We knew efforts would eventually be made to bail out blue states that have been fiscally mismanaged and face giant deficits combined with massive unfunded pension liabilities.
But many of us thought that the likes of New Jersey, Illinois, New York and California would need to wait for a Democrat President to have a chance at getting bailed out. Enter the Coronavirus pandemic, which has destroyed any semblance of fiscal common sense and restraint and given the green light to a drunken sailor spending orgy.
The Democrats are putting their foot down, demanding bailouts of deeply-in-the-red "blue" states (Hey, that sounds like a play on words, no?) The Dems are insisting that further Coronavirus relief bills include aid to the states that have piled on enormous spending obligations and harmed their growth potential with repeated burdensome tax increases.
Illinois is one of the most egregious examples of a state in which politicians have made promises they can't keep regarding gold-plated pension programs -- primarily for the sake of kissing the unions' derriére so the unions will in turn guarantee votes to keep the hacks in office.
The Prairie State, which would be solidly red were it not for the deep blue Windy City tail wagging the dog, has been under Democrat control for most of the past four decades. The state has driven out untold middle class taxpayers with repeated tax increases intended to stem the pension red ink. Unfunded pension liability is about $140 billion, and the state is currently funding its pension program at 38.4 percent. New Jersey isn't much better, with about $130 billion of unfunded liability, and funding currently at 35.8 percent.
California's two largest public employee pension funds -- CalPERS and CalSTRS -- have reported gaps of more than $138.9 billion and $107.3 billion, respectively. All told, California state and local unfunded pensions total about $1 trillion. Needless to say, if many municipalities and counties are in deep trouble as far as having bitten off more than they can chew, they are ill-equipped to help bail out their reckless state government.
The private sector and nonprofits began switching from defined benefit pensions to 401k and 403(b) tax exempt plans more than 20 years ago. It was obvious that the old way of doing things was unsustainable -- in large part because demographics showed that retirees would increase greatly in number, while the ranks of those paying into the pension plans were thinning out. This is just plain common sense -- something utterly lacking in so many liberal / progressive dominated state governments.
No doubt, bailing out fiscally irresponsible states will prevent much-needed reform from taking place. It will prevent accountability and transparency, and simply enable prolonged lunacy. In recent weeks, we've seen an appalling spending blowout in Washington, D.C., that will eventually crush this nation. I fear that our spineless politicians, drunk on profligate spending, will simply open up the floodgates and issue multi-billion dollar blank checks to irresponsible blue states.
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