Public Sector Pensions: The Parasite Devours its Host
The comments below are an edited and abridged synopsis of an article by John Rubino
The Wall Street Journal recently highlighted a better method of analyzing the impact of public sector pensions on state and local budgets. The results are ominous for government finances, the bond markets, and pretty much everything else.
A case can be made—and was made a long time ago by President Roosevelt, among many others—that the whole idea of public sector unions is misguided. As Roosevelt said, “It is impossible to bargain collectively with the government,” because when government unions strike they strike against taxpayers, which he considered “unthinkable and intolerable.”
We’re seeing the truth of this now, as public sector unions use their growing clout to convince politicians to write checks that taxpayers can’t cover.
The inevitable result of a parasite that grows faster than its host is the death of the host. In this case, that means municipal bankruptcies on a vast scale in the next recession, default on hundreds of billions of municipal bonds necessitating a government bailout—culminating in a system-wide crisis that pops the Everything Bubble here and around the world.
Unless something else blows up first. These days, it’s not if, but when and in what order the world’s unsustainable imbalances tip over.