Some day Americans (or whatever the people living on this part of the continent are called at that point) are going to understand that the standard of living and the prosperity Americans attributed to the free market in the Post-War era of the second half of the twentieth century was mostly the results of massive debts. It is almost like a science fiction movie. Our leaders figured out a way to take the wealth of the future and bring it to their present to spend.
And now that the future is getting closer we notice we don’t have much left.
(By the way, American prosperity was built by the free market. It’s just that we reached the point that we were able to leverage that wealth to increase spending by fantastic amounts. A person has a similar experience when he builds prosperity to the point that he is offered a credit card and assumes that his extra spending is no more problematic than before he had the card.)
While some cities are bankrupt or almost bankrupt, others are making their way toward that destiny and finally realizing their dire situation. That is how I would classify this Washington Post story on San Jose, CA.
Here in the wealthy heart of Silicon Valley, the roads are pocked with potholes, the libraries are closed three days a week and a slew of city recreation centers have been handed over to nonprofit groups. Taxes have gone up even as city services are in decline, and Mayor Chuck Reed is worried.
The source of Reed’s troubles: gold-plated pensions that guarantee retired city workers as much as 90 percent of their former salaries. Retirement costs are eating up nearly a quarter of the city’s budget, forcing Reed (D) to skimp on everything else.
“This is one of the dichotomies of California: I am cutting services to my low- and moderate-income people . . . to pay really generous benefits for public employees who make a good living and have an even better retirement,” he said in an interview in his office overlooking downtown.
In San Jose and across the nation, state and local officials are increasingly confronting a vision of startling injustice: Poor and middle-class taxpayers — who often have no retirement savings — are paying higher taxes so public employees can retire in relative comfort.
This is, of course, a perfect picture of how the Federal Government will burden and torment the mass numbers of American citizens to continue to support a political class and their corporate associates—those who lobby and get various government contracts and other special favors.
Essentially, back when taxes were low, taxpayers didn’t realize that they were being used as collateral to strike deals with public unions. These unions in turn helped the politicians win elections not only by their votes but also by contributions. Thus, the politician goes into debt, with taxpayers as collateral, and uses that debt to provide money to friends, who give part of it back to help keep him in office.
And now the current mayor is struggling desperately to alleviate the problem.
But as Reed works to shed government liability, state officials may be piling it on. In Sacramento, lawmakers want to create the nation’s first retirement savings plan for private-sector workers in which the state manages the money and guarantees a minimum rate of return.
Financial industry executives scoff at the program, known as the California Secure Choice Retirement Savings Trust Act.
“There is some irony, given the financial problems faced by some government pension plans, that the state would guarantee a return on a pension plan,” said Larry Zimpleman, chief executive of Principal Financial Group, which administers 45,000 private retirement plans, covering 3.5 million workers.
But as many as half a dozen other states, including Maryland, are exploring similar ideas.
Of course they are. They are politicians. They naturally inhabit a fantasy world where they simply coerce the results they want. The only answer to a toxic disaster resulting from compiling government stupidity is to pile on more stupidity.
Never let a crisis go to waste.