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$700,000,000,000 bailout: chump change compared to state pension shortfalls

October 07, 2008

If you think the solution for our current economic problems may be more government involvement, a quick look at how our various government agencies handle their own pensions obligations should give you pause:

The value of pension promises already made by US state governments will grow to approximately $7.9 trillion in 15 years. We study investment strategies of state pension plans and estimate the distribution of future funding outcomes. We conservatively predict a 50% chance of aggregate underfunding greater than $750 billion and a 25% chance of at least $1.75 trillion (in 2005 dollars). Adjusting for risk, the true intergenerational transfer is substantially larger. Insuring both taxpayers against funding deficits and plan participants against benefit reductions would cost almost $2 trillion today, even though governments portray state pensions as almost fully funded.

Also, as we head into the economic deep waters, we should keep in mind how they put the "Great" in the Great Depression (via Instapundit).

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