This is patently false, and spreading this falsehood has dangerous consequences.

Not only are the financial adjustments necessary to fix Social Security far easier to implement than what it’s going to take to rescue public sector pensions, but the sheer size of the public sector pension liability is actually bigger than the total liability for the entire Social Security fund. It is imperative that American voters understand this fact.

In the United States today, about 20 percent of workers are employed by the government (or public utilities that offer benefits on par with government). For recent retirees, their average pension after a 30 year career is more than $60,000 per year, and their average retirement age is 58. Because they retire 10 years before full Social Security benefits are eligible to private citizens at age 68, retired public employees actually comprise nearly 30 percent of the retired population.

The average Social Security benefit is less than $20,000 per year. Critically, the ratio of workers to retirees in the Social Security system is more than 3-to-1, set to move downwards marginally within the next 20 years, whereas the ratio of workers to retirees participating in government worker pension plans is already less than 2-to-1 and is on track to move to roughly 1.5-to-1 within the next 20 years. Here’s how that math stacks up:

According to the U.S. Census Bureau, in 2030, when Social Security will be supposedly approaching insolvency, there will be 99.4 million citizens over 58 years old, and 59.5 million citizens over 68 years old. This means that by 2030 (assuming no public employees also participate in Social Security — which many of them do), there will be 19.9 million government retirees collecting pensions that average $60,000 per year, and there will be 47.6 million private sector retirees collecting Social Security benefits that average $20,000 per year.

Got that? The total pension payouts to government retirees, who were only 20 precent of the workforce, will be $1.2 trillion, whereas the total Social Security payouts to private sector retirees will be $952 billion, only 80 percent as much.

Solvency

Now let’s talk about solvency, something that trained economists like Jeffrey Dorfman ought to understand thoroughly. Assuming government’s share of the workforce remains at around 20 percent, in 2030 we will have 247 million citizens over the age of 25. On a pay-as-you-go basis, to pay $1.2 trillion annually to 19.9 million government pensioners, 29.6 million active government workers would each require $40,343 per year withheld from their paychecks; to pay $952 billion annually to 47.6 million retired Social Security recipients, 150 million private sector workers would require $6,337 per year withheld from their paychecks — one sixth as much.

You can tweak the numbers all you like. Use medians instead of averages. Assume the public sector worker actually keeps working, on average, to age 60. Take into account disability payments, which are drawn from the Social Security fund. Assume people collect Social Security benefits before age 68. The stark fact remains: Our government pays more money to its own retirees — who represent 20 percent of the active workforce — than it pays in Social Security retirement benefits to everybody else put together. Financing Social Security, forever, can be accomplished with relatively minor incremental adjustments to withholding and benefits.

It is in this context that two special interest groups, public sector unions, and public/private investment fund managers, would have you believe Social Security is the bigger problem. Government labor unions want our attention drawn away from the cataclysmic disaster facing public sector pensions for as long as possible. They want voters to perceive the problem of retirement security to be one that requires shared sacrifice, when nothing of the sort reflects reality. Pension fund managers are getting filthy rich investing public sector pension fund money, and would love to get their hands on the nearly equivalent funds that currently flow into Social Security.

Dorfman’s final insult is to suggest 401(k) funds provide a more secure retirement than defined benefits. Sure, if you are a fund manager collecting commissions on individual 401(k) accounts, regardless of their volatility.

Benefits

The reality is that defined benefits are always preferable to 401(k) accounts because they greatly reduce market risk and they virtually eliminate mortality risk — i.e., in a pooled fund you don’t have to hope you die before your money runs out. The problem with public sector pensions is simple: (1) They rely too much on asset appreciation, something that is going to be increasingly problematic in our debt-saturated, deficit-ridden, aging society; and (2) they are way, way out of line with what ordinary citizens can ever hope to expect from Social Security.

Fixing public sector pensions is furthered by borrowing some concepts from Social Security, which might be characterized as an “adjustable defined benefit.” Here is the solution:

(1) Base pension benefits on career earnings, not final years of earnings.
(2) Stop using the taxpayers’ money to manipulate global investment markets and just put all the funds into Treasury Bills; better yet, put pensions onto a pay-as-you go financial footing where current workers pay for retiree benefits.
(3) Calibrate benefits so highly compensated participants get a lower pension as a percent of their career earnings than participants with low or average career compensation.
(4) Put a ceiling on annual pension benefits of twice the maximum annual social security benefit.
(5) Whenever necessary, lower pension benefits for all retirees on a pro-rata basis (subject to a floor equivalent to 75 percent of the average Social Security benefit) to the extent the system is underfunded, in order to restore full funding.
(6) Raise the age at which participants become eligible for pension benefits to a minimum of age 60.

Public sector unions and private investment fund managers are allies in what is probably the most egregious fleecing of taxpayers in American history.

*   *   *

Ed Ring is the executive director of the California Public Policy Center and the editor of UnionWatch.org.

Katy Grimes: With the recent Democratic reelection win by the Obama administration, get ready for more than tax increases.

The government now wants your private 401(k) retirement plan.  “As Washington debates what to do about the fiscal cliff that it foolishly created, many potential sources of new revenue will be thrown on the table. One of them is likely to be 401(k) plans,” Investor’s Business Daily reported Thursday.

“Retirement is an American’s reasonable expectation. We put money into investment plans so that our work today funds our hard-earned leisure of tomorrow. But many in Washington see our investment accounts not as the expressions of well-planned, disciplined decisions but as untapped reservoirs of wealth they can drain to fix the problems that they caused.”

There’s a great deal of money saved by private sector employees in 401(k) plans. But liberals in government say that these retirement accounts aren’t fair, and that they are the retirement plans of the wealthy.

More than 60 million American workers have a 401(k), 403(b) or 457(b) plans. But taxing these accounts or lowering the amount that can be contributed to them tax-free would do little to close the deficit and cut the debt, IBD said.

“Total assets in 401(k)s are roughly $3 trillion. So even if they were seized in their entirety, they would merely retire less than 19% of Washington’s $16.3 trillion debt.”

Since first election Barack Obama, his government liberals have been saying that our 401(k) exist on the backs of the poor, as if they had all the money and it was stolen by the rest of us.

The truly scary part is that I have no doubt that a majority of the people who voted to reelect Obama will not have a problem with the government claiming ownership of Americans’ 401(k) plans.  It’s the only fair way to level the playing field.

“But many in Washington see our investment accounts not as the expressions of well-planned, disciplined decisions but as untapped reservoirs of wealth they can drain to fix the problems that they caused,”

The war on women is nothing. “The war on retirement, particularly 401(k)s, is quiet now. But that’s because it’s a cold war,” IBD said.

In 2008,  Teresa Ghilarducci, an economist from the New School, first suggested to Congress the idea going after 401(k)s. One of California’s Congressmen, George Miller, a Democrat, loved the idea. “George Miller, who runs a congressional committee, Democrat in California, came out with the first notion of just getting rid of your being able to deduct for your income your contribution to your 401(k)…” He said we have to eliminate the ‘401(k) tax subsidy’ back in 2008,” Rush Limbaugh reported on his radio show Thursday.

Did Miller call this a “tax subsidy?”

“The government’s losing $80 billion by allowing you to deduct from your gross income, your taxable income, whatever you contribute to your 401(k), and they wanted to take that away. They had a hearing. They actually had a hearing on this back in 2008 where they heard from this professor. Ghilarducci appeared and she said, ‘I’ve got a better plan,'” Limbaugh reported.

“What we want to do, we want to take your 401(k) at its August level, before the crash. We’ll give you that equivalent and put it in your Social Security account, essentially, and we’re going to invest that money that we take from your retirement account, your 401(k), at its August level. We’re going to buy government bonds with it, which will guarantee you 3% — and then we will require that you put 5% of your pay into your 401(k) although it’s not yours anymore,” Ghilarducci said to Congress.

IBD warned that the hostilities might be closer than many of us think. “The American Society of Pension Professionals and Actuaries launched on Monday, according to Reuters, “a media campaign intended to educate U.S. employers and workers that the federal government might consider changing the tax benefits of retirement savings accounts.”

“A website set up by the ASPPA advises account holders to tell lawmakers to ‘keep their hands off your retirement savings’ and explains that ‘Congress needs to reduce the deficit, and part of deficit reduction will most likely be ‘tax reform’ that increases tax revenue’ — the strong suggestion being that Washington is coming after Americans’ 401(k)s,” IBD said.

Read more here: http://news.investors.com/ibd-editorials/112812-634984-401k-on-the-table-for-fiscal-cliff.htm?p=full

Be sure to read the comments left by readers on the IBD story.