The Pension Hole for U.S. Cities and States Is the Size of Japan's Economy

Many U.S. cities and states can no longer provide pensions for millions of public workers over many years, and they can only be saved if governments hike taxes, divert funds, or persuade workers to relinquish money they are owed, reports the Wall Street Journal . For public employees nearing retirement, median incomes, including Social Security and retirement fund receipts, have not risen in years. They are stuck with high average debt, and are often using savings for their children's educations and to care for their aging parents. A Pew study found state and local pensions lost about $35 billion in assets between 2008 and 2009 during the recession. Liabilities swelled by more than $100 billion annually. Such pension plans currently have less than 75 percent of the money they need to meet their promised payouts, while Moody's Investors Service calculates that the hole for state and local pensions is $5 trillion. Cities and states can either raise taxes, slash services, or more aggressively reduce retiree benefits.