There’s a class war coming to the world of government pensions.
The haves are retirees who were once state or municipal workers. Their seemingly guaranteed and ever-escalating monthly pension benefits are breaking budgets nationwide.
The have-nots are taxpayers who don’t have generous pensions. Their 401(k)s or individual retirement accounts have taken a real beating in recent years and are not guaranteed. And soon, many of those people will be paying higher taxes or getting fewer state services as their states put more money aside to cover those pension checks.
At stake is at least $1 trillion. That’s trillion, with a “t,” as in titanic and terrifying.
The figure comes from a study by the Pew Center on the States that came out in February. Pew estimated a $1 trillion gap as of fiscal 2008 between what states had promised workers in the way of retiree pension, health care and other benefits and the money they currently had to pay for it all. And some economists say that Pew is too conservative and the problem is two or three times as large.
So a question of extraordinary financial, political, legal and moral complexity emerges, something that every one of us will be taking into town meetings and voting booths for years to come: Given how wrong past pension projections were, who should pay to fill the 13-figure financing gap?
This is a war that has been brewing for a very long time.
I still don't like government employee unions. Labor negotiations used to be with the Union and Management. The Union knew that if it asked for too much it would kill the goose that laid the golden egg. Managment knew that it had to keep it's workers happy and on the line working but still make a profit. When Government Unions sit down at the table with Government Management, they often both sit at the same side of the table. No profit exists to pay the workers, only higher and higher taxes. Administrators have long wanted to give Unions higher and higher future benefits instead of other compensation because the costs can be masked in the short term and they won't have to raise taxes. In this process taxpayers get sold down the river with future obligations they never wanted.
Another valuable lesson here is to not trust your government. This state workers worked their whole careers and were promised a deal. Now that they have retired the government is going to come along and change the terms of it. The same thing is going to happen with Social Security. You can't trust the Government, and people should be clueing into that by now. Sphere: Related Content