States Cut Pensions, Too Little, Too Late

It is my opinion that one of the biggest problems the US faces, besides the demographic and policy consequences of illegal immigration, are pensions. Specifically, the generous retirement benefits provided to local, state and federal employees which states are not capable of repaying, and compare quite favorably with Greece, from a worker’s point of view. Mary Williams Walsh’s article in the New York Times reports some states like Colorado, are reducing, or like Illinois are trying to reduce pension obligations for future workers. The problem is that most of this is too little, too late. If Illinois’ pension fund becomes insolvent in 2018 as Dr. Rauh thinks it will, it will obviously slow growth in Illinois as extra taxes will cause a flight of capital and able-bodied persons from the state. Good luck getting a state job in Illinois after 2018. If the US must pick up the tab, as Rauh believes, where exactly is the money going to come from? Already, federal tax revenues must rise 20-30% according to this other NY Times article on the VAT. Colorado looks like it is doing the right things to straighten its pension. It is one election away, however, from reducing all of those gains, if a politician promises a return to 3% annual increase in exchange for public employee union votes.