This chart shows a forecast of when the NJ Public Employee Pension System will run out of money under the current rules. Speaking as someone who performs similar studies for a living, it's assumptions are completely reasonable (In fact in my opinion they are just a little generous).
The state cannot get 'off the hook' for liabilities under current law, and these benefits are absolutely committed to the civil service unions. So what do you imagine will happen to the broader NJ State finances when these dates come rolling around? I'll tell you...eventually, 100% of all of our taxes will be committed by law to keeping geriatric union members reclining in luxury. There will be no more money for silly luxuries like policemen, or courts and prisons, or anything else the state does.
To me this looks very much like when the doctor finally breaks medical protocol and not only tells you that 'yes it's cancer' but he also breaks down and tells you how long you have. And since a great many states are in exactly the same position as NJ, and the governments of Europe are considerably worse off, unless the law changes what we're looking at here is the probable 'drop dead date' on western civilization.
I'll tell you another secret...at present the financial markets are in a binary state. The full reasons for this are complicated, but it has to do with the way a higher percentage of short term investment creates market conditions that make longer term investment increasingly difficult for professional investors. So unless the US treasury and the FED decide to commit re-inflating them (a choice with it's own set of dire consequences just a little further down the road) then the markets will de-leverage pretty dramatically in the next few months, and all of these numbers can be bumped forward in time by about 5 years.
Full Story at the link.
3 comments:
The reality is probably less rosy than this projection because the highest earners are also very mobile and will move to lower-tax states in numbers sufficient to drop real revenues below the current projections. Short of shooting refugees at the border, Soviet-style, NJ can't do much about that.
Oleg you flatter me - I didn't realize you were still checking in.
While you're right in the broadest sense, I don't think it will be too big a contributing factor. This graph is a description of the pension liability vs pension capitalization so it doesn't have a linear relationship to the tax base. And even someone as simple as a politician will look at these numbers coming down the pipe and understand that you can't possibly solve them by jacking up the tax for 'the rich'. No one seriously trying to address the problem will even consider it.
What this means is, if you get a governor like Chris Christie who is prepared to at least try do the right thing, he may broaden the tax base instead. That might mean that in a given year, 'the rich' would be better off staying put than becoming tax refugees. The middle class on the other hand will be worse off, but as you said, they tend to be less mobile.
And don't forget, thanks to Obamacare and the growth of entitlements, the federal government is going to be in the same boat as the states so there might not be anywhere to run. I mean, if you have to leave your friends, family and business contacts to go from a cumulative 82% income tax rate to a cumulative 80.5% income tax, it's probably not going to drive too many people to the border.
I suspect that it would, as abusive tax policies seem to go hand in hand with other restrictions on personal liberties.
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