If you have been following my writing for any length of time, you’ll know that I have been loudly and regularly sounding the alarm bell on the pension systems of America’s cities and states. Here is a sampling of the pieces I have written on the subject:
- Pensions are Still Hiding from the Truth
- Dangerous Rules Make American Pensions Riskier
- Pensions Should be Fearful
- Pensions: Left on the Hook will be the Taxpayer
- Pensions in a Load of Trouble
Today, Sarah Krouse reports for The Wall Street Journal that the pension hole in the United States for cities and states is the size of Japan’s entire economy. Sitting in Rhode Island, I have witnessed the plight of Central Falls, which was forced to cut pensions in 2011. Krouse writes: “What happened in Central Falls is ‘certainly not going to be a one-off,’ said Robert Flanders, who acted as the city’s state-appointed receiver. ‘Because other cities and towns, not just in Rhode Island but across the country, are still in bad shape.'”
For the past century, a public pension was an ironclad promise. Whatever else happened, retired policemen and firefighters and teachers would be paid.
That is no longer the case.
Many cities and states can no longer afford the unsustainable retirement promises made to millions of public workers over many years. By one estimate they are short $5 trillion, an amount that is roughly equal to the output of the world’s third-largest economy.
Certain pension funds face the prospect of insolvency unless governments increase taxes, divert funds or persuade workers to relinquish money they are owed. It is increasingly likely that retirees, as well as new workers, will be forced to take deeper benefit cuts.
Read more here.
E.J. Smith - Your Survival Guy
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