Daniel J. Mitchell
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Most Western nations have huge long-run fiscal problems because of unfavorable demographics and misguided entitlement programs.

That’s the bad news.

The good news is that dozens of nations have fully or partially shifted to mandatory private savings as a pro-growth way of modernizing bankrupt tax-and-transfer Social Security systems.

But good news in the short run doesn’t mean good news in the long run if greedy politicians decide to loot the wealth accumulated in personal retirement accounts.

That’s already happened in Argentina and Hungary, and now it’s happened in Poland. Here’s part of a Financial Times report about the government stealing money from private pension funds.

Poland’s government on Wednesday took an axe to part of the country’s pension system in a bid to bolster public finances. Premier Donald Tusk said that part of the country’s obligatory pension system run by private funds would be dramatically revamped, with 120bn zlotys ($37bn) in government bonds held by the 14 funds being transferred to the government pension scheme and cancelled… The funds will keep control of the 111bn zlotys they hold in equities and current benchmarks will be loosened. The funds will be banned from investing in more government debt. Tusk said that the millions of Poles currently enrolled in the privatised system would have the choice of staying in the scheme or of transferring their assets into the government-run pension system. Market reaction to the long anticipated move was negative. The Warsaw Stock Exchange, where the private funds, known as OFEs, have a big presence, was down by more than 2 per cent. Yields on 10-year Polish government bonds jumped to 4.75 per cent, the highest in a year.

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Daniel J. Mitchell

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute.