Comparing stock variables (Pension liability shortfall) vs. flow variables (GDP, a rate of annual output) is a mistake that peeves me to no end.
That said, the pension shortfall is a disaster playing out in slow motion. We're just waiting for the hard cash constraints to bite - when they do it's not going to be pretty.
But it's not a real comparison. It's just contextualizing.
If I say that a brachiosaurus was the size of a house, I'm not saying that your current dwelling is comparable to a 65-million-year-old pile of death and dust.
Huge numbers are essentially meaningless to the human mind. But "all economic output of Japan in a year" is something that most people can wrap their heads around a little more easily. We know it's a fairly rich, industrialized nation, and so therefore that's a crapton of money.
We all know they meant "in a year", but the article isn't explicit about it -- it just says
>> the output of the world’s third-largest economy
Not "annual", not even "GDP". I bet a lot of readers came away thinking "a shortfall as big as Japan".
And maybe not just lay readers -- a "smart but not knowledgeable" reader might try to convert the stock into a flow or vice versa by assuming some interest rate and doing a back-of-the-envelope net present calculation and be off from the real numbers by an order of magnitude.
His argument isn't about conception of scale, it's about a fallacy of units. The analogy would be comparing the annualized diameter increase of a tree to the width of CO2 molecules in a conversation about inputs to environmental policies. The CO2 molecue simply doesn't grow. You have to compare the rate of CO2 release.
GDP comparisons are worthless, but cash flow to debt is an important metric. If it was compared to cash inflows of the actual government entity it would be interesting (and depressing).
In 2005 (pre bankruptcy) each GM car had $1525 worth of health care costs and $675 worth of pension cost built into the price.
So $2200 was being spent on benefits for a population that had 1 worker for every 2.5 retirees.
In California, School Districts are increasing pension contributions from 8 percent of their payroll in 2013 to 19 percent in 2020. This is already creating havoc as teachers unions are threatening to strike unless they get pay increases because districts were saving money to prepare themselves for the 2020 budget math!
That said, the pension shortfall is a disaster playing out in slow motion. We're just waiting for the hard cash constraints to bite - when they do it's not going to be pretty.