from Birch Gold Group:
There are currently two crises in the U.S. in need of attention: infrastructures and public pensions. Unfortunately, this twin crisis appears to have developed into an “either-or” crisis.
According to a recent article at Barron’s, States will have to choose one or the other (emphasis ours):
There is an infrastructure crisis in America. The U.S. earned a D+ in infrastructure for 2017 from the American Society of Civil Engineers. State pensions aren’t in great shape either. They are underfunded by an astounding $6 trillion. And as Barron’s Randall Forsyth points out, U.S. states face a dilemma: they need to fund both infrastructure and pensions, but have trouble doing either.
To put the big picture in perspective…
Worldwide pensions are approaching a $400 trillion shortfall, and mathematically may not survive much longer in the U.S. even if fully funded.
Meanwhile, the American Road and Transportation Builders Association (ARTBA) shows there are 47,000 structurally deficient bridges across the U.S. (see map below):
The blue areas show 0 – 4.9% deficient bridges, the yellow areas show 5 – 8.9%, and the red areas are 9% or higher (almost 1 out of every 10 bridges).
According to the map, there are over 178 million daily crossings on those structurally deficient bridges. That works out to almost 3,800 crossings per bridge on average. And this is just bridges… we haven’t even accounted for roads!
So infrastructure is as much of a crisis as pensions are. Since States have a limited budget, which problem will they focus on?
The States May “Throw Their Hands Up in the Air”
Barron’s described one pension problem as “generous promises” made by politicians to public employees from an era of higher interest rates:
Assume a high interest rate, and present contributions grow and compound at a rapid rate, which easily fulfill promises to retirees in decades hence. Conversely, lower rates require higher current contributions to meet those future promises.
Lower rates appear to match the current reality, however. So retirees who were promised a decent return for their contributions are now being left stranded.
The Barron’s piece finishes with a rather stark conclusion. In the face of this monumentally challenging decision, it’s possible the States may not do much, if anything:
As the 2020 elections approach, neither of these crucial problems is getting much attention. Infrastructure was a buzzword in the 2016 elections, but not much has happened since. As for public pensions, they’re not Washington’s problem.
To reiterate, retirees who have a public pension are “not Washington’s problem.”
Don’t Wait for States to (Maybe) Choose You
Round and round we go, where this political “merry-go-round” stops, nobody knows. But it sure seems like the State isn’t going to help much.