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Cities Face a Deepening Fiscal Crisis

Discussion in 'Political Discussion' started by Real World, Nov 17, 2010.

  1. Real World

    Real World Moderator Staff Member

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    I don't think enough people realize how bad the numbers are moving forward. We're in some serious trouble people. Not just now, but years and years down the road as well. Assuming this current "crisis" and economic "downturn" correct themselves, there's still the mountain of unsustainable obligations we'll have to face. Consider the current problem an absolute max of your credit card, and you losing your job. Assuming you find a new job (fix your economic situation), and find a new card to dump your debt onto, you'll still have the problem of owing massive amounts of money, that you couldn't possibly pay back. That's where we are folks.


    November 17, 2010

    Cities Face a Deepening Fiscal Crisis

    By Steven
    Malanga

    The steep fiscal crisis that many states face includes staggering retirement costs for their workers, estimated at some $3 trillion in unfunded future promises. The size of those liabilities has already shaken up some municipal bond investors, and the inadequate, sometimes misleading way that states account for these steep costs has attracted the attention of the Securities and Exchange Commission.

    But lurking beneath those obligations is another huge set of liabilities from municipal governments, that is, from cities and counties whose politicians have also made astonishing promises to workers that they will have trouble keeping. Unlike states, which can't declare bankruptcy, a few municipalities have already sought the protection of the courts to try and solve long-term budget problems. More may be heading that way. Bondholders and taxpayers beware.

    A recent study of the 77 largest municipal pension systems by finance professors Joshua Rauh of Northwestern University's Kellogg School and Robert Novy-Marx of the University of Rochester estimates that total unfunded liabilities of America's municipal pension systems is well north of half a trillion dollars. On a per capita basis, the professors estimated that each household in the 50 largest cities and counties they studied owes an average of $14,165 for future retiree liabilities. This, of course, is in addition to the other debt these places owe, most especially their municipal debt. New York City taxpayers, for instance, owe about $65 billion of municipal debt on top of what Rauh and Novy-Marx estimate is $122 billion in unfunded pension obligations.




    RealClearMarkets - Cities Face a Deepening Fiscal Crisis
     
  2. tehmackdaddy

    tehmackdaddy Practice Squad Player

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    "Unfunded promises." :bricks:
     

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