There is a whiff of the Irish situation in this story. Carinthia stood as guarantor for debts that it could not possibly cover,' he said. There are many regions that could slide into difficulties, including Belgium's Wallonia, or the Italian region of Sicily.
We are not debating where the health savings will come from. None of that is in the bill. This is the Senate kicking the can down the road to the Assembly and asking the Assembly to fill in all the rest of the blanks'. The month recession that ended in June wiped out asset values and forced cuts to contributions.
Now, liabilities are crowding out spending for services, roads and schools. Shortfall as the Fall Is Short. The situation is explicable to all except politicians expert at "kick the can. The arithmetic reality is becoming ever more visible as the political rhetoric designed to hide it weakens. They've also used rosy scenarios to inflate their estimated investment returns.
Unlike corporate accounting rules, the rules for government accounting let pension fund managers just pick a return number that makes their future liabilities look smaller.
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The outcome for the worst and best performing state pension funds places Illinois atop the heap as the worst of all. Moreover one finds the regression -- for one cannot call this "progress" -- changing rapidly over recent years. An except from one report evidences the downward cycle over some years, which of course makes the resulting problem ever greater and its solution ever more painful.
The gap is more than three times higher than it was just a decade ago.
The rapidly rising pension gap is not caused by the weak economic recovery. Average investment returns for the 25 biggest public pensions systems over the past decade were only two-tenths of a percentage point below expectations. The report acknowledges what has been known for quite some time — pension forecasts use actuarial tricks to hide the dire storms that are about to hit pension systems. Chicago has less than 33 cents set aside for every dollar promised.
The Chicago Municipal Employees plan is estimated to run out of assets in seven years, since it is only The police fund funded at Consider all that Ill annoy - punning ploy. By comparison the Illinois's dire straits, Wisconsin's public pension plan rates best, funded at over 99 percent of its future needs.
While the politicians will tell us this is an intractable political issue, it can only be said to be so specifically because political choices were made every year to underfund, in order that these same politicians could spend money elsewhere. Given the actuarial certainty that underfunding at this level threatens future pension recipients as it does a tax-paying public, one wonders -- what it will take for the average Joe to awaken to the basic truth that their elected officials have sold them out by degree each year?
On the Overburdened Hook. One fiscal reason for the funding problems in Illinois is blatant political favoritism for the few. One reads, " Thanks to a loophole created by the Illinois legislature, retired teacher union leaders are getting pension credit for the years they did union work after leaving the classroom. The arrangement has put taxpayers on the hook for millions of dollars in retirement benefits unrelated to teaching, and further drained an already overburdened state pension fund.
The private sector loses significantly by comparison, but also do most retired teachers. How the Trick Works. He's 59, and at age 60 he'll be eligible for a state pension based on the four-highest consecutive years of his last 10 years of work. Over the course of their lifetimes, both men stand to receive more than a million dollars each from a state pension fund that has less than half of the assets it needs to cover promises made to tens of thousands of public school teachers.
Kick the can one more time? Bloomberg reported in February the underfunding for Illinois for was down to Kick the Can. Expert opinion? The pension system is under-funded and over-paying, Brown added, and something has to give. The Biggest Joke. But being unsustainable seems without cost to the politicians on the way to insolvency.
In reality, there is nothing 'required' about the ARC — most jurisdictions can contribute absolutely nothing and face no legal repercussions, at least in the short run. The process of moving towards bankruptcy seems to move slowly, but in the end rushes on. Incredibly, the state is spending more of its general fund on pensions than on K education. One in four tax dollars pays for retirement benefits. The Free Fall Absurdity. Cost-saving reforms for the city's other two pension funds, which face insolvency in a matter of years, are being challenged in court by labor unions and retirees.
Three years later, the city, county and state governments have failed to make any impact on the accelerating problem. That despite all the additional money taxpayers are contributing, the unfunded liability of many funds continues to grow? That urgent change is needed? Those are the questions. Something has to give. In the case of Detroit, it has, resulting in bankruptcy proceedings. In the case of other government entities, it will.
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Picture That. Thus the data suggests a visualization, three of the six calculated by the ECB economists evidencing the form are shown below. All the forms agree in shape and relative end game:. For many industrial countries, the growth of general government expenditure was enormous in the 20 th century. This data gathering and calculations echo ominously the so-called Laffer Curve. It illustrates the concept of taxable income elasticity—i. Those extolling massive taxation of a populace declare the Laffer Curve to be right-wing politics, and yet as one sees the mathematics of this cannot ne said to be of any political stance, per se, but rather an apolitical stance in a world in which economic reality is not malleable by words.
Even liberal senators such as Ted Kennedy and Howard Metzenbaum voted for those low rates. Economist Larry Lindsey has documented from IRS data that tax collections from the rich surged much faster than that. Conspicuously Ignored. That the supposed right and left of American politics agreed in is being conspicuously ignored, as is the fact that in the first two years of both the Clinton and Obama administrations the tax rates could have been easily raised due to the makeup of Congress.
The rates were not raised. World Bank statistics reveal that almost every nation — from China to Ireland to Chile — has much lower tax rates today than in the s. The average income tax rate among industrialized nations has fallen from 68 percent to less than 45 percent. The average corporate tax rate has fallen from nearly 50 percent to closer to 25 percent today. Political leaders learned from Reagan that in a globally competitive world, jobs, capital and wealth tend to migrate from high- to low-tax locations.
France's current government under Hollande passed the now withering 75 percent tax on the "rich" only to see it drive capital away and face the prospect of cancelling that tax. The Laffer Curve or some similar economic mechanism simply acted within society as had been expected by all excepting the French socialists, who made a political "calculation" without resorting to mathematics. Such is the nature of political words unsupported by real numbers. Assert That Facts Lie. One may notice the similarity of plotted outcomes between theories and gathered data.
What remains to politicians who want to further kick the growing debt can down the road to the future is to attack the data collection itself, in essence asserting that facts lie.follow
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One knows this is an ancient and yet most modern and verifiable political ploy. It is obvious that a government often attempts funds itself at the highest possible percentage, and obvious that government is willing to lie about this. France is proving that the fattened state is essentially attacking its own citizenry in order to live "above" them.
Tirole remarked that northern European countries, as well as Canada and Australia, had proven you could keep a welfare social model with smaller government. Some have said the "state" actually works against society when it becomes unsustainably expensive. The collected statistic and graphs of the curves as shown above all suggest that a tipping point comes when too many demand from too few.
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The question is simple. A secondary lie is that of the overwhelming bourgeois tendencies of socialist government leaders.
They love money, perks and power as much as any capitalist, and use government as their means to appropriate it. Past a certain point, government becomes too large and devours a private sector's energies. Debt grows while investment falls, regulation increases costs which are passed on to consumers who struggle to pay rising prices. Public debt, advanced as a means to fund the social welfare state, has become what the IMF rightly notes is "not good enough" for economic recovery.
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The cause? Fat, fat government. The simple solution is a diet. Alas diets are difficult, are they not? As one notes in the United States, the labor participation rate rose from to , and subsequently has dropped to below the level of , all the while the Bureau of Labor Statistics estimates lowering unemployment rates. As less workers in an increasing population hold jobs, the only way to arrive at the PR of an estimated unemployment rate is to discount those workers no longer seeking employment actively. This is a political calculation, but one notes the shape of this curve parallels those above, as the IMF links "high debt and unemployment.
And while according to the Household Survey, , people found jobs, what is more disturbing is that the people not in the labor force, rose to a new record high, increasing by , to Fat, fat government has become ever more overweight and voracious. The numbers are not in question. The same curve can be seen in the economic activity index for Puerto Rico in the period from to , with the now clear default on its government bonds, its debt becoming unmanageable.