Recently, candidates for office in Iowa have been asked to promise future Iowa public employees that they will make no changes to the Iowa Public Employment Retirement System (IPERS) retirement plan. Instead, politicians need to state clearly that they make no promises to future employees about their retirement benefits. The fact that IPERS is currently underfunded by about $7 billion shows clearly that we already have over-promised benefits when compared to what we expected taxpayers and public employees to pay.
(When government has a defined benefit plan, the participants seem to think that any over-funding is their asset, but any under-funding is a liability of the taxpayers. In the past, when IPERS was over-funded, benefits were increased!)
The way to make sure that we don’t make retirement benefit promises that turn out to be more expensive than we expect to pay is to put new government employees on a defined contribution retirement plan – just like most employees in the private sector. This will cause the unfunded liability to come due over the next 50+ years, but at least it won’t get worse.
The three biggest drivers of our current and future federal spending deficits are Medicare, Medicaid, and Social Security. All three programs are increasing faster than their revenues, and are not sustainable in their current form. Presidential candidate Chris Christy just announced his idea to help sustain our Social Security program. I think he has a good idea. As a libertarian, I could easily argue that it is not a proper role of government to force people to pay into a system such as Social Security. But it is true that Social Security has kept, and continues to keep, many senior citizens our of poverty. He proposes to phase out payment of benefits for seniors starting with those who have incomes greater than $80,000 per year, and completely ending payments to those with annual incomes greater than $200,000. Additionally, he proposes for increase the normal retirement benefit from age 67 to age 69 for young people who are far away from retirement. Those young people are expected to be healthier and live longer that previous generations. They will still get retirement benefits for 15 to 25 years or more. If they are unable to work, they will have disability benefits. This proposal is better than increasing taxes. This will change the system to one based on need, rather than one based on what a person has paid in. Who has a better suggestion?