Why does the American political class spend so much time jabbering about “gun safety”, about gay marriage, about climate change?
To distract you from the economy, and the oncoming deflation of a huge entitlement debt bubble that is going to have drastic impact on…well, everything.
The California pension system – which is a bellwether for most blue-state-model pension systems around the country – is starting to groan under the strain of the contradictions it labors under (emphasis added):
As Steven Malanga has noted, both of these union-managed funds are notorious for pulling political stunts even as they face gaping shortfalls, going on a misguided “green” investing binge that flushed taxpayer money down the drain, and pulling out of tobacco companies on moral grounds just before those stocks began to rise.
But the underlying flaw with the funds is not their politicization. If anything, these kinds of moves are a distraction from more pressing crisis of public employee retirement systems: That state legislatures have epically over-promised the level of retirement benefits they can reasonably provide, and obscured this reality by presuming levels of investment returns that are impossible to sustain, especially in this era of historically low interest rates.
The choice is pretty stark – massive reforms, including a shift away from defined-benefit pensions for public employees, and other tough choices.
Politicians from both sides hate tough choices – but it’s the blue model that’s given us this debt, and it’s the blue states that are facing the most immediate fallout.
Minnesota’s public plans are – depending on your political point of view – either better-administered, or do a better job of laundering the money. Maybe it’s a little bit of both, combined with a state that has a better income-to-debt ratio than California for now, but the pain might strike us later.
Emphasis is on “later”.