Put simply, representatives need to be on a personal financial hook (or penalty) for laws, rules and policies, even after they've exited office.
Don't worry though. This exact same thing is also happening to Social Security, which will crash around the same time, or shortly after, so everyone working now will get the shaft.
Of course, the latest date I've seen (2038) is almost exactly when I should have been eligible to start drawing on it.
States cannot go bankrupt, without a change to federal law. Cities can and have, and pensions have already been addressed in that context. It's not a new question.
> and the people affected are going to sue. It will take at least a decade to work up to the Supreme Court, who will find (no matter WHAT the liberal/conservative makeup at the time) that, surprise, surprise, the government is NOT legally obligated to pay out the benefits they said they would.
It's already been established that pensions can be cut in bankruptcy, so, yeah, that's not even a question.
> Various governments will try to implement various forms of austerity to make it work,
They already are to prevent running into the major crises (e.g., recent pension funding requirements reforms in California.)
> Don't worry though. This exact same thing is also happening to Social Security, which will crash around the same time, or shortly after, so everyone working now will get the shaft.
Social Security won't crash; even with scenarios projecting Trust Fund exhaustion it still ends up paying at worst something like 2/3 of eligible benefits out or current revenues out to the limit of projections.
Minor nitpick, but it’s in Illinois’ state constitution that pensions cannot be reduced. Republicans want to change the constitution to remove this rule, but Illinois is an overwhelmingly Democratic state so that’s never going to happen. It will be interesting to see how all of this plays out.
Major nitpick, but in the event of municipal bankruptcy (the context of the store you responded too), federal bankruptcy law trumps state law—including the state constitution—because Supremacy Clause. The bankrupt entity doesn't cut pensions, the bankruptcy court does.
It's not just former employees that will suffer. Everyone suffers when states have to pay higher interest rates on their bonds because of poor credit ratings (that's what bankruptcy does to a state) or have to pay more for workers and contractors. Everyone will have to pay higher taxes and everyone will receive less from the government.
I cannot understand the logic of not making good on government obligations. You can take the position that the government should stop promising pensions, but how can anyone think it is a good idea for the government to fail to pay for the pensions it already promised people (or, frankly, any other promise the government made)?
It is going to be HUGE and do incredible damage. Retirees will be hurt catastrophically, costs of government borrowing will skyrocket, programs will be cut massively, workers will abandon government.
The issue is that the costs of meeting the prior obligations will be completely impossible. States, cities, and school districts will go bankrupt, massive numbers of people will be fired, and taxes will go up while service goes down.
Unfortunately the politics prevent a fix today and prevented a fix 10 or 20 years ago when it would have been much cheaper. The fix will happen in 10 to 20 years and it's going to be horrific.
As for Roth IRA. I don't trust the government to honor their end of the deal. I can see them taxing withdrawals for the top 10% in the future.
The union leaders and the politicians - typically in their 50 to 70s - who made the promises will be dead by the time the 25 year old new hires try to collect their pensions at 55 or 65. The incentives are all sorts of screwed up and it's very difficult to create a healthy set of constraints for this kind of bargaining.
They should simply put the burden of new obligations (debt or pension guarantees) on individuals rather than on the city. If you live in a municipality when they take on a bond for a stadium, or agree to pension payments, then you pay those debts regardless of where you have moved to. Or put the obligations on property, so people have an interest in not burdening themselves or their investments.