This is the Cato Daily Podcast for Friday, October 7th, 2016.

I'm Caleb Brown. State pensions continue to threaten state budgets and have come to threaten even the provision of basic local services.

The fear for many state governments sadly is

that the true severity of the problem will eventually be revealed. Peter Constant is a

senior fellow at the Reason Foundation and is executive director of the Retirement Security

Initiative.

We spoke last week.

If you had to pick one problem in state pensions and of course there are many but if there is the keystone

of the pension problem in the United States in states what would you say it is? Denial.

Denial.

And what enables that denial?

You know, as you look at pension boards as they're making decisions or even legislators as they're making decisions

related to pensions, you know, they have this big vehicle, so to speak, and they're driving it all

by looking in the rearview mirror. And there's this continual feeling that this is just a little anomaly, it's going to work its way out.

Look, look backwards, look at all the things that, where we had problems and they fix themselves so it just needs time.

I hear it phrased as once we get back to 8%

Right, right. Nobody's looking out the window. You know you got to look out that windshield and you got to look forward and there's this denial that we're sort of in a new normal environment.

People seem to not be able to make the connection that we went from the bottom of the Great

Recession to the top of the U.S. financial markets, the highest point any of our

index has ever seen, and pension funding status regained 2 or 3 percent.

That's got to tell you it's something beyond the fundamentals of investments that are driving this.

So the New York Times recently had a big story about pension financing and what the

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