Pension Tsunami, Record Federal Spending Increase U.S. Debts by $4.2 Trillion; State Debts Explode

by Hans Bader on December 31, 2011 · 3 comments

in Labor, Politics as Usual, Zeitgeist

Massive budget deficits and mushrooming pension, Social Security, and Medicare obligations increased the federal government’s long-term obligations by $4.2 trillion in 2011 — more than three times the $1.3 trillion official figure for the federal budget deficit, notes a Washington Post article. (Even the official budget deficit is more than eight times the size of the budget deficit back in 2007.)

But that’s just the federal shortfall. States, too, have trillions in unfunded pension obligations, which they use funny accounting methods to conceal, resulting in states claiming to have just a small fraction of the unfunded pension liabilities they actually have. State pension obligations have repeatedly been expanded in ways that were supposedly “revenue neutral,” but which any honest legislator could see would actually cost taxpayers countless millions. Under one such expansion, a Philadelphia councilwoman recently “retired” from her position for just a couple days in order to collect a $478,000 pension, then returned to office on January 2. She took advantage of a pension-law change that was “touted as being ‘revenue neutral’” when it was introduced. “It’s been anything but that. Since its introduction, Philadelphia’s DROP program has cost the city $258 million in extra pension costs over a decade, according to a 2010 Boston College study.”

In municipalities politically dominated by public-employee unions, municipal employees like cops sometimes end up retiring in their 40s with six-figure pensions. In 2006, when New York City claimed its pensions were fully funded, the City’s own actuary concluded it faced a shortfall of perhaps $49 billion. (Many municipalities are far worse: indeed, New York City “has often been held out as an exemplar in funding its pensions” properly.) To push bills increasing public-employee pensions, unions use paid “experts” who deliberately low-ball the costs of pension increases, like a former New York City actuary who admitted “that he routinely skewed his projections to favor the unions — he called his job ‘a step above voodoo’ — and admitted that he had knowingly overreached on the pension bill by claiming that it cost nothing, either now or in future years.”

For its part, the Obama administration has run up the biggest budget deficits in history. “President Obama’s policies would add more than $9.7 trillion to the national debt,” the Congressional Budget Office said in 2010. That’s many times the cost of the Iraq and Afghanistan Wars combined. Obama’s $800 billion stimulus package, which benefited public-employee unions, will actually shrink the size of the economy in the long run, the Congressional Budget Office says.

Robert Cogan December 31, 2011 at 6:42 pm

I might be concerned about these “Deficits of Mass Destruction” after you explain why I shouldn’t be more concerned about the Fed creating $2.7 trillion of “quantitative easing,” and $7.7 trillion (Bloomberg) or $16.1 trillion the Fed created to loan to the gambling banks (GAO Report 11-696.) Worried about inflation? Start expressing concern to the Vampire Squid, Goldman, and Morgan Stanley about speculation in commodities.
To reflate the economy, put the Fed under the Treasury, or restructure credit allocation by democratizing the Fed and create all the greenbacks (money created without debt!) needed to hire millions and stop foreclosures, reflate housing.

elaine marie December 31, 2011 at 7:32 pm

What a fiscal mess.

elaine marie December 31, 2011 at 7:33 pm

This is a fiscal mess.

Comments on this entry are closed.

Previous post:

Next post: