George Rebane
Well folks, Scranton’s bankruptcy may have been the cognitive tipping point for the nation, but because of the lamestream cover-up we can’t be certain. Following yesterday’s announcement by San Bernardino, the Pennsylvania city is now the 12th municipality filing Chapter 9, with 27 more jurisdictions standing in line to be next. And the cause of these financial calamities is the same – paying for public service pensions has broken the back of every one of them.
RR has reported on and predicted this trail of tears for the last five years when Mike McDaniel and I co-authored an SESF position paper alerting Nevada County to the problem and putting it into a national context. The Board of Supervisors gave us a polite listen and then dismissed the matter with a papered over version that everything was going well behind the curtain. Now we know that our unfunded pension liabilities are over $119M, and that is computed with a la-la land discount rate. During the entire time the local leftie chorus has denied that public service pensions would cause any fiscal failures, and that its reporting was all a rightwing scare tactic in their overall policy promoting the ideas of fiscal responsibility and smaller government. Where are those useful idiots now?
Before returning to how to handle these national disasters, let’s take a look at America’s tax situation. Obama, in his eternal avoidance of his track record on the economy, is now shifting focus to tax fairness. In his opening round, he has thrown out a placebo by urging Congress to exempt households earning less than $250K from the planned ‘Taxmageddon’ scheduled to hit next January. And he’s going to exempt them for a full year – my, my! – before he shoves it to them in 2014. BTW, don’t think he’s exempting them from all the other tax increases that will be popping out like corks out of champagne bottles next New Year’s Day. What a guy!
Obama’s big message of the week has been ‘tax fairness’, and that the ‘rich’ are still not paying their fair share. So what are the so-called rich paying now, and what should they pay? Look at the table below.
This is a tax participation schedule that is more ‘progressive’ than most of Europe. Progressives have no answer for what should be the maximum tax rate for Americans; their solution is to keep raising taxes for as long as necessary to pay for all the government that malignant socialism requires. The American people on the other hand have repeatedly told us that the max tax rate should be 30% or lower. Obama’s nostrums for driving off the coming tax cliff are significantly higher. And that sumbich is telling people that he’s going to get us out of Depression2 and the economy moving again by hitting the country with its biggest tax increase in history.
In the meantime there are mass movements of people and businesses scurrying from state to state seeking environments where government intrusion and the cost of tribute is less. Over the last decade California’s insane economics and eco-nazism have driven over four million of its productive citizens to friendlier financial climes. All this energy and creativity wasted on attempting to escape government instead of productively creating the wealth the country needs.
So how should we respond to the pension plague that is promising to swallow everything that we have worked for? My outlandish proposal has centered on the notion of ‘Just say NO!’. Simply refuse to contribute one more penny that is needed for current government services to the futile effort of trying to make up the impossible unfunded liabilities sums. We will first pay for the sheriff and fill the potholes, and then distribute pro rata to the pension funds what is left over.
I believe it will take just one jurisdiction, say, Nevada County to refuse to sacrifice tax revenues required for current needs. If it is done with openness and honesty, the infection of rational courage would catch on and spread across the country like a wildfire.
The basis for ‘Just say NO!’ is simple. The existing pension obligations are a legacy of corruption from the collusion of previous elected boards, councils, panels, …who negotiated with public service unions in an atmosphere of calculated concessions from the public welfare. The people were misrepresented by their electeds when such blatantly insane contracts for public service employees were negotiated. Prudent accountancy would have shown that there was no way that future tax revenues augmenting reasonable pension fund management would ever have provided the portfolio amounts required to pay off the lavish retirement benefits which the unions extracted and the politicians conceded. These contracts were simply not negotiated in good faith for the benefit of the taxpayers who were bamboozled at every step along the way.
The negotiating politicians knew that they would be long gone when the piper had to be paid. And in the meantime, ponying up to the unions got them the necessary campaign support and easy working conditions while they were in office. Well, now the time has run out, and the remaining alternatives are bleak. So bleak that they don’t include the ability for any semblance of funding the unfunded. In Nevada County we don’t even know how much we are liable for and when. All we know is that the sum ranges way upwards of $119M, because that figure was computed with laughable discount rates. Applying the Pelosi Principle here – we’ll know we’ve gone off the fiscal cliff after we are in freefall.
So given this history of collusion, perfidy, and corruption, our sitting politicians (assuming they are clean) have no better plan forward that declaring that they will ‘Just say NO!’. And dear reader, I invite you to consider what any reasonable counter to such a principled stand will be. Will the governor send in the National Guard to confiscate the county’s snowplows, or board up the Rood Center and put it up for sale, or … . Not if the county’s citizens strap on their cojones and gather en masse to defend what is ours, and that which will not be taken from us through legal machinations seeking to enforce and perpetuate a legacy of corruption.
And seeing that stand-off on the six o’clock news, what will happen when the next county in similar dire straits responds the same way? And then the next, and the next, …?
[17jul12 update] The Volker panel called the State Budget Crisis Task Force has just published its report. Its main conclusion is that “the gap between entitlement costs and state revenues available to pay for them have become unsustainable”. And that which cannot be sustained will not be sustained. More here.
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