Those cushy, unionized government jobs. Read the whole thing.

Long-term trend:

The United States had 2.3 state and local government employees per 100 citizens in 1946 and has 6.5 state and local government employees per 100 citizens now. In 1947, Hodges writes, 78 percent of the national income went to the private sector, 16 percent to the federal sector, and 6 percent to the state and local government sector. Now 54 percent of the economy is private, 28 percent goes to the feds, and 18 percent goes to state and local governments.

Should I hope my daughter will secure a government job someday? No. Things that can't go on forever, don't. I believe this, and I'm putting my money where my mouth is. I have a government job right now, and, Lord willing, I'll eventually have a tenured job. However, I don't have a union card, and I chose a 401(k) retirement plan, as opposed to joining Texas' Teachers Retirement System (TRS). The latter has done fine for its members so far, but I'm not betting my retirement on their continued success.

There's a great fiscal squeeze coming. Texas is better than average among the states, with 91% of its pension obligations funded, but only 2.5% of its non-pension retiree obligations (mostly health care) funded. As the squeeze becomes more manifest, Texas will raise taxes, cut retirement benefits, cut government services, and/or default. With the first and third actions, I have the option of moving to another state if things get bad enough. With the second and fourth actions, my pension be unaffected, but only because I opted out of the TRS.

What could go wrong with my plan? The federal government will face its own fiscal squeeze, and getting money out the country is harder than getting it out of a state. There is already speculation that people's 401(k) savings will be heavily taxed or converted into government annuities (i.e., forcing you to lend your savings to the government).

I think this sort of worry is paranoid for now, but I have no idea what will happen ten years out. The "optimistic" scenario is that the political strength of older voters who saved will prevent it. Why the scare quotes? In the national fiscal crisis, the options will be steep cuts in services, steep tax increases/confiscations, steep retiree benefit cuts, and default. None of these sound pleasant to implement, do they?

(You can inflate away long-term debt, paying it down with debased currency. However, in a fiscal crisis, there is a deficit, and hence, if you don't implement some combination of the above four options, then you won't be paying down any of your existing debt; you'll need to issue new debt and presumably have to roll over plenty of the existing debt. In this situation, buyers of the new/rolled-over debt will demand high interest rates to match any future inflation they expect to happen. I don't think a series of giant jumps in inflation could be planned with enough secrecy to make much money off it.)