Tuesday, November 13, 2012 - 12:01 am
"Worse still, beginning in 2014 state and local governments will be required to report their pension obligations like businesses currently must. This means that sometime in the next fiscal year the debt that is several times greater than that which is currently on the books will magically appear on balance sheets. Among the worst examples will be Illinois, where reported government liabilities will rise from a few thousand dollars per resident to as much as $100,000 per citizen. No government without the ability to print money can pay this amount, and this will generate a crisis that will test the republic.
On its face, the problems should be easy to fix. Government employees in many places have been made promises that cannot be kept. These are mostly about pension benefits such as compensation, retirement age and health care costs. In the most solvent places, such as Indiana, this will mean modest benefit cuts to teachers and public employees. It will also mean higher tax rates than we would otherwise have enjoyed. In Chicago, New York and Los Angeles it will mean fiscal chaos that is outside of modern memory. This will lead to calls for federal interventions, which must be largely resisted."