This morning, Glenn Beck brought his "pension pyramid" to Fox & Friends, purporting to illustrate how it takes "19 firefighters [to] pay for the one guy getting the pension," and that "when those 19 retire, it takes 352 firemen to pay for the 19 that are paying for the one." This, according to Beck, makes it "absolutely impossible to pay it off":
Quite a Ponzi scheme. But as with many things Beck, it's actually quite dishonest: Public pension experts, including economist Dean Baker, say Beck is using math that is "more than a bit contrived" and "a bit nutty" to "distort the issue."
Beck explained his "pension pyramid" on the August 5 edition of his Fox News show (accessed via Nexis):
BECK: See if this makes any sense to you. California fireman, big fat guy like -- he retires at the age of 50. He's making $125,000 a year. He'll retire with a pension approximately $94,000 a year -- 50.
Now, how many people does it take underneath him to pay for that pension? Nineteen -- 19 firemen underneath him paying for his retirement making $50,000 a year and putting 10 percent of their salaries into his pension. All of them have to take 10 percent and pay it here.
Well, that's not happening in a lot of cities. Highest we found was 8 percent, some are 6 percent, some are 4 percent, most are zero. You pay it all.
So, the unions have convinced the firefighters that this was sustainable and the politicians helped them. Now, when these 19 firefighters retire to pay their pensions, how many? Only 352 firefighters making $50,000 a year and putting 10 percent for their salaries and their pension to pay for one year of each of those firefighter pensions.
As conceptualized by Beck, public pensions would be funded entirely by current employees contributing to the annual stipend paid to current retirees. But as Dean Baker, co-director of the Center for Economic and Policy Research, explained in a statement to Media Matters, "These pensions are substantially pre-funded and they would have been more pre-funded had it not been for the stock crashes in 2000-2002 and more recently 2007-2009. So workers are having money deducted from their pay and the states are making a contribution year by year as well."
As Baker noted, those contributions earn investment income. According to Keith Brainard, research director of the National Association of State Retirement Administrators, investment income contributes more than 60 percent of pension revenue. "To allude solely to contributions to the exclusion of investment income is to distort the issue," Brainard told Media Matters.
Baker also took issue with Beck's calculations:
The math is also more than a bit contrived. The number of public workers getting 6-figure pensions are relatively few -- probably most are in police and fire departments. But, even here the arithmetic is a but nutty. He has the retiree getting $94,000 a year, but the remaining firefighters average $50k. Isn't there someone else in line who is also making a six figure salary?
In other words, the average salary for the working firefighters should not be that much different than it had been for the retired firefighter. So this arithmetic is more than a bit off.