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Joshua Rauh, Northwestern Kellogg School of Management professor, on pension problems many states are facing due to their looming budget issues, and w...
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Well it's no secret that pension costs are ticking time bomb for state balance sheet.
It's just a matter of timing for the money runs out some of these states while they're taking some steps to -- subprime problems but.
Progress has been real slow joining me now -- -- pension expert -- trial he's a professor.
With the Kellogg school about management jobs welcome back to the show you know a year ago this was one of the hottest topics in the country.
Everyone was afraid -- felt like we were right at -- doomsday.
And no one talked about it anymore it seems like we're more concerned about race isn't a mistake has this problem faded away.
Well I had the problem may be the salience of the problem is a little bit less.
Apparent right now tax revenues are up a little bit in states local governments -- -- patch things together a little bit but over the long run in the situation has not changed at all.
There's still are several stable governments that are on path to run out of assets by 2018 -- -- nineteen.
And nothing fundamental has changed some very small changes have been made in.
Certain states only couple examples of really courageous action this year I would say New Jersey and Rhode Island belong among that the people who deserve honorable mention.
You know it's interesting you mention courageous action because we some people thought we -- -- action in Ohio.
And yet that the public voted down the -- a move that the governor tried to put in there.
Isn't possible.
-- to get to -- -- -- with collective bargaining and if in the states don't go along with this -- -- you -- commences individuals in the states.
-- -- -- think is the major in Ohio mix together the proposal be abolition of collective bargaining.
We that fundamental pension reform.
And it seems that voters are not ready for got to about to go to abolish collective bargaining -- and Ohio.
Where is they are actually according to polls rate of Oprah pension reform so if the -- reform had been.
There separately on the ballot I think -- -- -- -- a national poll say that 69%.
Of Americans are supportive of putting new public employees new hires on to defined contribution plans is that defined benefit plans that they would have the same retirement plans that the rest of us have so I think that the public is ready for pension reform but I -- I think that probably approaching it by a if combining it we've.
Attacking collective bargaining adjustment may actually be too blunt an instrument may we need to go in more surgically and -- actually just put measures to the public they're really just about pensions -- I do think the public is commit to something -- to change Jack -- I don't disagree with you the American public believes that things need to change but the public sector and those who work and it.
Aren't so convince in this as part of the conflict and attention that prevents change from happening.
So how only -- this issue -- part where do we start how we tackle it.
On in there a lot of places for -- to jump.
And -- Well the public sector and the people who represented.
Public sector -- a hold people represented are not.
Totally overlapping they're not exactly the same the people who are representing -- the folks who are may be at retirement -- on the verge of retiring.
They would just like to duct tape the system together for another ten or fifteen years sitting at their money -- the system.
If you actually explain to a 35 year old teacher how this works and in some places these teachers are not in Social Security okay you're not -- his Social Security you're only paying into the black hole defined benefit pension system -- not gonna get anything unless there is reform.
Yeah most people most people understand angle along with such I think anything more of -- voice and more proactive voice.
From public sector workers who are you know who are in the middle of their careers.
And in the game of trying to convince them you know make sure everybody understands what's going on.
We need to be speaking -- to to those people -- and in addition I would say that you know there still are terrible problems with -- These pensions -- how much they cost of people have a general sense yet may be there under measured.
But they are dramatically under measured and every day that we continue under the current system a flawed.
Government accounting the state government accounting that is certified by the government -- standards board but that he's in violation of all principles of financial economics we're just growing the debt more more -- is just off balance sheet borrowing in disguise.
Just the parallels to Europe are frightening here and the big thing is our markets selling off in part because.
Very few people believe the European leaders have a clue on how to fix their problem.
So ultimately that's the case in -- well how does it play out the would have they don't address his problem.
Well it looks like we just lost just I'd --
