The Coming Pension Implosion



From a few days ago on Louisiana….

It’s hard to predict how deeply we must dip the gourd into the magic fountain of other people’s money to make good on the state’s current obligations. What is clear is regardless of whether one goes with the rosy estimates floated by those in the pension business or the much scarier numbers arguably more objective analysts reach, it would take tens of thousands out of Louisiana wallets just to plug the existing gap.

In other words, what Louisiana and practically every other state across this great land faces is a system that is — all together now — unsustainable.

It is beyond belief everyone doesn’t see this, which means everyone does. The state workers drawing these handsome pensions want them. They fight like cornered tigers over having to contribute another dollar to what they regard not as some extraordinarily generous entitlement paid for by folks who have no such protected eggs themselves, but as some kind of right, confined to them, as sacred as free speech.

Yeah, well, that which can’t continue won’t.  We merely argue over exactly when it ceases to continue and how ugly it gets when it does.  The answer to the latter, by the way, is “very.”

Illinois is in much worse shape than Louisiana, incidentally.  Their so-called “reform” (which wasn’t really) has led to four lawsuits which are now combined and will be heard in Springfield.

The lawsuits are brought by groups of employees, laborers and retired teachers who sought to have the pension law found unconstitutional. The lawsuits contend that scaling back cost-of-living increases, increasing the retirement age and other changes violated a constitutional provision that government worker pensions should not be diminished or impaired.

Yeah, well, go ahead and try to rule that this must be upheld.

There is no magical money fairy tree folks.  And while you can sue all you want and you can even try to force massive tax increases (this would roughly double property taxes in Chicago) you can’t force people and businesses to remain exposed to this outrageous level of increase in cost.

Chicago, for example, is mandated to come up with a staggering $590 million next year.  With the city having about 1 million households this is anet tax increase of over $500 each — and that’s just for one year.

To put not-too-fine a point on it Chicago’s property tax currently raises about $825 million annually.  In other words, property taxes would have to rise by about 72% — and that’s just one year’s “contribution.”  It does not bring the system into balance on a perpetual basis.

The worst part of the budget mess on both a state and federal level is that it is essentially all being driven by one thing — an out-of-control “health care” system that has become monopolistic and worse, enjoying protection from laws such as the Sherman and Clayton Acts that are designed to prevent this very behavior by any business or group of businesses.

Having fought for and won protection from those laws, and having used that protection for decades to grow its share of the economy from about 3% to nearly 20% this “industry” now threatens to bankrupt not only the federal government but state and local governments as well — while we, the people sit back and do exactly nothing about it.

There are answers to this problem as I have repeatedly outlined over the last few years — such as what I outlined back in 2012 before the last election.

The Market Ticker

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