USA - New standards highlight massive government retirement shortfalls

The pension bubble

As if the housing market collapse and European debt crisis weren’t bad enough, another fiscal disaster looms on the horizon. New rules adopted last week by the Governmental Accounting Standards Board (GASB) clarify the depth of mismanagement of state and local government pension programs.

• When the bills come due, it’s going to be very, very expensive.

The Pew Center reports a $1.38 trillion gap between the assets states have set aside to fund retirement and health care programs compared to the amount of their obligations to retirees. The revised accounting standards will show the true gap is even wider - something that could trigger a round of downgrades by rating agencies.

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