First Rule of Rescuing a Swimmer - Don’t Drown Yourself

Anyone who has dealt with lifeguard duties knows that the first rule is don’t drown yourself.  While this might seem obvious, every summer headlines are full of stories of entire families that drown because one swimmer got into trouble and as each one went in to save the victim, he was pulled under.  This follows on to the previous post of “Who Will Rescue the Rescuer?” about the city of Harrisburg, PA and the state of PA.  Not only is Harrisburg using funds earmarked for other things (pension payments and fire protection) to pay their interest, the state of PA is in dire financial straits itself.

This story is gaining steam.  The NYT has an op-ed this morning by previous LA Mayor Richard Riordan and investment executive Alexander Rubalcava that suggests ways for Pensions to balance their books.  Many suggestions seem reasonable, but unlikely, like using a realistic return assumption (discount rate), capping liabilities, slashing benefits, raising contributions, and forcing new hires into 401k plans.  There is one suggestion that has a chance of being acted upon – allowing cities and states whose pensions are ridiculously underfunded to “borrow” necessary funds from the US government.  This would basically be a plan where the US government issues bonds that are backed by all taxpayers, but funnels the money to these pensions, who are supposed to repay it one day. 

If, as a US taxpayer, you can feel the waters of financial liabilities lapping up around your mouth and nose, then I think you have correctly assessed the situation.  Adding to our existing, outsized burdens the estimated $1 trillion of unfunded state pension liabilities is one of the best ways to surely drown an already questionable swimmer – the US taxpayer.

Get ready…this program will soon be coming to a venue (city or state) near you. 

Read the original story at H. S. Dent