Sunday, March 6, 2011

There Are Bigger Gorillas In The Room

While investors have become preoccupied with the battle in Wisconsin, they seem to have forgotten the bigger budgetary Gorillas in the same room. States such as California, New York, Illinois, New Jersey, etc have much bigger defects. Bigger problems tend to mean bigger sacrifices and greater social and economic consequences.

The debate/battle ends when local and state governments can't find enough buyers for their debt offerings. That's already happening. Market forces, capital balancing reward relative to risks, ensure that the printing press disguised as infinite quantitative easing will be the only acceptable policy choice going forward.

Headline: Little-known LA police/fire retirement plan pays pension, salary at same time

The DROP program is an expensive public pension program that hardly anyone knows about, but pays out lump sums that average $200,000 and up to nearly a million dollars in some cases. KPCC's Madeleine Brand spoke with KCET's Judy Muller, who investigated the DROP program.

"DROP" stands for Deferred Retirement Option Plan. LAPD and L.A. Fire Department personnel who've worked for at least 25 years and are at least 50 years old can "retire," then go back to work immediately. When they return to work, pension payments are held while they continue collecting a salary, and after five years, they can leave and collect that money in a lump-sum payment.

Source: scpr.org

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