Yet another reason why taxes are going up, cities and states are going broke, and the world is approaching financial implosion…
As if the world needed another dangerous and volatile factor in the mix of looming economic downturn.
Unfunded liabilities for pensions have been a problem for a while now, but as investors continue to face fleeting returns, many states and cities are facing the music… and when it stops, there won’t be enough money to go around.
Someone will lose their savings, their standard of living, their retirement and maybe their future. Others will be taxed to death to clean up the mess of the many places were the system is cracked, fissured and falling apart.
According to FT:
The US public pension system has developed a $3.4tn funding hole that will pile pressure on cities and states to cut spending or raise taxes to avoid Detroit-style bankruptcies.
[…] the collective funding shortfall of US public pension funds is three times larger than official figures showed, and is getting bigger.
Devin Nunes, a US Republican congressman, said: “It has been clear for years that many cities and states are critically underfunding their pension programmes and hiding the fiscal holes with accounting tricks.”
Mr Nunes… added: “When these pension funds go insolvent, they will create problems so disastrous that the fund officials assume the federal government will have to bail them out.”
Large pension shortfalls have already played a role in driving several US cities, including Detroit in Michigan and San Bernardino in California, to file for bankruptcy. The fear is other cities will soon become insolvent due to the size of their pension deficits.
The inevitable result is, of course, tax increases and spending cuts – potentially on important and vital services.
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