Pensions

Pensions

Research

Jeremy Horpedahl, Harrison Searles | Sep 17, 2013
The US federal tax code contains a number of provisions designed to encourage individuals to save for retirement. These provisions allow individuals to avoid or defer taxes if they choose to set aside a portion of their income for future consumption. When all of these provisions are combined, they are the second largest “tax expenditure” category as defined by the Joint Committee on Taxation. The exclusion of retirement savings from taxation causes some economic distortions, which we will discuss in this paper. However, unlike some other tax expenditures, there is a strong economic rationale for not taxing savings. Higher rates of investment lead to higher rates of economic growth, and it may be sound policy for the tax code to encourage this behavior, even after considering the economic costs. Excluding retirement income from taxation may also make the tax system more efficient, even though most other tax expenditures reduce efficiency.
Jeffrey Miron, Robert Sarvis | Feb 13, 2012
This paper examines the fiscal health of the states, focusing on two worrisome characteristics: an understatement of unfunded pension liabilities and ever-increasing expenditures, driven primarily by health care costs.
Eileen Norcross, Benjamin J. VanMetre | Nov 08, 2011
This working paper shows how Rhode Island’s state and municipal pension systems face large and growing unfunded pension liabilities and provides recommendations for reform.
Scott Beaulier | Oct 11, 2011
America’s fiscal mess, coupled with poor management in the past and changing demographics, guarantees that public pension systems across the country will be reformed. At the margin, the case for more radical shifts from defined benefit to defined contribution plans is strong.
Eileen Norcross, Roman Hardgrave | Sep 28, 2011
This study focuses on public sector benefits costs in the state of New Jersey. Along with several other states, New Jersey’s pension system is badly underfunded and health care and other benefits for public sector workers are entirely unfunded.
Scott Beaulier | Sep 26, 2011
This paper explores the current state of public pensions across the United States and addresses transition cost and capital flight concerns.

Testimony & Comments

Research Summaries & Toolkits

Expert Commentary

By Nita Ghei |
Oct 27, 2013

Just a few short months ago, the Cyprus “bail-in” plan, which forcibly extracted assets from almost anyone with a bank account while the island nation fought to stave off creditors, seemed to forge a new frontier for cash-strapped governments. Unfortunately, as Russia and Poland have recently demonstrated, overwhelming pension obligations and the demographic realities of a shrinking labor force could all too easily lead governments to raid the one remaining stash: private savings for retirement.
Jul 23, 2013

While it is too late to save Detroit, it may still be possible to prevent similar disasters from unfolding elsewhere by ending our long-standing practice of putting state and local governments in charge of pensions.
Jul 19, 2013

Detroit became the largest city in U.S. history to declare bankruptcy when it filed for Chapter 9 protection on Thursday. Mercatus experts weigh in:…
Jun 15, 2012

As Congress approaches the summer recess, members continue to negotiate the language in the must-pass highway transportation bill. Now Congress faces a June 30th deadline, having only been able to pass a 90-day funding extension at the end of March for the nation's transportation needs. As important as stable transportation spending is to the nation's crumbling infrastructure, this bill is not only about roads and bridges. Private corporations are using it as a vehicle to ask Congress to change how they calculate their annual pension contributions, which could create a huge unfunded liability for the American taxpayer.
Mar 19, 2012

The U.S. credit card is maxed out, but politicians still want to go on a shopping binge.
Feb 27, 2012

Before expanding the state's pension portfolio, first consider the reason CalPERS faces an half trillion shortfall.

Charts

Beneficiaries continue to receive awards as long as they remain disabled or until they reach the full retirement age. The data show, however, that less than 10 percent of individuals leave the disability rolls by returning to work or medical improvement. Most beneficiaries simply convert automatically to retirement benefits at the federal retirement age.

Experts

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. Her primary research interests include the US economy, the federal budget, homeland security, taxation, tax competition, and financial privacy. Her popular weekly charts, published by the Mercatus Center, address economic issues ranging from lessons on creating sustainable economic growth to the implications of government tax and fiscal policies. She has testified numerous times in front of Congress on the effects of fiscal stimulus, debt and deficits, and regulation on the economy.
Jason J. Fichtner is a senior research fellow at the Mercatus Center at George Mason University. His research focuses on Social Security, federal tax policy, federal budget policy, retirement security, and policy proposals to increase saving and investment.
Matthew Mitchell is a senior research fellow at the Mercatus Center at George Mason University, where he is the lead scholar on the Project for the Study of American Capitalism. He is also an adjunct professor of economics at Mason. In his writing and research, he specializes in economic freedom and economic growth, public-choice economics, and the economics of government favoritism toward particular businesses.
Eileen Norcross is a senior research fellow at the Mercatus Center at George Mason University. As lead researcher on the Mercatus Center’s State and Local Policy Project, she focuses on questions of public finance and how economic institutions support or hamper economic resiliency and civil society. She specializes in fiscal federalism and institutions, state and local governments and finance, pensions, public administration, and economic development.
David M. Primo is a senior scholar at the Mercatus Center and an associate professor of political science and business administration at the University of Rochester. His current research focuses on the value of legislative “pork” for reelection, the politics of judicial appointments, and the connection between formal models and data analysis.

Podcasts

Russell Roberts | November 05, 2012
Joshua Rauh, Professor of Finance at Stanford University's Graduate School of Business and a senior fellow at Stanford University's Hoover Institution, talks with EconTalk host Russ Roberts about the unfunded liabilities from state employee pensions. The publicly stated shortfall in revenue relative to promised pensions is about $1 trillion. Rauh estimates the number to be over $4 trillion. Rauh explains why that number is more realistic, how the problem grew in recent years, and how the fiscal situation might be fixed moving forward. He also discusses some of the political and legal choices that we are likely to face going forward as states face strained budgets from promises made in the past to retired workers.

Recent Events

Media Clippings

Eileen Norcross, Matthew Mitchell, | Jul 23, 2013
Detroit reports an unfunded pension liability of $634 million, but using more accurate accounting methods it's closer to $3.5 billion.
Eileen Norcross | Oct 15, 2012
Eileen Norcross cited at Pensions and Investments…
Eileen Norcross | Aug 21, 2012
Eileen Norcross quoted discussing state and municipal pensions.
Veronique de Rugy | Aug 15, 2012
Veronique de Rugy quoted discussing government pensions.
Jason J. Fichtner, Eileen Norcross | Jul 09, 2012
Eileen Norcross and Jason Fitchner's article on pension liabilities is cited on National Center for Policy Analysis.
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