Will swing states pressure the presidential candidates for a pension bailout?
Will a few important swing states like Ohio and Colorado put pressure on the candidates to bail them out of their pension debt?
by Jonathan Ingram
Across the country, state pension funds are dramatically underfunded. Recent calculations have put the total level of states’ unfunded pension debt at $2.5 trillion (and possibly as high as $4 trillion). That’s more than one-sixth of the entire U.S. economy and more than all taxes paid to the federal government last year.
Sadly, the past few years have shown what happens when large institutions face big challenges. When institutions are “too big to fail,” the federal government feels the need to swoop in and bail them out. And there’s already movement afoot for a big bailout of state pensions.
But the federal government would have to raise taxes, cut spending or both to finance such a massive bailout. This would invariably create winners and losers. Some states would receive more from the federal government than their share of the costs. Others will pay more of the costs than they would receive from a potential bailout. States that have acted responsibly would be forced to subsidize the reckless behavior of the states that have not.
In the spirit of tonight’s presidential debate, let’s take a look at the winners and losers among the swing states.
As you can see, most of the swing states would lose from a federal bailout of state pensions.
Colorado residents would pay $32.4 billion more in taxes and receive $9.3 billion less in other federal spending after a federal bailout of state pensions. The tax hikes and spending cuts affecting Colorado residents total $41.7 billion. In exchange, Colorado would receive $57.4 billion in bailout benefits. That’s a net gain of $15.7 billion, making Colorado a Bailout Winner.
Florida residents would pay $107.7 billion more in taxes and receive $31.4 billion less in other federal spending after a federal bailout of state pensions. The tax hikes and spending cuts affecting Florida residents total $139.1 billion. In exchange, Florida would receive $89.8 billion in bailout benefits. That’s a net loss of $49.3 billion, making Florida a Bailout Loser.
Iowa residents would pay $16.8 billion more in taxes and receive $5.5 billion less in other federal spending after a federal bailout of state pensions. The tax hikes and spending cuts affecting Iowa residents total $22.3 billion. In exchange, Iowa would receive $17.0 billion in bailout benefits. That’s a net less of $5.3 billion, making Iowa a Bailout Loser.
New Hampshire residents would pay $9.2 billion more in taxes and receive $2.1 billion less in other federal spending after a federal bailout of state pensions. The tax hikes and spending cuts affecting New Hampshire residents total $11.3 billion. In exchange, New Hampshire would receive $8.2 billion in bailout benefits. That’s a net loss of $3.1 billion, making New Hampshire a Bailout Loser.
North Carolina residents would pay $47.8 billion more in taxes and receive $18.1 billion less in other federal spending after a federal bailout of state pensions. The tax hikes and spending cuts affecting North Carolina residents total $65.9 billion. In exchange, North Carolina would receive $37.8 billion in bailout benefits. That’s a net loss of $28.1 billion, making North Carolina a Bailout Loser.
Ohio residents would pay $59.4 billion more in taxes and receive $20.8 billion less in other federal spending after a federal bailout of state pensions. The tax hikes and spending cuts affecting Ohio residents total $80.2 billion. In exchange, Ohio would receive $166.7 billion in bailout benefits. That’s a net gain of $86.5 billion, making Ohio a Bailout Winner.
Virginia residents would pay $56.0 billion more in taxes and receive $21.6 billion less in other federal spending after a federal bailout of state pensions. The tax hikes and spending cuts affecting Virginia residents total $77.6 billion. In exchange, Virginia would receive $48.3 billion in bailout benefits. That’s a net loss of $29.3 billion, making Virginia a Bailout Loser.
Wisconsin residents would pay $32.8 billion more in taxes and receive $10.5 billion less in other federal spending after a federal bailout of state pensions. The tax hikes and spending cuts affecting Wisconsin residents total $43.4 billion. In exchange, Wisconsin would receive $56.2 billion in bailout benefits. That’s a net gain of $12.8 billion, making Wisconsin a Bailout Winner.
Should the states that have been responsible be forced to subsidize the reckless behavior of those that have not? Will a few important swing states like Ohio and Colorado put pressure on the candidates to bail them out of their pension debt? Or will the candidates follow the lead of Sen. Jim DeMint by sending a strong message that there will be no bailout. As long as state and local governments believe a bailout is possible, they’ll continue to delay making the tough choices necessary to get their fiscal houses in order. Will either candidate take that option off the table?
To see how a federal bailout of state pension debt affects your state or county, visit NoPensionBailout.com. While you’re there, be sure to sign the petition telling Congress that you oppose the bailout.
Note: The complete methodology of this bailout simulation can be found in the Institute’s full report, “A federal bailout of state pensions systems will reward failure.”