Over the Waterfall...
"Estimates put the unfunded liabilities at between $1,000bn and $3,000bn after years of states promising benefits but not contributing enough in both good times and bad to cover them.
US state pensions becoming federal issue
Like Greece, we'll be forced to fund a federal bailout of our own civil service pensions, and that will be the beginning of the end.
Chalk another triumph for America's labor unions.
(I wonder what we'll call the country next time around.)
3 comments:
The obligations are not going to be met.. its that simple. Its either going to be inflation or default. The latter would be the better choice, but would require some very painful decisions such as:
Reduce pension payments and retroactively ban receiving more than one pension (big problem here in NJ).
Eliminate all pension payments for anyone younger than 67 for current retires, with the age limit raised to 72 for the future. We can't be paying pensions to people in their 40's who retired after just 20 years.
Eliminate pension completely for all new and recent hires. Defined contribution plans only (with a decent match for people who stick around for more than 5 years). Right now, the Sates tend to offer crappy plans that only offer variable annuities. This is the wrong investment for any younger worker.
Eliminate or voucher out (with a limit on total lifetime payments) insurance payments for retires.
In the broadest terms I agree with you. I've been saying the same thing to John Derbyshire for months everytime he tells people to go get a government job.
I think the most likely outcome is a three way combination of a haircut for the unions, a bailout from the feds and a tax increase for the taxpayers. The percentages will all be decided by local politics.
The first ones to show up hat in hand will get the best deal and the line will run out quickly. There is already a lot of bailout fatigue and the idea of bailing out the civil servants will not go down well in most places.
I think the "hair cut" will be closer to a beheading. The more I find out about the unfunded pension obligation the more I am convinced that one day the State will write checks with no money behind it.
Raise taxes to pay for it? I am already at the end of my rope. I got hit with a 25% property tax increase and a 25% increase in sewer rates (which is another tax). My rents have gone down by over 20%. I can't pay anymore. At some point, I just won't pay. If there are enough people like me, those liens won't be sold (happened during the early 90's). The city and county won't collect what they need to pay the bills.
The State? With my business in the tank, how much will I be sending use and income tax wise?
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