Investigative journalism

From Payback time: Padded pensions add to New York fiscal woes

An online, searchable database compiled by The Times contains the names and pensions of about 3,700 public retirees in New York who receive more than $100,000 a year. 

In fact, the cost of public pensions has been systemically underestimated nationwide for more than two decades, say some analysts. By these estimates, state and local officials have promised $5 trillion worth of benefits while thinking they were committing taxpayers to roughly half that amount.

There is hope for the press corps. This strikes me as true muckraking.

What’s this got to do with global macro? Plenty. Public-sector pensions are one of the liabilities of the state, in addition to other entitlements and financial debt. And the story is similar whether it’s Greece, the UK or New York City. Note that these liabilities only get more onerous for us, the taxpayers, with deflation, unless the pensions are indexed to both directions of inflation. They mostly can’t be clawed back. (However, a US city can declare bankruptcy; does this relieve its pension obligations?) Which makes me believe that the tax man cometh for pensions. Those beyond some threshold are going to get taxed big-time.

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