American government pension funds are short what they owe government workers by some $2 trillion. That does not show up in the national debt, of which every taxpayer recently owed some $150,000 and counting, plus interest. Either retiring government workers will be stiffed or taxpayers will make up the deficit when it comes due or some combination of those will be imposed. Wanna bet?
This deplorable but readily predicted condition is a direct result of unethical, corrupt government, assented to by citizens who, were they not mostly public school products, likely would have known better. However, maybe they would have ignored what they knew, our species is good at that.
Let’s parse the inescapable corruption in both government pensions and government employee unions. It’s at this point, a bit lick picking at a scab, but we do that, too.
Pensions for government workers are corrupt these days because any financial type knows that they cannot be paid and it is therefore unethical to promise them. You must, if you pay any attention at all, know that private industry abandoned pensions in favor of 401(k) plans decades back. Along about the time, by no coincidence, that the Federal Reserve started holding interest rates too low for investors in ‘safe’ investments such as bonds, to return normal earnings for the use of other people’s money. Pension plans since then, have too often been unable to earn enough to cover their pension obligations. (Government helping us …) Meanwhile, the government repaid its own debts at lower interest than the market would have assigned, so it profited while the pension funds suffered. Corrupt misuse of power, right?
There’s more. Government knew it would be unable to pay the pensions over time, but instead of following private industry with their abandonment, it buckled to union pressure and retained them. When you allow unions in a two-party system, you have set up an auction for the union; it sells its services and members to the highest bidder, usually in the U.S, Democrats. From there, the union owns those politicians and the citizens drop to a distant third place. More corruption, right?
By now of course, the spreading corruption, without a strong public presence of religious principles anymore to restrain it, has led to our ‘crony capitalism’ that has merged politicians, business leaders and union bosses into one unprincipled and greedy if not happy family of mutual back-scratchers. Only the citizens are excluded.
We should note that this hangs over state and local government most heavily. A few places have gone bankrupt, mostly from pension obligations; Detroit is the most notable to date. The politics swirling around that procedure can only be imagined but the obviously faux bankruptcy conjured over the GM bankruptcy proceedings by the Feds (to protect UAW pensions) may prescribe a pattern. Or not; we’ll see. Presidents Bush and Obama could still conjure up bailout money in those days. Now? Wanna bet, again?
Remember King Damocles with the sword hanging over his head? Now it’s the cities and state and the sword is labeled: “Pensions.” While the suspending thread (called ‘the bond market’) is thinning. Just, you note, as zillions of baby boomers are starting to mob the retirement scene. Gonna be a great retirement party coming up … We’ll just have to see to whom the waiter brings the bill …