Pension Debt Exceeds 40k Per Household
. . . and we know the Boomers are not going to pay this off, it will be left for the kids.
Read more below.
"According to a first-of-its kind pension-tracking website created by a team at Stanford’s Institute for Economic and Policy Research, America’s unfunded pension liabilities—the difference between the value of state pension funds and the amount owed to public sector workers—totals over $4.8 trillion, or $41,219 per household."
The study uses a reasonable, conservative rate of return, something the pension funds intentionally do not do, for if they did, the public might catch on that this is all a Ponzi.
"The findings highlight the fact that state pension shortfalls are not some marginal worry, but one of the most pressing fiscal problems facing the United States—quite possibly more urgent than the U.S. federal debt. Because while the federal debt is higher (at $19 trillion), federal tax revenues are several times larger, as well. Moreover, the federal government, unlike states, can issue debt in its own currency (currently at record-low rates) and even print money to cover its obligations. And while the federal debt as a percentage of GDP has increased at an alarming rate over the past several years, pension debt has grown even faster."
This is a shocking problem in some states. Unsurprisingly, the problem is most pronounced in the Blue Model states, and it is they who will need to be bailed out. Mead ends:
"But it seems increasingly likely that the states and localities in the most dire straits will one day be forced to approach the federal government for a bailout, Puerto Rico-style. In the short run, Congress should make policy changes to minimize this risk—but in the long run, it should start planning for how to manage the fallout of the looming pension meltdown. Will any federal assistance be forthcoming, and if so, on what terms?"
I suspect the feds will need to bail some out. I do not support unfettered cash bailouts, however. Instead, a strong requirement for elimination of all state, and local pensions, and replacement with 401(k) style retirement plans, and more than 70% of the relief in the form of loans to the state, with long term low interest rate loans. The people within these states need to pay for these pensions, and not the people in the US generally. Some amount may need to slip through the cracks but this should be small.
The states are about to go through a serious inflection, which will demand more efficiency, and better husbanding of resources. I can hardly wait.