" illustrated the differences between the few politicians who are, and the many who are not, willing to face facts. Marco Rubio, the former speaker of Florida's House of Representatives who is challenging Gov. Charles Crist for the Republican U.S. Senate nomination, made news by stating the obvious.
Asked how the nation might address the projected $17.5 trillion in unfunded Social Security liabilities, Rubio said we should consider two changes for people 10 or more years from retirement. One would raise the retirement age. The other would alter the calculation of benefits: Indexing them to inflation rather than wage increases would substantially reduce the system's unfunded liabilities.
Neither idea startles any serious person. But Crist, with the reflex of the unreflective, rejected both and said he would fix Social Security by eliminating "waste" and "fraud," of which there is little. The system's problems are the result not of incompetent administration but of improvident promises made by Congress.
Synthetic indignation being the first refuge of political featherweights, Crist's campaign announced that he believes Rubio's suggestions are "cruel, unusual and unfair to seniors living on a fixed income." They are indeed unusual, because flinching from the facts of the coming entitlements crisis is the default position of all but a responsible few, such as Wisconsin's Rep. Paul Ryan, who has endorsed Rubio. What is ultimately cruel is Crist's unserious pretense that America faces only palatable choices, and that improvident promises can be fully funded with money currently lost to waste and fraud.
By the time the baby boomers have retired in 2030, the median age of the American population will be close to that of today's population of Florida, the retirees' haven that is Heaven's antechamber. The 38-year-old Rubio's responsible answer to a serious question gives the nation a glimpse of a rarity -- a brave approach to the welfare state's inevitable politics of gerontocracy.
George Will's e-mail address is email@example.com.