Editorial: Who will eventually pay?

Puerto Rico is flat broke, unable to make a $2 billion payment to bondholders due July 1. The island has a 45 percent unemployment rate and has already jacked up its sales tax to a massive 11.5 percent in an effort to raise funds.

Look for federal taxpayers to eventually foot the bill.

The public-sector irresponsibility isn’t confined to Puerto Rico. While Detroit’s money woes are well known, the website newsmax.com lists 20 other U.S. cities as candidates for bankruptcy, including Fresno and Oakland in California and Providence, the capital of Rhode Island. The New York Times concurs, noting over the weekend that “dozens of cities, counties and states may be heading down the same financial rabbit hole” as Puerto Rico.

Readers of this page won’t be surprised to learn that the primary culprit is “deferred costs,” including generous government pension and retirement benefits. “We’ve promised more than we can pay without confiscatory levels of taxation,” a financial adviser, told the Times.

Nor is Nevada immune. On Tuesday, the Pew Charitable Trusts released a report revealing that the state’s unfunded pension liability is among the nation’s worst when calculated as a share of personal income.

In 2003, Pew reports, Nevada’s unfunded pension liability totaled 4.9 percent of the state’s personal income; that number has now more than doubled to 11.8 percent. This means Nevada would need to confiscate 11.8 percent of all income earned by state residents to cover these obligations.

The report noted that while states don’t have to pay these costs right away and could take steps to reduce liabilities, “those claims on future earnings can limit states’ budget flexibility when the costs come due” while also affecting “credit ratings and borrowing costs.”

Unfortunately, Nevada lawmakers have typically responded to such realities with studies and inertia.

But while this state’s day of reckoning may not loom as near as it does in Fresno or Oakland or Illinois — which faces a $111 billion pension gap — it will arrive, nonetheless.

Pension costs aren’t the only explanation for government money woes. An increasingly progressive public sector that recognizes few limits on its authority and insists on injecting itself into every aspect of private life only exacerbates the crisis.

But equally culpable is an electorate that too often agitates for fiscal prudence but howls with indignation at even the slightest government retrenchment. Until voters stop viewing elected officials as bearers of goodies paid for with somebody else’s money, the steady march toward fiscal calamity will continue uninterrupted in more cities and states as well as in our nation’s capital.