PIMCO pimping for libs and Obama.
There are some serious weaknesses in his reasoning. The most fundamental one being that even the more moderate steps he believes would fix things would require foresight, self discipline and a willingness to buck public employee unions. None of these qualities existed up to now and there is no good reason to believe local governments will have sudden epiphanies and get them.
Municipalities have the next 30 years to remedy any pension shortfalls
Yeah, and I believe in Santa and the Tooth Fairy. They aren't going to do squat until the cards are starting to fall.
He is also assuming that external factors, such as the federal government's solvency and the growth of the economy in general will be positive and improve in the near and long term. We don't have an historical precedent for the current insolvency of the federal government. Ditto for some of the states.
What is record high inflation (yes, it IS coming) going to do the municipalities' balance sheets? And the cost of borrowing? And the cost of servicing pensions and benefits?
Government economic philosophy: Next year we'll recommend forming a commission to do a study to recommend ways to deal with our budget procrastination.
lol “Bill Gross is “the bond pimp” looking for a new batch of hoes!” found that comment regarding this.
http://www.pimco.com/Pages/NationalMunicipalBond.aspx
http://www.pimco.com/Pages/MuniMarketBargainsACloserLookatMunicipalDebtDeficitsandPensions.aspx
So much of the risk depends upon the specific state and the municipality. Some were run with outrageously corrupt and reckless fiscal policy. They had bond authorities that issued bonds for worthless projects by connected cronies.
The only solution in the USA is a policy that requires sacrifice by all including the poor and also tax hikes for the rich.
PIMPCO is blowing hot air on this one.
I'd like to see an analysis of various municipal budgets with the pension data points laid out for all to see.
I could think of a simple spreadsheet format that would make a taxpayer's hair turn white if they saw it.
Oddly, the Rebecca of Sunnybrook Farm crooners haven't suggested anything along those lines.