GilfordGrok

Government Worker Benefits Bankrupting States - Union Head Response - Bankrupt Private Companies Too

by Bull Dog Pundit

While it might not be the sexiest of topics, it is the most fiscally alarming - the out of control costs for government worker retirement and health care benefits.  But a recent article on the huge gap between government worker pensions and private pensions startled me.

The U.S. government has a bigger unfunded liability for military and civil servant retirement benefits ($4.7 trillion) than it does for Social Security ($4.6 trillion).

Read that again - the US government owes its workers more money (which it doesn’t have) in retirement benefits than is owes to the nation as a whole in social security.

.

But that’s not the worst part. For most of you, state and local taxes are going to significantly increase thanks those government’s promising the moon to employees, but not paying for it.

Pension promises have “gotten out of hand,” says Peter Hanson, 73, chairman of NAI James E. Hanson Inc., a real estate firm in Hackensack, N.J. His firm offers a healthy private pension - up to 25% of compensation, given to employee retirement accounts - but it is tied to profits and given as a lump sum, not a lifetime promise of benefits.

.

Governments’ generosity could have serious consequences for taxpayers and pensioners. Some states - including Illinois, Indiana, Michigan, New Jersey, Ohio and West Virginia - have troubled retirement systems that may require huge tax increases, spending cuts or even defaulting on promised benefits.

.

The financial soundness of civil servant pensions varies across the country. Government pensions are, on average, in a similar condition as private pensions - about 20% below the assets needed to be properly funded. But some states, especially in the industrial Midwest, have severely troubled pensions.

.

“The taxes needed to pay for these promises would push many of these states’ economies into a death spiral,” Chicago bankruptcy lawyer James Spiotto says.

And the public employee union head’s response to this?

Supporters of government pensions say the decline in private pensions is the problem, not the generosity of public retirement plans. “Rather than lower the bar for public employees, we need to stabilize retirement programs for everyone,” says Richard Ferlauto, director of pension and benefit policy for the American Federation of State, County and Municipal Employees, a union with 1.4 million members.

.

He acknowledges public pensions are getting more scrutiny. “People want to know, ‘Why should you have more security than us?’ ” he says. “It’s pension envy.”

What galls me most about this is not the fact that he’s defending the benefit. After all, he’s a union head and that’s his job. The real problem here is his failure to realize that there’s even a problem.  No mention is made of the huge tax increases on the people that are going to be required to pay for these benefits.