Wednesday, October 26, 2011

Denial and rage

A New York Times article reports that the state of Rhode Island is in dire financial shape, cutting back on spending, and in danger of reneging on its pension and other obligations. Other states and municipalities are not far behind. Walter Russell Mead predicts that the Times reporter, Mary Williams Walsh,
...can expect angry push back from a whole sector of American political life that thinks this whole problem will go away if we tax the rich, clap our hands and all say together, “I believe in government.”
Mead blames the "Ostrich Party" for bringing Rhode Island — and not only Rhode Island — to this pass. "Unrealistic assumptions about rates of return helped hide the ugly truth about the looming pension meltdown — and anybody who tried to raise the alarm about the coming crisis was hooted down as an enemy of the workers." In this column he describes what happened and why.
.... No Rhode Island retiree can rely on getting the benefits promised; nobody can predict how this will all work out.

That is not the kind of uncertainty that 70 year old retired teachers and firefighters should have to face. A decent society would not let that happen — but the blue social model in its decadent late shark-jumping years of fake promises is anything but decent. Political chicanery, fuzzy math, denial, rhetoric, ambition: this is how a union betrays its members, this is how politicians betray their constituents.

To give the devil his due, this monumental crack up was the result, in its early stages, of ignorance and complacency more than anything else. The union leadership and the statehouse pols took growth for granted. They had grown up in the post war boom; good times were what they expected. They believed that the American economy would continue to grow richer every year and that there was a never-failing cornucopia of “more” somewhere that would somehow make sure that there was always enough money in the kitty to redeem the promises made. You could always squeeze another quart out of the milk cow. ....
Mead writes that there are three approaches taken to respond to the crisis:
  • There is the true blue ostrich approach of the unions themselves and their closest allies: denial and rage.
  • There is the attitude of more centrist Democrats like Governor Cuomo and Mayor Emanuel: make prudent cuts, hold the line on spending, work to quietly make government more efficient without jumping into a full scale confrontation with the unions.
  • And there is the Scott Walker, dragonslayer approach: take them on.
.... [I]f the Mama Bear New Democrats serve their porridge too cool, the Papa Bear Republicans like Wisconsin’s Scott Walker and Ohio’s John Kasich risk serving it too hot.

Polarizing politics and demonizing state and local government workers is not a good idea. It is unfair for one thing; it is bad politics for another. Toxic blue model legacy costs are the problem: rigidly bureaucratic government structures, unrealistic costs, years of underfunded pension plans, regulations that choke growth and initiative, outdated progressive ideas about how change works — these are the roots of our problems, not the middle school teacher down the street or the retired post office worker living modestly on a pension that may be underfunded but is hardly a bonanza.

The fifty year old teacher, fireman or police officer may have been naive to believe his or her union leaders, the politicians and the journalists who all said there was nothing to worry about — but most of those workers cannot be called “greedy” or “selfish”. They are victims of a complex, multi-player Ponzi scheme and have been lied to by a lot of people for a long time. They also face some serious financial costs. Not only are their pensions likely to be less generous and solid than they were led to expect; they may well face layoffs and wage freezes as states struggle to cope with legacy costs.

Reform cannot and should not be understood simply as an assault on state and local government workers — although these workers cannot be insulated from the general consequences of a major failure of our political system. The problem is not that teachers and firefighters earn “too much” money; the problem is that we have developed a dysfunctional social system which cannot pay its bills. ....

Ultimately the only solution is for the country to move on to a new post-blue economic model that can generate enough wealth to cover our existing debts. In the absence of a serious growth agenda, both the Cuomo and the Walker approaches can’t get the job done. And what the country needs is a competition between growth strategies, not a contest between strategies for cutbacks. .... [more]
Rhode Island: Athens of America? | Via Meadia
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