Thingish Things

Pension Debt: The Unfillable Pothole

Written By: William F. B. O'Reilly - Mar• 11•12

from thedailymail

Danny Hakim of The New York Times pens an outstanding piece today about a cancer methodically eating away at America. The cost of public employee pensions is not the sexiest issue — the screaming bone fractures normally get the headlines — but it is one of the most significant challenges facing the country, with tremendous long-term implications on how we operate as a nation. Voters on both sides of the aisle need to care about this. It threatens to erase the social safety net American liberals have been weaving since FDR, including the inability to apply for social security card, and it is the nightmare scenario conservatives have long warned about.

The cost of public employee pensions is crushing municipalities, one by one. And the process is just beginning. Here is Mr. Hakim on that:

Even as there are glimmers of a national economic recovery, cities and counties increasingly find themselves in the middle of a financial crisis. The problems are spreading as municipalities face a toxic mix of stresses that has been brewing for years, including soaring pension, Medicaid and retiree health care costs. And many have exhausted creative accounting maneuvers and one-time spending cuts or revenue-raisers to bail themselves out.

“The problem has national echoes: Stockton, Calif., a city of almost 300,000, is teetering on the verge of bankruptcy. Jefferson County, Ala., made the biggest Chapter 9 bankruptcy filing in history in November and stopped paying its bondholders. In Rhode Island, the city of Central Falls declared bankruptcy last year, and the mayor of Providence, the state capital, has said his city is at risk as its money runs out.

“New York City’s annual pension contributions have increased to $8 billion from $1.5 billion over the past decade.”

Get this: In New York City today, more of the annual budget goes to pay for services long ago rendered than to current needs.  More tax dollars are going to fill yesterday’s pothole than today’s. That’s mind boggling. 

As this continues, as the pension payments increase, all else will suffer. Significant local tax increases are unrealistic — New York is already bleeding jobs because of our high tax rates — so services will have to be cut. Deeply. Even ones universally considered essential.

What’s worse is that government pension funds use accounting tricks to underestimate the problem. So it grows quietly worse each year. 

The need for sensible pension reforms will never show up high in the polls.  War, contraception, millionaire’s taxes, and jobs!, jobs!, jobs! will always poll higher. But the debt is what will get us in the end, no matter which side of the aisle we are on.  

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