Dan Mitchell discusses a new National Bureau of Economic Research working paper entitled “Shrouded Costs of Government: The Political Economy of State and Local Public Pensions.”
….The politicians give the bureaucrats excessive compensation. But they make it difficult for taxpayers to figure out how they’re getting robbed by concentrating a big share of the excess in harder-to-measure fringe benefits.
Another advantage of that approach, by the way, is that the bill for all the retiree benefits doesn’t come due until some point in the future, by which time the politicians who put taxpayers on the hook often have retired or moved on to some other position.
Generous benefits for government employees are a neat way for politicians to avoid accountability. They do not appear in the budget and are a hidden liability of the government. For a start we need to prevent politicians from creating unfunded future liabilities not just for government employee benefits, but for Social Security, Medicare and Medicaid funding. At present these are a hidden iceberg as they do not appear on the government balance sheet. It is too easy for politicians to kick the can down the road, failing to address any future funding shortfall. These unfunded future liabilities should be reflected on the balance sheet in order to improve accountability. If the actual liability is uncertain, then actuarial estimates can be used — in much the same way as used by insurance companies.