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Do the Math

Brother, Have you Got $3 Trillion?

Every morning I like to go through the newspapers to find the scariest number of the day. Some days it is the price of oil, other days the current level of unemployment. The $1 trillion bill – a lowball figure, if there ever was one – for the recently enacted health care reform package is certainly a daunting figure, as is the size of the national debt, the debt owed on the national debt, the cost of sending a child to a four-year liberal arts college and the current price of Yankees tickets. Obviously, one’s reaction to each of these numbers is determined by how personally and how imminently one stands to be affected by them. Now that my kids are out of college, it’s the Social Security System that most concerns me. Yankees tickets I don’t need to worry about. I’m not a Yankees fan.

Every once in a while I stumble across a number so staggering it makes me go back to see if it was a misprint. Sometimes it’s the number of highway workers killed repairing roads each year (in the hundreds). Other times it’s the total fatalities in Chinese coal mines each year (in the thousands). Now try this one on for size: In an op-ed piece recently published in The Wall Street Journal, Andrew G. Biggs, a resident scholar at the American Enterprise Institute, estimates that the total amount of underfunding for state government employee pension funds across the nation exceeds $3 trillion. Taking issue with a recent report that pegs the total underfunding at $450 billion, Biggs warns that this much smaller figure presumes a hopelessly unrealistic 8 percent return on the investments that prop up the funds. He contends that the amount of underfunding is roughly seven times more than the figure being bandied about – which means funding these undernourished pension plans may cost seven times more than we expect. And taxpayers not included in these pension funds are the ones who will get stuck with the bill.

Let’s put that $3 trillion in context. It is three times the size of the bill for the health care package. Three times. Given that the bill’s opponents argued it would bankrupt the country, what then lies in store when these pension fund obligations come due? Since it is politically impossible – and in some states illegal – to make significant cuts in mandated pension fund obligations, the total bill to taxpayers will be a number few of us can even fathom.

What really worries me is that Biggs’ essay was tucked away at the bottom of the editorial section of the Journal, under a story about widening broadband access. And it’s not as if that number is repeated on a daily basis the way the harrowing statistics for housing starts, home foreclosures or unemployment are. The $3 trillion figure had its brief moment in the sun and then sauntered off into obscurity. The public got back to its knitting.

This is no way to run a railroad.

My suggestion is that the government immediately set up a bipartisan commission whose sole purpose will be to focus the public’s attention on really important numbers. The Commission to Get the Public to Stop Talking About American Idol and Concentrate on Something Important for a Change would have no other purpose than to ceaselessly remind Americans to stop worrying about the rising cost of cable TV and start paying attention to that $3 trillion shortfall. If somebody doesn’t start dealing with this problem soon, Biggs will soon be warning us of a $5 trillion shortfall, or a $7 trillion shortfall, or maybe even a $10 trillion shortfall. I hope for all of our sakes that that $3 trillion figure was a misprint. Or that Mr. Biggs’ math is weak. Otherwise, we’re in deep trouble. All of us.

About Joe Queenan

Joe Queenan is a regular contributor on business issues, corporate culture, and financial follies to Barron's and The Wall Street Journal.