Disassembled Watch I

The first in a continuing series of posts on America’s governments going broke or something close to it….

“Here’s a feature of Obamacare you probably don’t know about: A transfer of hundreds of billions of dollars in liabilities to retired public employees from state and local governments to federal taxpayers.”

Via Josh Barro, who is a ruthless critic of the GOP while brokering little tolerance for the stunts of Democrats, here is evidence of a serious backdoor bailout of irresponsible state and municipal governments. Federal taxpayers take the hit for this if its successfully implemented.

Why do I find this important?

Urbanist critics on the Right have scoffed at the prevailing narrative on recovering cities with some accuracy that cities have unique fiscal vulnerabilities related not only to badly managed public pension systems but overgenerous public sector retirement compensation. This represents nothing less than an absolute game-changer on that charge.

Workers were promised significant retirement health benefits that start upon retirement and transition into supplemental coverage after age 65. Very little of these benefits were pre-funded and their expense alone was enough to torpedo municipal budgets in the coming years.

With this policy, Pres. Obama has altered that ominous backdrop dramatically. Local and state governments can now transition public workers from these expensive plans to cheaper ones provided on the relevant ACA exchange. Recall these plans are subsidized by the government for all but the wealthy.

Hundreds of billions of dollars in liabilities disappear off municipal and state accounts within the next two to three years. Worse, the amount is far greater because local governments are among the biggest offenders of underfunding liabilities and unlike states, we have little research on how much exactly they owe.

If we accept the narrative that we are going broke, one way or another, for one set of reasons or another, this is a damning ‘nail in the coffin’.

Absolute transparency in municipal budgeting gains more urgency with this development. The money saved at the municipal or state level should be returned to the taxpayers who will inevitably pay higher federal taxes as the federal deficit increases.

Of course, if we believe that will happen….

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