April 19, 2007

CalPERS study finds that spending helps the economy

CalPERS has commissioned a study to show the supposed economic impact of the pensions it pays to retired government workers.

But the study, or at least the way it is being reported by the retirement fund, is a classic case of looking at what is rather than what could be.

Yes, when you pay people pensions, they spend the money, and that spending creates other economic activity, including jobs.

But that money came from the taxpayers and the employees in the first place, and was invested by CalPERS. If the taxpayers and employees kept the money and spent it or invested it themselves, much of the same economic activity would result, and perhaps even more.

This is a little bit like those studies purporting to show that a new sports arena would add a certain amount of money to a local economy. Most of the effect is simply measuring activity that would have occurred elsewhere anyway.

Posted by dweintraub on April 19, 2007 8:27 AM