Long-term viability of Social Security has been a subject of concern for years. Now, the Detroit bankruptcy filing turns the spotlight on municipal and state pensions.
I personally believe Social Security is in better financial shape than most people think. Social Security can easily survive into the 22nd century and beyond, if only we have the will.
But retirees, and anyone who expects to retire in the future, ought to be nervous about the shock waves from the Detroit bankruptcy. How many other cities, big and small, will have their credit ratings reduced? How many more will follow Detroit into bankruptcy? Not many, we may hope.
I read in U.S. News and World Report that Chicago, New York City, San Francisco, and Boston have more unfunded pension liabilities per household than Detroit. That’s attributed to the Milken Institute. No reason to jump to the conclusion that any of the aforementioned cities are anywhere near bankrupt. But I’m about ready to jump to the conclusion that municipal pensions nearly everywhere are a ticking time bomb. Far as I can see, Social Security is totally public and transparent, but all these municipal and private pension systems are transparent as mud.
Here in Maryland, the state government wants to turn over responsibility for teacher pension funds to county governments. State officials say the state can’t afford to fund teacher pensions; county officials respond that local governments can’t afford it either. Teacher pensions could become a potato that’s politically too hot to handle, if not in Maryland, possibly in other states.
Multinational corporations have long since torn up the “social contract” that united American business, workers and consumers in pursuit of the American Dream. Pensions are more like a legal contract between workers and employers. If bankruptcy were to enable states and municipalities to welsh on pension obligations, who’s going to enforce the pensions promised by corporations?
I can’t begin to get my mind around the magnitude of the pension crisis, if it is a crisis. It all seems abstract, to my poor mind. Does anyone have a handle on the pension problem?
— John Hayden
- What Detroit’s Bankruptcy Means for Public Pensions Nationwide (dailyfinance.com)
- Report: Detroit’s bankruptcy could set tone (thedailyrecord.com)
- Michigan attorney general says he’ll defend Detroit pensioners in bankruptcy hearings (mlive.com)
- Meredith Whitney: ‘Detroit Will Start A Wave of Municipal Bankruptcies’ (economicpolicyjournal.com)
- Detroit’s Bankruptcy Should Be A Warning To Every Worker Expecting A Pension, Or Social Security (forbes.com)