John Lanchester provides a useful service in his new book How to Speak Money – What the Money People Say And What It Really Means introducing his topic by noting:
There’s a huge gap between the people who understand money and economics and the rest of us. Some of the gap was created deliberately, with the use of secrecy and obfuscation; but more of it, I think, is to do with the fact that it was just easier this way, easier for both sides. The money people didn’t have to explain what they were up to, and got to write their own rules, and did very well out of the arrangement; and for the rest of us, the brilliant thing was, we never had to think about economics. (page xiv)
The details of modern money are often complicated, but the principles underlying those details aren’t (page xv)
“There was a fear that if it was made understandable, it wouldn’t seem important” Grayson Perry on art world terminology (page 5)
My theory is that the jargon was developed to mask really stupid concepts (usually benefiting the jargon-user in some way) that, were they to be explained honestly, would be laughed out of use.
For example, the California Institute for Local Government (CILG) offers a Guide to Pension Terminology where they seek to define some terms that I believe could have been defined better.
There have been those out there who do not see a public pension crisis including Teresa Ghilarducci who took to public TV yesterday to make that exact claim but…..when it came to New Jersey:
The New York Times reported today that a “blue-ribbon panel of the Society of Actuaries — the entity responsible for education, testing and licensing in the profession — says that more precise, meaningful information about the health of all public pension funds would give citizens the facts they need to make informed decisions.”
Basically the report made four very sensible recommendations that most citizens would be amazed had to even be recommended. Anyone without ulterior motives should have no problem agreeing with three of them:
- a plan’s funding goal should always be 100 percent
- disclosure of a “standardized plan contribution” that would be calculated by all plans using the same discount rate and funding methodology
- not using funding instruments that delay cash contributions (i.e. Pension Obligation Bonds)
Then there is the tricky, though no less valid, recommendation:
Professor Joshua Rauh moderated a webinar on the public pension crisis that covered many bases and is well worth watching all the way through:
but for those interested in the role actuaries play here are some excerpts:
A hallmark of government today is effective secrecy. Meetings at which decisions are purportedly made are publicized in small print among hundreds of legal ads. The media, if they even bother to report real issues, print official happy-face press releases. Consequences of actions, if even disclosed, get buried in reports that run on for hundreds of pages.
What all this leads to is surprise when an absurd concept like providing an extra monthly payment to current retirees comes to light as it did in Detroit recently as part of an orchestrated campaign to now cut all benefits. Where in the private sector do pension trustees get told they have extra money and decide to dole out a little to people who have no vested right to it except what is created after the fact?
But when it is oblivious taxpayers footing the bill for the benefits of those making the rules we get concepts like the 13th check and a few others:
Roger Lowenstein, the author and financial journalist who has been in front on so many important issues including the public pension crisis, has an article in this weekend’s WSJ titled ‘The Long, Sorry Tale of Pension Promises‘ which ends with:
“if you want governments to come clean, go after their drug of choice—credit…..Before we get more Detroits, or more Studebakers, the federal government should enact an Erisa (with teeth) for public employers. More simply, it could announce that local governments that fail to make timely and adequate contributions to their pension plans would lose the right to sell bonds on a tax-free basis. That would get their attention.”
I thought so too, once, but with Mr. Lowenstein’s imprimatur making it more likely and upon reflection I now see two problems with an ERISA for public plans.