Public pension funds across the U.S. are hiding the size of a crisis that’s been looming for years. Retirement plans play accounting games with numbers, giving the illusion that the funds are healthy.
The paper alchemy gives governors and legislators the easy choice to contribute too little or nothing to the funds, year after year.
The misleading numbers posted by retirement fund administrators help mask this reality: Public pensions in the U.S. had total liabilities of $2.9 trillion as of Dec. 16, according to the Center for Retirement Research at Boston College. Their total assets are about 30 percent less than that, at $2 trillion.
With stock market losses this year, public pensions in the U.S. are now underfunded by more than $1 trillion.
That lack of funds explains why dozens of retirement plans in the U.S. have issued more than $50 billion in pension obligation bonds during the past 25 years — more than half of them since 1997 — public records show.
John Bolton got a lot of grief last week for suggesting it would take the bombing of an American city to get people’s attention about the serious terrorist threats out there, but maybe his example is useful for the economy. The way I see it, with the market down to 90’s levels, unemployment exploding, the collapse of the financial sector, the trillions in lost value in the market and home prices, and the various other horrible economic news, if our economy was a country, we would already have had the equivalent of New York City, Los Angeles, Chicago, Houston, Philly, Phoenix, Dallas, and San Diego reduced to rubble. This pension liability is just a mop-up operation, threatening the next tier of cities with annihilation, equivalent to losing Charlotte, Columbus, Austin, and Jacksonville.
We are so screwed.
*** Update ***
I should probably add there is an obvious fix to this. Clearly more of us need to stand athwart history and cut open a Lipton tea bag while shouting porkulus. Obviously, that is our road to salvation.