When you rely on the government

Thank goodness for the safety and security of government sponsored defined benefit plans and Social Security.  For the past 60 years Americans have been told by Democrats that only these programs can truly be counted on for genuine retirement security.  And millions of teachers, firefighters, policemen and other government employees have been all too eager to "leave the driving to us" when it came to retirement planning.  In the Democrat World, individuals could never actually "invest" any of their Social Security contributions in something as risky as the stock market because unlike Social Security, it's not guaranteed. 

Well, that appeared to be the case until President Obama called the upcoming August checks into question.  He put it this way to CBS News:

"I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it...."

This new twist on safety is also being felt in the small city of Central Falls, R.I., which appears headed for default.  The New York Times reports that pensioners there could be left high and dry.

The impoverished city, operating under a receiver for a year, has promised $80 million worth of retirement benefits to 214 police officers and firefighters, far more than it can afford. Those workers' pension fund will probably run out of money in October, giving Central Falls the distinction of becoming the second municipality in the United States to exhaust its pension fund, after Prichard, Ala.

Police and firefighters in Central Falls sure wish that Wisconsin's Scott Walker had been their governor years ago and applied some controls over collective bargaining.

Daniel L. Beardsley Jr., executive director of the Rhode Island League of Cities and Towns, said it was not the city's idea. Other states limit what can be decided in collective bargaining, but Rhode Island's law says that for police and firefighters, "wages, hours and any and all terms or conditions of employment" are subject to negotiation.

"That means even the length of a mustache," said Mr. Beardsley, who over many years has represented Central Falls and other municipalities in contract negotiations. Talks broke down more often than not, he said, and then the same state law called for binding arbitration, which for many years was a clubby process that emphasized comparable benefits all across the state more than any city's ability to pay.

"It was a domino effect," he said, leaving Rhode Island with the nation's highest per capita spending for fire services and sixth-highest for policing. (The binding arbitration law does not apply to public workers other than police officers and firefighters in the state, although some want it extended to teachers.)

So, whether its Social Security or government sponsored defined benefit plans, politicians are being shown to be poor businessmen.  For years, politicians have told Americans that they need not worry, that their Social Security contributions were being put into a "lock box."  Now AARP members are awaking to the "IOU" in the lock box from Uncle Sam.  In fact, the only security eligible for the lock box is a special treasury note. 

Imagine if a publicly traded company handled its retirement plan in such a manner -- having to borrow to make payments or only owning its own stock.  Management would be imprisoned.  Now, imagine that the Social Security box could actually hold dividend paying stocks of some our nation's largest companies, such as McDonalds, AT&T, Altria or Johnson and Johnson.  During the crash of 2008 the value of those stocks would have plummeted.  But the stream of dividend income would have been uninterrupted.  That income could have become monthly checks.  Not only that, but the stocks themselves have rebounded in value quite nicely.  Wouldn't every retiree feel more comfortable knowing that his social security check was the combination of earnings unrelated to the government (dividends) and contributions?

So who do you love?  Or trust.

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