A Morning Edition piece on the shortfall in Pennsylvania's public employee pension funds told listeners that just 10 years the funds were over-funded, then the good times went away. Actually, 10 years ago the stock market was in the middle of a huge bubble. This temporarily inflated the assets of pension funds, including the public pension funds in Pennsylvania. While competent economists recognized this bubble and warned of the consequences of its collapse, virtually all of the economists who were steering economic policy, and being relied upon as sources by media outlets like NPR, insisted that stock prices would continue to rise and that the stock market would offer 7 percent real returns on average in the years ahead. Because Pennsylvania and other states listened to these incompetent economists in planning its pension contributions and benefit levels, they now face enormous funding shortfalls. Few, if any, economists have suffered at all in their careers for this incredible failure in their performance.
--Dean Baker
