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Unfunded Benefits Dig States’ $3 Trillion Hole: Orin S.
Kramer
Orin S. Kramer
Bloomberg
Thursday, January 21st, 2010
Everyone seems to know the current path of federal fiscal policy
is a deathtrap over the long term. What’s peculiar is
the relative inattention to the balance sheets of state and
local governments.
Hidden behind accounting fictions, the politically unspeakable
reality is that public employee pension systems are under-funded
by more than $2 trillion. Add more than $1 trillion in unfunded
health-care benefits for retired public employees, and state
governments face protracted structural deficits ranging from
challenging to insurmountable.
Unfunded promises are the equivalent of government debt. The
burden of promises made by state governments to their employees
-- effectively an invisible wealth transfer from future taxpayers
to current and prospective public-sector employees -- amounts
to about one quarter of U.S. gross domestic product. The strength
and durability of the current economic recovery are unknowable;
that state and local governments, which employ one in nine workers,
will be a drag on that recovery is certain.
Ultimately, mathematically unsustainable trends must reverse.
As with New York City in the late 1970s, eventually the federal
government may get involved in redefining the services state
and local governments provide, the benefits paid to public employees
and the burdens on taxpayers. States cannot kick the can down
the road ad infinitum.
Full
article here
"When the people find they can vote themselves
money, that will herald the end of the republic."
- Fall Of The Republic - Buy
the DVD here
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