[quote=The-Shoveler]When the City of Los Angeles goes the whole house of cards falls IMO.
It’s the 800 pound gorilla,
Note, also I believe 8-10% inflation would make all this a non-event if it were to last over 5 years.
The pension short fall would be reduced to a small amount, (so would DB pensions as well).
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How exactly would 8-10% inflation make this go away. Most defined benefit pension plans have a COLA associated with them that is based on CPI.
I guess your hope is that with 8-10% inflation you’ll end up with a corresponding 8-10% increase in wages which will drive a corresponding increase in tax revenues. Those tax revenues will now be sufficient to pay the pension shortfall but at the same time you’ve increased liability on the pension side. Why do we need 8-10% inflation? Why can’t we just go with the deflationary solution and default/reduce benefits?
This is the problem with most economic models and economists. They look for a solution to a problem by adjusting one variable and assuming everything else is going to stay the same. The thing is it doesn’t work like that. In a 10% inflation environment wages might only go up 5% while gas and food goes up 20%. It’s extremely tough to get uniform high inflation across the board. In your case it’s lets inflate wages and hold everything else constant.