City and state officials have been as accomplished as Washington, D.C., squanderers in lavishing money they don’t have and never considering that the days of sunshine and plentiful revenues might end. They thus set us up for a mighty fall. My prime example for this thesis is highly publicized Stockton, Calif., which is getting ready to treat us to what could be one of the nation’s most memorable bankruptcies.
There was once nary a cloud in the Stockton sky. Press reports tell us how the housing market was booming, property taxes were zooming and the City Council was building a minor league baseball stadium over here, a convention center over there and an entertainment complex on its waterfront. It was also doling out unbelievable retirement benefits for city employees, not the least of the generosity being free health care.
Excuse me bondholders, excuse me city retirees, excuse me citizens without necessary services, but housing prices collapsed, meaning taxes produced pennies in a city with a population of 300,000 that has extravagant commitments. It is already so bad that officials are firing unaffordable cops as murders tragically go up.
Stockton is not alone in its misery. Most of the states and hundreds of cities have put themselves in similar trouble, and we know a primary source of their excessive obligations. It is government of, by and for politicians and public employees working in mutually advantageous collusion. The unions provide votes and campaign contributions and the politicians provide good pay, pensions to die for and health and other benefits that let employees live like kings.
The pension liberality has been the real killer. It might have done political damage to the office holders if they had then taxed enough to pay for what would be due, but many cheated through surreptitious underfunding. It did not help that the stock market took a dive in 2008, rendering many invested pension funds even more hopelessly incapable of fulfilling the promises made. The national gap, according to students of the subject, is a whopping $3 trillion.
A consequence could be a generation of hurt and an America unlike the one we have known, and here are some proposed answers that won’t work.
Reform is the answer
Experts I trust have looked and said an improved stock market will not solve the problem. And if the federal government coughed up the money, you could well get a credit ratings drop and less eagerness by foreign countries to lend us money — except at rates that would be ruinous.
Reform is the answer, and there are glimmers of hope, as found in a Heritage Foundation piece noting that some 41 states have restructured pension plans to make them more workable. In some cases, union members have shown themselves ready to contribute more to their benefits.
But some of the most valiant fighters for the most meaningful change have faced hooligan opposition. Wisconsin unions threatened a boycott of any business failing to support them in their fight against Republican Gov. Scott Walker’s efforts to save the state and, of course, are trying to remove him from office.
My guess is that it is going to take the Stockton bankruptcy and still many other drastic occurrences for the public to see the truth and politicians to forge a real rescue. It would help if some in the news business would understand that collective bargaining with a sovereign government is not a “right,” and it would be nice if Obamacare were rescinded to save states from crushing Medicaid costs it would impose on them.
It won’t happen overnight, but if our leaders take nothing but half measures, fearful of union retaliation, even the union members will be worse off, and the rest of us will be telling tales of what a great place America used to be before some of them helped ruin it.