When I go over my personal budget, I have to make sacrifices. Perhaps I don’t eat out as often, or I turn my thermostat down, or even limit my purchasing of non-necessity items. We all do this because we know we can’t live in the red for long with out collection agencies and banks taking our possessions away. Yet, for federal and state governments, over spending and not balancing their checkbooks is a way of life. We all know about the federal deficit, but one thing that has gone unnoticed that could sink the federal budget more than the banking meltdown of late ’08 is the state budget deficits stemming from overreaching state employee pension and benefits programs.
Nationwide, it’s estimated that state and local governments are short on paying future claims to the tune of $1-3 trillion! If current trends continue (which, of course they won’t) and if we assume an 8% return on investment rate for the pension funds (which we can’t) states will begin running out of money by 2018, with Illinois being the first, and 20 by 2025. Of course, government being what it is, we can expect states to spend too much in boom cycles, and well, spend too much in bust cycles too, so 2018 might actually be 2013 unless politicians radically change there ways.
Let’s look at California, the world’s 5th largest economy. They currently have a deficit of $28 billion. 80% of all CA spending goes towards pensions and benefits. The liberals that have controlled CA since prohibition are all about raising taxes to compensate. The fact of the matter is they cannot raise taxes high enough to make up the difference, and if they try too hard to do so, they will see even greater flight by white-collar workers from the Golden State. The only people immigrating to CA are illegal's from south of the border, and they don’t pay any taxes anyway.
Even the once and new Democrat governor, Jerry Brown, has said that the budget will be full of drastic cuts. Of course, any time a politician speaks truth about financial issues, the same unions hacks stand up and yell about how that no one better cut their pensions and benefits because they DESERVE them.
New Jersey Governor Chris Christie is all over YouTube confronting such announcements with the hard truth that nothing is guaranteed, state union employees must be willing to sacrifice in order to make sure other necessary government activities can remain functional.
Bernie Sanders and Robert Reich Are Confused by Economics. And Government. And Reality | Seton Motley