Changing the Dialog in 2012

Blame it on e-mail, texting, Twitter. Say it is because we are too rushed, overloaded with information, doing more and more with less and less. Or an over-reliance on cut and paste. Whatever the cause – if there is just one – we’ve become a nation of lazy writers and speakers, readers and listeners. Which means we repeat the same phrases we read/heard somewhere else and do not even stop to consider whether or not they are accurate.

Differing Opinions on Whether State Pension Problems are a “Big Deal” – but Why Refuse to Engage?

On September 2, 2011, Josh Rauh of Northwestern University posted a blog entitled “Are State Pension Problems a ‘Big Deal’?” He states this question was asked by a colleague given that pension contributions account for 3.8% of state and local spending.

Addressing Media Misconceptions about Public-Sector Pensions and Bankruptcy

Given last week’s release of a new study by Joshua Rauh and Robert Novy-Marx and how several media outlets are promoting the assertions without providing context that their work is grounded in economic theory versus public finance, it seems appropriate to reprint this February 2011 article from Government Finance Review by Ronald D. Picur and Lance J. Weiss:

“Everyone who pays attention to the news has noticed the drumbeat of reports urgently warning that the public pension system is perched on the brink of disaster and that it will soon collapse, bringing a number of state and local governments down with it. These stories are based on questionable research from self-proclaimed experts in public finance, and their predictions have created misconceptions about the health and future of the public-sector pension system.”

When PIIGS Fly: Do we Need to Act?

From dire assumptions being widely promulgated as absolutes to a CNBC anchor saying how some “liken the distress in Greece to the distress we have seen in states,” there’s continued heightened rhetoric regarding municipal finances. The Spring 2011 issue of The Lord Abbett Review focused on this very topic — and whether federal bankruptcy laws should be amended with a new chapter that would provide states with the ability to declare bankruptcy, which they cannot currently do.  The answer, according to the author, is no.

Another Round of Rauh & Novy-Marx Questionable Projections

Robert Novy-Marx and Joshua Rauh – whose analysis last year contained flawed methods reflecting an inaccurate understanding of public sector finance and operations– released a new paper that makes more dramatic projections about the condition of public retirement systems and their effects on state taxes. The paper, The Revenue Demands of Public Employee Pension Promises, uses underlying assumptions that understate revenues, inflate costs, and ignore other available public policy options. As a result, the paper’s conclusions bear little resemblance to the actual practices of most state and local governments, or their pension plans, and again have limited application for policymakers wishing to address the financial impacts of the Great Recession.