The Biggest Ponzi Scheme in History

Wednesday, 15 Aug 2012 11:13 AM

By Fran Tarkenton

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We all know about the scoundrels who have bilked investors out of billions of dollars. To name a few, there’s Bernie Madoff (an estimated $50 billion), Allen Sanford (an estimated $8 billion) and Tom Petters ($3.65 billion). That’s over $70 billion!

But that’s chump change. Try $2 trillion! That’s what America’s municipal and state governments have tried to bilk from public service workers and taxpayers. That’s the estimated amount of unfunded pension liabilities for our cities and states.

madoff-2009-getty.jpg
Bernard Madoff (right) did not try to bilk nearly as much from investors as America's municipal and state governments.
(Getty Images)
Pensions were promised to city and state workers (often at nearly 100 percent of the individual’s highest compensation; often beginning shortly after their 50th birthday), along with full healthcare benefits and, essentially, employment for life. Politicians at the municipal and state have made promises for years and years that the public coffers couldn’t possibly keep.

Most of them weren’t actually stealing the money— just trading it for their own political job retention and power (the political version of “employment for life”).

They promised that the tax base would continue to rise — then, whoops, along came the Great Recession! They also promised their pension funds would average annual returns of 8 percent or more. When was the last time you saw that kind of return on your portfolio? They promised and promised and promised (and, even now, continue making outlandish promises). Even when those promises were made, there was no realistic possibility of them ever being fulfilled; they were just empty promises to entice votes.

Editor's Note: Will Obama Be Defeated? Vote Here!

The politicians have depended on the gullibility of the public service workers, the complicity the public service union bosses, and the apathy of taxpayers/voters. The short explanation for this $2 trillion crime is that we voters have gotten the governments we deserve. We deserve it for being asleep at the wheel — voting with too little information or not voting at all.

The tea party movement began a revolution against this Ponzi financing at the federal, state and local levels. But the most effective corrective force has been the cold reality of empty city and state bank accounts.

Virtually every state and most cities are scrambling to deal with this reality. In the past couple of years, more than 25 municipalities (including very big ones like Stockton and San Bernardino, Calif.) have declared bankruptcy. This doesn’t just mean re-setting the lavish compensation, pension and benefit packages of public unions, it also means cutbacks in vital services. And more promises broken.

As we taxpayers accept our share of guilt for this “Ponzi of All Ponzis,” we must vow to stay awake and alert and take an active role in even the smallest local elections in the future.

At the same time, those who have assumed that “government work” means permanent employment with outsized benefits, should be adjusting their attitudes to reality. The other option is to continue to kick the can down the path that took Greece, Spain, Italy, Portugal, and Ireland (not to mention California, Illinois, and New York) into economic oblivion — taking millions of workers with them.

Public service is important and can be noble. Still, for the sake of your and your family’s future security, you should demand meritocracy and accountability in the public sector, just as there is in the private sector.

Demand that your own talent and initiative will be truly valued; don’t just be another digit on a balance sheet. That works for the individual, for your community, and for our nation.

And if you want the maximum return on your individual efforts and capabilities, consider a move to the private sector, where jobs are created, success is honored, and the biggest dreams can be achieved. It takes hard work, discipline, and persistence through the ups and downs of business. But what I can promise you with no reservations at all, it’s rewarding — and it’s as real as it gets.

Editor's Note: Will Obama Be Defeated? Vote Here!

Fran Tarkenton is the Founder and CEO of OneMoreCustomer.com, a web resource for Small Business Advocacy and Education. After his Hall of Fame football career, Fran had a successful career in television and then turned to business. He has founded and built more than 20 successful companies and now spends his time coaching aspiring entrepreneurs. Read more reports from Fran Tarkenton — Click Here Now.

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