Fagan, one of the villains in that wonderful musical, “Oliver,” facing discovery and punishment, decides to flee in a song titled, “Reviewing the Situation.”
His counterparts in today’s world are the politicians who created the pension systems that now threaten to hoist them on those petards.
The fact is that democratic governments around the globe have made promises to their people that they cannot afford to keep. Some variation of default now seems inevitable.
Greece is the screaming example in Europe. But many states in the United States have also saddled themselves with pension systems that promise six-figure incomes for life to men and women who retired in their 50s — and provide health insurance to boot.
It will be necessary for democracies to review the situation. Sour-minded critics long ago predicted that democracy would fail as a system because it gave the people the power to vote themselves riches. That unflattering assessment of human nature is now being tested.
Pension systems invite lawmakers to procrastinate: benefits voted today don’t have to be provided until the beneficiaries retire years later. It is easy, therefore, to underfund the trust funds by greatly overestimating how much the funds will earn on investments and underestimating how long retirees will live.
By the time these mistakes become obvious, it is too late to avoid a funding crisis.
Those crises abound today, here and abroad. Some of them can be met only by a partial default — by breaking the promises made and scaling back the benefits delivered to an affordable level. In Greece, the people will get far less than they expected. The defaults will vary in degree from country to country, from state to state and city to city.
The end result must be a higher level of responsibility by democratic governments. The other alternative is too grim to contemplate.
— Emerson Lynn, jr.
