Dead broke again

Question: If you were a private businessman who had deliberately failed to fund your contractual obligations to your shareholders and creditors, where would you be?

Answer: In jail.

A new Pew study reveals that the pension funds of the states have been deliberately underfunded by fully one trillion dollars. Note: this mess has nothing to do with Social Security, which if you have read my previous post you now know is insolvent—that is, its 2010 revenues will not be sufficient to meet its 2010 expenditures. Rather, these underfunded (which is a euphemism for insolvent) state pension funds are the retirement funds of teachers, police, DMV goons, etc. Over the years state legislatures, trying to avoid politically unpopular tax increases, have simply siphoned off tax revenues that should have been applied to state pension funds and spent them on day-to-day expenses of government. If you had done something of the sort in your private business, you would now be enjoying fifteen years of state supervised hospitality at a prison near you. State legislators, however, have no legal or fiduciary responsibilities to their constituents or employees, so they’re off the hook. The worst that they can suffer is being booted out of office.

So here’s the situation in America today: The Social Security system is living on borrowed money, and the borrowing must increase enormously year after year as Baby Boomers by the millions reach 65. State pension funds are insolvent, and the states (many of which are themselves trapped in budget crises that cannot be resolved) cannot raise sufficient money to fully fund them. Private pensions and 401k fund have been gutted.

If you haven’t yet viewed Gary North’s presentation about the bleak future of retirement in America, now’s a good time as any because the future isn’t getting any better.

Read about the state pension fund mess here