What do preschoolers with marshmallows and Pennsylvania’s pension crisis have in common? Both demonstrate a failure to delay gratification.
Dr. Joseph Horton at Grove City College compares Pennsylvania’s pension crisis to the classic psychological marshmallow experiment. In the experiment, preschoolers were given one marshmallow and promised two marshmallows if they waited 20 minutes (decades to a preschooler) before eating the first one. The children who were able to wait for the second marshmallow grew up to have more successful careers than the kids who ate right away.
According to Horton, Pennsylvania’s politicized pension system has fallen victim to immediate gratification:
It seems, in examples from all over the country, that we have elected too many politicians who would have chosen to immediately eat the single marshmallow. For example, Pennsylvania, where I live, currently has unfunded liabilities for state employee retirement benefits of approximately $47 billion, according to the Commonwealth Foundation. That means politicians have promised to pay $47 billion worth of benefits for which they have not set aside money. Our politicians have made promises without planning how to pay for them. We have been given the sugar rush today, but the bill will eventually come due.
So how do we instill the value of delayed gratification in state government? In today’s Patriot-News I suggest the solution is to take away politicians power to eat the marshmallow, or take the politics out of pensions. That means transitioning to a defined contribution, 401(k)-style plan where the costs are predictable because pension benefits must be paid as they are earned.
In fact, the primary reason we now have a $47 billion pension deficit is not because of the 2001 pension bump for teachers and state workers, or the 2002 increase for retirees Mr. Rowland lobbied for—though those combined added $10 billion to taxpayers’ debt—nor from underfunding.
Rather the majority of today’s pension liability was because actuary guesses were wrong. Our investments didn’t earn as much as they projected, and now taxpayers are on the hook for paying nearly $1,000 a year more per household for decades.”
It’s time to stop eating the marshmallows and refrain from consuming our children’s and grandchildren’s future success.