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Teflon, Rockets and Pension Funds

Teflon is really cool: Nothing will stick to it. It’s the slipperiest, slickest, most friction-free stuff around. The stickiest, messiest, gooiest mess slides right off. Teflon is used in industry whenever friction simply won’t do. Because nothing sticks to it, it’s appli cations seem endless. In the pantheon of chemically engineered gods, Teflon stands near Zeus.

When a person is referred to as “Teflon,” it means that noth ing sticks to them in the political sense. Ronald Reagan was sometimes referred to as the Teflon president. He was such a masterful politician that he could jump fully clothed into a vat of pure nasty and climb out smelling like a rose. He dodged scandal after scandal, gaff after gaff, like some kind of Moham med Ali of politics, floating like a butterfly and stinging like a bee. In public life, Teflon is the “X factor” which separates the very good from the truly great. Political careers are made and destroyed in the public forum, without a judge or a jury. Politi cal teflon is that amazing ability to stand calmly and assertively while political opponents hurl chamber pots filled with shame and blame, only to watch it all slide off without leaving so much as a crumb on one’s suit. And that, of course, brings us to the subject of public pension funds.

DuPoint Inventor Roy Plunkett discovered Teflon in 1938, DuPontTM Teflon® fluoropolymer is one of the most slippery materials in existend and resists both heat and chemicals.

It is well understood that public pension funds around the country are in a state of utter disarray. According to the Pew Center on the States, employees’ public pension and health in­surance funds were underfunded by more than $1 trillion in 2008. Grossly negligent financial mismanagement, irrespon sible return assumptions, and imprudent risk taking have com­bined with chronic underfunding to leave a swath of destruc tion in their wake. State governments around the nation have failed to stash away anything close to the amount of money their (often elderly) beneficiaries are owed. Had these fiducia ries operated in the private sector, they would have been fined or even jailed under ERISA. One study found that the average funding rate across the 59 city and state pension plans surveyed was 54 percent. Another study estimates that teacher pension systems across the nation are underfunded by $484 billion. The Pew Center on the States rated state pension funds on a 4 point scale and gave zero points to Alaska, Colorado, Illinois, Kansas, Kentucky, Maryland, New Jersey and Oklahoma. In the private sector, there would be FBI raids, press conferences, and men in suits hiding their faces behind handcuffed wrists on the evening news.

But has anyone been punished because $1 trillion (some es timates place it at $3 trillion) has gone astray? No.Will anyone be punished in the future? It’s doubtful, but the lawsuits have just begun to fly. Why? The individuals that approved the over blown rates of investment return are faceless, the committee members that approved the underfunded budgets have moved on, and the deficits are so big they have no meaning to the aver age person. The public debate has nowhere to go but to other is sues—issues that can be used to win legislative seats, sway elec tions, enhance prosecutorial resumes, or buy voters with pork. That’s Teflon in action. Despite the enormity of the crisis, there is nothing political for it to stick to so all of the blame and em barrassment will simply slide off.

Examine the current political debate regarding public pen sions: It has been cleverly shifted to the current salaries and ben efits currently being paid or promised to existing state and fed eral workers. That’s clever sleight of political hand, but diverts us from the real issue. Teflon is at work and the taxpayers will be left to clean up the mess.

No discussion of teflon would be complete without ac knowledging the most non-stick man of the last century, Wer ner Von Braun. Read Michael Neufeld’s excellent biography of him. It’s excellent and done to standards which should make the Smithsonian proud.

Werner Von Braun was a German rocket scientist straight from central casting. Remember Dr. Strangelove? Yeah, that guy. Von Braun was a founding father of U.S. rocketry; both ballistic missiles for war and the manned space program for peace.

Portrait of Werner Von Braun.

As one of the principle architects of our manned space program, he was the father of the Saturn V rocket (still the most impressive rocket in human history for my money) and the tall, handsome, blonde-hair, blue-eyed, German accented, face of the “dream of space” for a generation of Americans. His entire professional life was devoted to the dream of putting men into orbit and onto the moon.“I aim at the stars,” he is famously quoted.

For the conclusion of this article please visit:

http://www.wangerinvestments.com/newsletters/2010-q3/teflon-rockets-and-pension-funds

Eric Wanger, JD, CFA President,
Wanger Investment Management, Inc.