Those of us who have even a brief history in business economics understand you can’t make promises that are unsustainable. You’d have to be a fool to make a business decision now, that would result in undetermined future liabilities decades in advance. That’s exactly what our municipalities, cities and states have done.
The pensions are a huge issue. Certainly, employers contributed to their own pensions in one way or another, but unless some sort of miracle happens, most of the liabilities will remain unfunded and there simply will be no money left for payouts.
You’ve heard about cities considering bankruptcy, which would allow them to reconfigure the current liabilities into something that might be sustainable. I simply do not think this is possible. How the heck would anyone be able to even come close to figuring out how much health care will cost in 20 to 30 years? The cost of living? No way would I want to take that business gamble.
But the our states have been at the black jack table gambling for years. We’re crushing the future for generations of Americans by handing them this burden.
From the New York Times.
Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.
But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.
Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.
I really don’t think the bankruptcy route is an option for states, but I’m no expert. I’d much rather see the states pop a reality pill and deal with the issue at hand. Over a period of time, public pensions must end and be replaced by personal financial planning and self-responsibility.
The federal government could set a good example by actually dealing with a very similar problem … Social Security.