Good God -- California Unfunded Pension Liabilities Estimated at Over $92,000 per State Household
All that money you thought you were saving for retirement -- it may be you were really saving it for your friendly neighborhood DMV worker's retirement.
LB:
So how big are the social security liabilities?
December 4, 2016, 1:23 pmJoel:
Probably true, generally, but I wish this wasn't based on Household data.
Sowell rails against this, and I agree.
December 4, 2016, 2:29 pmSamWah:
Past time for the intelligent and able to bail out of this airplane before going down with it. I suspect that these numbers may be underestimated.
December 4, 2016, 2:54 pmJoe Mama:
The body of the article at Zerohedge states that the real number is $150K per household. The $93K is based on some optimistic return on investments.
December 4, 2016, 3:16 pmirandom419:
There's a funny lawsuit out there, that I can't find now. Basically, some California sheriff's want their uniform allowance factored into their pension even though they wouldn't be wearing them.
December 4, 2016, 3:56 pmsean2829:
Remember, 1/3 of California households are also on Medicaid so the remaining 2/3 will be picking up the tab. And that $93K deficit is surprisingly close to the average amount of money Americans have socked away in their 401K plans (~$100K).
December 4, 2016, 5:07 pmSTW:
Maybe they should pass a law that you have to live in California to draw a California pension. That'd keep them around to help pay the pensions of their fellow travelers. An added benefit would be helping to keep the rest of us from being inundated by even more people with more money than sense.
December 4, 2016, 7:15 pmJohn Moore:
Another reason to build a wall - on Arizona's western border. We need to keep out the economic refugees fleeing California, or they will bring their bad ideas here!
December 4, 2016, 8:08 pmReallyOldOne:
Social Security Faces $9.6T in Unfunded Liabilities--$83,894 Per Household per http://www.cnsnews.com/news/article/social-security-faces-96t-unfunded-liabilities-83894-household
December 4, 2016, 8:47 pmIf you can believe any source these days.
Patrick Henry,The2nd:
It's time for courts to let go of the bad policy not based in any Constitution that pensions can't never be changed from a persons hire date.
It's better to let people realize the reality now because there is no way states will be able to pay.
December 4, 2016, 8:55 pmLB:
Can't be right.
Here's the numbers for the UK, with 20% of the US's population, and a crap pension. $8K a year.
http://webarchive.nationalarchives.gov.uk/20160105160709/http://www.ons.gov.uk/ons/dcp171766_263808.pdf
These are old numbers, 2005, 2010. The current numbers are a state secret - no joke.
Levy (2012) explains that the last official figure for the state pension schemes’ obligations was
produced by the Government Actuary’s Department (GAD), as at 31 March 2005, at £1.347 trillion,
In summary, the estimates in the new supplementary table indicate a total Government pension
obligation, at the end of December 2010, of £5.01 trillion
==============
I'd be checking that those numbers are really the liability numbers.
On top you have federal worker's pensions....
December 5, 2016, 1:29 amslocum:
They used to do exactly that (actually, they imposed CA income taxes on pensions regardless of whether the pensioner still lived in CA). But that was banned in 1996:
http://www.pmstax.com/state/bull9602.shtml
December 5, 2016, 4:34 amslocum:
And the 150K figure is based on an assumption of 6% investment returns, which is still pie-in-the-sky. What would those numbers be based on, say, 3%?
December 5, 2016, 4:36 amReallyOldOne:
You may be right that the numbers are "not right". However, I posted the link from which the #s were quoted and added a disclaimer "If you can believe any source these days." If the numbers aren't right, do you have a more reliable/believable source?
December 5, 2016, 7:38 amkidmugsy:
I don't see the point of comparing a funded scheme that is underfunded (California state employees) to an unfunded scheme that covers essentially the whole population (UK state retirement pension). It's plain daft.
December 5, 2016, 9:02 amJoe - the economist:
Krugman says the social security system is solvent since the liability is funded with US Treasury Bonds which are backed by US taxpayers
That means the the California pension system is also solvent since it is funded with California bonds which are backed by california taxpayers.
December 5, 2016, 10:00 am(Sarc)
LB:
Another fiddle to watch for is using an asset rate, with the assumption of zero defaults, on the liability side of the book.
The correct approach is inflation to discount liabilities, and the asset rate with default for any assets you do have.
December 5, 2016, 10:38 amLB:
Krugman is bonkers. He ignores pensions in his debt calculations. He only cares about what is owed to bankers, not the plebs.
December 5, 2016, 10:39 amLB:
So the reason is this.
If GDP grows at 2% but the debt is growing at 25% plus [like the UK] then even you can tell what the consequences are.
Both schemes are underfunded.
December 5, 2016, 10:42 amJoe:
krugman is beyond bonkers, delusional. Currenlty he is deeply affected by the Trump derangement syndrome, just read his commentary regarding trump and hillary.
December 5, 2016, 11:38 amMatthew Slyfield:
The numbers aren't right, not because there are better numbers elsewhere, but because social security isn't a liability the same way that a pension is. There would be political ramifications, so it isn't likely to happen, but congress could decide to simply end Social Security, cut off all benefit checks, On the other hand, a pension is a contractual obligation that can't just be canceled as a matter of law.
December 5, 2016, 2:58 pmkidmugsy:
No, the British scheme isn't funded at all. It seems you don't understand the vocabulary.
December 5, 2016, 5:14 pmIke Evans:
I was born and raised in Idaho, which is about as Red of a state as you can get. (I currently reside in Minnesota.) People from that state often complain about how it is a one-party state. Either you are a Republican, or you just don't belong, and this creates problems for the state. I agree. However, if I had to choose between any one of the extremely red states (Idaho, Wyoming, etc.) as opposed to any one of the extremely blue states (California, New York, etc.), I would take the red state in a heartbeat!!!
December 6, 2016, 7:36 amLB:
Since when does unfunded mean no liabilities?
You need to be clear. The problem with pension funds comes about when their deficits grow. The definition of the deficit is
deficit = liabilities - assets.
For government pensions the assets are zero. There are none. The state owns no assets to pay them. So deficit = liabilties.
The problem is then what the rate of growth is in the liabilities compared to the growth of GDP.
25% plus growth in the UK against 1-2% growth in GDP.
December 6, 2016, 12:21 pmrxc:
Social Security and Federal Government pensions are backed by the only bank in the world that has demonstrated that it is ready, willing, and able to print as much money as it takes to keep paying those checks. And they have gotten away with for the past 8 years, with no one willing or able to call them on it. As long as no entity cares and no entity has the power to force a collapes, it will continue. They just print more money and add zeros to the fictional deficit.
Everyone else is screwed.
December 6, 2016, 7:46 pmrxc:
The Federal govt has the power to tax, which is a real asset. It won't appear on a balance sheet because there are no other entities that have the right to just take money away from you, because they want to. There are also no other entities that can draft you into an army, put you in jail, or even kill you, if they think you are enough of a threat. It might be hard for the politicians to raise taxes, but if pushed hard enough, they can and will do it. Unless they have the option of just printing more money, which is the exclusive province of the Feds, and the Federal Reserve.
The politicians worry more about the old people than they do about the rest of the populace. They vote, a lot, and they have lots of time to think about who they are going to vote for (or against).
December 6, 2016, 7:51 pmrxc:
The Democrats are also starting to make noises about all that money just sitting in IRAs, not doing any "social good", and serving as a tempting target for unscrupulous financial people. The people need to be protected against abuse, so what better plan than to fold your IRA/401K/etc into SS and let the government guard it for you, while they put it to good use. You already have an account number, and get an annual accounting of your benefits, so why keep it somewhere risky?
December 6, 2016, 7:56 pmHeresiarch:
They simply have perfect politicians out in California, per Thomas Sowell: "The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics."
December 11, 2016, 12:46 pm