Private Equity and Public Pensions: What’s the Return?

Eileen Appelbaum

April 18, 2025
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Private equity is on the prowl for new sources of funding and workers’ personal retirement retirement savings are in the cross hairs. In the first Trump administration, the Department of Labor approved including private equity in workers’ IRAs and 401(k)s.under certain circumstances. Take up was disappointing. In Trump 2.0, PE expects more leeway in what it can offer. It is developing Exchange Traded Funds that would include investments in private assets and the industry is optimistic that these will be approved for inclusion in people’s personal retirement savings.

Attracting traditional private equity investors to continue funding the industry is proving difficult. Fundraising by private equity hit a seven year low in the first quarter of 2025, $22 billion below the comparable figure for the same period last year. The problem is that PE investors have faced three years of reduced payouts, with PE cashing out and returning only half the typical value of investments in 2024 compared to what they typically sell. This is a drop of $400 billion below what investors were expecting in returns .

With a Trump administration that looks favorably on private investment funds, PE firms have again set their sights on workers’ retirement savings – their IRAs and 401(k) accounts – that hold an estimated $12 trillion (yes trillion with a t). Currently, these savings are mostly off-limits to PE firms, because they are riskier, come with higher fees, and are more illiquid than stocks and bonds. The Department of Labor limits PE’s ability to shove their products into these retirement accounts because they are not compatible with workers’ requirements, including the ability to tap their retirement funds as needed. But that may change in the second Trump administration with a more compliant Congress amenable to passing laws to facilitate investment of these retirement funds in private equity.

The private equity industry argues that these investments will provide more diversification, access to the thousands of companies held in PE portfolios, and a chance to earn higher returns. After all, pension funds have invested billions of dollars of retirement savings of millions of workers in private equity funds for decades in pursuit of higher returns. Why shouldn’t workers with IRAs and 401(k)s have the same opportunity?

So, how have those pension funds fared?

PitchBook’s Pension Fund Tracker has the answer: “The top pensions in the country returned a 7.4% return average over the past decade.” That’s what the 50 largest pension funds in the U.S. earned over a 10-year period ending June 30, 2024.

And how did a plain vanilla portfolio of 60% stocks and 40% bonds do over the same period? It returned 8.1%, handily beating these large pension funds. The California Public Employees’ Retirement System (CalPERS), the largest in the country with $502.9 billion in assets under management, saw a 6.2 percent return over the 10 years ending June 30 of last year.

A diversified portfolio that includes large allocations to private equity has not boosted the retirement savings of workers in these pension funds.

This is not surprising. A similar analysis of the 50 largest university endowmentsshowed the same lesson. These endowments are heavily invested in private equity and other private assets, whose disappointing returns failed to beat a plain vanilla portfolio of 60% stock and 40% bonds over a 10-year period

The message is clear – private equity does not belong in the retirement savings of workers. Investing in PE increases the risk, but it does not boost the returns for people saving for their old age.

This first appeared on CERP.

Oligarchy Has Arrived in America

Bob Lord

 April 18, 2025
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In February, the economist Gabriel Zucman posted an absolutely stunning graphic online that depicts the wealth of America richest 0.00001 percent as a share of our nation’s total household wealth.

The share of American wealth held by the 19 lucky souls in this top 0.00001 percent now stands at 2 percent, a ten-fold increase from the share these deep pockets held over four decades ago in 1982. Collectively, as of this past December, these rich held $3.1 trillion of the country’s $146 trillion total household wealth.

If 2 percent doesn’t seem to you like all that much, consider that this $3.1 trillion amounts to one-fiftieth of our country’s wealth. We have, of course, exactly 50 states. The 19 Americans in this top 0.00001 percent hold personal net worths ranging from $50 billion to $360 billion. They together control the same amount of wealth as an average American state — think Massachusetts or Indiana — with a population of about 7 million people.

And the growth of our top 0.00001 percent’s wealth share over the years has been geometric, not linear. If policy choices over the next 42 years allow the trend of the past 42 years to continue, our top 0.00001 percenters won’t merely increase their wealth share from 2 to 4 percent. They will be increasing their wealth share ten-fold, to about 20 percent.

Will what’s left of American democracy survive for much longer if this wealth-concentrating trend continues?

Nearly a century ago, former Supreme Court jurist Louis Brandeis famously warned us: “We may have democracy, or we may have wealth concentrated in the hands of a few, but we cannot have both.”

We’re now seeing the nightmare scenario Brandeis feared — an oligarchic subversion of American democracy — play out in real time. We can argue politely about whether any single billionaire represents a policy failure. But having our nation’s three richest billionaires – Musk, Bezos, and Zuckerberg – sitting front and center at the inauguration of a billionaire president  sure looks like we have a president answerable to oligarchs, not America’s voters.

An extreme concentration of oligarchic-level wealth, Brandeis feared, can easily translate into an extreme concentration of political power. To believe that this concentration has not occurred here in the United States rates as totally delusional. Musk spent over $250 million on Trump’s 2024 campaign, less than one one-thousandth of his personal fortune, yet enough to overwhelm the campaign finance system.

Musk, maybe more significantly, used his control over a powerful social media platform, X, to promote Trump’s campaign. Bezos and another billionaire, Patrick Soon-Shiung, demanded that the editorial boards of the newspapers they own, the Washington Post and the Los Angeles Times, not run editorials endorsing Trump’s opponent, Kamala Harris.

Let’s remember that each of the country’s four wealthiest Americans — Musk, Zuckerberg, Bezos, and Ellison — controls at least one major media outlet or social media platform.

Let’s also remember that Musk, nearly immediately upon Trump taking office, began making unilateral decisions that are leading to the firing of tens of thousands of federal workers, the termination of life-saving foreign aid, and, if lawsuits don’t prevent it, the dismantling of entire federal agencies.

Decades of policy failures have led to the concentration of wealth — and power — into so few hands that we are seeing our democracy crumble before our eyes. For nearly half a century, everything from wage and labor policies to antitrust enforcement and intellectual property and trade standards have been moving us in the direction of more concentrated wealth.

In inflation-adjusted dollars, the federal minimum wage today stands at half its 1968 level. Over the past 50 years, union density has plummeted. The market power in virtually every major industry now sits massively concentrated in just a handful of giant corporations.

Against all these trends, tax policy remains our last line of defense, our firewall against the power of our wealthiest.

Think about things this way: Our policy choices in areas outside taxes — labor, wages, antitrust — all impact our national concentration of income. These policy choices drive the sharing of our country’s income between labor and capital and between consumers and businesses. And these policies have been driving an ever larger share of our nation’s income to those at the top.

Tax policy, by contrast, governs the conversion of income into wealth. Without taxation, necessary living expenses would cause income and wealth inequality to deepen over time — because those with smaller incomes must devote a larger portion of their income to basic living expenses. The passive income generated by the resulting unequal distribution of wealth — dividends and interest income, for instance — then proceeds to drive income inequality still higher in future years, causing the sharing of income remaining after living expenses to become even more skewed in favor of our richest.

With these dynamics in play, progressive income and wealth taxation becomes a necessary counterbalance to income inequality. Absent progressive taxation, income and wealth inequality will continuously worsen. The greater the level of income inequality, the more progressive the system of taxation necessary to counteract that concentration.

From this perspective, America’s tax policy choices have been an abject failure for nearly 50 years. Our top 1 percent’s share of our country’s income has more than doubled since 1980. Our tax system has become hugely less progressive. Regressive taxes like federal payroll taxes and state-level sales and property taxes have increased, while the gains from federal income tax cuts have flowed disproportionately to those at the top.

Between 1980 and today, the top federal income tax rate on paycheck income — the only substantial income that flows to most American households — has fallen by about one-fourth, from 50 percent to 37 percent. But the decline in the top income tax rate on dividends — income that flows primarily to major corporate shareholders — has fallen from 70 to 20 percent.

And these numbers just describe the surface of our current tax-cut scene. The investment gains of the ultra-rich compound tax-free until the underlying investments get sold. At sale, these gains face a one-time tax rate of 23.8 percent. That 23.8 percent translates into an equivalent annual  tax rate that can run under 5 percent. And if a rich investor dies with billions of untaxed capital gains, all those gains totally escape any income-tax levy.

A tax system, to effectively contain the concentration of a society’s wealth, must contain a mechanism to tax either wealth itself, the income from that wealth, or the intergenerational transfer of wealth — or some combination of the three. America’s current tax system falls short on all these counts.

The income subject to federal income tax often represents only a fraction of the actual economic income that’s filling American billionaire pockets. Investment gains go untaxed unless and until investment assets get sold. The federal estate and gift tax system — originally intended to tax the intergenerational transfer of wealth — stands eviscerated by a combination of cuts and the refusal of Congress to shut down avoidance strategies that tax lawyers have fine-tuned and court decisions have blessed.

Today, even billionaires can avoid federal estate and gift tax entirely.

Here’s how undertaxed our billionaires have become: In a study commissioned by the U.S. Treasury Department, four economists at the University of California-Berkeley analyzed the tax payments of the richest 0.001 percent of American tax units, about 380 taxpayers in all, a total that roughly matches the annual Forbes 400.

In 2019, this study found, those 380 deep pockets ended up paying in taxes federal, state, and foreign just 2 percent of their wealth. The average tax burden between 2018 and 2020 for those in the top 0.00005 percent — some  90 tax units — amounted to just 1 percent of their wealth.

Meanwhile, between 2014 and 2024, the total wealth of the Forbes 400 grew from $2.3 trillion to $5.4 trillion, an average annual growth rate, net of taxes and consumption spending, of 8.9 percent. The wealth of just the top 19 on the Forbes list over these years grew at an annual rate of over 12 percent.

So do the math: Oligarchic wealth in America is growing at a rate that dwarfs the actual tax rate upon that wealth. The oligarchic cancer destroying American democracy is continuing — and will continue — to metastasize.

Unless we rise up.

Bob Lord is a veteran tax lawyer who practices and blogs in Phoenix, Arizona. He’s an associate fellow of the Institute for Policy Studies. 

The Plot to Kill Social Security

Jim Hightower

 April 18, 2025
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Photograph Source: US Government – Public Domain

How ironic: The most inefficient bureaucracy in government turns out to be Donald Trump’s “Department of Government Efficiency.”

That could be humorous, except that DOGE — a creature of the right-wing Project 2025 — has been devastating to millions of people. And it’s about to get worse. Elon Musk — the flighty überrich autocrat put in charge of “efficiency” by his buddy Trump — is now going after the Social Security deposits of 73 million senior citizens.

But wait, hasn’t Trump himself promised (loudly and often) that he would not ax this essential retirement program? Yes… but Elon is his “gotcha.”

Rather than an honest kill, Musk is strangling the program with bureaucratic red tape. Claiming to be cutting waste, he’s eliminating 7,000 people who administer the program, shouting, “Bureaucratic excess!”

Except, Social Security is actually a renowned model of government efficiency, spending less than 1 percent of its revenue on administration. So by whacking the people who do the work, Musk is actually whacking the people who are due to receive their earned benefits.

For example, he’s decreed that the public can no longer apply for benefits or resolve questions by phone. Instead, they must now travel in person to some distant Social Security office. But the staff there has also been decimated, so people who’ve come from afar are told to go back home and call for an appointment — a call that will often not be answered.

What’s at work here is a Musk-Trump ploy to wreck Social Security’s remarkable record of efficiency. Their intent is to make the service so bad that they can then let profiteering corporations privatize your retirement. Don’t let them.

James Hightower is an American syndicated columnist, progressive political activist, and author.