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Wisconsin Wit

Sunday, March 20, 2011

Moral Hazard: When Those Who Govern Become Those Who Prey

Last week I was discussing the Wisconsin political situation with a friend. I said: " There is a problem with pensions it seems." He replied: "Maybe, but not in Wisconsin."

He was right.

Wisconsin public employees have had a defined benefit pension system that has been the top of the nation...in fact, years ago, when I was in the brokerage business, my fellow brokers watched closely to each and every purchase decision the Wisconsin pension system made...why? because they were the best in the nation and everybody knew it.

The amount of accrual that is necessary for a defined benefit plan is substantial....and Wisconsin has a fully funded plan....the amount of accural for a defined contribution plan would be very,very much less, and there is a moral hazard for states to STEAL the difference from public employees and make the change in pension plans to do so...That is moral hazard indeed.

1 comment:

  1. Anonymous8:41 AM

    And you can bet that the so called "study" in the guv's budget proposal to evaluated defined contrabution vs. benefit will most assuredly come out in favor of contribution--for the very reason you raise--despite our system being very healthy. And, precisely because most of the R's governing this state have no morals.

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