400,000 Teamsters Union members, who are already retired, just discovered that their pension payments may be reduced by 65%. The pension fund, managed by the union and employers, is heading toward insolvency within 10 years. Aside from corruption and mis-management, since 2008, so many small businesses went bankrupt that it left a growing number of employees being supported by a shrinking number of employers (exactly like federal social security). Teamsters members are going to be voting soon on these pay cuts and they are afraid that if they do not accept the reductions, then they will receive zero payments instead.
The state of Illinois has been unable to pass a budget that was due four months ago. Since then, the state has been financially loping along with consent decrees. One of the many ways the state has chosen to free up money is simply not to pay lottery winners. Today, any Illinois lottery winner owed over $600 is given an IOU from the state. Illinois State Lottery tickets are still being advertised and sold, which would be consumer fraud and a prison sentence if any company did this. The amount that the state has withheld from winners is now over $288 million. Lottery winners have formed a class-action lawsuit to sue the state for payments plus interest.
The U.S. federal government brought in a record $3.3 trillion in taxes for the 2015 fiscal year. But that tax haul still wasn’t enough money, there was still an accounting deficit of $439 billion, although the lowest in 8 years. However, this is with an artificially low interest rate engineered by the Federal Reserve. If interest rates were anywhere near normal, the federal deficit would have been about $600 billion higher. Let me state this another way, with normal interest rates, the federal government will be spending one-quarter of all taxes they collect just to pay for the interest on the national debt. This is not a sustainable financial structure.
Whether it is a household, a business, or public institution, financial illiteracy results in a physical calamity, sooner or later.