Maine Madness – Government Retirees Receive 17:1 On The Dollar Contributed reports Taxpayer-Funded Government Pensions to Turn Thousands of Retirees into Millionaires:

The 25,000-plus individuals currently enrolled in the Maine Public Employees Retirement System will received a combined $15,383,315,649—an amount equivalent to $11,834 for every man, woman and child in Maine. Of that nearly $15.4 billion total, retirees have paid in a combined $882,274,785—less than six percent of the total pension cost.

On average, for every $1.00 withheld for their paycheck while working, government retirees will get back $17.00 in lifetime pension benefits. For some government retirees, for every $1.00 paid into the retirement system, they will get back more than $300.00.

2,101 – number of government retirees set to receive lifetime pension benefits of $1 million or more

• 9,193 – number of government retirees set to receive lifetime pension benefit of $500,000 or more

• 50 percent – percent of current government retirees who worked for government 25 years or less

There are 25,000 people, 8% of which are about to be millionaires, 36% of which are going to retire with 500k+. There are about 1.3 million residents of Maine.

This is one of the core and insoluble problems of the concept of government, right before your eyes :)

I have explained it before:

A small number of people each individually have a huge marginal interest in the growth of specific programs, while the majority of people who fund this growth, each of them at a marginally small percentage, have very little vested interest in the elimination of particular individual programs. This creates a mismatch in incentives that brings about the inevitable.

When very few people have such asymptotically higher incentives in a single program than the majority, then every single one of them will be fighting tooth and nails and with ferocious tenacity for his money, while everyone out of those in the majority who is, at the threat of imprisonment or violent seizure of property, forced to pay for this particular program has little to no to even negative incentive (time, opportunity cost, etc.) to do something about it.

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State Pensions Owe $5.17 Trillion – Total US Debt at 700% of GDP

Recently I posted something about the phenomenon of private credit contraction being more significant than public credit expansion.

In there in noted:

I’m also not sure to what extent other municipal and state pensions are covered in the flow of funds number, but I rather doubt they are included at all.

Now I came across some numbers:

Joshua Rauh, an economist at Northwestern University, and Robert Novy-Marx of the University of Chicago, recently recalculated the value of the 50 states’ pension obligations the way the bond markets value debt. They put the number at $5.17 trillion.

After the $1.94 trillion set aside in state pension funds was subtracted, there was a gap of $3.23 trillion — more than three times the amount the states owe their bondholders.

“When you see that, you recognize that states are in trouble even more than we recognize,” Mr. Rauh said.

That same article also points out something interesting about past patterns of debt blow ups throughout history:

Professor Rogoff, who has spent most of his career studying global debt crises, has combed through several centuries’ worth of records with a fellow economist, Carmen M. Reinhart of the University of Maryland, looking for signs that a country was about to default.

One finding was that countries “can default on stunningly small amounts of debt,” he said, perhaps just one-fourth of what stopped Greece in its tracks. “The fact that the states’ debts aren’t as big as Greece’s doesn’t mean it can’t happen.”

Also, officials and their lenders often refused to admit they had a debt problem until too late.

“When an accident is waiting to happen, it eventually does,” the two economists wrote in their book, titled “This Time Is Different” — the words often on the lips of policy makers just before a debt bomb exploded. “But the exact timing can be very difficult to guess, and a crisis that seems imminent can sometimes take years to ignite.”

This is important: What will break the federal and state governments’, and ultimately of course the taxpayers’, backbone, won’t be the officially declared debts, but the ones that are off the books.

So based on this, the total debt count in the US so far:

Total private+public debt as per flow of funds report: $52.5 trillion
+ Social Security & Medicare obligations: $43 trillion
+ State pension obligations: $5.2 trillion
= $100.7 trillion total debt or about 700% of US GDP.

“When an accident is waiting to happen, it eventually does …”

Amen to that!

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