There is a “perfect storm” of events shaping up that will take most Americans by surprise – especially those who paid into, and now rely on, a pension to help make ends meet after retirement.
Unbeknownst to most people, pension funds in the United States are grossly underfunded. In fact, according to The Financial Times, academic research has determined that the collective funding shortfall for all U.S. public pension funds combined is three times larger than official figures indicate – and it’s getting bigger.
Rep. Devin Nunes, R-Calif., said that for years it has been clear “that many cities and states are critically underfunding their pension programs and hiding the fiscal holes with accounting tricks.” In fact, the city of Dallas just moved to freeze withdrawals from its fire and police pension funds because they are billions of dollars in the hole.
Nunes introduced legislation in the House in November to reform how public pension plans report their figures to the general public. He said that when the funds become insolvent, “they will create problems so disastrous that the fund officials assume the federal government will have to bail them out.”
‘Five or 10 years out there will be major failures
In other words, taxpayers will be on the hook to pay for something they never contributed to, had nothing to do with setting up and had no role in managing, via elected representatives. In fact, Congress has already considered this as a real option.
Already, major pension shortfalls have played a huge role in driving a number of large American cities to bankruptcy. These include Detroit, the biggest of them all, as well as San Bernardino, Calif., and others. Many fear that cities, too, will soon become insolvent because their pension plans are far too generous for the amount of funding they bring in.
“The pension problems are threatening to consume state and local budgets in the absence of some major changes,” said Joshua Rauh, a senior fellow of finance at the Hoover Institute, a think tank, and finance professor at the Stanford Graduate School of Business, who helped conduct the study.
He noted further that it’s very likely that over the next five to 10 years there will be many more pension-related citywide bankruptcies.
Again, it’s very probable that most Americans have no idea this financial tsunami is coming. But it is, just the same, and when it strikes, it could affect tens of millions of people.
In fact, as reported by Project Chesapeake, the pension debt bubble, when it bursts, is liable to overwhelm most Americans and send their standard of living spiraling down to levels last seen during the Great Depression.
Some financial observers and analysts, despite the recent meteoric rise of the U.S. stock market, believe that the country is headed for an era of super depression – meaning poverty would be even more widespread than after the stock market collapse in 1929. That’s because the larger the debt cycle is, the bigger the subsequent depression when the bottom falls out.
One giant Venezuela
Then, more than simply public pensions will be drained. Government benefit programs like Social Security, Medicare and Medicaid will also be emptied, as the government – already $20 trillion in debt (about $10 trillion of which was added just during the Obama administration) – will simply be unable to raise enough money to fund all of its obligations. It can’t simply print more because boosting the money supply will simply lead to more inflation and make the dollar worth even less.
So, in essence, the federal government is in much the same shape as local cities and entire states. Over the decades, pandering politicians seeking votes have made promises to the masses that the country can no longer keep, financially speaking. When you don’t have the money to pay out benefits, the only way to get it is from the people. This would take massive new tax increases, but these would come even as tens of millions of Americans lost their savings and their pension incomes, leaving them with nothing. So what would be left to tax?
The “rich” will become a favorite target (they already are), but Congress can return to that well only so many times. Eventually the rich will take their possessions and their wealth and leave the country.
Between the failing public pensions and the massive U.S. national debt, America will change dramatically, and almost overnight, going from an easy-credit, debt-ridden society to one that is completely broke, which will greatly diminish our status in the world.
We’ll become one giant Venezuela.