Govt. Worker PensionPlans and National Debt

Here's an interesting piece from Reason magazine. An excerpt:

Although Americans may have a vague sense that the nation has run up a great deal of debt, the public employee benefit problem is not well known. Yet the wave of benefit promises is poised to wash away state and local government budgets and large portions of the incomes of most Americans. Most of these benefits are vested, meaning that they have the standing of a legal contract. They cannot be reduced. And the government employees’ allies, such as California’s legislative Democrats, are cleverly blocking some of the more obvious exit strategies.

For instance, when the city of Vallejo went bankrupt after coughing up 75 percent of its budget to police and firefighters, the state Assembly introduced legislation that would allow cities to go bankrupt only if they get approval from a commission. Such a commission would of course be dominated by union-friendly members. The result: Cities would be stuck making good on contracts they cannot afford to fulfill.

When the economy was booming, these structural problems could be hidden. But not now. As debt loads become unsustainable, you can expect cuts in services, tax increases, pension-obligation bonds, or some combination of the three.

The whole thing is well worth a read. So we have a world credit default swap market estimated to stand in the trillions, a national debt at around 12 trillion and climbing, major banks around the world whose balance sheets still do not accurately represent the nature and extent of their holdings (and levels of debt, bad investments--including their participation in the folly of the unregulated, labyrinthine, Byzantine credit default swap market), and any number of hidden obligations on the part of the US government at all levels. The very picture of financial health. Once again, we live in an age in which international bankers and moneymen will be the targets of conspiracy theories. And, once again, these theories will have been generated by reason of the actions of the money men themselves.