The War Between Public Pensioners And Tax Donkeys Is Heating Up

The comments below are an edited and abridged synopsis of an article by Charles Hugh Smith

Public pension obligations are rising so fast that even repeated tax increases can’t keep up, setting up a war between entitled baby boomers and younger taxpayers (Tax Donkeys), who pay most federal and local taxes.

 War Between Public Pensioners And Tax Donkeys Is Heating Up | BullionBuzzIf the stock and bond markets suffer even modest declines, the pension war will move to open political combat. The 2008-09 global financial meltdown was a taste of the reality facing public pension programs: Once annual returns slip from +7% annually to -7% annually, the pension plans are soon insolvent.

In the war between public pensioners and Tax Donkeys, the pensioners can’t switch pension programs, but the Tax Donkeys can move to lower-tax states.

Many cities and counties are going broke, slashing services and hiking taxes to no avail. Promises made by politicians cannot possibly be kept, and those expecting services and taxes to remain untouched will be shocked by the massive cuts in services and massive tax increases that are coming.

These dynamics will fuel a migration of the Tax Donkeys from failing cities, counties and states to more frugal, well-managed and small business-friendly locales.

The Tax Donkeys can live anywhere they please. They don’t need to stay in NYC or San Francisco. In a lower cost area, they only need to earn a fraction of the income to live a much more fulfilling and rewarding life.

If the real estate and stock/bond bubbles pop, the pension bubble pops, too. Once property taxes start declining even as rates are jacked up, the public pensioners will lose the war. Once the stock and bond portfolios of the pension programs are shrinking rather than growing, the public pensioners will lose the war.

Those who can’t leave can opt out: close their businesses, quit their high-stress, high-paying job, and start living as close to the ground as possible.

Those who opt out move from contributing the most to contributing the least. Politicos and elites can entertain the fantasy that big city life is irresistible: it isn’t. It’s great for those feeding at the trough, but not for those filling the trough.

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