The late Illinois Senator Everett Dirksen is reputed to have characterized the “Great Society” fiscal policy of the 1960s with the wry observation that “ A billion here, a billion there….and after a while it adds up to real money.” Fifty years later we add a few zeros and we’re talking trillions. Were it just the Federal Government’s climbing debt and ongoing deficits that would be scary enough. But before the main event of Federal meltdown manifests itself, the opening act will be the ballooning pension and healthcare obligations of teachers, first responders and other state and local obligations. Decades ago these employees traded lower current income for a state guaranteed retirement. Mismanagement of these pension plans has resulted in a funding deficit which, it is estimated, to be approximately $ 4.4 trillion.
This may be the defining issue of our times as it will affect everyone, either as a retiree or as a younger member of the workforce paying increased taxes to make up the shortfall. An executive summary of the situation in the Knowledge@Wharton newsletter explains the limited and painful options for remedying this situation. None of them are good. Most involve more taxes, especially on real estate, and cuts in other government services.. Coupled with an aging population that is living longer we have a “Time Bomb Inside the Public Pension Plans” Want to know what your share of the shortfall might be? Read the article. It may well be more than you have already put aside.
Plan accordingly. As Tennessee Williams said, “You can be young without money, but you can’t be old without it.”CATEGORIES: Economics