Wednesday, March 24, 2010

Pension tsunami update

Rush Limbaugh mentioned this story about how much drug company profits will shrink under health care reform.
Let's think about this.
Take $90 billion in profits, and you lose lots of tax revenue, right? If not business taxes, then taxes paid by employees on that money.
The government plans to pay pensions for its employees. You usually buy stocks and bonds to have the growth to pay for those benefits.
Weaker companies produce fewer dividends to shareholders and worse returns. So the pension funds will be short of their goals.
So, do you raise taxes more to pay pension obligations, or reduce the promised payout to retirees?
If you're not careful when you chop down a tree, it may take out your favorite flowers when it lands.

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