Move over housing bubble and student loan bubble: here’s pension bubble!

Obama 2013 Budget Debt Projection
Obama 2013 Budget Debt Projection

Recently, I was talking to Dina about which state I would like to live in. I looked at a whole bunch of factors like tax rates, housing prices, religious liberty laws, voting patterns… but I also looked at state obligations to pay pensions.

Let’s take a look at the story from the Washington Examiner to see why this is important.

It says:

Years of gimmicks and politically motivated benefit increases for government workers have left America’s states and municipalities with pension funds that are short at least $1.5 trillion — and possibly as much as $4 trillion if the investment returns of these funds don’t live up to expectations in coming years.

[…]Since 2007, states and localities have been forced to increase annual contributions into pensions by $43 billion, or 65 percent, and in various places these rising payments are crowding out other government services or driving taxes higher or both. Retirement debt has even played a crucial role in high-profile government bankruptcies — including in Detroit; Stockton, California; and Central Falls, Rhode Island. Fixing the problem is proving expensive, and it won’t happen quickly in places with the worst debt.

[…][O]fficials in Stockton spent years enhancing benefits to workers without understanding the debts they were accruing. The city agreed back in the 1990s, for instance, to pay not only its own share of contributions into the pension system, but those of staff, too. It also guaranteed healthcare for life for retirees.

[…]Facing $400 million in pension debt and $450 million in promises for future healthcare, the city declared bankruptcy in 2012. Employees lost some of their perks, like healthcare in retirement, but citizens suffered, too. Trying to save money, the city cut essential services, including the police department, and crime soared.

[…]Places that cannot reform pensions, or where legislators were slow to act, are inevitably seeing tax increases to finance these steep obligations. In Pennsylvania, 164 school districts applied in 2014 to increase property taxes above the state’s 2.1 percent tax cap. Every one of them listed pension costs as a reason for the higher increases. In West Virginia, the state has given cities the right to impose their own sales tax to pay for increased pension costs.

Several cities, including Charleston, have already gone ahead with the new tax. Chicago Mayor Rahm Emanuel tried to impose a $250 million property tax increase last year to start wiping out pension debt in the Windy City, where pensions are only 35 percent funded. When the City Council balked, Chicago instead passed $62 million in other taxes, including a levy on cell phone use, as a stopgap measure. But the city faces a pension bill that is scheduled to rise by half a billion dollars annually in 2016.

I was able to find a helpful table that shows the solvency of all the public sector pension plans in each state. There are sensible states where I could live. It’s also important to look at the trend to see what direction the state is moving in, and thankfully the table had that information.

Anyway, here is the point I want to make about this.

When I look at these numbers, I feel sad, because it means that I have to be careful about my spending, and not spend too much on things that are fun in the short-term. I also cannot stop working to take a year off to go backpacking in Europe, because that would wreck my resume, and lose me a whole bunch of earned income. Sometimes, reality causes us to feel bad like that, so we run away from it. We find people who will agree with our feelings, and we shut out people who see things clearly. But we as Christians should not make decisions based on intuitions and feelings. And it doesn’t even work if you wrap up a bad decision in spiritual language, i.e. – “God told me…”, either. As much as I might feel like spending my money on frivolous things, I know in my mind that I cannot do that. I don’t like having constraints on my freedom, but to ignore data like this in my decision-making would not end well for me.

Sue Bohlin of Probe Ministries recently wrote a wonderful post about short-term pain versus long-term pleasure.

She writes:

Decision-making often involves choosing between short-term pleasure or short-term pain. (Usually it’s more like short-term inconvenience.)

Short-term pleasure often leads to long-term pain, and short-term pain often leads to long-term pleasure. What doesn’t work, and is a horribly unrealistic expectation for life, is short-term pleasure leading to long-term pleasure! (Wouldn’t THAT be nice?!)

Maturity and wisdom is displayed by the choices we make, especially when we exercise patience and self-control, not insisting on the instant-gratification jolt of “I want it NOW!!!” Many of our choices for pleasure in the right-now end up costing us down the road, causing pain later. You know, like that fourth brownie that tastes soooooo good in the moment, but then you can’t zip up your jeans a few days later. Or indulging your child’s demands and whims today because you want to be the “cool parent” and you want them to like you, but then you start to notice the ugliness of that child’s sense of self-absorbed entitlement. Short-term pleasure, even when that pleasure is simply trying to avoid pain, results in long-term unpleasant consequences.

But when we recognize the value of self-control and self-denial in the present, so that we can reap the harvest of pleasure in the future, that’s wisdom. Mark Twain advised, “Do one thing every day you don’t want to do.” That’s good advice, but of course God thought of that much earlier! Using self-control and self-denial is how we fulfill the biblical idea of not indulging the flesh (Galatians 5:16).

[…]Jesus said, “If anyone wants to become My follower, he must deny himself, take up his cross daily, and follow Me.” (Luke 9:23) Denying ourselves, taking up our cross, and following Jesus are all about short-term pain with major long-term pleasures!

Sue is wise. And her newest post is all about how to deal with feelings.

She says:

What is the biblical perspective on how to handle overwhelming feelings?

There are healthy and unhealthy ways to do that.

The healthy way to deal with strong feelings starts with thinking wisely about feelings in general. Our pastor often says that feelings are real (we do feel them, often intensely), but they’re not reliable (they make terrible indicators of what is true). So we should acknowledge them, but not be led by them.

Especially powerful, overwhelming feelings.

Allowing yourself to be controlled by your feelings is unwise and immature. The flip side of that is our example of Jesus in the Garden of Gethsemane. No one ever experienced the strength of horrific feelings like He did, to the point of sweating blood. He allowed Himself to feel His feelings, but then He turned in trust to His Father, submitting to His will. He set the bar for how to handle overwhelming feelings: feel the feelings, and trust the Lord.

Often, though, especially in the young, people deal with their strong feelings in unhealthy ways.

Feel the feelings, but don’t let them into your decision-making.

3 thoughts on “Move over housing bubble and student loan bubble: here’s pension bubble!”

      1. Of those, I think the best are Wyoming, Oklahoma, South Dakota (a fantastic state – I would be there but for the winters), Texas, with Texas at the top actually.

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