COMMENTARY: Happy New Year suckers,
pay up: Your share of public pension crisis now $424,500
Posted on December
30, 2011
By Frank Keegan
Here is a New Year’s resolution every American private
sector worker must keep no matter what: Write a check for $14,150 Jan. 1 to
make up for state and municipal pension shortfalls. Prepare to write one every
year for 30 years. This is on top of all other taxes and fees governments at
all levels gouge from us.
Taxpayers –
through governments and public workers – pumped $25 billion into the top 100
pension funds in three months ending Sept. 30, according to the latest report.
Those fund’s managers paid out $52 billion and lost $199 billion in market value. How deep into the fiscal abyss
do they have to plunge us before somebody wakes up?
Even if by some miracle fund managers can meet promised
average earnings to pay benefits through 2036 — which would require an average
annual risk-free return of almost 10 percent — somebody must
come up with an additional $45 trillion for all state and municipal pension
funds in between to pay promised benefits.
That’s about $1.5 trillion a year — one and
a half times greater than the entire U.S. Defense
budget — to provide absolutely no public services. No police on
the streets, teachers in classrooms, sanitation workers picking up our trash.
No public buildings repaired or built, no food for the hungry or shelter for
the homeless, no health care for the indigent — no anything.
For decades through accounting tricks and outright lies
politicians used pension funds as secret credit cards. The Great Recession
market crash did not cause the pension crisis but merely exposed the scam.
The latest U.S.
Census
report on 100 top public pension funds, representing about 89
percent of value, for the third quarter proves the accelerating death spiral.
It shows those funds down $395 billion, 13.5 percent, from the 2007 peak of
$2.9 trillion.
Based on those numbers, taxpayers and state and municipal
workers pumped at least $28 billion total into all public pensions during in
the third quarter, and fund managers lost it all plus another $195 billion. In
addition to those losses, pensions paid out almost $58 billion
— more than double the “contributions.” That’s $56.6 billion in
benefits and $1.5 billion in “withdrawals” by those who lost all the money in
“earnings on investments.”
Those investments — which must grow every
month, every quarter, every year to pay promised benefits
— lost money in seven of the past 23 quarters and did not
produce enough income to pay benefits and expenses in three more.
None of this massive accumulating debt shows up on state and
municipal books when they claim “balanced” budgets. It just continues to accrue
and compound while politicians and their crony managers, brokers and placement
agents loot and pillage pension funds at will.
Oblivious taxpayers refuse to pay attention, and public
workers continue to cling to those who betray them.
Nobody knows what will happen when the money runs out. What
politicians refer to as “structural” deficits — deficits they
themselves structured — are set to eat more and more revenue
through health care, infrastructure repair and replacement, mandates, debt
service, catastrophe and insurance funding, and an array of cost
increases — including more for themselves
— that politicians built into the budget process.
The declining number of private sector taxpayers who pick up
the tab for everybody else — down
3.1 million, or 2.8 percent, in a decade — simply
cannot continue to fund government when all the hidden deferred costs start
hitting the abyss of reality in coming decades.
Total private
wages increased only 25 percent from 2001 to 2010, but total
official government spending increased 73 percent. The real catastrophe
is that number does not include spending politicians hid and inflicted on
future taxpayers.
False pension promises to state and municipal workers are a
big part of that secret debt and are growing every year.
The longer politicians try to stretch out the payments the
more it costs, ultimately passing a fiscal event horizon of no return.
For example, the latest census data mean that during the
past five years state and municipal pension funds paid about $98 billion more
in benefits than they earned on investments.
Total earnings on investments was about 3.4 percent a year
for the average total cash and security holdings, not the 8 percent pension
managers claim they miraculously will get every year.
What that means, best case, dear private sector worker, is
we owe $14,150 in extra taxes for 2012 and every year for the next 30 years
even if the politicians who have lied to us for decades somehow accomplish what
they failed to accomplish in the past.
Good luck on that. Happy New Year suckers. Just pay up and
shut up.
Frank Keegan is a national editor for The Franklin Center for Government and Public Integrity,
watchdog.org
and statehousenewsonline.com
. Any disgusted public employee, journalist, activist organization or citizen
watchdog who wants help exposing government waste, fraud and abuse may contact
him at: frank.keegan@franklincenterhq.org
For a comprehensive primer on
state and municipal government pensions, check Statebudgetsolutions.org and sunshinereview.org . And for an aggregation of news from around
the country, check Pensiontsunami.com .
http://www.franklincenterhq.org/2914/commentary-happy-new-year-suckers-pay-up-your-share-of-public-pension-crisis-now-424500/