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Sept. 22, 2017 - Ron Paul Liberty Report
17:21
Tick-Tock Goes The Unfunded Pensions Clock

There are a lot of financial time bombs that the U.S. government, and state governments, have created. The $20 trillion national debt gets plenty of press. The insolvency of Social Security and Medicare don't get nearly enough. But there's also another financial time bomb lurking to the tune of trillions. Unfunded public pensions. Ron Paul talks about it today on the Liberty Report!

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Time Text
Unfunded Public Liabilities 00:07:38
Hello, everybody.
Thank you for tuning in to the Liberty Report.
With me today, as co-host is Chris Rossini.
Chris, thank you for being with us today.
Good morning, Dr. Paul.
Great to be with you.
Well, good.
You know, the confusion that exists today is that some people are doing badly and some people are doing very well.
And we're going to be talking about pension funds, so we're going to talk about the future, but the future may be on our doorstep.
How are the pension funds doing is the big question.
And yesterday, Zero Hedge, as usual, had some very interesting articles on economics.
And I want to read the title to you, Chris, and to the audience of two articles they put out because I think they're attention-getting and important and a reflection of the type of economic policies we've been following.
The first one is, this $700 billion public employees ticking time bomb is only 6.7% funded.
Most states are under 1%.
Well, that should concern a lot of people.
I guess if you are getting ready to retire and you work for the government, you better be concerned.
But so it's already starting, but the future is really what counts because there's some fudging going on, even what they're claiming.
Now, the other article is they're quoting Malden, John Malden.
Americans don't grasp the magnitude of the looming pension tsunami.
So it's big.
There's more articles like this.
We've heard about it before.
So Chris, I'm sure you've given this a little bit of thought.
And I was kidding you earlier than say, well, you know, people in my age group, I'm not going to depend on a public pension fund, but people in my age group might decide to retire someday.
So be prepared, work hard because they're going to want their money back.
Yes, unfortunately, this is an extension of the greater picture of the living beyond our means problem that we have in this country.
And we've gone way past that, where we know about the federal debt being $20 trillion.
And now my understanding is these unfunded public pensions are about $5 trillion.
So the promises are out there and there's no money for them.
And this is largely a government problem because I read that only 4% of companies even offer pensions anymore.
So, but whenever government has a problem, it's our problem.
So what it boils down to is politicians making promises with other people's money.
There you go.
And people believing them.
So what do you think about that, Don?
Well, of course, this is a reflection of a deeply flawed economic policy that we have.
And, you know, that article that said $700 billion public employees ticking time.
This is just sort of aside from that overall $5 trillion or $6 trillion of unfunded liabilities.
But this is the other one.
The article claims that not many people have paid much attention.
I didn't know that much about it.
It says the other post-retirement benefits is to the tune of $20 billion just in the 2015 they paid out.
And it's other.
It's not retirement.
So they're using this money before the people retire.
It has to do with medical benefits and other things at an earlier age.
And that is one of the reasons why it's been consumed.
But the other thing, Chris, is how do they calculate even the projections, which are lousy, but they're projecting that, you know, compounding interest.
And it looks like a lot of them are compounding interest at best 6%.
So it might be that it's much worse than even what they're pretending it to be.
Yes, and what we're actually witnessing is pretty much government lies.
And we know that they lie to us and the voters.
And we know that they lie to the troops.
The troops aren't out protecting freedom or the Constitution or our country.
They're actually lying to themselves.
The people that work for them, the bureaucrats, the police, fire.
They've been lured into these jobs thinking that they're going to have these extravagant retirement benefits.
And the money's just not there.
Well, you know, the fraud element here is blatant because the money's been used up.
It's a Ponzi scheme.
They're hoping that there'll be enough new people coming in to pay off the original participants.
So it's a Ponzi scheme.
But, you know, when you talk about monetary policy and inflation problem, the whole thing, whether it's Social Security or anything else, that is also fraudulent because let's say, well, we know the government, I've always claimed that Social Security beneficiaries don't have to worry about unfunded liabilities because they have unlimited ability to print money.
And therefore, they are going to get some money.
But what if you get a paycheck or a Social Security check and you're supposed to get $1,000 a month, you get $1,000, but what if it only buys $500 worth of goods and services?
That's ongoing.
The fraud is already hurting people on fixed incomes.
And that's why there's a lot of people complaining.
But that is a fraud of debasing the currency and a responsibility of the government.
But I often think about, you know, what if a private insurance company that was running a bond fund or something like that, our insurance program, and they committed the outward fraud of not having any assets behind their promises.
They would go to jail, and every once in a while they do go to jail.
But under these circumstances, the government unfunded liabilities, I think they're going to limp along.
And even if they won't be like Social Security, where the propping up is going to be easy because Congress can do it anytime they want and all they have to do is worry about the value of the dollar.
I think that even some of the private pension funds will be bailed out.
Take a look at student loans, which is slightly different, but it was a boondoggle, $1.4 trillion, and most of it is not going to get paid.
And the beneficiaries are the ones liable.
They're going to get bailed out by the government.
And because of the unlimited ability to print money, and the liberals brag about this.
The Keynesians brag about it that we can always pay our bill.
But what they can't do is guarantee the value of the currency.
And that's why these numbers are horrible.
But once again, I think the big ones, they'll come to a rescue.
Now, Kentucky's been a little bit more honest.
And they'd say, hey, you know, we have problems here.
And they will do their best when it's recognized that these aren't working.
And the reason my argument isn't going to hold up long term is that if everybody gets bailed out, what does that do to the value of the dollar?
Eventually, people will give up on the dollar, you know, whether it's the massive increase in military spending or the massive bailouts of the welfare state.
Eventually, the real threat on this whole system will be the loss of confidence in the dollar.
Yes, and I do want to stress that as well, that at the center of this, there's a lot of moving parts with the politicians lying and everything, but at the center is the monetary system, the Federal Reserve.
Dollar Debasement Risk 00:09:32
They have created this false reality.
And I get the sense when people hear 20 trillion, 5 trillion, all these, it really doesn't mean anything.
You could say 100 trillion, and it wouldn't matter because we've been detached from economic reality to think that there are no consequences to this, that this can just go on forever, even though all of human history proves that it doesn't.
But one point I'd like to make, too, is this is huge stuff, but we're always distracted by other things, whether it be foreign dictators or latest cultural markets stuff.
There's always a carousel of things to keep in front of our eyes to take away this story that government is going to have to default someday.
So my question, Dr. Paul, for you is, will war be used as a distraction?
We know governments like to do that.
They obviously have the stage set for whatever war they want.
Will that play a part in the financial catastrophe?
Yeah, it'll come.
And in the meantime, there will always be a threat of a war.
You know, we have to prepare.
Even as we speak, Mattis has been out there indicating that America is under deep threat because they don't have enough money in the budget.
So they will always scare you.
But there is a philosophic belief by many individuals because they've been recited to me.
They said, you know, the only way we got out of the Great Depression is when Roosevelt got us into World War II.
And the one thing is true.
It was less unemployment because millions went to the war and got shot at.
And yet, I remember World War II, and believe me, the conditions did not improve.
It was a very depressed conditions.
Things were actually made worse.
Things were rationed.
They didn't even make automobiles.
But war is considered a panacea because it employs people.
But what they don't realize, it's a total distraction from the wealth of the country.
If you're building all these bombs and weapons, that's wealth that's going out of the country.
So war makes it much worse.
And even the token warism that we're involved with, you know, in the Cold War and all the little wars that we're fighting, if you ever calculate all that, that has to be paid for by wealth leaving the country.
You say, oh, no, this gives us some good jobs.
Business people are making money and there's some good jobs out there.
But it's all temporary because it's based on debt.
A few people may even benefit by war, but it will be morally wrong because they will be benefiting for the wrong reason.
They will not be productive.
So, yes, and there will be this, and I think what you were alluding to is could there ever be a deliberate attempt to distract?
Well, all you have to do and go back to the time of Bill Clinton when he got into some problems at home, he went ahead and dropped some bombs, you know, and get in the news.
So it's a common practice for politicians to get involved, even though it's making things worse.
It costs more money and endangers us.
And so long term, you still have to say yet to pay the bills.
And earlier on, Chris, you said something about, you know, we have to live beneath our means right now because we've been spending too much.
And that's what this bond issue is all about.
And even though I believe that they will try to bail out, there's no guarantee of the long-term bailout.
It's pretty amazing that the churning of $15 trillion in the 0809 recession didn't get us economic growth, but it sort of kept things alive by just passing pasting it together.
But it didn't raise the standard of living of the middle class or the retiree.
It didn't really change the labor participation rate, which is still very low.
So that problem exists.
So you can't solve the problems of a deeply flawed economic system by saying, yeah, let's have a good little war and let's print more money.
That is deception, deceptive, and dangerous and fraudulent.
But this whole system, I think, you mentioned the Federal Reserve, the system that we've had since, especially since 1913, is based on fraud.
And one of the reasons why, you know, the founders were determined to try to prevent this, because they saw what happened when they had runaway inflation with the Continental Dollar.
They didn't want that to happen, and they were explicit.
But this encourages whether you're talking about financing for war, financing the welfare state, bailing out pension funds, providing pension funds that they can't pay for.
It all depends on the ability of the government to debase currency.
And in the early and middle stages of that, what you see is the elimination of the middle class.
And that's a big complaint.
That was one of the reasons why Sanders actually got some attention because he addressed it, although with the wrong ideas and the wrong understanding.
He knows that the middle class is suffering, and yet those who complain won't solve the problem unless they admit up front that it is the economic policies, the economic system of Keynesian economics and fiat currency where the real culprit is.
Yes, and I think it's very safe to assume that when the comeuppance comes for these pensions, people are not going to be happy.
And it's going to create a lot of resentment of who's going to want to bail out.
We know that there are some states that are fully funded.
They were responsible.
They're going to be penalized to take care of the states that were irresponsible.
It's kind of similar to what we have with bailouts for floods and all the other stuff.
It's a moral hazard that this Federal Reserve system has to, for the people that do the right things, have to pick up the pieces for the people that do the wrong things.
And the pensions are just another example of that.
My closing thought, Dr. Paul, is, you know, we do this because we want to avoid pain.
We want our country to thrive and avoid mistakes.
And we see what the right ideas are.
But with these trillions and trillions, there's no avoiding the pain that has to come with this.
So I think the only thing that we can do is put out the right ideas of how do you pick up the pieces after this.
Well, very good.
It's a good summation.
And it is a big question.
How will it evolve?
What do you do if you have somebody facing this and they are in retirement and all of a sudden they lost their pension, this sort of thing, what can you do?
And there's no easy answer.
You could, if you discovered this 20 or 30 years ago and say, you know, I'm not sure that Social Security is going to last.
And even my 401k might not work.
And they might not have ever opted to put a little bit of protection and insurance in metals.
It is a very great dilemma.
And I think the crisis will come and it's going to hurt a lot of people.
But I think the only thing where I can see some hope is there's more and more people understanding this and that it'll be so disruptive they're going to have to look for a correction.
Over the centuries, when it was realized that the real culprit was this pretense that wealth can be created by creating new money or debasing the currency, then they go back to a sensible approach.
Even our country did it after the runaway inflation of the Continental Dollar.
It was also the bad consequence of the Civil War.
They were off the gold standard.
They went back on the gold standard and restored some sense to the economy.
So it does happen, but the conditions are very bad now.
And then people say, well, Ron, does that mean it's impossible?
No, it's not impossible, but it's practically impossible in the sense that the politicians and the people won't accept it.
Because if you cut back spending and balance the budget and live within our means, yeah, it could be restored.
But it's not going to happen politically.
So people have to be prepared and do their very best.
But the most important thing is for we who are interested in the ideas is to present these ideas for the rebuilding of a system.
Just as the founders did after the war and after they realized how bad the continental money was, they restored the effort.
So that can be done, but it won't happen, won't do any good unless we change our mind about what the role of government ought to be.
That we have to certainly attack that notion that you alluded to is war might help us.
You know, let's have a war to solve our problem.
Silliest thing in the world.
Yeah, those answers, those suggestions have to be refuted.
And the answers can be found in the principles of liberty and limited government and sound money.
And of course, that should be our goal if we are interested in achieving peace and prosperity.
I do want to thank you, Chris, for being with us today.
And I also want to thank our audience for being with us.
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