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US states entangled in pension crisis
Wed, 27 Apr 2011 13:14:15 GMT
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The upshot of a recently released study suggests that more than half of all states in America are short of funds for the retirement benefits they have promised to pensioners.

According to the Washington-based Pew Research Center, 31 states are short of USD 1.26 trillion on promises to the retirees and in just one year the funding gap has grown by 26 percent. The funding levels of ten additional states have also deteriorated, a press TV correspondent reported on Wednesday.

Pensions are deemed "underfunded" when states are unable to pay at least 80 percent of liabilities, according to results of the study by the nonprofit think tank. Such pensions affect everyone because they mean higher taxes or cuts in essential public services.

“If we promised more than what is there what do we do? Magic?” Economic analyst Rollin Amore asked.

Most states are legally bound to pay for the pensions; they may borrow from other states rather than the federal government, if they don't have the money in their treasury. Many Capitol Hill lawmakers have already backed legislations to prevent the federal government from bailing out states.

The gaps are already straining governments and stoking political fights over the workers' benefits in states such as New Jersey, Ohio and Wisconsin.

“At some points you've got to pay for these entitlements. Ok, it's not to say that entitlements don't belong to society. There is a point where entitlements though destroy the ability of a society, destroy the ability of its economy to sustain them and every goes down,” Amore added, stressing that more protests may be on their way.

A new Gallup poll showed that the majority of non-retired Americans do not think about themselves as having enough money to live comfortably during retirement; the number of these individuals has increased sharply from about a third who felt this way in 2002.

The 40-year-old David Meadows says he will never really retire and doesn't believe he will ever receive social security benefits.

The International Monetary Fund has announced that China will surpass the US economically in real terms in 2016. Whoever is elected in 2012, the IMF says, will be the last president to preside over a US economy on top. With only five years to change the outlook, that person has a daunting task ahead.

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