Pensions a 'black swan,' looming crisis

Chris Woodward   (OneNewsNow.com) Wednesday, August 08, 2012

Though new tax hikes set to take effect this January, one expert says that is not the only crisis the country is facing.

According to American Family Radio's Dan Celia, another looming crisis is that of pensions, "because it is likely to be, and it shouldn't be, a black swan event to the economy."

A black swan event, such as a tsunami, is something that cannot be predicted.

"A crisis in a particular financial market should not be [a black swan event], but it is going to sneak up on everybody," says Celia. "Because everybody's been ignoring it for so long, it is likely going to cost you and I, the taxpayers, billions of dollars, if not trillions of dollars, to bail out and to fix the problem." One related study from JP Morgan this summer puts unfunded liabilities facing state and local governments at 3.9 trillion. In June, the Pew Center on the States found 34 states failed to maintain safe levels of money in the pension funds, which most experts agree is about 80 percent of long-term obligations, according to The Washington Post. "It's going to be huge," the expert asserts. "You're going to see major changes in these policies in and around these pension plans. And I'm talking primarily about state and local government, [and] probably even some large, non-profit institutions [like] universities, colleges and such."

Some non-profit institutions may weather the storm, however. As Celia points out, they have very large endowments.