Block any pension bailout now to force reform
As long as state politicians can cling to delusions of a federal bailout of their bankrupt pension funds, they'll put off drastic reforms needed to save public workers' retirement benefits. That is why a "No Pension Bailout" effort launched today is so important to the future of America.
Illinois Policy Institute (IPI) was shocked into launching this national pension-saving push by that bankrupt state's Fiscal Year 2012 budget book citing a "'federal guarantee of [pension] debt' as one of the possible ways to reconcile the state's massive retirement debt."
IPI director John Tillman said, "We have a math problem. The only way to get reforms to deal with the math problem is to face the truth."
He said politicians "kick the can down the road. We have to put a barricade across that road. Then the politicians will be forced to deal with the mathematical reality."
Just last month Illinois legislators refused to face reality and deal with at least $203 billion in false retirement promises to public workers. Officially, the unfunded pension liability is about $83 billion of that.
Others put the cost to future taxpayers much higher. Economist Andrew Biggs calculated the real Illinois unfunded liability as of two years ago was more than $192 billion and growing fast.
Economists Joshua Rauh and Robert Novy-Marx determined that current pension debt is going to cost the average Illinois household more than $2,300 every year for 30 years on top of all other tax hikes and state revenue increases from economic growth.
To one degree or another, the story is the same in every state. "Reforms" passed so far by 41 states do little or nothing to reduce this debt.
When beleaguered taxpayers get the bill for tax increases that do not put a single teacher in the classroom, police officer on the street, pick up any trash, fill any potholes or provide any government services of any kind, the backlash will be devastating.
The catastrophe is so hopeless that some have floated the idea of a national bailout, possibly using long-term pension obligation bonds.
In a recent research paper, Boston University law professor Jack Beermann repeats the finding of other recent studies that "... the pension crisis is real ...," and "Retirees face the risk of reduced pension payments and current employees face the risk of receiving less generous retirement benefits than the promises that they have been depending upon."
He calls a bailout "one modest proposal" impeded by "... many practical reasons to be cautious ...," including the "moral hazard problem" of corruption and the fact that even after bailout, "Investment volatility and political considerations are likely to continue to threaten the financial viability of pension funds if they continue as currently structured."
No bailout would prevent irresponsible pension practices from continuing. And, as IPI discovered, even the remote possibility of bailout gives politicians one more delusion to cling to in delaying real reform to save public workers' pension benefits.
That is why IPI teamed with U.S. Sen. Jim DeMint to stop any federal effort to bail out state and municipal pensions.
They document that a bailout would penalize states that have more prudently managed public pensions and reward reckless behavior in states with pension debt that never will be reduced without drastic reform.
A bailout would actually encourage irresponsible practices and make the crisis worse.
It also would weaken constitutionally protected state powers and sovereignty.
For taxpayers, bailout would mean decades of ever growing debt. For public workers, it would mean increased risk of losing benefits because politicians would have no incentive to save their pensions from eventual collapse.
The facts show all a bailout would do is kick the pension time bomb a little farther down the road. The longer it ticks, the bigger the blast when it detonates.
We can work to stop that by supporting No Pension Bailout. A petition button is on the site along with information about U.S. Senate Resolution 188, which is stalled in committee.
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