New Jersey Senate President Steve Sweeney proposed what he said was not a bailout for public pensions in this country. Rather the federal government will give to those other states who have deliberately underfunded their defined benefit plans $1 trillion so they can consider that money as an asset in determining what is euphemistically called their ‘Annual Required Contribution’ (ARC).
Among the warped thinking that would germinate such an absurd plan, by far the most dangerous is:
As if a federal bailout were a given for anyone feckless enough to need one.
Other disturbing aspects:
Just print the money: As if that would solve all problems. Can’t afford a job, an education, health care, a yacht? – let the federal government give you the money to buy those things and if you default on their ‘loan’ they can always print more money but at least you have what you want.
Phantom assets for funding: As with Pension Obligation Bonds which similarly were loans to public pensions to be repaid by future taxpayers the plans got to consider that an asset (without a corresponding liability item) to artificially reduce the ARC.
Strategic Underfunding: If a federal public pension loan-bailout procedure is enacted why wouldn’t other states and municipalities choose that route over responsible funding? Promise all the benefits you want, put in nothing, apply for the 1% federal ‘loans’ when eligible and everyone makes out. What could go wrong?