US Pension Crisis Picking Up Full Speed,
by Martin Armstrong, 5/25/17
The
Pension Crisis is serious and is the catalyst that will bring everything
down. Nearly 600 State & Local governments are now in the hole and has
reached nearly $1.2 trillion of unfunded pension liabilities in FY 2014.
This reflects total pension liabilities of $4.798 trillion and total pension
assets (or fiduciary net position) of $3.607 trillion.
This staggering number is nearly 25% of
the annual GDP and accounts for roughly 97% of all public pension funds in the
United States. California is raising taxes to cover the short-fall for now, but
this is going nowhere fast. Government pensions are what destroyed the Roman
Empire and history is going to repeat.
I have stated before that there are
people on Capitol Hill who support confiscating all private 401K plans in the
country and replacing them with an allotment monthly. We know what will happen
to that one, so you better have something else besides cash. The government
cannot meet the promises for its own employees and they will turn to increasing
taxes and confiscating private property.
Comments
The
reasons for this government pension crisis are many. Excessive government debt
encouraged the Federal Reserve to lower interest rates and kept them low for
decades. The US stock market was propped up by Federal money printing, but was
wobbly for a decade. The 2008 mortgage meltdown ushered in the 2nd
Great Depression. Open borders and loose
welfare immigration resulted in trillions in welfare costs.
Pension
plans depend on more earnings and when earnings are not there, they fall behind
on funding these pensions. Pensions use the defined benefit plan model and this
model is unsustainable. The vast
majority of private sector plans are 401Ks, using the defined contribution
model. These are sustainable and
government employee pensions need to be converted to 401k-type plans. These
pension plans need to be terminated and individual balances need to be
transferred to a defined contribution plan.
To adjust for near term retirees, a separate “age weighted” plan can be
added. Government employers can continue to contribute to these defined
contribution plans. This isn’t hard.
Norb
Leahy, Dunwoody GA Tea Party Leader
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