Here’s one way to deal with the problems of the breakdown of the Blue Social Model: assume them away.Bloomberg reports that many state pension funds have been assuming an annualized return of 8% on their investments, despite earning no more than half that in recent years (Washington’s state fund, the top performer, only managed to eek out 3.92% over the past 10 years). Private companies that consistently misstated their financial condition this egregiously would be in trouble with the law.State pension funds are grossly underfunded, and the picture only gets worse when retiree health care costs are added. In 2010 the Pew Center estimated that the states were $1 trillion short. If — when — the state portfolios don’t live up to these unrealistic goals, the gap widens. Dramatically. Indeed, an updated version of the Pew study this year found that the deficit increased 26% to $1.26 trillion in the past year.States can face the music now and take a painful hit, or they can keep lying to themselves and take a bigger, uglier hit down the road. Not much of a choice, but that is where we are.