There’s a class war coming to the world of government pensions.The haves are retirees who were once state or municipal workers. Their seemingly guaranteed and ever-escalating monthly pension benefits are breaking budgets nationwide.
The have-nots are taxpayers who don’t have generous pensions. Their 401(k)s or individual retirement accounts have taken a real beating in recent years and are not guaranteed. And soon, many of those people will be paying higher taxes or getting fewer state services as their states put more money aside to cover those pension checks.
At stake is at least $1 trillion. That’s trillion, with a “t,” as in titanic and terrifying.
The figure comes from a study by the Pew Center on the States that came out in February. Pew estimated a $1 trillion gap as of fiscal 2008 between what states had promised workers in the way of retiree pension, health care and other benefits and the money they currently had to pay for it all. And some economists say that Pew is too conservative and the problem is two or three times as large.
Here's a dirty little secret for those anti free enterprise "progressives" who believe those cake jobs with the cushy benefits will be there for life.
Those pension funds are invested in those same private companies you detest so much. Without a flourishing private sector, your pension assets might as well consist of tumbleweed.
Oh and your job, without that private sector, where will the taxes come from to cover your fat ass position with benefits?
So instead of killing the golden goose, why don't we work on the attitude that the private sector isn't some sort of evil vulcan invasion.
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2 comments:
When the economy does a downturn the private sector gets a double-hit. First our 401K takes a dive, meaning that our retirement fund just took a hit. Then public pensions take a dive, meaning that our taxes have to go up to finance the shortfall. We have to save both for us and them, and they are getting a bit heavy to keep carting around.
We are going to have to adjust pensions. People that were promised money from the government are going to complain, but they never should have trusted the government anyway.
Starting with the invention of social security type systems, governments in the western world have been building the pension bomb. Keynesianism has been added to increase the power of the pension bomb. The last 30 years of deficit policy attached the fuse oh the bomb. And the Financial Crisis lit the fuse. It doesn't take a CPA to realize that there will be a boom-boom soon. It doesn't take a rocket scientist to know that boom-boom means no pension instead of a smaller one.
So what are politicians doing about it? Putting out the fuse? Defusing the bomb? Nope. Their answer, backed up by Keynesianism, Paul Krugman, and the Deocratic Party, is to run up even bigger deficits. This makes the bomb even bigger. I don't expect much better from republicans if they regain power. The "third rail" of pensions remains the biggest danger to the economy of the future, yet it seems to be off limits until it blows.
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