These past weeks a new report came out regarding the public finances of the various American states. Apparently it is no longer only the U.S. Federal government that is bankrupt (in debt more than 100 percent of GDP right now and getting worse by the day). Now the overwhelming majority of the states are also drowning in hopeless red ink. What the Truth in Accounting annual State of the States report shared for 2018 is not encouraging for the future of financial markets in the United States.
It explains why you need to contemplate what goes in a Regal IRA.¬†Nowadays¬ Gold offers insurance and protection during market turbulence better than any other historically proven safe haven asset.¬†It has a proud track record of nearly 5,000 years as the guardian of wealth for the people from the ancient world to date. This is why you need to think about gold IRA rollover rules and regulations now before the public finances of the U.S. government and the states get any worse.
Are Most American States Really Completely Broke?
Most investors are familiar with the uncomfortable fact that the federal government is beyond financially insolvent on paper. It is hard to argue with an over 105 percent debt to GDP ratio no matter how hard you try. What many are only dimly aware of is the fact that the overwhelming majority of the American states can not pay their obligations either. This fact emerged from the 2018¬†Truth in Accounting yearly State of the States report.
Per this research report, the 50 states have amassed an eye-watering $1.5 trillion U.S. dollars in debt that is unfunded. How could they accomplish this when they are not allowed to run enormous deficits at all? They have done it through promising their residents retirement benefits and pensions plans that they simply can not afford to deliver. The report reads like a Greek tragedy:
“States, in general, do not have enough money to pay all of their bills. Based on our latest analysis, the total unfunded debt among the 50 states increased by $53.4 billion to more than $1.5 trillion in FY 2017. Most of this debt comes from unfunded retiree benefit promises, such as pension and retiree healthcare debt. This year, pension debt accounts for $837.5 billion, and other post employment benefits– mainly retiree healthcare liabilities– totaled $663.1 billion.”
The statistics only become more grim as you read through the report. Fully 40 out of 50 states lack the necessary funds to cover their bills. In this report, the authors compile a ranking according to the burden on the resident taxpayers. The leading so-called “sinkhole state” is New Jersey. Every taxpaying citizen in this deb-ridden state owes a mind numbing¬ $61,400 so far. Number two Connecticut is somewhat better with a resident debt burden of only $53,400 each tax paying person. The final three sinkhole states in the top five are Illinois, Kentucky, and Massachusetts.
Don’t Any States Have Surpluses Today?
There actually are 10 states that have surpluses these days. For states in the best financial shape, you have to look north to Alaska. Its yearly budgetary surplus amounts to $56,500 for each taxpayer. The next five so-called “sunshine states” include North Dakota, Wyoming, Utah, and finally South Dakota.
For the rest of the states though, over half of them (56 percent)¬†score a dismal final grade of either D or F according to the report on their fiscal condition. When the report assigns a D grade, this means that the burden on state taxpayers ranges from $5,000 to $20,000. This is 18 of the U.S. states. To attain the dubious distinction of an F grade, the state must boast more than $20,000 in taxpayer burden debt. This amounts to¬ 10 of the U.S. states today.
But What About the Famed State Balanced Budget Requirements?
You may be wondering about the notorious state balanced budget requirements after reading through this fiscal report. The bitter irony is that practically¬ all 50 of the U.S. states (excluding Vermont) must abide by their balanced budget laws. Yet the list of states not doing well fiscally is discouraging, as this graphic reveals:
The report explains how the 49 states cleverly sidestep their own regulations:
“In the world of government accounting, things are often not as they appear.”
To back up this point, the report illustrates with a few examples how state governments get away with these accounting tricks. The 49 delinquent states:
- Count money that they have borrowed like income
- Inflate their assumptions of current and future revenues
- Delay paying their present bills through the beginning of the coming fiscal year which will rule them out of current compilations
- Deliberately understate the actual costs of the state government
It is how they have amassed an incredible $1.5 trillion in unpaid bills while still paying lip service to their balanced budget laws. The majority of their under-funded state liabilities come from their poorly funded pensions plans. The report reveals the accounting tricks that have made 80 percent of the U.S. states more or less bankrupt:
“The most common accounting trick states use is hiding a large portion of employee compensation from the balance sheet and budget. Employee compensation packages include benefits such as healthcare, pensions, and life insurance. States become obligated to pay such benefits as employees earn them. While these retirement benefits will not have to be paid until the employees actually retire, they still represent current compensation costs as they were earned throughout the employees’ tenure. That money also needs to be swept into the pension fund to accumulate investment earnings as well. If states did not offer pensions and other related benefits, they would have to compensate these employees with larger salaries out of which they would have to fund their own retirement savings.”
Retirement Dreams Based on Future Government Pensions Are Ultimately Pipe Dreams
The sad truth today is that if you have built your future hopes and dreams on receiving a promised state government pension plan, then you are probably living a pipe dream. The odds are not in your favor that the pension will ever be paid. This report is only the latest evidence of the cold, hard, cruel facts.
The United States’ incredible historically all-time high debt bubble has many ugly facets. One of them is the massive $21 trillion in federal government debt, another is $1.5 trillion in state unfunded debt, and the other two are sprawling consumer and corporate debt. The heavy debt burden in the country should be sounding all kinds of warning bells in your head today. It is one of the key themes simmering beneath the markets and economic detached reality right now.
The coming pension crisis is the latest reminder of how dangerous the debt powder keg overhanging the United States actually is. Between state, national, consumer, and corporate debts, the writing is on the proverbial wall. You need protection from the impending debt-driven economic explosion. Remember that when the debt bombs and rising interest rate matches combine, it is not going to be pretty for your retirement portfolio if you do not take serious measures soon.
Gold Is The Best, Last Hope and Historically Proven Line of Defense for Your Retirement Portfolios Now
Gold is your first, last, best, and ultimately only line of historically proven defense today. Now you know why you need a Regal gold IRA. It is time to think about the options for getting gold in your retirement portfolio before the economic debt bombs start exploding all around.