One of the reasons state budgets are extremely out of control are pensions of their unionized public employees. There have been lots of publicity about this of late, and I have often commented on the subject.
Unfortunately, the unions involved still feel optimistic about the ability of their pension funding to accommodate the coming obligations.
It is easy to be optimistic if you feel the future return on investments will be higher than what most market observers consider is possible. That is: If you feel our budget deficits will have no effect on investment markets. And if you feel there will be no future inflation.
That requires a lot of false optimism.
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