The post “More on Detroit” at Newmark’s Door contains excellent links throughout, but I really liked Craig’s short and sweet recommendation towards the end:
One thing we can do is insist government employees be paid up front. Defined benefit plans were thought to remove risk from employees. But they aren't risk free and they never were. And they are subject to terrible abuse. Pay the employees and let them manage the risk. [emphasis added]
This is one of those things that “everyone knows” but it’s pretty clear that everyone doesn’t. Craig’s spelled it out clearly.
As an economist, it bothers me greatly, the ease with which people can move risk around and insist that it has disappeared. When you combine three card monty with wishful thinking, you get bad politics.