I think it is just human nature to project that good times last forever. I first read of the possibility of pensions being underfunded in the early 2000s, from an article in BusinessWeek. The article sounded an alarm that many pension managers upped their investment return projection based on the stock market rise in the 1980-2000 time frame. Yes, 10%/yr, from here to eternity.
Many businesses made the same rosy projections for business growth, and paid a heavy penalty for plants and tooling investments that sat idle. California, being home to many tech companies, raked in big tax revenues from cap gains paid by high-tech workers, managed to spend all of that, then had big deficits when the tech bubble burst.
I do not think it is any different than when an individual loses his home because he expects it to keep rising in value and cashes out all of his home equity to spend. Businesses and governments are not that much smarter than the average Joe Blow, because they are of the Joe Blows, by the Joe Blows, and for the Joe Blows.
That's my explanation, and I am sticking to it.
some of us think everything will be the worst case scenario. this will also cause you paralysis in doing anything.