Funded Vs. Unfunded

Arnold Kling makes a good point about the current economic crisis:

I don’t think of the long-term budget fight as being between Democrats and Republicans or between rich and poor. I look at it as a fight between people with funded retirements and unfunded retirements.
If I have saved enough to support my lifestyle in retirement, then I have a funded retirement. If my neighbor who teaches in public school wants to support a similar lifestyle based on her pension, then she has a retirement that is somewhat unfunded. That is, as of now, her pension plan has only about fifty cents for every dollar of promised benefits.
Social Security and Medicare also are unfunded. …
Down the road, someone is going to get the shaft. It could be my neighbor, it could be me, or it could be both of us. That is, people who are relying on the unfunded systems–public sector pensions, Social Security, and Medicare–might find their benefits cut. Or people who are relying on personal savings could wind up having those savings taxed away in order to address the shortfalls in the public systems. Or all of us could have our savings eroded by inflation, from which we may not be able to protect ourselves.

I think that is correct, although it doesn’t tell the whole story. I think there is also a huge intergenerational conflict that doesn’t follow the funded vs. unfunded pattern, since young people stand to be on the losing end of that one regardless of which sort of retirement they plan on.
Lately, I have been hearing stories about people who have stopped putting their savings in places where the government can readily find them (e.g., 401k plans) in the expectation that the government will try to appropriate those savings in order to make up, in part, for the unsustainable promises it has been making for decades.


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