Pension Crisis

Brazil's Pension Crisis Is Like America's on Steroids

Unsustainable and yet seemingly unstoppable


It's hard to shake them down for money when they're always at the beach in swimwear!
Credit: leakytr8 / photo on flickr

Government employees retiring early and then getting plum pensions for the rest of their lives? Check. Loopholes and corruption allowing government employees and their spouses to rack up six-figure annual retirement payments at the public expense? Check. Executive branch leaders trying to contain the problem while legislators beholden to government employees actually increase the size and scope of pension obligations? Check. An obviously unsustainable, growing massive government debt? Uber-check.

But this isn't Illinois or California. It's Brazil. The New York Times today has a piece exploring Brazil's disastrous pension plan. It should sound familiar to any American who has been following our various domestic pension crises:

Brazilians retire at an average age of 54, and some public servants, military officials and politicians manage to collect multiple pensions totaling well over $100,000 year. Then, once they die, loopholes enable their spouses or daughters to go on collecting the pensions for the rest of their lives, too.

The phenomenon is so common in Brazil's vast public bureaucracy that some scholars call it the "Viagra effect" — retired civil servants, many in their 60s or 70s, wed to much younger women who are entitled to the full pensions for decades after their spouses are gone.

Brazil's president is trying to restrain the growing fiscal crisis, but its congress is refusing and actually making it worse. Part of the problem, reporter Simon Romero notes, is that Brazil's demographics are getting more modern, which in turn highlights how unsustainable the concept of a public pension is. Even setting aside corruption and abuse of pension rules, Brazilians are living longer and having fewer children. These are all positive developments indicating improving quality of life. But it necessarily means there are going to be fewer young people to milk to make up any debts from pensions.

And of course, there's the familiar sense of entitlement among those who have cashed in on the pension program, which is helping keep appropriate solutions—like scaling back benefits or increasing the retirement age—from being implemented:

"Making retirees pay the price is just not fair," said João Pimenta, 63, a former director of a shopkeepers' association who retired at age 49 and regularly leads protests against pension cuts in Brazil's capital, Brasília. "Why isn't the economic elite being called upon to sacrifice? I'm sick of hearing that normal people need to pay the price with their pensions."

As a result, Brazilian states have had to cut back actual government services in order to make up their pension costs. Rio de Janeiro is going to have to set aside more money for pensions than it will be paying for schools and health.

What is odd about this story is that it makes absolutely no references to the various government employee pension crises across the United States. Instead, there's a comparison to Greece. But the fact is, there's very little about this story about Brazil, except for maybe the pension-fed gold-digger wives, that cannot be seen in places like Illinois and California, and elsewhere in the United States. Romero even notes the economic "inequality" that results from government employees getting absolutely outrageously large pension benefits that are divorced from economic realities. If only we were willing to talk about our own public employee pensions the same way.