I choose to filter myself here and often thesaurus.com is helpful but when I’m giving a speech I only have about three seconds to decide on my next word before I lose the confidence of the gathering. So it was last Thursday when I spoke at a New Jersey Taxpayers’ Association meeting and I needed a word to sum up the role of actuaries in the public plan funding fiasco:
.
.
(NB: it’s not Neil Coleman, NJTA legislative liaison speaking in the video – it’s me as the subtitles were from a prior video – though I believe he was nodding in agreement).
Was I right to label a whole wing of my profession whores? Let’s define our term:
whore
(hôr, hr)
n.1. A prostitute.2. A person considered sexually promiscuous.3. A person considered as having compromised principles for personal gain.
.
Are practices like asset smoothing acceptable for public plans? Is 7.95% a reasonable assumption as to future trust earnings for a severely underfunded plan? Can clients be allowed to arbitrarily slash, or eliminate, contribution requirements for years on end? There may be actuaries out there who truly believe so and therefore would not be compromising their principles though there is better word for them.
What about those actuaries who fully realize they are throwing phony numbers out there but choose to keep silent and let venal politicians, gullible taxpayers, and public employees get their way? There’s a better word for them too.
But most of these people aren’t stupid or cowardly. They’ve got jobs to do and often families to feed. They need to make money and if what they do for a living damages society I don’t begrudge them their rationalizations. Also, on a personal level the ones I’ve met are fun to be with and when I go to conventions I seek out their 50-minute sessions even if they’re non-core. At this point I’m confused as to whether I’m discussing public plan actuaries or whores, though it wouldn’t be the first time.
Posted by Tough Love on December 8, 2012 at 6:12 pm
A lot of these decisions, particularly WHETHER and HOW MUCH to contribute are NOT up to the actuary but are governmental policy decisions. Sure it’s wrong to promise something without intending to pay for it (just as it is wrong to promise something that is either beyond your reasonable ability to pay for, or for which you really don’t know the cost).
Given that the actuaries DO NOT make the final make actual FUNDING decisions, the best they can (and SHOULD) do is clearly state their funding recommendations under both THEIR best guess and 2 more conservative and 2 more less conservative assumption sets. Those who refuse to do so, or use unreasonable assumption sets “recommended” by their employer are indeed whores. Hopefully there aren’t too many ion the latter category.
John, I believe you are assigning more blame than that which belongs to THEM. Indeed, a GREAT deal of blame belongs to our politicians who, do to self-interest, have allowed this structure to continue, a structure in which they often vote on financially material issues w/o even having estimates of the cost. If transparency, evaluation, reporting and publication of the true costs (year by year for 20+ years) were mandatory, it would be MUCH MUCH more difficult to promise that which we cannot afford.
The root cause of this financial mess is that the Pension & Benefit promises are too generous by AT LEAST a factor of 2.
Posted by Javagold on December 8, 2012 at 7:08 pm
whores with STD…..because thats the only whores who can hurt other people
Posted by Willy on December 10, 2012 at 10:38 am
Language a bit strong but profession has been led astray. It is a failed model when based on capricious assumptions.
Posted by burypensions on December 10, 2012 at 11:27 am
I agree and I regret the sexual connotations in the word. I will also admit that before PPA there were instances where
I did some whoring too as to interest rates (9.6% was my most deviant act though I will say that it was the 90s and everyone was doing it – still not much of an excuse) so I sympathize with public plan actuaries who have no IRS ‘guidance’ on assumptions, though I don’t sympathize with them in not requesting (or demanding) it.
I wish there were a better word but, even upon reflection, I can’t come up with one. I see NJ giving out official assets values as the ‘actuarial’ value of $87 billion when there are only $72 billion (maybe) in the fund. I see COLAs being eliminated in NJ and the actuaries redoing valuations so as to lower contributions (even if they are ignored or slashed later). In Union County I see a firm dummying up a report to justify predetermined actions (in this case the provision of retiree lifetime health benefits to 541 employees):
http://burypensions.wordpress.com/2011/06/13/how-public-employees-get-to-run-government/
I see no more precise word.