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Candidates' debate
Substance over style
Financial reform must-haves
How 'little guys' are being robbed
Unemployment falls as 652,000 give up
Ban financial derivatives
Debunking the federal pension myth
Cost of inflation-free bank bailout
Answers to questions: HERE

August 2010:
..Cut payroll taxes
..No bailouts: transfer, adjust
..Let home prices fall
..Japan's 1900s deflation

July 2010:
..AZ Immigration law
..70 years of tax & spend
..Cut the payroll tax!

May & June 2010:
..Inflation-free bailout?
..Ross Perot's lesson
..Looming tragedy
..Costly IRS mandate

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Debunking a federal pension myth: It's not a self-sustaining program funded only by members

It was argued to me that federal government pensions are paid by payroll deductions made throughout the employees' careers. While that statement in and of itself is true, it is not the complete truth, and it is not the whole truth, and it does not tell the full story. The full truth is the story of private sector employees subsidizing a benefit that 82% of private sector employees do not receive themselves. 

Current federal government employees contribute 1.3% of their payroll into their pension plan. (Note that I used the word "plan" as opposed to "fund," a detail I will explain in a bit). For reference, Social Security taxes are 12.4%. How do you account for pension contributions being only 1/10th of what SS contributions are, given that average pension benefits exceed average SS benefits? 

The answer is that private sector employees help to pay for public sector employees' retirement benefits. Does the phrase "unfunded liability" ring a bell? There are two types of pensions: 

FUNDED: There is an actual fund/pool of money invested -- an actual lump sum, nest egg of principal that will draw interest and pay benefits. This is the type of pension plan used by the few private businesses that still offer pensions. 

UNFUNDED: This is the plan used by the federal government, most state governments, and Social Security itself. There is no nest egg; there is no lump sum pile of cash. Payments are made from current tax revenues and member contributions. 

The gross underfunding/under contributing of federal government employees is what helps to account for the fact that the average federal government employee makes 59% more in wages alone than the average private sector employ, and a whopping 108% more in combined wages and benefits than the average private sector employee.