I am pleased to be an invited speaker at the Sustainable State & Local Retirement Systems: Responsible Stewardship of Public Funds & Fairness for Employees. This convening will bring together state legislative leaders, plan officials, and national thought leaders to discuss the steps states can take to address underfunded public pension plans and best practices for putting retirement systems on a sustainable path. Many states and cities are seeking to balance responsible stewardship of taxpayer dollars and the ability to recruit and retain a high-quality workforce. We seek to help policymakers wrestle with questions of benefit plan design, evaluation of funding mechanisms, and examination of the legal framework for reform.

Session topics include:

• Retirement reform and the law
• Retirement for police and firefighters
• Retirement for teachers
• Retirement reform and the media
• Asking more from actuaries

October 24-25, 2013 

Mandarin Oriental Hotel
1330 Maryland Ave SW
Washington, District of Columbia 20001

6:00pm, Friday, October 25, 2013
The New School
Wolff Conference Room

6 East 16th Street, Room 1103
New York, NY

SCEPA was honored to welcome Robert L. Gordon, distinguished economist from Northwestern University and brother of SCEPA founder David Gordon, to present the annual Irene & Bernard L. Schwartz Lecture.


Professor Gordon has rocked the economics profession and the employment policy debates at the highest levels with his recent – and controversial - work predicting an end to economic growth as we know it. He writes, "Our best days may be behind us." He debated his theory in a recent TED talk and was featured in New York Magazine, where he is described as a "declinist and an accidental social theorist."

Gordon's work demonstrates the shrinking impact of innovation due to the "headwinds" of debt, demographic change, diminishing educational returns, and inequality. Focusing on inequality, Gordon will compare his own policy recommendations with those put forward by his brother in his book, Fat and Mean.

New School economists David Howell, Professor of Economics and Public Policy, and Anwar Shaikh, Professor of Economics, will join Gordon in a debate on inequality. Howell will argue that Gordon has ignored the powerful growth consequences of redistributing wealth and power away from the very wealthy, and Shaikh will give us the long-view of periodic crises in capitalist economies, where the end of growth is periodically predicted.

Robert J. Gordon, Stanley G. Harris Professor of the Social Sciences, Department of Economics, Northwestern University
David Howell, Professor of Economics and Public Policy, The New School for Public Engagement
Anwar Shaikh, Professor of Economics, The New School for Social Research

Teresa Ghilarducci, Chair of the Economics Department at The New School for Social Research, and Director of the Schwartz Center for Economic Policy Analysis

You can join the conversation on Twitter using #gordonecon.

On October 23, 2013, the Maryland legislature will hold a hearing on Senate Bill 1051, the Maryland Private Sector Employees Pension Plan sponsored by Senator James Rosapepe. The bill will be heard in Annapolis by the Maryland Joint Committee on Pensions. SCEPA submitted written testimony regarding the state of future retirees in Maryland based on our March 2013 report, "Are Maryland Workers Ready for Retirement?" The report received headlines in the state last spring for its findings that '40% of older households in Maryland are ill-prepared for retirement' and that '49% of those working in Maryland are not enrolled in an employee-sponsored retirement plan.' 

SCEPA testified at a hearing in the Maryland House of Delegates on similar legislation sponsored by Delegate Tom Hucker that would increase access to a retirement savings plans by giving workers the option of opening an individual Guaranteed Retirement Account (GRA) through the existing Maryland State Retirement and Pension System. The Guaranteed Retirement Account (GRA) is based on Ghilarducci's STATE GRA plan, which was recently enacted in California.

Is the government shutdown just political theater or are there larger economic consequences to this new normal of extreme political brinkmanship? 

The Schwartz Center for Economic Policy Analysis (SCEPA) hosted three New School economists on the economic fallout of the government shut down. Professors Teresa Ghilarducci, Rick McGahey and Christian Proaño discussed the causes of the shutdown, the economic implications of increasing or not increasing the debt ceiling, and what will happen if an agreement is not reached by the deadline of October 17. The event ended with an audience Q&A. Watch the video below and check out the panelists' presentations. 


Teresa Ghilarducci, "Economists Agree that Defaulting is Stupid"
Chair of the Economics Department at The New School for Social Research and Director of the Schwartz Center for Economic Policy Analysis

Rick McGahey, "Why Congress is Allowing a Default"
Professor of Professional Practice in Public Policy and Economics and Director of Environmental Policy and Sustainability Management

Christian Proaño, "The Dire Economic Consequences of a Default"
Assistant Professor of Economics

Beginning in August and extending into the fall, I have been invited to several international conferences to discuss the United States retirement system, the need for pension reform, and the Guaranteed Retirement Account (GRA) proposal.

August 29thStockholm Seminar

September 25th: Allianz-Oxford Pensions Conference 2013
The goal of the Allianz-Oxford Pensions Conference is to locate opportunities for value in today's market and discuss the future of pensions. This conference is looking for innovative strategies on how to securely invest for the long-term.

November 15th: World Pension Summit 2013
The World Pension Summit 2013 seeks to foster ongoing and advanced learning for senior pension professionals specializing in pension investments and risk management.


A recent article in Institutional Investor by Fran Hawthorne, "Claim s that 401(k)s Beat Defined Benefit Plans Stirs Controversy," analyzes the findings of an Employee Benefit Research Institute (EBRI) Issue Brief claiming that defined denefit (DB) plans do worse than defined contribution(DC) plans for all incomes.

Hawthorne’s critique points out the weaknesses of the EBRI study. These include the fact that the study includes only data on voluntary 401(k) plans, which have higher contribution rates than the more prevalent automatic enrollment plans, that it uses unrealistically high rates of return on stocks, and that it ignores the fact that employers contribute 'free money' toward DB plans, but do not need to contribute to DC plans.  

Hawthorne is thorough. However, she overlooks two significant problems. First, EBRI overstates the retirement plan coverage and participation rates for workers, especially following an unemployment spell; this is especially important in the aftermath of the Great Recession. Second, it uses an implausibly high growth rate of average hourly earnings. EBRI’s findings are partly a result of these skewed assumptions.

These concerns are spelled out in a Huffington Post Business blog, jointly written with SCEPA Research Economist Joelle Saad- Lessler. 


On July 9, 2013, The New York Times reported that U.S. Senator Orrin Hatch (R-UT) announced a new proposal to allow the life insurance industry to manage public pensions.

Senator Hatch's high hopes that insurance companies are better insurers of public pensions than municipalities and states is based on three false beliefs.

  1. States regulate insurance companies better than their pension funds.
  2. Insurance companies will insure pension funds cheaper and more efficiently than state and local pension funds.
  3. Insurance companies are more secure than state and local governments.

Each of these assumptions is wrong.

Governments have promised their employees these benefits, so they can't simply "get the obligation off their books" by privatizing the management of the funds. Further, insurance companies are for-profit institutions – shareholders come first – so they charge more than state and local pension funds. Also, as we have seen, insurance companies can fail, requiring huge government bailouts. Examples abound, with AIG foremost in memory. At the state level, Executive Life took over California's pension funds in the 1970s and then went belly up. Pension beneficiaries lost everything.

Senator Hatch argues he is earnest. He wants to help state and local governments, not insurance companies. His theory is that pensions would come off municipal books and benefit from more reliable contributions.

But state and local governments could pay their pension obligations with a simple administrative and actuarial fix - by looking at their assets and liabilities and figuring how much they have to pay each month. This is called 'easy math,' a concept familiar to anyone with a mortgage.

The problems faced by some state and local governments are not structural. Rather, a minority of governors and mayors took pension holidays. They liked paying nothing, diverting funds from their pension obligations to other budget lines. Rather than creating a new structure for public pensions, Senator Hatch, the ranking Republican on the Senate Finance Committee, could hold hearings highlighting this political failure and calling for these localities to pay what they owe.

Contrary to Senator Hatch's intention, this proposal would expose public pensions to more insecurity, not less - while boosting industry profits.