Most newspapers try to avoid the self-serving studies that industry groups put out to try to gain public support for their favored policies. But apparently the New York Times does not feel bound by such standards. It ran a major news story on a study by Citigroup that was designed to scare people about the state of public pensions and encourage them to trust more of their retirement savings to the financial industry.

Both the article and the study itself seem intended to scare more than inform. For example, the piece tells readers;

"Twenty countries of the Organization for Economic Cooperation and Development have promised their retirees a total $78 trillion, much of it unfunded, according to the Citigroup report.

"That is close to twice the $44 trillion total national debt of those 20 countries, and the pension obligations are 'not on government balance sheets,' Citigroup said."

Okay folks, how much is $78 trillion over the rest of the century for the 20 OECD countries mentioned? Is it bigger than a breadbox?

The NYT has committed itself to putting numbers in context, where is the context here? Virtually none of the NYT's readers has any clue how large a burden $78 trillion is for the OECD countries over the rest of the century. The article did not inform readers with this comment, it tried to scare them. That is not journalism.

For those who are keeping score, GDP in these countries for the next 80 years will be around $2,000 trillion (very rough approximation, not a careful calculation) so we're talking about a big expense, roughly 4 percent of GDP, but hardly one that should be bankrupting.


Furthermore, the whole treatment of the expense as an "unfunded" liability is problematic. Suppose the United States spends 7 percent of its GDP on education (roughly current spending) and this share is projected to rise to 8 percent over coming decades. We can treat the commitment to educating our children as an "unfunded liability," after all we don't have any money set aside from prior years to fund it.

But since we are already spending the 7 percent on education every year, the additional burden will just be the boost to 8 percent. That is a burden of 1 percentage point of GDP or roughly half the cost of the increase in annual military spending associated with the wars in Iraq and Afghanistan. 

There is a similar story with public pensions. In the case of Social Security, the U.S. is currently spending about 5.0 percent of GDP on the program, up from 4.0 percent in 2000. Spending is projected to rise by another percentage point over the next 10–15 years, are you scared?

Almost every item mentioned in this article seems intended to scare from the very paragraph:

"When Detroit went bankrupt in 2013, investors were shocked to learn that the city had promised pensions worth billions more than anyone knew — creating a financial pileup that ultimately meant big, unexpected losses for Detroit’s bondholders."

Investors were shocked, really? Are the people who invest trillions of dollars morons? The books of Detroit's pension system were publicly available. The problem was not the actuarial accounting blamed in this piece, the problem was simply that Detroit was a bankrupt city unable to meet its obligations because of a tax base that crashed as it lost two-thirds of its population.

If there were any investors who were shocked by Detroit's pension liabilities then the NYT should do a major piece profiling these people. They are almost certainly way over their heads in jobs that pay six and seven figure salaries.

Finally, there is little doubt that the Citibank piece itself is intended as a promotional piece for the financial industry. After detailing the alleged crisis facing public pension funds, Citibank tells readers:

"Finally, the silver lining of the pensions crisis is for product providers such as insurers and asset managers. Private pension assets are forecast to grow $5–$11 trillion over the next 10–30 years and strong growth is forecast in insurance pension buy-outs, private pension schemes, and asset and guaranteed retirement income solutions."

The one small hint that readers get in the article that this study was an industry promotion piece comes when we are told:

"For years there have been frequent reports of pension systems rife with pay-to-play deals, improper payouts, overly risky investment strategies and other problems. But the Citigroup researchers looked beyond such scandals and depicted the worldwide accumulation of giant, invisible pension obligations as a matter of simple demographics."

Of course, it might have been more useful if instead of telling readers that the study, "looked beyond such scandals," to tell readers that the study ignored such scandals.