The Pension Reckoning Is Only Beginning

State senator Stephen Sweeney of New Jersey, home to one of the worst public pension crises in the country, has proposed a national solution to the mess: a trillion dollar federal bailout for state pension funds. NJ.com:

The government aid program — which Sweeney stressed would not be a bailout  — would allow financially strapped New Jersey to shed its $50 billion unfunded liability and cut the state’s required annual pension contribution in half.

“If it’s in the nation’s interest for the federal government to step in and keep Wall Street and General Motors afloat, it should be able to find ways to protect the pensions of middle-class teachers, police and government employees,” said Sweeney (D-Gloucester). […]“The simple fact is that we have a system where an NJEA member retiring in just a few years contributes just $126,000 to their pension and health benefit costs over 30 years and takes out $2.4 million in benefits. The math does not work at all. That is the fundamental problem that needs to be solved,” said Nicole Sizemore, Christie’s deputy press secretary.

The reason the math does not work is that states and cities mostly, but not entirely, run by Democrats have piled up huge, unconscionable pension fund debts over the years by making promises to workers that they then failed to honor by using dishonest accounting tricks to hide the true cost of these obligations from taxpayers. Now the bills are falling due and state and local governments are being squeezed. That’s going to continue.

One of the big fights in American politics now looming will be our own version of the EU fights between Club Med and the north. Indebted states and cities, who very often are solely responsible for their debts because of incompetent and selfish decisions, will want to be bailed out by federal taxpayers. Some help will have to be given—we are talking about the pensions of retirees who have no other recourse. But how generous will the relief be, and what reform conditions will be attached?Democrats are going to favor easy bailouts with no strings. Republicans, for their part, will want tough conditions on any aid: workers will have to pick up costs, state constitutions that guarantee worker pensions no matter what will have to be amended, public sector unions will need to be placed under controls or perhaps reformed as in Wisconsin, and all government pension funds placed under strict national regulations.One certainly feels that the pensions of politicians who voted for the policies that created this mess should be viewed a little more harshly than the pensions of public sector workers. Mr. Sweeney and his legislative colleagues might have to see their own pensions eviscerated as the price of helping their constituents.Sweeney’s call for a trillion dollar bailout fund is only the beginning. Blue model misgovernance has created a trillion-dollar disaster, and how America digs itself out of this hole will be one of the big questions of our time.