Tuesday, January 5, 2010

US Public Pensions Face $2 Trillion Deficit

Government employees are about to get screwed on their pensions. The money isn't there to pay out. They'll tax the rest of us , but there are many, many other government priorities for the tax money. Government-employee pension benefits are going to be cut.

According to the chairman of New Jersey’s pension fund, the US public pension system faces a higher-than-expected shortfall of more than $2 trillion.

State and local governments are correctly perceived to be in serious difficulty,” Orin Kramer told the Financial Times.

“If you factor in the reality of these unfunded promises, their deficits will rise exponentially.”

Estimates of aggregate funding requirement of the US pension system have ranged between $400 billion and $ 500 billion, but Kramer’s analysis concluded that public funds would need to find more than $2 trillion to meet future pension obligations.

Kramer, chairman of New Jersey’s investment council and also a senior partner at the hedge fund Boston Provident, warned that outdated accounting models and unrealistic expectations of future returns had led states to underestimate their pension requirements.

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