Sunday, July 31, 2016

Letter-Writer Ronald A. Sobieraj ‘Suggested’ Road-Fix Scheme: Soak Everyone Else

New Jersey’s Transportation Trust Fund is running on empty. The trust fund pays for road maintenance mainly through sales taxes on transportation fuel like gasoline and diesel fuel. NJ politicians, namely Republican Governor Chris Christie and the Democrat controlled legislature, have been kicking around various tax-neutral plans that raise the gasoline tax in exchange for tax cuts elsewhere, such as reducing the state sales tax, eliminating the estate tax, or cutting retiree income taxes.

These plans have been going nowhere. As of this writing, no gasoline tax legislation has been passed. But one thing that almost all NJ politicians agree on is that roads should be funded through gas taxes. This seems fair, given that the burden of paying for the roads is roughly proportional to road use.

However, a recent letter by correspondent Ronald A. Sobieraj (Raise income tax and exemption) and published in the NJ Star-Ledger suggests otherwise. In the name of “fairness,” Sobieraj calls for roads to be “paid from the general funds and not from a dedicated tax. Roads and highways benefit everyone,” he rationalizes, “not just buyers of gasoline. Could today’s world exist without automobiles?”

First, let’s examine the idea that “everyone benefits.” That’s a common rationalization to justify  coercive government programs that force people to pay for goods or services that they do not choose to fund voluntarily, or in the way the government programs demand. We’re all told that we benefit from an educated society. But do we all benefit in the same way? No. I don’t benefit from tobacco products. So, why should I have to pay for the education of tobacco workers? There are all sorts of goods and services I don’t benefit from, yet am forced to pay for through my education taxes.

Now consider roads. We all benefit. Granted. But we benefit in different ways and contexts. An elderly person who doesn’t own a car, but instead gets around using taxi service or Uber, pays indirectly, through the service fees. The stores she shops in stock their shelves with goods delivered using roads. The transportation costs are included in the price she pays for the goods. So she pays indirectly, as and when she needs it. Why should she have to pay extra, through a general tax?

Which leads to Sobieraj’s suggestion for paying for the general funds—soak the rich. Yes, soak the rich. “I suggest the top income tax rate be raised and the standard income tax exemption also raised to exceed the federal amount,” he writes. Well! Let’s raise taxes, but only on the other guy. That’s original! Force the economically successful—which of course means “more successful than me”—to hand us free roads!

What can be less fair than forcing a small minority to subsidize the road use for the rest of us?

Sobieraj does make one good point: Raising the gas tax while lowering the general sales tax “would provide a subsidy to those who buy those expensive electric cars.” It’s true that gas taxes give electric car users a free ride (so to speak). Some have suggested switching to a mileage-based tax to compensate.

That aside, Sobieraj’s ideas for funding the government roads is just another immoral wealth redistribution scheme. In a fully free society, roads would be privately owned and maintained, and entrepreneurs would find ways to fairly charge users. Until that day, road user taxes, such as gasoline taxes, is among the fairest ways to fund the roads.

Related Reading:

How Would Government Be Funded in a Free Society?—Craig Biddle

Friday, July 29, 2016

A Real Long-Term Solution to New Jersey’s Public Pension Mess

New Jersey’s public sector pension fund is a disaster. Everyone knows it. It is grossly underfunded, thanks to years of politicians over-promising benefits, which way exceed private sector retirement plans. The Democrats’ solution is to tax the rich, which—even if revenue projections from such a tax panned out—would barely put a dent in the multi-billion dollar gap between benefits and revenue. The Republicans? I haven’t seen much of a solution from their side, either.

Yet, everyone agrees we need both a short-term and a long-term solution. Hence, Republican Governor Chris Christie's Pension and Benefit Study Commission. The commission’s proposed long-term solution was laid out by one of its members, Thomas Byrne, in a Times of Trenton guest column titled A bleak but avoidable future. After rejecting tax increases and saying “It is unrealistic to think that we can squeeze the needed pension payments out of the current State budget,” Byrne said:

That is why the pension commission proposed a constitutional guarantee of funding, which would supersede the recent court ruling.  However, the funding would come from changes going forward to both the state pension plan and to public employee health benefits.  The plan would fully fund the $40 billion hole in the pension funds.  Benefits going forward would be lower, but still as good or better than private sector levels. The Commission can't reverse 20 years of malfeasance, but we were able to identify savings to be recycled solely for the benefit of public workers.  We dealt with reality.

The “recent court ruling” referred to a lawsuit filed by the public sector unions and others to force the state to make promised payments into the retirement funds. The NJ Supreme Court rejected the lawsuit.

The question is, how will a constitutional amendment guarantee funding without tax increases or spending cuts? There are sharp benefit cuts, of course. But the whole purpose of “pension reform” is to honor pension promises already made.

All of that aside, I think the fundamental problem is being sidestepped.

I left these comments:

The fundamental problem is that the people collecting pension and health benefits are not the people responsible for funding. Basically, public sector unions can demand, demand, demand benefits. Vote-pandering politicians can grant, grant, grant benefits. Taxpayers are stuck with the long-term bill, the total amount of which they have no way of knowing. It’s totally corrupt.

The very first reform to be enacted should be to end this system. The long-term solution is to turn control of pension and health—from funding to benefits—over to the unions. This is not just a theoretical proposal. It’s completely practical. I know. I’m currently collecting a pension through such a system.

I am a retired member of a private sector plumbers local union. Our union membership, through an elected board of trustees, controls both the pension and health benefits funds (the board also includes employer representatives).

Here are the basics of how it works and has worked for decades.

Our union representatives negotiate periodic contractual agreements with union contractors’ representatives. The main wage feature is a total hourly package. The union membership then decides, by vote, on how much of the total package goes into the pension and health funds and other purposes. For example, the total contract package may be $50 per hour (less for apprentices, more for foremen, etc.). The membership may decide to allocate $8.00 to pension; $12.00 to health insurance; and $5.00 to other purposes. The rest—$25.00—goes into our pay checks.

We the union membership, through our trustees, are responsible for keeping contributions and benefits in line. The membership understands that simply demanding increased benefits is not enough. We must also be willing to provide appropriate funding. If contributions fall short—e.g., because of a bear market or over-promising of benefits—we the union membership can not simply go back to the contractors and demand they make up the shortfall, as public sector unions now demand of taxpayers. The total pay package is set by contract. We must decide either to cut our benefits or increase funding by reducing wages. You’d be amazed at how responsible people can be when they are actually responsible for their own financial affairs. All of the incentives tend toward responsible management of the funds.

Of course, what to do with non-union beneficiaries of the public funds (of which my wife is one), the current unfunded liability, and the already-promised benefits also have to be worked out. But one thing's certain: The current system of public workers demanding and politicians granting, leaving taxpayers on the long-term hook, is corrupt to its core. My understanding is that the Pension and Health Benefit Study Commission has proposed a constitutional amendment guaranteeing full funding of the funds. Far from being a fix, a constitutional amendment is nothing more than doubling down on the same system that got us into this crisis.

Political leaders should consider the private sector trade union system as a model for truly fundamental reform. It’s transparent. The contractors know up front what they must pay workers, and know that they will not be on the hook for benefit mismanagement. Taxpayers deserve the same transparency. Public sector unions shouldn’t continue to both have their cake and eat it.


Of course, public sector employee pay would have to be adjusted upward, so that the “total pay package” reflects the switch of responsibility for funding the pension away from the state to the unions. That and other related details would have to be worked out.

Much of what government now provides, like the public schools, should be phased out and abolished. This would greatly reduce the scale of the retirement problem as education returns to the free market private sector, where it belongs. But the government, even one reduced to its proper function of protecting individual rights, will need employees. Putting these employees in charge of their own retirement planning, rather than maintaining the current corrupt system should be the long-term goal. The private sector has largely moved to 401ks, 403bs, IRAs, and the like, in lieu of defined benefit pensions. It’s time the government did the same.

Related Reading:

NJ’s Pension Funding Crisis and Public Tax Hypocrisy

Wednesday, July 27, 2016

The ‘Clean Energy Revolutionaries’ March for Energy Poverty

On the eve of the 2016 Democrat National Convention, Dwaine Perry, New Jersey Star-Ledger Guest Columnist, and chief of the Ramapough Lunaape Nation wrote of how his group “will help to lead the ‘March for a Clean Energy Revolution,’ which calls for a ban on fracking and an end to dirty and dangerous fossil fuel extraction.”

During the article, Perry cited “the toxic legacy of industrial dumping” like the “Ford Motor Company’s “illegal dumping” of “thousands of tons of paint sludge and other toxic materials.” But he mainly railed about  a “global ecological crisis” which requires “systemic action, accountability and justice. We don’t see climate change as a warning,” he writes, “but more a ticking clock, and the time for action is late.”

The action he calls for is anti-energy. He calls his diatribe against live-giving fossil fuels “environmental justice.”

I left these comments:

Reliable, economical energy is the lifeblood of industrial progress and a good standard of living. Solar and wind are intermittent and dilute and cannot be scaled and produced on demand. They are not reliable or economical. So just what is the Ramapough Lunaape Nation doing to solve the intractable drawbacks of “clean energy” to make it a viable replacement for fossil fuels capable of competing on a free energy market? Or is this group simply looking to use the government’s guns to shut down vital fossil fuel development and use, and hope that someone else will somehow find the solutions?

The alleged “ecological crisis” is nothing compared to the human tragedy that will unfold if the anti-fossil fuel movement succeeds. Billions will suffer and die for lack of the energy human life depends on. And Perry has the nerve to conclude the article with “We want everyone to survive and to thrive into future generations.” Thankfully, ecology crusaders weren’t around to stop progress at the dawn of the Industrial Revolution. Those few of us that would be around today—the future generations of 250 years ago—would still be living short, dangerous, poverty-stricken Dark Age lives.

Energy driven, capitalist enabling industrial development has and continues to produce a safer, cleaner environment for people. Fossil fuels have been by far the leading energy source in taking a hostile, danger-filled natural state of nature and making it hospitable to human flourishing. Until something better is actually developed and demonstrated and proven in the market, it’s cruel and suicidal to hamper fossil fuel development. Never mind the “thousands of tons of paint sludge and other toxic materials were illegally dumped in our communities.” That’s a bait-and-switch tactic. Actual pollution can and should be addressed through technology and law. The issue is energy. Shutting down our progressive energy production in the name of stopping pollution would be the ultimate in “throwing out the baby with the bathwater”—like banning all medicines because they sometimes have negative side effects.

If “corporate greed” is how we label fossil fuel companies, then every one of their customers are equally greedy and guilty  of “environmental injustice.” Consumers are the users. How is this group of anti-fossil crusaders going to get to Philadelphia? Can’t drive down in cars. Can’t travel over safe, paved roads. Can’t even ride bicycles. Can’t stop along the way and enjoy a restaurant meal or pick up a bottle of clean water from a convenience store. All of those things require fossil fuels to operate and/or produce. Maybe these marchers will take a grueling days-long hike through dangerous forests to get to Philadelphia the way they would have had to do centuries ago. People choose fossil fuels because it makes their lives better. If fossil fuel producers are guilty, so are these users.

The Ramapough Lunaape Nation and their ilk claims to champion the environment. I champion human life and well-being. They worship raw, unaltered nature. I  worship nature transformed to human benefit. They advocate only “clean” energy. I advocate energy of whatever kind can gain consumer acceptance in a free market. They value raw “pristine” nature. I value industrial, technological, economic progress. They’re for energy poverty. I’m for energy abundance. They hate fossil fuels. I love fossil fuels. They are naturalists. I am a humanist.

It’s fitting that the Clean Energy Revolutionaries are marching against reliable energy during the Democrat National Convention. They’ll get a sympathetic ear. The Dems have been captured by radical environmentalist witch doctors who would sacrifice human energy needs to the climate gods. That’s why I’ll never vote Democrat, no matter how pathetic an alternative the GOP chooses for its nominee.

Related Reading:

Fossil Fuels and Climate Change: Remember Life Before Them

Monday, July 25, 2016

Is Trump an Alternative to Sanders?

A day after New Jersey Star-Ledger columnist Mark Di Ionno reported how Donald Trump’s and Bernie Sanders’ support springs from the same cultural roots (Sanders success sign of middle class revolt—see my last post), the Star-Ledger argued, after Sanders’ nomination chances died, that Trump cannot satisfy Sanders voters' need for change. In urging Sanders supporters not to switch to Trump, the Star-Ledger writes that Donald Trump:

wants to expand his base by adding millions of voters who believe in using government to solve real problems that affect us all.

And that has been at the heart of Bernie Sanders' appeal throughout the campaign. For nearly a year, he has built a movement based on bringing as many people as possible into the circle of opportunity, and only a strong, progressive government does that.

Only government can lead the fight to reform education and Wall Street, expand health care, save our infrastructure, and rebuild the middle class.

This is not the kind of stuff Trump is selling, which most Sanders supporters should have discerned by now.

So it's mind-boggling that 20 percent of Sanders primary voters say they will support Trump in the general election in a Washington Post poll.

Yes, Trump is a statist, just like Sanders. Nonetheless “anyone,” writes the Star-Ledger, “who believes that Trump serves under the same flag is in for a grim reality check.”

I left these comments:

I’m disgusted with Trump as the GOP nominee. He is an authoritarian. This he shares with Bernie Sanders.

But the similarities diverge there. As the Star-Ledger says, “anyone who believes that Trump serves under the same flag is in for a grim reality check.” True. Trump is infinitely less bad than Sanders. Under the classic statist guise of creating a government that “works for all of the people,” Sanders means to strip the people of the individual freedom to live by their own judgement in support of their own lives, goals, values, and happiness. He is a self-described socialist, the very philosophical premise of which is to repudiate individual sovereignty and liberty on principle in favor of corralling us all into a chain gang controlled by a whip from Washington.

The Sanders movement encompasses people who more resemble the clueless inhabitants of Animal Farm—who blindly followed the pig leader Napoleon into tyranny, destitution, and slavery—rather than morally, economically, and historically enlightened American voters. Leaving aside Sanders’ specific policy proposals, which are secondary, my full thoughts on Sanders are laid out here: China’s Recovery from Socialism vs. Bernie Sanders, The Most Evil Politician in America.

Related Reading:

Sanders’s Open Socialism Blows the Cover Off of the Left’s Stealth Socialism

Saturday, July 23, 2016

Do Sanders’ and Trump’s Electoral Success Signal a ‘Middle Class Revolt?’

In a recent New Jersey Star-Ledger article, Mark Di Ionno argued that the electoral success of Donald Trump and Bernie Sanders is a sign of middle class revolt. He writes:

Bernie Sanders and Donald Trump voters are like first cousins in an estranged family. They say they don't like each other, but they share the same DNA.

Anger. Frustration. The sense that the American dream, or the America they dreamed of, is slipping away.

The seeds were flung with the scattered formation of the tea party in 2009, followed by Occupy Wall Street. Different political views, yes, but same viewpoint:That America was no longer a place by the people and for the people. That it favors politicians and their corporate/special interests financers, and chews up and spits out the little guy. [sic]

When campaign workers at both Sanders and Trump headquarters described their demographic yesterday, they sounded identical.

"We have teachers, police, firemen, union guys. They all say the middle class is falling apart."[sic]

"Trump and Bernie supporters come from the same line of frustration," said [NJ state Assemblyman John Wisniewski. "They see bankers engaging in reckless behavior and destroying the economy, and never punished. They see a culture of political corruption."

There may be some truth to this line of analysis. But the question is, is this really a middle class revolt? What, exactly is the middle class? What are its roots? One of the biggest beefs, referenced several times in the article, is the issue of “good-paying manufacturing jobs going overseas.” What do these Sanders/Trump supporters demand? That it be stopped, freezing the status quo? Did stagnation build the middle class? Is ‘middle class’ synonymous with an entitlement mentality and government favoritism?

I left these comments:

How did we get to the point where the American Dream is threatened and diminished by a system that “favors politicians and their corporate/special interests financers, and chews up and spits out the little guy?” [sic]. In short, the mixed economy, regulatory welfare state—now at its vastest, most intrusive size ever.

Politics is the realm of government force. Economics is the realm of voluntary cooperation and exchange. Politics and economics should not mix, for the same reasons politics and religion should not mix. When they do, what do you get? In religion, you lose religious freedom and the opportunity to live by your own conscience, religious or non-religious. Likewise, when government force into the economy grows, voluntarism diminishes, along with freedom and its corollary—economic opportunity. And then you get a politically corrupted economy whereby the government becomes the tool of politicians and special interests—not just financiers—competing to forcibly impose their agendas by law; i.e., to “rig the system” in their favor at others’ expense. That’s how we got the 2008-09 financial crisis and Great Recession; the result of politicians, allying with a handful of mortgage lenders and eventually coercing the rest, employing the vast accumulated regulatory apparatus of the state to push “affordable housing” policies on the economy in the 1990s and 2000s, leading to a Perfect Storm of government intervention that triggered a monumental housing bubble, bust, and ultimately economic collapse.

The favoritism increases in proportion to government’s power over the people’s economic affairs. Make no mistake. The favoritism starts with government controls, not “corporate/special interests financiers.” The dollar is no match for a bullet. Without the government’s corrupting regulatory and tax powers, there could be no “rigging” of the economy by any private economic faction, be it the environmental, labor, business, or whatever lobby, and no incentive to do so. A private company can set its own $15 minimum wage, but it cannot outlaw all sub-$15 jobs by imposing it across the entire economy. Only government can do that. Likewise, a private financier can bail out any incompetent bank or auto company with his own money if he chooses, but he cannot force taxpayers to help fund it. Only government can do that. The same goes for all economic controls and favors.

Yet what do these alleged middle class rebels gravitate towards? Do they demand more economic freedom and less government control, the only kinds of reforms that can protect “the little guy?” No. They gravitate toward two authoritarians whose idea of “help” consists of continuing to expand the very regulatory powers that incentivize, enable, and feed the growth of cronyism and political corruption of the economy—one a self-described “democratic socialist” who would increase “public control of the means of production”—more government control over the economy—by stripping the individuals that comprise “the public” of the economic freedom to produce and trade for his own benefit; the other a nationalistic pragmatist who would subordinate the individual’s economic control to his shifting whims and deal-making skills.

The true middle class is marked by enlightened self-interest, self-reliance, respect for achievement, respect for the rights of others, and a self-sufficient attitude that doesn’t seek handouts or favors, but instead exploits the freedom to work and rise by voluntary trade with others. A true middle classer does not expect the entire economy to stagnate for his benefit. A true middle classer, for example, would recognize that a company has as much right to fire a worker as a worker has to quit a job; that a company has a much right to hire the workers of its choice as a job-seeker has to accept the best job offer he can find; that just as the worker is not a slave of a company, the company’s owners are not slaves of their workers; that each has the moral right to pursue their own economic self-interest, whether their interests align or diverge—and that any attempt to politically infringe another’s economic freedom for short-term gain eventually hurts us all.

I sympathize with the “Anger [and] Frustration” of the revolt, such as it is. I sympathize with “The sense that the American dream, or the America they dreamed of, is slipping away.” But not with the revolt’s misidentification of the causes or solutions. There are government policies that drive investment and jobs outside our borders for other than sound economic reasons. But the policies—e.g. the corporate income tax—not the global economy, is the problem. Xenophobia on trade is not the solution.

These pseudo-middle class rebels more resemble the clueless inhabitants of Animal Farm than the enlightened middle class rebellion we really need. If Trump and Sanders are the extent of the rebellion the middle class can muster, the American Dream—which is really nothing more than the political and economic freedom to pursue your dreams without any coercive human impediments—is in deeper trouble than anyone imagined.

Related Reading:

Trump’s Antitrust, Tax Attack on Bezos Still Not Enough Reason to ‘Dump Trump’

Thursday, July 21, 2016

Anti-Fossil Fuel Group ‘Food & Water Watch’ Would Restrict Energy Needed to Produce Plentiful Food and Clean Water

A letter appeared in the New Jersey Star-Ledger claiming that Fracking has been greenwashed as climate-friendly:

In a recent editorial, The Star-Ledger called green groups' opposition to fracking a "travesty" [Fracking, a help in the climate fight, deserves respect from greens. See my posts on this editorial here, here, and here.] The real travesty is how fracking has been greenwashed by the industry and the Obama administration as climate-friendly.

Pipelines and oil trains are crisscrossing the region to rush fracked oil and gas to LNG export terminals and refineries, which pose an immediate threat to drinking water, air quality and public health and safety.

We must reduce both carbon dioxide and methane [a byproduct of natural gas] to address climate change. We must stop the oil trains and pipelines. This means we must stop extreme fossil fuel extraction (which includes fracked gas and oil) and move decisively to true, green energy.

This letter was submitted by Jim Walsh, the New Jersey-based Mid-Atlantic Region Director at a group calling itself, interestingly, Food & Water Watch.

I left these comments:

The author of the letter accusing the Star-Ledger, the industry, and the Obama Administration of “greenwashing” fracking identifies himself as “Jim Walsh, the New Jersey-based Mid-Atlantic Region Director at Food & Water Watch.”

But exactly what food and water does this organization watch? Water doesn’t just come out of our taps automatically from nature. Nor does enough food to feed 7 billion people just happen in nature. Walsh apparently wants us to believe that water and food are just there in nature, and fracking destroys it. But, if Food and Water Watch actually had their eyes open, they’d recognize that the opposite is true. Both adequate clean water and plentiful, nutritious food require massive amounts of reliable fossil fuel energy to produce and deliver, and fracking is the most important energy advance contributing to that flow of water and food producing energy in a long time.

Yet climate witch doctors are trying to take away this vital energy, in the quasi-religious hope that someone, somehow will figure out a way to make “true, green energy” replace it. But nowhere on Earth has “green” energy—solar or wind—proven capable of serving as a primary, dependable energy source. Why is India turning massively to fossil fuels to bring clean water to the 40% of its people that don’t yet have it? Because no fossil fuels, no clean water. Why is our air cleaner than where people from unindustrialized, non-fossil fuel-using regions must rely on dirty, open wood-, coal-, and dung-burning indoor fires for cooking and heating? Because of central fossil-fueled power plants, equipped with modern anti-pollution technologies. Why do we live longer, healthier lives than ever before? Why are we safer than ever from climate-related extreme weather dangers? Fossil fuels.

Anti-fossil activists are not interested in making “green” energy capable of replacing the economical, reliable, industrial-scale energy now provided mainly by fossil fuels. Observe that no one proposes to stop “green energy” from competing in the market. Observe that the Greens want to use government force to shut down our life-giving, proven energy in the hope that “true, green energy” will miraculously do what it hasn’t yet been proven capable of doing—provide economical, reliable, industrial-scale energy. What will happen when we “stop extreme fossil fuel extraction (which includes fracked gas and oil)” and our lights go out, our water stops running, our food becomes increasingly scarce, our heat doesn’t work, our hospitals and schools and factories shut down, and our way of life grinds to a halt, because “green” energy isn’t ready?

There certainly is an “immediate threat to drinking water, air quality and public health and safety”—the energy enemies, armed with unsubstantiated climate alarmism and blind faith in green alternatives. Fracking may not be green, by Walsh’s standards. But neither is “green” energy—far from it. And fracking is great for human life. As long as Walsh, pop-up activist groups like “Food and Water Watch,” and their ilk maintain their war on fossil fuels and other reliable energy sources like nuclear and hydro, the one motive they have no moral right to claim is concern for human well-being.

Related Reading:

Fossil Fuels and Climate Change: Remember Life Before Them

Tuesday, July 19, 2016

The Missing Ingredient in the Debate Over the Constitutional 'Fix' for NJ's Pension 'Crisis'

In November, New Jersey voters will choose whether to amend the state constitution to require the state to fully fund the state pension system, which is now deeply in the hole. The amendment would require the state to make fixed annual payments to the pension, come hell or high water.

Mark J. Magyar, the policy director for the New Jersey Senate Democratic Office and former adviser to Republican Gov. [Christie] Whitman and the independent Daggett for Governor campaign, argued in a New Jersey Star-Ledger guest column in favor of the amendment.

Some have come out strongly against it. While Magyar clings to the classic magic Leftist fix for all of society’s problems, taxing millionaires and business corporations to fund the pension payments, others strongly disagree:

The governor and his pension commission leaders — Tom Healey, a former assistant U.S. Treasury secretary under President Reagan, and Tom Byrne, the State Investment Council chair and former Democratic Party leader — argue vociferously that making the pension payments would require massive [sales and income] tax increases on all New Jerseyans and draconian cuts to school aid and other government services.

The problem is, neither side wants to alter the basic structure of public sector union benefits. I left these comments, somewhat edited for clarity:

The constitutional 'fix' for the pension 'crisis' misses the fundamental problem—the disconnect between funding and beneficiary. Under the current setup, politicians can and do over-promise benefits to public sector employees while kicking the issue of how to pay for it down the road to future governors and legislators. The result is “crisis.” The loser is the general taxpayer.

This disconnect is inherently corrupt. The best reform long-term is to have the beneficiaries pay for their own benefits. This can be done in one of two ways; either convert to a defined contribution plan, or turn the retirement funds over to the unions to manage.  

The later way would involve setting a contractually fixed “total compensation package” for public union employees, and then let the employees, through their unions, set their own benefit schedule and then divide their total pay package between benefits and pocket salary accordingly. That’s the way it works for private sector trade unions. I am a retired member of a private sector plumbers local union. Our union membership, through an elected board of trustees—and working within the confines of a total pay package fixed by periodic contractual agreements negotiated with union contractors’ representatives—controls both the pension and health benefits funds. (The board includes employer representatives.)

We the union membership, through our trustees, are responsible for keeping contributions and benefits in line. The membership understands that simply demanding increased benefits is not enough. We must also be willing to provide appropriate funding. If the funds become underfunded—e.g., because of a bear market in stocks—we the union membership can not simply go back to the contractors and demand they make up the shortfall, as public sector unions now demand of taxpayers. The total pay package is set by contract. We must decide either to cut our benefits or increase funding by reducing our wages. You’d be amazed at how responsible people can be when they are actually responsible for their own financial affairs. All of the incentives tend toward responsible management of the funds.

Turning the retirement funds over the public sector unions would leave a much smaller state fund for non-union employees (of which my wife is one, now retired), which can then be frozen and replaced with a defined contribution plan. The upshot would be that the public sector unions would no longer be able to conspire with political allies to boost benefits with no regard for funding. Taxpayers would know exactly what their government employees are costing them. End of crisis. End of perpetual political brawls.

Magyar’s article is titled The truth about N.J.'s pension crisis and how to fix it. But the real truth about NJ’s pension crisis is that if we don’t fix the fundamental problem, a constitutional amendment would only make it worse. Fix the fundamental problem, and we can leave the constitution out of it, as we should. As for the current underfunding “crisis,” if taxes must be raised to pay for the unfunded promised benefits, the tax burden should be spread proportionally among all taxpayers, rather than unfairly dumping the burden on a small minority whose only crime is economic success.

Related Reading:

NJ’s Pension Funding Crisis and Public Tax Hypocrisy