Alan Caruba
There’s something about the future that few people take into consideration. It sneaks up on you and  suddenly you find yourself in the midst of it. It is often as bad or worse than predicted.
Let me use my home state, New Jersey, as an example, but I could just as well cite figures for West Virginia, Illinois, and others that are just flat out of money because they mortgaged the future to vast public pension plans. These states are essentially insolvent and others are not far behind.
Richard F. Keeley, a former New Jersey state budget director and now head of the Policy Research Institute at Princeton University’s Woodrow Wilson School, recently cited a few figures to which some attention should be paid. “The federal government reported a budget deficit of $349 billion for fiscal year 2007.” This amount is likely to rise when you figure in the stimulus package and supplemental appropriations for the war.
“Furthermore, the comptroller general of the United States points out that this number does not reflect the deficits in Social Security and Medicare--$53 trillion—not to mention the $11 trillion federal debt.” Now, if these numbers seem large to you, it is because they are. The comptroller said that the “current fiscal policy of the federal government is unsustainable.”
In New Jersey, said Keeley, the debt is in excess of $30 billion, plus unfunded liabilities—debt by any other name—in the pension and health retirement funds of $85 billion. We have a former Goldman Saks financial genius for a Governor, Jon Corzine, and he has been heard to toy with ideas such as selling off our fabled Turnpike. This is known as sheer terror and desperation. It’s not all his fault. In New Jersey, a legislature in the grip of unions representing public employees hasn’t balanced budgets over the course of the terms of several governors.
Moreover, New Jersey has not put aside funds to cover the promises made for retiree health care, an amount cited at $58 billion. This is in addition to the amount by which its pension funds are in arrears, estimated at another $25 billion.
A billion here, a billion there; it begins to add up. In his book, “While America Aged”, Roger Lowenstein, a former reporter for The Wall Street Journal, author of several other books, contributor to leading periodicals and, ironically, a resident of New Jersey, notes that, “Financial debacles are as old as the sun. Virtually all involve some form of borrowing, and borrowing is essentially an arrangement between the present and the future. This is why pensions are so vulnerable.”
In his book, Lowenstein uses some case histories, reaching back to the origins of the union movement that not merely initiated the concept of pensions and, later, health benefits, but also sewed the seeds for the collapse of those who gambled the future would not arrive too soon.
“In the 1960s, six of every ten Americans were covered by a pension plan, and it was possible to envision that soon the entire workforce would have its retirement security guaranteed. That dream has gone terribly sour. Pension sponsors from airlines to textile manufacturers to steel mills have gone belly up, and hundreds of others are now deeply in the red,” writes Lowenstein.
“America now faces a crisis of epidemic proportions. The fabric of the nation’s pension system is collapsing—at the very moment when the population is aging. Today, American has approximately 38 million senior citizens; in a generation, the number will virtually double, to 72 million. Indeed, by 2030 one in five Americans will be over sixty-five.”
In April, the Associated Press reported that Toyota “toppled General Motors from the top global sales spot for the first time ever,” added that, “Where it becomes the world’s No. 1 automaker depends on annual worldwide vehicle production, rather than sales” and we must, of course, wait until the end of the year until those numbers are tallied. Little wonder that Lowenstein wrote, “The auto industry, burdened with legions of retired factory workers, is teetering on the brink.”
The news, in fact, is even worse as Lowenstein points out that, “So many pension plans have gone bust already that the federal agency that insures pensions is itself in trouble.”
The Pension Benefit Guaranty Corporation is responsible for the pensions of 1.3 million people whose plans have already failed. The pace is picking up, ninety-four collapsed in 2006 alone. This federal government agency is already $19 billion in the red “and could eventually require a tax-payer bailout.”
“Even worse, the states and localities, which have promised pensions to millions of present and future retired policemen, teachers, clerical workers and others, are hundreds of billions of dollars behind on their payments to state pension funds.”
For Americans accustomed to endless prosperity, growing up and growing old in a nation that, since the end of World War Two in 1945, soared above all others in productivity and financial success, this news may seem incomprehensible. These were the years when Social Security and Medicare assured a smooth landing for one’s old age, but as Lowenstein notes, “Congress, if it chose, could reduce or cancel Social Security benefits tomorrow” but “pensions are forever.”
A younger family member tell me he does not expect Social Security to be available when he retires and I am inclined to agree. Often saddled with debt from college loans, taking on the cost of raising children, trying to keep pace with rising costs, this generation in their late thirty’s and early forty’s have a bleak future.
Exacerbating the rising costs of food and fuel is the fact that very few people have adequate savings to face retirement years and, as we have seen, the equity in their homes has, in some cases, disappeared in the sub-prime mortgage debacle. Even those paying their mortgage on time, as the vast majority is, have seen their value of their homes decline.
In combination with unions representing the public and private sectors who relentlessly pressed for more and more benefits, the nation’s politicians have blithely ignored the obvious, offering the unions and their constituents the promise of expanded or new programs to ease the costs of aging or encountering illness.
The future, however, has arrived. Banks are writing off huge losses. The Federal Reserve has become the bank of last resort. Time to check how much gold is stored in Fort Knox—probably not enough.
Alan Caruba's weekly commentaries are posted on the website of The National Anxiety Center and are widely disseminated on the Internet. He also has a daily blog called Warning Signs. Love to read? Visit his monthly report on the best in new fiction and non-fiction at Bookviews.com.
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