The US faces a crisis over its gaping pension funding hole. Retirement funds have less than 75% of the money needed to meet promises made to millions of public-sector workers, including teachers and policemen, according to the Public Plans Database.
Pew Charitable Trusts estimates that unfunded state pension liabilities amount to $1.4trn, while Moody’s Investors Service reckons the deficit for state and local pensions could be as high as $4trn.
Some funds could face insolvency unless governments raise taxes, divert funds or persuade workers to accept reductions to their promised benefits, says Sarah Krouse in The Wall Street Journal. Extended lifespans and expensive benefits have contributed to soaring costs.
“The International Monetary Fund’s top staff misled their own board, made… calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory. This is the lacerating verdict of the IMF’s top watchdog on the fund’s tangled political role in the eurozone debt crisis, the most damaging episode in the history of the Bretton Woods institutions… It describes a ‘culture of complacency’, prone to ‘superficial and mechanistic’ analysis, and traces a shocking breakdown in… governance… the whole approach to the eurozone was characterised by ‘groupthink’ and intellectual capture. They had no… plans on how to tackle a systemic crisis… because they had ruled out any possibility that it could happen.”
Ambrose Evans-Pritchard, The Daily Telegraph