Tag Archives: Intergenerational Theft

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How exposed is your state to the problem of underfunded pensions?

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I am thinking about moving to a new state in the future, and one of the factors I am considering is underfunded pension liabilities. This basically refers to the ability of a state to pay out pensions to retiring public sector employees going forward. I’m going to tell you everything you need to know to solve this problem in this post.

First, Investors Business Daily explains the problem:

A new report by Hoover Institution Senior Fellow Joshua Rauh shows that, unless action is taken soon, many local governments could face bankruptcy because they can’t meet their pension obligations.

[…]The problem is surprisingly simple: States and cities overestimate returns on their pension fund investments, while systematically underfunding them. The result is a growing deficit that will require massive tax hikes or dramatic and painful cuts in government services and promised pensions to public workers.

Rauh’s study looked at 564 state and local pension systems, representing $4.8 trillion in pension liabilities and $3.6 trillion in assets — for an apparent current deficit of just $1.19 trillion.

So far, so good. But Rauh notes the average expected return on pension assets is about 7.6% — which means a doubling every 9.5 years. He calls that assumption “wildly optimistic,” and says a more realistic assumption would be the Treasury bond rate of 3% or lower — less than half the expected return.

Unless pension managers, politicians and voters do something now, the unfunded liabilities of the national system will continue to grow out of control, reaching $3.4 trillion in just 10 years. States and cities across the country would have to raise taxes massively to keep from becoming insolvent.

Right now, state and local governments set aside about 7.3% of revenues for public pensions. To keep the funding gap from exploding and taking down governments across the nation, pension spending would have to rise to  17.5% of revenues on average — roughly equal to a 240% tax increase.

How did things get so bad? Generations of feckless politicians have refused to face down public employee unions, which have negotiated massively expensive pensions for their members while concealing their true cost. Politicians have gone along with it because, heck, it’s not their money and anyway, the problems will take place long after they’re out of office. That’s where we are now.

States and cities will come under intense pressure to raise taxes on local citizens to pay for this travesty. Instead, they should get rid of the public employee unions that have plundered the public for too long and have made local government inefficient, expensive and dysfunctional. If not, they can expect to face the same economy-crippling effects as Detroit, San Bernardino and a number of other cities have — financial insolvency.

Now, obviously states with kick-ass governors like Scott Walker of Wisconsin are not going to have the same exposure to such problems as incompetent governors like Maggie Hassan of New Hampshire. Scott Walker know how to rein in public sector unions.

Let’s get the numbers to confirm this hypothesis.

Bloomberg has the numbers:

Bloomberg ranked 49 U.S. states based on their pension funding ratios in 2014 under GASB 25. (Delaware is not included because of insufficient data for GASB 25.)

Here are the best states… Wisconsin is 100% funded:

States with the best-funded pension liiabilities
States with the best-funded pension liiabilities

And actually there is a comprehensive analysis of the fiscal solvency of all the states right here from George Mason University.

Here’s the map:

Overall fiscal solvency by state
Overall fiscal solvency by state

I notice that the deep blue states like California, Massachusetts, Illinois, Connecticut, New Jersey, etc. are just horrible states. No wonder everyone is fleeing them in droves. Socialism doesn’t work. Eventually, the money runs out.

So, if you’re thinking of moving to a new state, look at that. And if you don’t want to move, then vote for governors like Scott Walker who will take on public sector unions – otherwise, you’re headed for a big tax hike in the future, to pay for the big spending liberals of the past.

News

Republican senator Tim Scott pushes school choice in MSNBC interview

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I managed to find some of the transcript here on Newsbusters.

Let Tim Scott explain it:

THOMAS ROBERTS: This is Thomas Roberts by the way. You said you are concerned about kids that growing up in the wrong zip code and — like yourself that had a tough start on the way out. But if we look at agencies that are following some of your voting records, they have concern. And the NAACP has given you an “F” on their annual scorecard. They also say that you voted against the ACA. You voted to hold Attorney General Eric Holder in contempt of Congress. You oppose the Congressional Black Caucus’ budget. Delayed funding on a settlement between the U.S. and black farmers who say they were prejudiced against because of their race. So how do you respond to that, if your true concern is about lower-income families and kids? 

TIM SCOTT: Let’s just ask ourselves if we look back over history when the congress was controlled by the Democrats for 40 consecutive years. If we look at the result of that control, what has happened in black America? We saw greater poverty. If we take statistics from the 1970s to the 21st-century, what we see very clearly is that poverty’s gone from 11% to 15%. These are classic examples of the policies of the left have not worked. I will tell you, that if I have an “F” on the NAACP scorecard, it’s because I believe progress has to be made and the government is not the answer for progress. I was a kid growing up in poverty. I had a mentor who was a Chick-fil-A operator named John Moniz who taught me that the brilliance of the American economy happens through business ownership and entrepreneurial spirit. So whether you own the business or not, success is possible if you, a: have a good education, b: have a strong work ethic. For the average person who can work. These two key components come together and form a foundation. That is the way that you eradicate poverty. All the social programs that we’ve had. We have the largest government we’ve ever had in the history of the country. We have more nonprofit organizations working on the same issue. And yet we have higher percentage of people living in poverty. The key it seems like is individual freedom and economic opportunity, fusing those together in an agenda that focuses on education seems to leave forward.

Elsewhere in the interview, he talks about how Indian-American Republican Governor Bobby Jindal has pushed hard for vouchers for the poor in Louisiana, and how the D.C. Opportunity Scholarship voucher program helped the poorest black students to get a quality education – even though Barack Obama opposed it as a favor to their public sector union bosses.

See, here’s the deal. If Republicans want to get serious about winning the votes of poor people and minorities, they don’t have to pass policies that discriminate against the wealthy or against whites. They just have to pass good policies. It shouldn’t matter what color anybody’s skin is. School choice is a police that disproportionately benefits the poor and minorities, but it doesn’t discriminate. You just hand money to the parents whose children are stuck in an underperforming public school, and then the parents decide where to send their child. This is better than forcing parents to have to send their kids to a failing public school. It is not right for a child to be handed a garbage education just because lazy unionized Democrats don’t want to face competition from private schools. Kids come first!

Let’s learn about school choice from the Cato Institute and the Heritage Foundation.

Cato Institute:

The Heritage Foundation:

Awesome!

This is how you build Republican  voters and do the right thing at the same time. Republicans like to help the poor. But we also like to screw the public sector unions. Private unions are fine – public sector unions are poisonous. We have to destroy them and save the children, at the same time. Everybody wins! Well, except the Democrats.

News

Big government spending is suffocating the next generation with debt

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Youth unemployment by ethnicity (5/13)
Youth unemployment by ethnicity (5/13)

Libertarian economist Veronique de Rugy writes about it in Reason magazine.

Excerpt:

A word of caution for kids heading off to college this year: Your degree may be worth less and cost more than you think. Your job prospects will likely be grim, whether or not you get that sheepskin. Oh, and you’re on the hook for trillions in federal debt racked up by your parents and grandparents.

Washington has willfully ignored the looming crisis of entitlement spending, knowingly consigning young Americans to a future of crushing debt, persistent underemployment, and burdensome regulation. Politicians on both sides of the aisle share the blame.

This summer, Congress made a big bipartisan show of cutting student loan rates to 3.4 percent from an already artificially low 6.8 percent. But even that seemingly helpful gesture will wind up hurting the Americans it claims to help. Federal student aid, whether in the form of grants or loans, is the main factor behind the runaway cost of higher education. Subsidies raise prices, leading to higher subsidies, which raise prices even more. This higher education bubble, like the housing bubble before it, will eventually pop. Meanwhile, large numbers of students will graduate with more debt than they would have in an unsubsidized market.

And when those new, debt-laden graduates head out into the labor market with their overpriced diplomas, they may not be able to find a job. According to data provided to me by my Mercatus Center colleague, former Bureau of Labor Statistics (BLS) commissioner Keith Hall, fewer than half of Americans today between the ages of 18 and 25 are employed. For those in that cohort actively on the job market, the unemployment rate is 16 percent, versus 6 percent for job-seekers aged 25 and above.

These young folks are also more likely to be long-term unemployed: While accounting for just 14 percent of the labor force, they make up 19 percent of the long-term unemployed, defined by the BLS as 27 weeks or longer.

The lucky few young’uns with jobs of some kind also suffer from rampant underemployment. In a recent blog post, Diana Carew of the Progressive Policy Institute wrote: “In July 2013, just 36 percent of Americans age 16-24 not enrolled in school worked full-time, 10 percent less than in July 2007.” In other words, of these 17 million young Americans, 5.6 million were working part-time, 3.2 million were unemployed, and 8.4 million were out of the labor force altogether.

I really recommend you read the rest of the article, especially if you aren’t following what Obama’s policies are doing to our economy. Special attention is given to the effects of Obamacare on job creation.

Just as a community service, I want to post for you young people (and your parents) a list of the majors that lead to higher paying jobs:

Top 10 highest-paid college majors

  1. Petroleum Engineering: $120,000
  2. Pharmacy Pharmaceutical Sciences and Administration: $105,000
  3. Mathematics and Computer Science: $98,000
  4. Aerospace Engineering: $87,000
  5. Chemical Engineering: $86,000
  6. Electrical Engineering: $85,000
  7. Naval Architecture and Marine Engineering: $82,000
  8. Mechanical Engineering: $80,000
  9. Metallurgical Engineering: $80,000
  10.  Mining and Mineral Engineering: $80,000

And here are some majors that you should avoid at all costs:

  1. Counseling Psychology: $29,000
  2. Early Childhood Education: $36,000
  3. Theology and Religious Vocations: $38,000
  4. Human Services and Community Organization: $38,000
  5. Social Work: $39,000
  6. Drama and Theater Arts: $40,000
  7. Studio Arts: $40,000
  8. Communication Disorders Sciences and Service: $40,000
  9. Visual and Performing Arts: $40,000
  10. Health and Medical Preparatory Programs: $40,000

So young people need to be careful what they study in order to get a job that will allow them to pay off all the government debts that their teachers were busy running up. Their teachers taught them that government spending was good, but their teachers aren’t going to be paying for the government spending. They are the beneficiaries of the increased government spending. The pupils are the ones who will have to work to pay for the spending on the social programs enjoyed by their teachers.

It’s very important for young Christians to understand that degrees are getting more expensive, and it’s important to choose a field that is going to produce a return on your investment. Not only do STEM (science, technology, engineering and math) degrees get you a job that pays, but it has other benefits. For example STEM degrees grind out every last bit of impracticality and entitlement-feeling out of you – because in a STEM program, no one cares about your “specialness”. You solve problems or you fail the class. It’s not a situation where you can just repeat what the professor says in order to get good grades, as is often (but not always) the case in the humanities.