Baracky Doc Doc, that quack, and his stooge Tim Geithner, have told European leaders that their recent display of fiscal responsibility is most unwelcome, most unwelcome:
In a public letter in advance of the group’s summit, the president makes it clear that he disapproves of Europe’s pullback in spending
It seems the sight of countries trying to act responsibly instead of following in the bankruptcy footsteps of Greece upsets the Impostor-in-chief.
... alarmed by the sovereign debt woes in Greece and some other countries, European leaders have turned their focus on getting their fiscal budgets in order, passing tough spending and other social policies that analysts say will crimp public and private consumption in Europe and slow global economic growth.
Many economists, including Federal Reserve Chairman Ben S. Bernanke, have warned about the dangers of the large budget deficits in the U.S. as well, and lawmakers in both parties, reflecting the public’s concern about deficit spending, have been reluctant to back Obama’s calls for additional fiscal economic stimulus.
So we have Tim Geithner and Barack Obama on one side (SPEND SPEND SPEND MORE!!!!!) and we have European nations and the Fed Chairman on the other side (“Maybe there is such a thing as too much debt…we don’t want another Greek crisis, do we??).
I have been saying for awhile now that the USA debt level, and the percentage of it financed by foreigners such as the communist Chinese, is excessive by historical standards and in absolute terms when unfunded liabilities such as Social Security, Medicare, Medicaid, and now Obamacare are thrown in. But many people still tend not to get it (including the president and Treasury Secretary…), so I am going to shift gears and talk about a different pending bankruptcy in the USA: state pension funds.
In last weekend’s New York Times magazine, the weekly “The Way We Live Now” column focuses on public pension funds, which are “massively short of money”. Let’s enjoy a few bon bons from the unlta-Liberal New York Times (i.e., for you Liberals, it’s not so easy to dismiss the thesis):
…for years, localities and states have been skimping on what they owe. Public pension funds are now massively short of the money to pay future claims — depending on how their liabilities are valued, the deficit ranges from $1 trillion to $3 trillion. <sasoc emphasis>
Hey, there’s that “T” word again…
Pension funds subsist on three revenue streams: contributions from employees; contributions from the employer; and investment earnings. But public employers have often contributed less than the actuarially determined share, in effect borrowing against retirement plans to avoid having to cut budgets or raise taxes. <sasoc emphasis>
Yes, “borrowing against retirement plans to avoid having to cut budgets or raise taxes.” Where have we seen this before? Hmmm, perhaps Social Security, as I discussed here? Seems politicians and voters have a hard time making the tough choices on spending, preferring to defer defer defer the cuts into the future when it will be someone else’s problem…
According to Joshua Rauh of the Kellogg School of Management at Northwestern, assuming states make contributions at recent rates and assuming they do earn 8 percent, 20 state funds will run out of cash by 2025; Illinois, the first, will run dry in 2018.
Did you catch the “…assuming they do earn 8 percent…”? This is an assumption about investment returns on pension fund cash balances invested in the markets. And what if they return less than 8 percent per year, which in the recent financial environment is not hard to imagine? The states will run out of money sooner, of course.
According to Rauh, if the unfinanced portion of all public pension obligations were converted to debt, total state indebtedness would soar from $1 trillion to $4.3 trillion. Such an explosion of debt would threaten desperate governments with bankruptcy.
Ooooh, there’s that “B” word, bankruptcy. But I know, Dumb and Dumber and Dumberer (Krugman) will tell you that here in the USA, we’ll never go bankrupt!! Not us!! The rules don’t apply here, so pretend you didn’t read that last sentence. For the rest of us sane-minded citizens, what might the implications be?
Illinois, once its funds were depleted, would be forced to devote a third of its budget to retirees; Ohio, fully half. This would impoverish every social (and other) program; it would invert the basic mission of government, which is, after all, to serve constituents’ needs.
Ohhhh, there’s that concept of finite resources (mis)managed by government: some will benefit while the majority will do without. Sounds good, yes? But here is my favorite line from the article:
Government’s greater ability to borrow enables it to defer hard choices but, as Greece discovered, not even governments can borrow forever. <sasoc emphasis>
So let’s all celebrate the latest Obama humiliation of the United States in front of other world powers: Dumb and Dumber, alone in the wilderness, advise everyone to spend and borrow, spend and borrow; boy it makes you proud, doesn’t it?
Read Full Post »