Bernard Madoff oversaw a $65 billion Ponzi scheme. For that, ourdivine justice system deemed he should serve a 150- year prisonterm. California Gov. Jerry Brown oversees a pension scheme thatloses $240 billion a year. For that, voters might award him anotherfour-year term.

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Let's put that $240 billion in perspective. If that annual lossalone was the gross national product of a country, that countrywould be the 35th wealthiest country in the world (according to2010 UN data). Seen another way (based on the 2011 World FactBook), this $240 billion in debt would rank the California PensionSystem the 25th most debt-laden country in the world.

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Ouch.

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And that's only one state (albeit the biggest).

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The problem with pensions did not start with the advent ofpension plans. The original pension plans (including SocialSecurity) didn't qualify as Ponzi schemes because they weredesigned in a way that very few beneficiaries survived well intotheir retirement years—and many workers died before they retired.This imbalance of payers vs. payees led to immense piles ofpositive cash flow. 

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The problem wasn't just that Americans started living longer.The problem occurred when benefits were extended instead of beingcut back to reflect the extended life expectancy of workers. Thesetwo factors combined to transform pension plans from staid employeebenefit plans to outright Ponzi schemes.

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That needs to end. And we need our elected officials torecognize this. And the sooner the better.

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The first step might be to outlaw pension plans from this pointforward. This wouldn't eliminate existing benefits, but justprohibit any future employees from participating. Eventually, asexisting beneficiaries pass on, the liabilities of pension planswill diminish and eventually the plans themselves will die out.

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Most private companies already have discovered the danger of thenaked liability created by today's pension plans. The evolutionfrom defined benefit to defined contribution is nearly complete inthe private sector. Today, only very large or very small companieshave pension plans. A congressional act to outlaw pension planswill impact few private employees.

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For public employees, well, that's a whole 'nother kettle offish. Is it realistic to allow individual states to decide to gothe way of Greece, Spain and perhaps other Eurozone failures? Doyou think if California goes bankrupt, the federal government won'tbe pressured to bail it out?

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I'm sure the farmers in Iowa, Kansas and Nebraska wouldn't mindhelping out the folks in Hollywood and SiliconValley. 

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Christopher Carosa

Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).