Cliff Dwellers

When you hear talk about “the fiscal cliff,” ask, “Which one?”

This coming January, if Congress and the president fail to take action, every American who pays income taxes will pay more. Also set to increase? Payroll taxes, which every worker pays.

But even if we can avoid falling off those cliffs, another threatens.

It has been identified by finance professors Robert Novy-Marx at the University of Rochester and Joshua Rauh at the Stanford Graduate School of Business, who summarized their recent research paper, “The Revenue Demands of Public Employee Pension Promises.”

The bottom-line? Looking at the pension commitments state and local governments have already made to public employees, the professors “found that, on average, a tax increase of $1,385 per U.S. household per year would be required, starting immediately and growing with the size of the public sector.”

That’s only the average. “New York taxpayers would need to contribute more than $2,250 per household per year over the next 30 years,” according to their analysis. “In Oregon, the amount is $2,140; in Ohio, it is $2,051; in New Jersey, $2,000.”

Politicians have promised lavish pension benefits. And then not funded them. Plus, employees often outrageously game the system, spiking their benefits to the tune of millions over decades of retirement — like the Illinois teacher’s union lobbyist did by teaching a single day in the classroom.

If we don’t get the problem under control, this cliff keeps getting higher, making, as the professors put it, “the $1,385 per-household increase required today seem cheap.”

This is Common Sense. I’m Paul Jacob.

7 Comments so far ↓

  1. Oct
    26
    11:04
    AM
    Drik

    Total unfunded liabilities for the US ison the order of $221 trillion. All the money in the world right now is $67 trillion. They are inflating it as fast as they dare with QE3 but it’s not going to be fast enough. Trade off is that if they trash the currency too fast, it crashes the currency, China stops loaning us money, and the people revolt. If they don’t trash it fast enough, the debts can’t be paid, the people revolt. In both scenarios, people get humgry and homeless and blame whomever is currently in charge. Then they go after them.

  2. Oct
    26
    11:32
    AM
    Al Moncrief

    COLORADO COURT OF APPEALS CONFIRMS COLORADO PERA PUBLIC PENSION COLA BENEFITS AS CONTRACTUAL.

    The Colorado Court of Appeals has reversed and remanded an initial District Court ruling that denied the contractual status of public pension COLAs in Colorado. The Court of Appeals confirmed that Colorado PERA pension COLA benefits are a contractual obligation of the pension plan Colorado PERA and its affiliated public employers. A huge victory for public sector retirees in Colorado! The Colorado Legislature may not breach its contracts and push taxpayer obligations onto the backs of a small group of elderly pensioners.

    The lawsuit is continuing. Support pension rights in the U.S. by contributing at saveperacola.com. Friend Save Pera Cola on Facebook!

  3. Oct
    26
    12:20
    PM
    Paulina West

    And people say we need more PUBLIC Transportation!

  4. Oct
    26
    2:11
    PM
    Jay

    When will the people stop GIVING THE POLITICANS (state, local & federal) SUCH LAVISH PENSIONS AS THEY ENJOY? (Let us start with Congress, and work downward).

  5. Oct
    26
    6:46
    PM
    Pat

    Even if the bill is $2000 per person, where will it come from? You can’t get blood from a stone. People who can’t make a living can’t pay taxes. States that charge too much in taxes lose taxpayers. They seek friendlier (and cheaper) states. What’s that saying: eventually, you run out of other people’s money.

  6. Oct
    26
    9:02
    PM
    Drik

    Eventually you run out of states to run to.

  7. Oct
    29
    12:52
    PM
    eatingdogfood

    Unions = Bankruptcy !!! Thank You Democrats and Your Union Bosses !!!

    Read more: http://www.statebudgetsolutions.org/blog/detail/milliman-government-pension-report-exposes-magnitude-of-catastrophe#ixzz2Ai049Phw

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