[1Old Pro]

"I don't know how we'll solve this problem."

Only one way to solve it, when a Ponzi scheme goes bad it must fail - in this case the solution is default. These pensions could never have been paid, they were too rich to begin with - it was a Ponzi scheme to help get politicians elected.

[Organic Panic]

As long as the last taxpayer has two pennies to rub together the government won’t be broke.

[pepsionice]

Around six years ago in California....at one of the public university operations....the chief of security retired. She was set to collect around $140,000 in pension (as I remember the story). The person who replaced her...was just a temp, and he was set to retire in twelve months.

So a year would pass, and the hiring committee went back to the retired gal (with $140,000 a year in pension from the university), and hired her to come back. Yes, she was collecting a regular salary of roughly $175,000 and the $140,000 in pension. I just sat there reading through this and wondering how the ethics committee could have just agreed this was acceptable.

[Opinionated Blowhard]

The thing that gets me about public pensions is the outrageous lack of accountability. The reason we have such troubles is because politicians kept increasing the pension and other retirement benefits without a thought about who was going to pay for it or how much it would cost the taxpayer on an on-going basis. Now they are locked in as “rights” and the court would probably deny any attempt to reduce them. The politicians who voted for pension increases need to be put in jail.

[alternatives?]

Three options to fix:

1) raise taxes.

2) reduce benefits by inflation

3) increase the death rates of retirees

[dragnet2]

Government employees and their unions are literally choking off Middle America. And once again, this is all brought to us by the evil extreme corrupt in government.

[stars & stripes forever]

Many politicians collect more than one government pension, because they have been in the system all their lives. That adds as up as well.

[justlurking]

"Pensions are going to be a huge issue nationally," he said. "Unfunded pension liabilities are estimated to be as high as $4 trillion. In 2015, the Treasury Department collected $1.5 trillion in income taxes. Thus, to close the pension funding gap, you would have to divert all income taxes toward pensions for nearly three years straight. I don't know how we'll solve this problem."

Social Security has the same problem, but not for the same reason: contributions have been made, it just hasn't been enough. Economic assumptions made back in 1983 turned out to be too optimistic.

Excess taxes were loaned to the federal government (as provided by the original law, not by any subterfuge), and it's now being paid back. This chart is from 2014, but it gives you an idea of the problem:

http://www.heritage.org/~/media/images/reports/2014/08/bg2936/bg-socsec-oasi-chart-1-600.ashx

(Sorry, you'll have to click on the link -- the image is apparently generated dynamically, and I can't insert it in this posting)

The orange parts are benefits being paid in excess of Social Security taxes. So, the Trust Fund is being redeemed, and that redemption comes out of the general fund, increasing the deficit. The net effect is conversion of the Trust Fund (special obligation bonds held by Social Security) into regular Treasury bonds held by investors.

This will continue until the Trust Fund is exhausted. Originally, it was supposed to be sufficient for 75 years, but starting in 1988, the window has been growing shorter, with only a short reprieve in the early 2000's:

http://www.heritage.org/~/media/images/reports/2014/08/bg2936/bg-socsec-oasi-chart-2-825.ashx

The latest Social Security Trustee's report puts the exhaustion of the Trust Fund in 2034. But, this graph (made in 2014) projects the trend to instead place it in 2024.

What will happen when that occurs? By law, Social Security can only pay benefits that can be funded by incoming Social Security taxes. For now, the Trust Fund is allowing them to maintain the current benefit level. But, the Social Security's own projections say there will be a 21% shortfall in 2034, slowly increasing to a 27% shortfall in 2089. That means that absent any intervention by Congress, that's how much benefits will be reduced.

What would Congress have to do right now to fix the problem? From the Trustee's Report:

1. revenues would have to increase by an amount equivalent to an immediate and permanent payroll tax rate increase of 2.62 percentage points (from its current level of 12.40 percent to 15.02 percent, a relative increase of 21.1 percent);

2. scheduled benefits would have to be reduced by an amount equivalent to an immediate and permanent reduction of 16.4 percent applied to all current and future beneficiaries, or 19.6 percent if the reductions were applied only to those who become initially eligible for benefits in 2015 or later; or

3. some combination of these approaches would have to be adopted.

[Robert357]

The solution is actually fairly simple and politicians know what it is and are working hard to implement it.

The solution is to cause massive inflation in a way that doesn't increase what the government agencies owe. That way they will repay their “pension obligation” with near worthless money.

The key is to first make sure that pensions are not indexed to a “real” or “fair” inflation index, but if they are to one that is under the control of the government. The next step is to encourage moderate, but ever increasing levels of inflation. Gradually (frog in a pot of hot water) increasing the degree of inflation until the dollars are not worth much.

If you listen closely to what is going on at the Federal Reserve they are adjusting interest rates so as to “manage inflation.”

Inflation steal from a generation of savers so that governments can give “money” to those who don't save.