For years taxpayers have lost the battle to numerous government employee unions, who have exacted generous concessions on pensions and health benefits. The by-product of these large concessions has been higher and higher property taxes, income taxes, sales taxes or a combination of numerous tax increases. With most Americans struggling financially, there simply is no more money to give the government. Taxpayers are hanging by a thread.
Now, with the financial crisis mounting and growing, these state and local government pensions are cracking. The financial crisis has blown a hole in the rosy forecasts of pension funds that cover teachers, police officers and other government employees, casting into doubt as never before whether these public systems will be able to keep their promises to future generations of retirees. Within 15 years, public systems on average will have less half the money they need to pay pension benefits, according to an analysis by Pricewaterhouse Coopers. After losing about $1 trillion in the markets, state and local governments are facing a choice to either slash retirement benefits or pursue high-return investments that come with high risk. Some pension experts say the funding gap has become so great that no investment strategy can close it and that taxpayers will have to cover the massive bill.
Already, some funds are seeking to trim benefits to conserve money. Some governments have also proposed increasing the amount of public money paid each year into the funds. In New Mexico, lawmakers passed legislation this year requiring public employees to contribute about 1.5 percent of their salary to cover retirement benefits. Labor unions representing 57,000 of the workers sued the state in response. In Philadelphia, officials delivered an ultimatum to state lawmakers: Allow the city to take a two-year break from contributing to its pension system or Philadelphia would lay off 3,000 workers and cut sanitation and public safety services.
Advocates of bigger and bigger government are finding out that there is just no more taxpayer money out there to fund expansionist government reforms and programs. At the end of the day big government will not be able to meet the future obligations of the gorilla-sized government growth that has not abated since FDR’s New Deal policies. For these reasons, billionaire investor Warren Buffett has called these pensions ticking “time bombs.”
Article Source: http://EzineArticles.com/?expert=Thomas_Corley