Wyoming Liberty Group
Medicare and Medicaid are the two largest government-run health insurance programs in the United States, and arguably the world. Combined, they cover an estimated 120 million Americans and spend a quarter of the federal government’s budget. And without major reforms, these entitlements threaten to bankrupt taxpayers and hang patients out to dry.
Imagine living in a place where anyone can have anything they want by just wishing for it. If one wants a house, one imagines a house—and poof—it appears. But scarcity is the basis for an economic system, thus in a place with no scarcity, people have no needs. In a place where people have what looks like every material need by just wishing for it, they have no need to work, no need to cooperate with other people, and as a result, being naturally quarrelsome, people tend to live farther and farther apart.
Government pension plans promise to pay current and future retirees a benefit based on a defined formula. To make good on its promise, government contributes tax dollars to a pension fund and invests them to generate income. But what happens when contributions and investment returns fall short? Will government raise taxes, cut spending, or reduce the promised defined benefit to retirees when the pension bill comes due?
Few people understand how the state pension system works but objections to reform are legion. Even though the type of pension benefit state employees receive has virtually disappeared in the private sector, many politicians, bureaucrats and state pension managers seem to think the government sector is different, making reform unnecessary. However, government sector pension plans suffer from the same fundamental flaws as those now mostly purged from the private sector. For that reason, we must overcome these objections and start serious reform in the government sector.
- Pension contributions to rise.
- Taxpayers now contribute $6.71 for every $1 contributed by bureaucrats.
- Taxpayers soon to be gouged at $7.08:1 before improvement to $6.21:1.
Wyoming’s last legislative session saw movement in the direction of more government sector pension reform, and not a moment too soon. With only 77.62 cents per dollar promised available to pay retired state workers should financial disaster strike, Wyoming’s legislators recognize that the state’s pension plan contributions must rise. Fortunately, legislators also recognize that government workers themselves must contribute more to their own retirement. Problems inherent to the government sector pension plans are augmented when employees contribute little or nothing to their own retirement. Taxpayer contribution equity is the first step towards a pension system fair to both retirees and taxpayers.