Thingish Things

Pension Bomb Quantified

Written By: William F. B. O'Reilly - Jun• 22•11

Reports Reuters today:

“U.S. state and local governments will need to raise taxes by $1,398 per household every year for the next 30 years if they are to fully fund their pension systems, a study released on Wednesday said.

JGI | Getty Images

“The study, co-authored by Joshua Rauh of Northwestern University and Robert Novy-Marx of the University of Rochester, both of whom are finance professors, argues that states will have to cut services or raise taxes to make up funding gaps if promises made to municipal employees are to be honored.”

New Jersey households would be hit the hardest, according to the study.  They would each owe $2,475 in extra taxes each year for the next three decades.  But it would be far worse than that.  Not all households pay income taxes.  Almost half pay no federal income taxes today.  So the cost to families and individuals would be far worse than this study suggests. And what will happen when interest rates spike, as they invariably will?

An estimated $three trillion and counting is owed to U.S. pension plans right now.  But many states, New York included, still aren’t doing anything about it.  It’s madness.


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One Comment

  1. Your Friend says:

    I know we never agree on this topic, but all of this disappears if the jobs situation is improved. It’s a fact of economics. Jobs are all that matters and the political games being played that are artificially repressing jobs growth is a crime. There are a lot of people on your side of the aisle who are trying to innocently pretend that no such games are being played. I’m not buying. The 2012 election will inform us whether the rest of the independent electorate is buying or not. My gut tells me that Mitt Romney simply saying the word “jobs” a lot will not assure his election. Action, as we all know, speaks louder than words. Action up, people.

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