Pension Cuts Won't Cover U.S. Taxpayers' $3 Trillion Bill, Professor Says

Public bailouts are not done. Public and private pension funds have huge shortfalls in a low real (constant currency) return environment.

The study of 116 U.S. retirement plans for teachers and government workers showed that as of June 30, 2009, they had $1.89 trillion in assets to cover $3.15 trillion in liabilities, Rauh said. The research used the typical fund’s assumption that investments will earn about 8 percent annually. That is a gap of $1.26 trillion -- more than double the shortfall of a year earlier, according to a study by the Pew Center on the States.

“There is no magic bullet as far as policy changes are concerned,” Rauh wrote in the paper. “Ultimately taxpayers will have to come up with sums of this magnitude. If unfunded liabilities continue to grow the bailouts could be even larger.”

Source: bloomberg.com