Detroit Bankruptcy, Now We Wait

Largest Bankruptcies

Largest Bankruptcies (Photo credit: Adam Crowe)

Long-term viability of Social Security has been a subject of concern for years. Now, the Detroit bankruptcy filing turns the spotlight on municipal and state pensions.

I personally believe Social Security is in better financial shape than most people think. Social Security can easily survive into the 22nd century and beyond, if only we have the will.

Detroit skyline

Detroit skyline (Photo credit: Bernt Rostad)

But retirees, and anyone who expects to retire in the future, ought to be nervous about the shock waves from the Detroit bankruptcy. How many other cities, big and small, will have their credit ratings reduced? How many more will follow Detroit into bankruptcy? Not many, we may hope.

I read in U.S. News and World Report that Chicago, New York City, San Francisco, and Boston have more unfunded pension liabilities per household than Detroit. That’s attributed to the Milken Institute. No reason to jump to the conclusion that any of the aforementioned cities are anywhere near bankrupt. But I’m about ready to jump to the conclusion that municipal pensions nearly everywhere are a ticking time bomb. Far as I can see, Social Security is totally public and transparent, but all these municipal and private pension systems are transparent as mud.

Here in Maryland, the state government wants to turn over responsibility for teacher pension funds to county governments. State officials say the state can’t afford to fund teacher pensions; county officials respond that local governments can’t afford it either. Teacher pensions could become a potato that’s politically too hot to handle, if not in Maryland, possibly in other states.

Multinational corporations have long since torn up the “social contract” that united American business, workers and consumers in pursuit of the American Dream. Pensions are more like a legal contract between workers and employers. If bankruptcy were to enable states and municipalities to welsh on pension obligations, who’s going to enforce the pensions promised by corporations?

I can’t begin to get my mind around the magnitude of the pension crisis, if it is a crisis. It all seems abstract, to my poor mind. Does anyone have a handle on the pension problem?

— John Hayden

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8 Comments

Filed under Aging, Debt crisis, Economy

8 responses to “Detroit Bankruptcy, Now We Wait

  1. No unfortunately.. I have no idea about USA .. But our future pensions are dependant on investment in stocks and shares for private pension pay outs.. So when the Dominoes start to fall its bound to have a knock on effect ALL round..

    Sending well wishes..
    Sue

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  2. Pingback: Comment comprendre le destin économique et financière de Haiti avec le régime martelly-Lamorthe | Le Vrai Discours Actuel de Hermann Cebert

  3. I am waiting for the aftershocks too, it’s just the beginning.

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  4. Bev

    My daughter and her husband both work in the California school system. So, that means they won’t have social security to depend on except for some of the earlier years when they lived back East. I have tried to impress upon her that the CalPERS pension might not be there, or be enough to support them when they retire, but they are too busy trying to make ends meet as it is. Of course, they would always have the option of moving back to SC where the money might go farther, but I doubt I’ll be around when they have to make that decision.

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    • Interesting, the retirement move for a lower cost of living! I’ve heard that in the past, a trickle of U.S. Social Security recipients have moved to countries like Mexico or Ireland, where life might be pleasant and the American Social Security check might buy a higher standard of living. I don’t know how changes in currency exchange rates might impact such decisions. But I imagine a lot of Baby Boomers might be considering such moves in coming years.

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      • Bev

        I’m getting a LOT of pressure to do this, but have no interest in it. If it’s one of the South of the Border countries, and they have political or monetary problems there, who do you think the natives will come after first?

        And the horror stories I’ve heard about Thailand and, perhaps, Bali. Nope. I’ll take my chances here. Remind me to tell you what is happening right now to a friend who is in the Philippines. And I thought that country would be somewhat “friendly” to Americans. Apparently not. Graft is rife and the living is not friendly.

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  5. I agree, Bev. I’m not the type to be comfortable settling, late in life, in a strange land, far from home. Think I’ll take my chances right here in the good ol’ USA.

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