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Pension Problems Approaching 'Point of No Return'

By    |   Wednesday, 05 August 2015 12:51 PM

Pension Problems Approaching 'Point of No Return'
(Dollar Photo Club file image)
The nation’s pension problems are quickly approaching “the point of no return,” Tom Hutchinson, senior editor of the Newsmax newsletter "The High Income Factor," told Newsmax TV.

The shortfall between the benefits state governments have promised to their workers and the money available to meet those obligations totaled a whopping $968 billion in 2013, up $54 billion, or 6 percent, from 2012, according to a study by The Pew Charitable Trusts.

The data "don't fully incorporate the strong [financial-market] returns of recent years" for pension funds, the report states. But state pension funds are still in a world of pain.

The cumulative state pension debt will likely stay above $900 billion—and rises above $1 trillion when local pension shortfalls are included, according to the study. "State and local policymakers cannot count on investment returns over the long term to close this gap and instead need to put in place funding policies that put them on track to pay down pension debt."

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“And that is certainly the trajectory it is heading towards,” Hutchinson told “Newsmax Now.”

“If things continue to go as they're going, down the road there's going to be a lot of pain, but it's still possible that if you can get good economic growth and increase the revenues to these states — and at the same time over the long term increase the return on the pension investments — it could be worked out.”

Turning to Puerto Rico’s economic woes, Hutchinson said the only way out is through strong economic growth.

A Puerto Rico agency defaulted on bonds for the first time Monday, initiating a clash with creditors as the struggling commonwealth seeks to renegotiate its $72 billion debt load, Bloomberg News reported. The Caribbean island paid just $628,000 of what was due on securities sold by its Public Finance Corp. because the legislature didn’t provide enough money, Melba Acosta, the president of its Government Development Bank, said in a statement. About $58 million of interest and principal was due.

“What you see in these countries when they try to address the fact that they have taken on too much debt, go exactly 180 degrees the wrong way,” he said.

“They decide to raise taxes and kind of leave the benefits the same … and they find themselves in a worse bind than they are already. In the U.S. there's more options because they have an option to potentially grow their way out of it.”

(Newsmax wire services contributed to this report.)

About Tom Hutchinson
Tom Hutchinson is a member of the Newsmax Financial Brain Trust. Click Here to read more of his articles. He is also the editor of The High Income Factor. Discover more by Clicking Here Now.

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The nation’s pension problems are quickly approaching “the point of no return,” Tom Hutchinson, senior editor of the Newsmax newsletter "The High Income Factor," told Newsmax TV.
Pension, Problems, Economy, Newsmax TV
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2015-51-05
Wednesday, 05 August 2015 12:51 PM
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