Americans believe theyre sitting pretty with their pensions
funds, 401(k) retirement plans and medical benefits. But, as weve
written previously on numerous occasions, pensions are anything
starting to see the
coming pension wipe out creep up in smaller cities, and you
can be assured that this will spread like wildfire as local, state
and federal governments that have over committed funds and underestimated
economic growth and tax revenue struggle to stay in the black.
example comes to us from Central Falls, Rhode Island, where the
city government has basically told pensioners that they can either
voluntarily agree to pension benefits cuts of 10% to 50%, or face
the possibility of a total wipe out of their retirements if the
city goes bankrupt:
to a CNN report, Judge Robert Flanders who appointed by the state
to work out a solution to keep the the city from going bankrupt
said the choice is limited to the pensioners to either volunteer
to a 50% pension cut or risk losing it all in bankruptcy court.
has been given as part of an overall restructuring plan for the
city in which broad sweeping sacrifices and deep budget cuts are
being made across the board in order to close the gap on the citys
$80 million dollar budget shortfall.
In a Fox News
interview (video below) Judge Flanders lays out the reality of the
Correct me if Im wrong, but I read a quote from you, A
haircut looks better than a beheading.
Flanders: Correct. What I was trying to convey is that a bankruptcy
may even be worse than what we propose, and so I was hoping to
do this by voluntary agreement. As terrible as it was, it may
be better than what we can offer in a bankruptcy.
The city of
Central Falls has a budget shortfall of $80 million. Certainly a
large number, but nothing even close to what were looking
at in larger metropolitan areas, states and the Federal government
itself. When we look at all of the combined commitments were
well outside of the realm of millions and have entered the untenable
region of trillions of dollars in debt and deficits.
ago it was difficult for any American to imagine that governments
would have to either cut pension funds or draw on those funds to
make ends meet. Recently, when Tim Geithner ran out of money, the
first thing he did was to raid pension funds to the tune of tens
of billions of dollars. For now, those pensioners are safe, but
it wont be long before all governments start coming for those
pension funds giving pensioners the ultimatum of either agreeing
to massive benefit cuts or simply going bankrupt.
And you can
be assured that, even though today the majority of Americans will
vehemently deny the possibility and call you a lunatic for even
making the suggestion, when governments go after the pensions of
their own employees and retired employees, in the spirit of fairness,
they will also come after private retirement accounts.