I never get to read as much as I like during the quarter, but over spring break I started reading WFB son and satirist Christopher Buckley‘s novel Boomsday, a fun read about a PR executive who leads a national campaign of public discontent (eerily similar to tea parties, now that I think about it) in the face of the mounting burden on society to pay for entitlements like social security to baby boomers, now retiring en masse. Fictional economists in the book coined the term “Boomsday” to mean the day that baby boomer retirement benefits really start to the hit the public coffers, threatening the national economy. The joke here is that the PR executive uses her blog to gain traction for a government incentive to give benefits to the families of senior citizens who agree to off themselves, rather than get old and collect social security on everyone else’s dime.
Ridiculous, of course, but it was one example of concerns about the burden of entitlement programs hitting the mainstream. I like to keep Fiat Lux as related to Stanford and its students as I can, but entitlements are still a big issue because it’s us students who are on the hook to pay for them, and there’s no guarantee they won’t be exhausted from poor planning by the time we’d collect them ourselves.
The concerns are timely, too. Pension reform is an issue that I’ve really gotten into over the past year, including taking a directed reading on it right now. Just a few weeks ago, five Stanford students in the Public Policy Program’s graduate practicum made the news by taking the side of financial economists over public pension actuaries in a long-standing debate about how to evaluate public pension liabilities for governments. When applying risk-free discount rates like financial economists want, since pension obligations are essentially riskless, the students wrote in a Stanford Institute for Economic Policy Research (SIEPR) policy brief that California is on the hook for $425.2 billion – nearly half a trillion dollars – in pension liabilities. Before the Stanford brief, California’s retirement liabilities were expected to be big – $100 billion, according to a July 2009 report by the non-partisan Legislative Analyst’s Office – and even that would start crowding out funding for essential programs like higher education and roads, but no where close to half a trillion. The Stanford students even responded to direct criticism from the California Public Employees Retirement System (CalPERS), the state’s major public employee retirement fund, who attacked their methodology.
With these entitlement obligations looming into the future, I found the embedded Saturday Night Live clip above telling. All of a sudden, it’s now okay to taunt public employees for the work they do – and the benefits they receive. If that attitude persists, it’s unlikely that taxpayers will continue to agree to pay for public employee benefits as they stand. And that’s one key to solving entitlement obligations before Boomsday.