The Collapse-Part II

There is a problem far more seeded than the staggering amount of private debt and leverage that is now present in the domestic economy. The headlines of foreclosures and bank write-downs have for the moment removed the glaring apocalypse of government liabilities from our thoughts.

In June of 2006, I wrote an article published by the Von Mises Institute in which it was stated that future liabilities of all government retirement programs, including Social Security and Medicare, is around $57 trillion or the equivalent of over $500,000 per household in the United States. The current Gross Domestic Product of this country stands at about $11 trillion and the approximated wealth of the world has been surmised to be about $40 trillion. The problem with government retirement liabilities is obvious.

The retirement liabilities of government also include those benefits at the state and local level. If trillions of dollars are an unimaginable amount, then perhaps billions of dollars is a little easier to comprehend. The amount by which the government employee pension and healthcare plans are under funded in the state of New Jersey lies somewhere in the neighborhood of $55 billion. For every citizen of New Jersey this represents an indebtedness of over $6,000, and this is just the portion that is under funded. It of course says nothing of the personal savings and capital already confiscated for the funded portion of that state’s pension programs.

The pension problems of New Jersey, though extreme, are representative of the amount of liabilities every state faces. To some the state of New Jersey is too far from reality and billions of dollars still is a number still beyond comprehension. The funding of the local government school district’s employee pension and retirement healthcare funds require an amount that exceeds $1,000,000 per teacher and administrator. With a current full time staff of nearly 400, the pension liabilities for today’s employees in the Hudson School District are roughly $400 million. This amount does not include those already in retirement from the school district. If the citizens of the Hudson School District were required to fund these pensions solely from their own pockets, then the liability per resident would exceed $40,000; for a family of four it would be $160,000 of lost wealth.

The point is clear. Government pension programs have bankrupted citizens locally, statewide, nationally, and in the end the world.

-To be continued-

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