Just Hours Old, And If You Were Born in Connecticut, You're Already $28K In Debt
That's how pension expert Adrian Moore put it on Twitter (@reasonpolicy). He linked to this piece at Reason Foundation about pension liabilities, reported by Truong Bui:
The unfunded gap has expanded since 2002, as shown in "Chart 1" of the study. The funded status saw a miniscule rise in 2008, but then it deteriorated afterwards. That improvement was largely the result of the state government's issuance of $2 billion in General Obligation Bonds (GO) for the Teachers' Retirement System (TRS) to make up for the funding shortfall. Essentially, the state borrowed money to fund the pension, reflecting an attempt to engage in "risk arbitrage": putting the borrowed money in high-yield investments that earn a higher return than the interest of the bond. The implied logic is that the use of GOs would profit the pension without imposing any extra cost on the state. That logic is specious, as evidenced by the worsening funded status after 2008. What the state of Connecticut did was not arbitrage, but gambling with money that posed considerable risks. As the authors of the study put it, "this is the equivalent of homeowners taking a second mortgage on their houses to invest in the stock market in the hope that the investments pay more than the cost of the mortgage."If Connecticut's pension funding is bad enough, its Other Post-Employment Benefits (OPEB) system, which includes healthcare and life insurance obligations, is in a direr state. The OPEB funded ratio in 2013 was 0.6 percent. The state has set virtually zero assets ($144 million) to cover $22.7 billion in OPEB obligations (see "Chart 2" below). Add that to the previous estimate of the pension debt and the state owes almost $100 billion in unfunded pension and benefit liabilities, which calculates out to be $27,668 of debt for every man, woman, and child in Connecticut.
You were just born, kid? Well, don't just lie there in the ICU! Get a job!
As usual, our government and large companies have over-promised.
I suppose we(other than Amy)are partly at fault for believing them.
As pointed out before, the solution is inflation and bankruptcy.
After listening to a complaint about a company getting out of its pension obligations through bankruptcy, I remarked that when one joins a company; it is kind of a bet. You are betting that they make enough money to pay your wages, and you bet that they make enough money to pay their pension promises. Sometimes the bet doesn't pay off.
Most of the younger people I hire don't want to pay into Social Security: they don't want to take the bet. They think it won't be there in the future, or under its pay as you go system, they will be getting $5 a month when the time to collect arrives.
doombuggy at October 16, 2014 6:29 AM
Let's look at the United States.
We are $18 trillion in debt. ( That's $18,000,000,000,000 ). Our population is 310,000,000. That works out to $58,064 per person, including all those new-borns.
Nick at October 16, 2014 7:41 AM
Nick: "That works out to $58,064 per person, including all those new-borns."
So a newborn in Connecticut starts out $58,064+$27,668=$85,732 in debt on day 1.
That really sucks.
Ken R at October 16, 2014 9:02 AM
I joke that I have two credit cards...and pay each one off with the other one. I just keep rolling a bigger and bigger balance. Starting at age 18 and racking up $4000 a month to maintain myself in the proper lifestyle, I'll have $1.2 million on each card in 50 years. Not too bad, considering the infant in connect-ti-cut has 1/3 of that at birth.
Then they can have my carcass.
doombuggy at October 16, 2014 9:23 AM
Math error: the kid will have 1/30 of that at birth.
doombuggy at October 16, 2014 9:26 AM
All the more reason to stop giving kids allowances and tell them to work for all their money.
Don't laugh. That used to be the way of the entire world before the 20th century - and even in the U.S., it lasted at least until the roaring 1920s - and it certainly came back from 1929 to 1946. This taught most kids, early on, to think twice before spending and to make that a lifetime habit. What's so horribly wrong with it?
(Mind you, I'm talking about making kids do UNPAID chores first - and only then could they do extra chores for money, thus giving the parents a rest. That's the way the adult world works, after all! No adult gets paid to do chores unless they're someone else's chores.)
Not to mention that, with allegedly falling birthrates around the world but a growing life expectancy, we, as individuals, clearly need to learn to save and save for our old age at a rate we never had to in the last 60 years. We can't count on young taxpayers anymore; even a straight-A student can get hit by a car at 18 and never become a taxpayer. Not to mention kids who don't become taxpayers for nastier reasons. Not to mention that no couple breeds unwanted kids for the sake of the economy.
lenona at October 16, 2014 10:10 AM
Can't we just spend trillions on chasing another shadowy Emmanuel Goldstein character around the planet and allow the profits from the arms industry to trickle down on us like a warm, golden shower of Reagonomics and deficit spending?
That works, doesn't it? Please tell me that works!
Gog_Magog_Carpet_Reclaimers at October 16, 2014 10:11 AM
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