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- Where'd all the money go, Chris Christie?
Every so often, Republicans bring up the idea of privatizing Social Security, of "investing" that money into Wall Street as a way to strengthen the economy. The idea was shot down when George W. Bush advanced it almost a decade ago. But at some point in the future, Republican rhetoric could get so insanely libertarian that the idea of privatizing Social Security no longer seems so out there. When that does happen, liberals will have to point to New Jersey as an example of why this idea doesn't work.
David Sirota at the International Business Times reports that in 2010, New Jersey Governor Chris Christie hired a former Carlysle Group private equity investor named Robert Grady to "manage the state's pension money." Grady invested the money with a number of firms including—surprise!—the Carlysle Group. What happened next?
Between fiscal year 2011 and 2014, the state’s pension trailed the median returns for similarly sized public pension systems throughout the country, according to data from the financial analysis firm, Wilshire Associates. That below-median performance has cost New Jersey taxpayers billions in unrealized gains and has left the pension system on shaky ground. Meanwhile, New Jersey is now paying a quarter-billion dollars in additional annual fees to Wall Street firms — many of whose employees have financially supported Republican groups backing Christie’s reelection campaign.
Those who originally opposed the state's shifting of pension funds into hedge funds, private equity, venture capital, real estate and other “alternative investments” see the below-average returns as no accident but an inevitable byproduct of the strategy: The Christie administration has effectively taken money from retired state workers and delivered the cash to Wall Street money managers.
It's important to note, too, that this all happened at a time when the market has been relatively strong. Can you imagine how much money Christie and his cronies might have lost if we had another recession between 2011 and 2014?