The Haphazard Blog

Glenn Beck Isn’t Always Crazy

by on February 21, 2010 3:33 PM, under Politics

After finishing work on Friday I headed over to the living room to watch TV and FOX News was on the TV. Turned out, they were the only “news” channel not to be going on-and-on about Tiger Woods with pointless opinion. (He cheated on his wife over and over. There’s no excuse. No one will ever know if he’s really sorry. What did people expect from him besides an apology?) In any case, Glenn Beck was starting and he was talking about pensions.

Personally, I think pensions are the next big mess. I don’t see the government standing by as pensions start to get wiped out when they can no longer be paid. Especially when so many of them will be for former government employees and unions. Just like social security and Medicare, pensions are becoming untenable. The simple math makes no sense on them. Beck showed a clip of the Governor of  New Jersey talking about what it looks like in his state.

One state retiree, 49 years old, paid over the course of his entire career, a total of $124,000 toward his retirement pension and health benefits. What will we pay him? $3.3 million in pension payments over his life and nearly half a million dollars for health care benefits: A total of $3.8m on a $124,000 investment.

So the worker that replaces him will be contributing $8,070/yr to the pension and it will be paying the retired worked $72,300/yr (assumes 30 years of contributions and 35 years of pension payments with 5% increases). What kind of ROI are they expecting to get? This is going on all over the country. When Mercedes-Benz was trying to sell Chrysler off a couple years ago, the buyer’s were trying to avoid purchasing the pension obligations. That was their biggest concern, not the other assets.

Pensions are going to crush companies and states. Here in Kansas, the pension fund is only 56.5% funded ($8.3B shortfall) for their calculated future obligations. I’m certain those calculated future obligations are larger than they calculate given the explosion in government salaries over the last few years. Healthcare is 0% funded ($317M shortfall). Pew Research released an in depth paper for all 50 states, the trillion dollar gap.

Again this is a case where politicians will wait until the last minute to do anything because the only possible solutions for state/federal government are to raise taxes to cover the shortfall or reduce benefits. Best to let the next politician deal with the problem (even better if they can collect theirs first).

Companies will have to stare down bankruptcy to get out. Depending on how well the workers/unions at those companies are connected, the taxpayers may get to bail them out too.

So far, President Obama has talked about taking care of the long term now, but he hasn’t shown any leadership or made any demands of Congress to make those goals a reality. Are we doomed to let things continue until they are so bad? When no one will buy our debt and inflation is running out of control? The Tea Party is a good idea in concept, but from my perspective, they are simply a partisan group who chose a popular issue to attack the President and Democrats with. They’d have a lot more legitimacy if they formed before President Bush left office and attacked his policies that did the same thing we see them attacking now (stimulus, debt).

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