Maybe we are going broke because we just haven't spent enough. Maybe we are going broke because we spent too damn much and saved too damn little and promised more to more people than we could ever hope to pay.
For a survey of promises with no future, consider this from the Wall Street Journal:
By most accounts, [public] pension plans are in trouble. How many plans and how much trouble depends, at least in part, on the accounting. And now that the Governmental Accounting Standards Board has adopted new rules for calculating pension liabilities today, the hole faced by many pension plans could look a lot deeper.
The WSJ article includes a chart that will be encouraging or very depressing, depending on where you live and work. Bear in mind that the new rules are still much weaker than those governing private accounting, and that pension funds are considered adequately funded if they cover 80% of their obligations.
I was very relieved to see what I already had some idea about. South Dakota's pension fund was 96% funded under the old rules and 88% under the new rules. Now that my butt has relaxed, I can start thinking again. I note that Wisconsin is also in very good shape, at 94% under the new rules.
California PERF is at 65%. The California Teachers pension fund is at 41%. West Virginia and Vermont are also in the mid-forties. Pennsylvania School Employees is at 34% under the new rule. Illinois Teachers is at 18%. These figures are the result of unrealistic promises reinforced by ridiculously optimistic assumptions.
No one can see the future, but simple rules can tell you how to plan if you plan responsibly. I continue to believe that the world economic crisis is a result of decades of fiscal irresponsibility.
For another case in point, consider this fact: Stockton California is about to go belly-up. From the San Francisco Gate:
Faced with a crippling $26 million deficit, the City Council is expected to vote Tuesday to become the largest U.S. municipality ever to file for Chapter 9 bankruptcy protection - further stigmatizing a city already reeling from years from skyrocketing unemployment, foreclosures and rising murder rates.
How did Stockton get into this fix?
Real estate values nearly quadrupled from 2000 to 2006, pushing property taxes higher and pouring money into city coffers. Leaders of the 292,000-strong community spread out along the San Joaquin River channel pulled out $300 million in bonds for civic projects that included gussying up its waterfront and building a hockey arena and minor-league baseball stadium.
Some $48 million went toward an eight-story building to replace the worn-out City Hall, where the cement work shows huge cracks and cat-size rats chew the carpets. The city had already agreed to a generous deal with its workers - everyone who worked for Stockton for at least a month became entitled to health benefits for life. Then, in 2008, the recession hit like a jackhammer.
Do I detect a pattern here? In Europe you get to take a second vacation if you don't feel up to snuff during your first one. In Stockton, you get got health care for life if you worked for the city for a month. I don't know what will happen in Europe, but in Stockton we can see what happens. The police force is cut as the murder rate doubles. The city council builds a new palace for its comfort and can't afford to move into it. People who retired expecting a couple of grand a month in health care benefits will get a couple of hundred a month, if that.
It is tempting to ignore this if you are living in South Dakota or Wisconsin, and not working in the public sector in Illinois or Stockton. Unfortunately, the budgetary future of these United States looks to be on the same trajectory as the latter. Maybe we should address that problem now rather than later. I don't know if Mitt Romney is up to that. I know for certain that the current occupant of the White House is not.
Most of the dumb project are pushed by business/real estate/financial interests, who generally own local governments. I was involved for years fighting Rapid City's 2012 slush fund, which build a lot of unnecessary projects there at the behest of the city business elites. Sure, they're nice, but not really needed. Same thing happens all over the state. You want to end this you had better get rid of the Republicans, because they're the ones pushing it.
Posted by: Donald Pay | Tuesday, June 26, 2012 at 03:38 PM
Right, Donald. Democrats are the fiscally responsible people. The things you believe.
Posted by: Ken Blanchard | Wednesday, June 27, 2012 at 12:23 AM
If Democrats are not fiscally responsible, at least compared to Republicans, why have the biggest run-ups in the deficit and the two biggest economic downturns occurred under Republican presidents?
Posted by: A.I. | Wednesday, June 27, 2012 at 07:55 AM
A.I., the biggest run up in the debt/deficits has been in the last four years. This fact is not exculpatory for Republicans, but doesn't look good for Democrats, either.
Posted by: Jon S. | Wednesday, June 27, 2012 at 09:37 AM
Uh, no. The most of the debt/deficits of the last four years came about because of the Bush tax cuts, the Republican recession, and the Republican Iraq war.
Posted by: Donald Pay | Wednesday, June 27, 2012 at 08:59 PM
Donald, did Obama repeal those tax cuts, or did he actually sign law extending them?
Posted by: Jon S. | Thursday, June 28, 2012 at 11:45 AM
A.I.: Obama has added more to the debt in this first term than Bush did in eight years. http://southdakotapolitics.blogs.com/south_dakota_politics/2012/03/presidents-deficits-compared.html. More importantly, he proposes budgets that show the deficits reaching for infinity. The Democratic Senate has proposed no budget in the last three years. I rest my case.
Posted by: Ken Blanchard | Thursday, June 28, 2012 at 11:19 PM