The Beginning Of The End
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Broken Promises: Pensions All Over America Are Being Savagely Cut Or Are Vanishing Completely

How would you feel if you worked for a state or local government for 20 or 30 years only to have your pension slashed dramatically or taken away entirely?  Well, this exact scenario is playing out from coast to coast and in the years ahead millions of elderly Americans are going to be affected by broken promises and vanishing pensions.  In the old days, things were much different.  You would get hired by a big company or a government institution and you knew that the retirement benefits that they were promising you would be there when you retired in a few decades.  Unfortunately, we have now arrived at a time when government institutions and big companies have promised far more than they are able to deliver, and “pension reform” has become one of the hot button issues all over the nation.  Many Americans that have been basing their financial futures on their pensions are waking up one day and finding that their pensions are either gone or have been cut back dramatically.  According to Northwestern University Professor John Rauh, the latest estimate of the total amount of unfunded pension and healthcare obligations for state and local governments across the United States is 4.4 trillion dollars.  America is continually becoming a poorer nation and all of that money is simply not going to magically materialize somehow.  So where is that 4.4 trillion dollars going to come from?  Well, either pension benefits are going to have to be cut a lot more all over America or taxes will need to be raised dramatically.  Either way, we are all going to feel the pain of these broken promises.

There simply is not enough money out there to keep all of the pension commitments that have been made.  Something has got to give.  In the end, millions of elderly Americans will likely be plunged into poverty as pensions disappear.

Some local governments around the nation are already declaring bankruptcy and are either eliminating pensions or are cutting them very deeply.  Just check out what just happened in Central Falls, Rhode Island….

For years, city officials promised robust union contracts and pensions without raising revenue to pay for them. Last August, the math caught up with them. Central Falls was broke, its pension fund short $46 million. It declared bankruptcy.

“My daughters grew up here, went to school here. It’s all gone,” said Mike Geoffroy, a retired firefighter.

He said he could not make the payments on his house after his pension was cut by $1,100 a month.

When will the math catch up with the city where you are living?

For years and years most of our state and local politicians have been ignoring this problem.  But eventually a day comes when you simply cannot ignore it any longer.

Check out what Pensacola Mayor Ashton Hayward said about the situation in his city recently….

“When our annual pension liability is more than our yearly property tax revenues, we have to do something”

Keep in mind that taxpayers don’t get any new services for money spent on pensions.  It is money that goes straight into the pockets of retired workers.  State and local governments are desperately trying to pay retired workers what they are owed and fund ongoing government functions at the same time, but many have reached the breaking point.

All over the country, state and local governments are going broke.  The following is from a recent article by Duff McDonald….

Alabama’s Jefferson County has actually gone bankrupt. Stockton, California is all but ready to do the same. And all you have to do is look to Detroit—or any of the nearby auto towns named after a Buick model of one sort or another—and you see fiscal crisis playing out right now. Look in your own backyard—or at the potholes on your neighborhood roads—and you will likely find the same.

Things are so bad in Stockton, California that they are actually skipping debt payments….

The city of 290,000 that rode the wave of the housing boom in the late 1990s and early 2000s now finds itself littered with foreclosed homes, saddled with pension, health care and other obligations it can’t afford, and unable to pay its bills.

The City Council voted last month to suspend $2 million in bond payments and begin negotiations with bond holders, creditors and unions.

And did you notice what is being blamed for the financial problems in Stockton?

Pension and healthcare benefits.

Sadly, we are seeing pension nightmares erupt all over the nation right now.

For example, check out what is happening to the Public School Employees’ Retirement System and State Employees’ Retirement System in Pennsylvania….

PSERS had an accrued unfunded liability of nearly $26.5 billion, the amount of money the fund is short to cover existing retirement benefits. That hole is expected to grow to $43 billion by 2019. SERS is $12.5 billion in the red, and that shortfall is expected to climb to nearly $18 billion by 2018. Unless the stock market makes giant sustained gains, taxpayers will have to refill those funds.

That doesn’t sound good at all.

In California, the Orange County Employees Retirement System is estimated to have a 10 billion dollar unfunded pension liability.

How in the world can a single county be facing a 10 billion dollar hole?

This is madness.

The state of Illinois is facing an unfunded pension liability of more than 77 billion dollars.  Considering the fact that the state of Illinois is flat broke and on the verge of default, it is inevitable that a lot of those pension obligations will never be paid.

In fact, there are going to be a whole lot of broken promises all over the country.

Pension consultant Girard Miller told California’s Little Hoover Commission that state and local government bodies in the state of California have $325 billion in combined unfunded pension liabilities.

That comes to about $22,000 for every single working adult in the state of California.

So where is all of that money going to come from?

But at least most state and local government employees are still covered by pension plans, even if they are failing.

In the private sector, pension plans are vanishing at lightning speed.

According to the Boston College Center for Retirement Research, the percentage of workers in America covered by a traditional pension plan fell from 62 percent in 1983 to 17 percent in 2007.

That isn’t just a trend.

That is a tidal wave.

And many of the private pension plans that still exist are massively underfunded.  For example, Verizon’s pension plan is underfunded by 3.4 billion dollars.

So what should Americans do in light of all this?

Well, the number one thing to realize is that the pension plan you have been counting on could disappear at any time.

We live in an economic environment that is extremely unstable, and about the only thing you can count on in this environment is rapid and dramatic change.

Do not plan your financial future around a pension plan.  If you do, you are likely to be bitterly disappointed.

Americans that plan to retire in the coming years should do their best to try to fund their own retirements.

Unfortunately, most Americans are not putting away much of anything for retirement.  As I have written about previously, one study found that American workers are $6.6 trillion short of what they need to retire comfortably.

Ouch.

Over the next 20 years approximately 10,000 Baby Boomers will be retiring every single day.

A lot of them are going to be blindsided by empty pension funds and broken promises.

We are facing a retirement crisis of unprecedented magnitude, and there is not much hope in sight.

And if there is a major stock market crash, things are going to be much, much worse.

Most pension funds and retirement plans are heavily invested in the stock market.  If we were to see a major financial crisis like we saw back in 2008 it would be absolutely devastating.  Millions of Americans could see their retirement plans wiped out in short order.

Once again, please do not place your faith in the system.

If you do, you are likely to end up holding a bag of broken promises.

A gigantic tsunami of unfunded pension obligations is coming.  A lot of state and local governments are going to go broke.  A lot of promises are going to be broken.

If you hope to retire any time soon, you better plan on being able to take care of yourself.

You Know That Your City Has Become A Hellhole When….

All across America there are cities and towns that were once prosperous and beautiful that are being transformed into absolute hellholes.  The scars left by the long-term economic decline of the United States are getting deeper and more gruesome.  The tax base in many areas of the nation has been absolutely devastated as millions of jobs have left this country.  Hundreds of cities are drowning in debt and are desperately trying to survive.  Last year, city government revenues in the United States fell by another 2.3 percent.  That was the fifth year in a row that we have seen a decline.  Meanwhile, costs associated with health care, pensions and virtually everything else continue to explode.  So what are cities doing to make ends meet?  Well, one big trend that we are now witnessing is that many U.S. cities have been getting rid of huge numbers of employees.  If you can believe it, 72 percent of all U.S. cities are laying workers off this year.  Social services and essential infrastructure programs are also being savagely cut back in many areas of the country.  The cold, hard truth is that most of our cities are flat broke and things are going to get even worse in the years ahead.

So how do you know if your own city has become a hellhole?

Well, a few potential “red flags” are posted below….

You know that your city has become a hellhole when most of the street lights get repossessed because of unpaid electric bills.

You know that your city has become a hellhole when it announces that it will no longer prosecute domestic violence cases in order to save money.

You know that your city has become a hellhole when it simply stops sending out pension checks to retired workers.

You know that your city has become a hellhole when it rips up asphalt roads and replaces them with gravel because gravel is cheaper to maintain.

You know that your city has become a hellhole when it eliminates the entire public bus system.

You know that your city has become a hellhole when nearly half of all the people living there can’t read.

You know that your city has become a hellhole when one out of every ten homes sells for under $10,000.

You know that your city has become a hellhole when you can literally buy a house for one dollar.

You know that your city has become a hellhole when you have hundreds of people living in the tunnels underneath your streets.

You know that your city has become a hellhole when three of your past five mayors have been sent to prison for corruption.

You know that your city has become a hellhole when nearly half of the public schools in the city get shut down because of a lack of money.

You know that your city has become a hellhole when you have dozens of young people rampaging in the streets that are thirsty for revenge and that are armed with bats, pipes and guns.

You know that your city has become a hellhole when it is considered to be one of the 10 most dangerous cities in the world.

You know that your city has become a hellhole when thieves defecate in the back seat after they have broken into your car and taken your things.

You know that your city has become a hellhole when prostitution and drug dealing are two of the only viable businesses that remain in the city.

You know that your city has become a hellhole when the police chief announces that the police department will no longer respond to calls about burglary and identity theft due to very deep budget cuts.

Many of the examples above may seem humorous at first glance, but the truth is that they reveal just how deeply tragic our economic decline really is.

This is one of the reasons why I write about our trade deficit over and over and over.  Every single month, tens of billions of dollars more wealth goes out of the United States than enters it.  Every single month, we are getting poorer as a nation.  Every single month, we lose more jobs and businesses.

Any politician that tells you that he or she can solve our economic problems without fundamentally addressing our horrific trade imbalance is lying to you.  That means that there are a whole lot of liars in both political parties.

If the number of good jobs continues to decline, the plight of the average American family is going to continue to get worse.  Home sales will continue to hover around record lows.  The American people will continue to become increasingly frustrated with the economy.

The signs of decline are all around us.

Quit listening to the politicians and just open up your eyes and look.

So do any of you have any additional signs that a city has become a hellhole to add to the list above?  Please feel free to leave a comment with your thoughts below….

22 Statistics About America’s Coming Pension Crisis That Will Make You Lose Sleep At Night

As the first of the 80 million Baby Boomers have begun to retire, it has become increasingly apparent that the United States is facing a pension crisis of unprecedented magnitude.  State and local government pension plans are woefully underfunded, dozens of large corporate pension plans either have collapsed or are on the verge of collapsing, Social Security is a complete and total financial disaster and about half of all Americans essentially have nothing saved up for retirement.  So yes, to say that we are facing a retirement crisis would be a tremendous understatement.  There is simply no way that we can keep all of the financial promises that we have made to the Baby Boomer generation.  Unfortunately, the crumbling U.S. economy simply cannot support the comfortable retirement of tens of millions of elderly Americans any longer.  The truth is that we are all going to have to start fundamentally changing the way that we think about our golden years.

Once upon a time, you could count on getting a big, fat pension if you put 30 years into a job.  But now pension plans everywhere are failing.  State and local governments are cutting back and are raising retirement ages.  A majority of Americans have even lost faith in the Social Security system, which was supposed to be the most secure of them all.

The reality is that we are moving into a time when there is not going to be such a thing as “financial security” as we have known it in the past.  Things have fundamentally changed, and we are all going to have to struggle to stay above water in the economic nightmare that is coming.

Part of the reason we have such a gigantic economic mess on the way is because we have promised vastly more than we can deliver to future retirees.  When you closely examine the numbers, it quickly becomes clear that a financial tsunami is about to hit us that is going to be so devastating that it will change everything that we know about retirement. 

The following are 22 statistics about America’s coming pension crisis that will make you lose sleep at night…. 

Private Pension Plans And Retirement Funds

1 - One recent study found that America’s 100 largest corporate pension plans were underfunded by $217 billion at the end of 2008.

2 – Approximately half of all workers in the United States have less than $2000 saved up for retirement.

3 – According to one recent survey, 36 percent of Americans say that they don’t contribute anything at all to retirement savings.

4 – The Pension Benefit Guaranty Corporation says that the number of pensions at risk inside failing companies more than tripled during the recession.

5 – According to another recent survey, 24% of U.S. workers admit that they have postponed their planned retirement age at least once during the past year.

State And Local Government Pensions

6- Pension consultant Girard Miller recently told California’s Little Hoover Commission that state and local government bodies in the state of California have $325 billion in combined unfunded pension liabilities.  When you break that down, it comes to $22,000 for every single working adult in California.

7 – According to a recent report from Stanford University, California’s three biggest pension funds are as much as $500 billion short of meeting future retiree benefit obligations.

8 – In New Jersey, the governor has proposed not making the state’s entire $3 billion contribution to its pension funds because of the state’s $11 billion budget deficit.

9 – It has been reported that the $33.7 billion Illinois Teachers Retirement System is 61% underfunded and is on the verge of total collapse.

10 – The state of Illinois recently raised its retirement age to 67 and capped the salary on which public pensions are figured.

11 – The state of Virginia is requiring employees to pay into the state pension fund for the first time ever.

12 – In New York City, annual pension contributions have increased sixfold in the past decade alone and are now so large that they would be able to finance entire new police and fire departments.

13- Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern’s Kellogg School of Management recently calculated the combined pension liability for all 50 U.S. states.  What they found was that the 50 states are collectively facing $5.17 trillion in pension obligations, but they only have $1.94 trillion set aside in state pension funds.  That is a difference of 3.2 trillion dollars.

Social Security

14 – According to one recently conducted poll, 6 out of every 10 non-retirees in the United States believe that the Social Security system will not be able to pay them benefits when they stop working.

15 – A very large percentage of the federal budget is made up of entitlement programs such as Social Security and Medicare that cannot be reduced without a change in the law.  Approximately 57 percent of Barack Obama’s 3.8 trillion dollar budget for 2011 consists of direct payments to individual Americans or is money that is spent on their behalf.

1635% of Americans over the age of 65 rely almost entirely on Social Security payments alone.

17 – According to the Congressional Budget Office, the Social Security system will pay out more in benefits than it receives in payroll taxes in 2010.  That was not supposed to happen until at least 2016.  The Social Security deficits are projected to get increasingly worse in the years ahead. 

18 – 56 percent of current retirees believe that the U.S. government will eventually cut their Social Security benefits.

19 – In 1950, each retiree’s Social Security benefit was paid for by 16 U.S. workers.  In 2010, each retiree’s Social Security benefit is paid for by approximately 3.3 U.S. workers.  By 2025, it is projected that there will be approximately two U.S. workers for each retiree.

20 – The shortfall in entitlement programs in the years ahead is mind blowing.  The present value of projected scheduled benefits surpasses earmarked revenues for entitlement programs such as Social Security and Medicare by about 46 trillion dollars over the next 75 years. 

21According to a recent U.S. government report, soaring interest costs on the U.S. national debt plus rapidly escalating spending on entitlement programs such as Social Security and Medicare will absorb approximately 92 cents of every single dollar of federal revenue by the year 2019.  That is before a single dollar is spent on anything else.

22 – Right now, interest on the U.S. national debt and spending on entitlement programs like Social Security and Medicare is somewhere in the neighborhood of 15 percent of GDP.  By 2080, those combined expenditures are projected to eat up approximately 50 percent of GDP.

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