Gino's Observation

I made reference yesterday to some comments from Willie Brown, the one-time majordomo of the California legislature, which prompted this typically pithy response from our friend Gino, who has the pleasure of being a Californian:

willie brown, though correct, has left out some of the stuff. CA pays out more money to those who are not working than those who are working.

with retirement at 50 for many workers, they recieve almost the same as their last salary(80-90%), plus the primo health benefits the private sector could never bargain for, and they're living til their 80's.

for some, their death would be a public service.

And right on schedule, someone else has noticed this problem. Kenneth Anderson at the Volokh Conspiracy blog notes the following from the Financial Times:

Estimates of aggregate funding requirement of the US pension system have ranged between $400bn and $500bn, but Mr Kramer’s analysis concluded that public funds would need to find more than $2,000bn to meet future pension obligations.

That's $2 trillion, folks. With a "T." A 2 with a vapor trail of zeroes following it. Gulp.

So who's going to pay that? Anderson wonders if anyone will:

Two trillion dollars? One question about these obligations is whether taxpayers will stick around to pay them, or instead will vote with their feet. (“Vote with their feet” is something that has been discussed in various ways at VC — as an aspect of a federal system and states with their own laws.) Many of these pension obligations have been incurred by municipalities and others by states, and in some cases the obligations are intertwined. But what happens if voters-taxpayers move out?

The assumption has long been that taxpayers are stuck, on account of jobs and other circumstance. But query whether that is necessarily true as the baby boom generation retires. In that case, it might find itself far more mobile, in circumstances where rising taxes at every level make relocation a more valuable decision at the margin. For that matter, if otherwise desirable locales manage to tax their businesses away, will the baby boomers’ kids and grandkids have reason ever to locate in places that lack jobs? They might have been raised there — but would they go back?

Anderson is describing California today. And as he notes later on, people are moving with their feet and have been. Ask a Coloradan if they've seen some new California neighbors in recent years.

The day of reckoning is coming, sooner than most of us might realize.