Wednesday, August 22, 2012

More Government Foolishness ... Where's the Money?

We'll briefly discuss three government spending debacles today -- one each in California, Illinois and the federal government.

They have one thing in common: There's no apparent way to pay for what they're spending or committed to spend, and they have no apparent or announced plans to do so either. We're just supposed to believe that the government somehow will come up with the money and that it won't cost anything to do so. Of course, that's not true. Someday down the road future taxpayers will be given the bill to pay. And they may not be able to pay it then.

Could it be that We the People of today like these eventually non-free freebies from the government so much that we're willing to close our eyes to reality and simply hand the tab over to future generations to pay? If not, why do politicians get away with this unaffordable and unpaid for OPM spending? To top it off, they're not even saying one intelligent or serious thing about how it will be paid for.

In other words, for this current generation of taxpayers, are essential government spending reductions and higher taxes both off the table? If so, we really do live in fantasyland. And sadly, we all know how the fantasy will end. Future generations will be stuck with the tab we're running up on them.

(1)  California's government, in heavy contention with Illinois for being the worst run of the fifty states, now wants to compel private sector workers to join a state government managed supplemental retirement program. Another California Brainstorm says this in part:

"The sages of Sacramento have done such a splendid job of not adequately funding California's public pensions that now they want to do the same for non-government workers. Their latest brainstorm is to establish state-administered retirement plans for workers in the private economy.

This is not a joke. Social Security faces a funding shortfall as the baby boomers retire. The business world long ago began moving toward 401(k) plans from pensions that they couldn't sustain. (See GM, failure of.) The most far-seeing states have begun to move in the same direction, if the politics allow. But the other-worldly liberals who run the Golden State want to establish a new pension for five to seven million additional workers.

The legislation would require employers that don't already sponsor retirement plans to enroll their workers in state-administered "individual retirement accounts," but they are really defined-benefit pensions in disguise. . . .

A retirement board consisting of government officials and appointees would invest the money and guarantee a still-to-be determined rate of return. Employers would be required to withhold wages to fund the plan—or pay a $500 penalty per worker....

Governor Jerry Brown hasn't taken a position, but he ought to veto it on principle as a danger to the public fisc. If nothing else, he ought to have the self-respect to sit on it until the legislature takes up his proposals to reform the state's bleeding public pensions. Democrats who run the legislature won't even give him a vote."

(2) The governor of Illinois, after years of ducking the issue, now has a plan to take his case to the good people of Illinois to decide how to fix the ~$83 billion unfunded pension liability for public employees. But he won't reveal what the secret plan is right now. Bringing pension effort to the people says this:

"After the Illinois Legislature failed to act on several pension reform proposals Friday, Gov. Pat Quinn said it was time to bring the effort to the people. . . .

“The people of Illinois are impatient with nothing at all,” Quinn said. “They want to go forward for the common good, so we may have to use the power of direct democracy to get action by the Legislature on a very important subject.” . . .

Quinn was hazy on details . . . . He said a final proposal would be outlined at some point after Sept. 11 — following the Republican and Democratic national conventions as well as the annual 9/11 observances.

However, any effort to get a measure on the ballot wouldn’t put the question before voters on Nov. 6....

Absent a statewide special election, the soonest voters could potentially weigh in — if enough signatures were gathered — is in 2014, the next time a statewide election is held.

The governor several times emphasized that with any reforms his goal was “to keep it a good system, but it can’t be an extravagant system.”

The state’s annual contribution to its pension systems is in the neighborhood of $5 billion plus interest owed for some previous years in which the state took on more debt rather than make a direct payment out of that year’s budget — and that number continues to increase as part of a ramp-up established by lawmakers in 1995 to fully fund the systems after years of neglect. . . .

“I don’t want our legacy to be that we’re handing on $83 billion (in pension liability) to our children and our grandchildren,” Quinn said. “That’s not a very good legacy.”

Aides later also clarified that the final direction of any reform push had not been decided and could include anything from a push to get a constitutional amendment on the ballot to the establishment of some sort of commission."

(3) And President Obama points out to college students that he doesn't want them to have to pay for their education, unlike his opponent Mitt Romney. On Trail, Obama Attacks Romney on Student Aid has this to say:

"President Obama, adding another chapter to his litany of differences with Mitt Romney, took to the road on Tuesday to promote his record on education and assail his Republican challenger for advising financially struggling college hopefuls to “shop around and borrow more money from your parents.”

Campaigning here and in Ohio, Mr. Obama presented himself as the lucky product of affordable education and his opponent as the enemy of it. Mr. Romney, he said, would cut student loans and grants, and do nothing to curb the tuition increases that threaten to put higher education out of reach of millions of middle-class Americans.

“He said, ‘The best thing you can do is shop around,’ ” the president said to boos from a youthful crowd of 3,500 in a sunny quadrangle at Capital University in Bexley, Ohio. “That’s it. That’s his plan. That’s his answer to young people who are trying to figure out how to go to college and make sure that they don’t have a mountain of debt.”

It was the first day of Mr. Obama’s two-day swing through a pair of electoral battlegrounds, and it showcased what has become a methodical drive by the president to make the election a stark choice between him and Mr. Romney: on tax policy, Medicare, education — anything, it seems, but the gasping economy.

The president said his policies, from a $10,000 tuition tax credit to a doubling of Pell grant scholarships, had helped an additional three million students afford college. Mr. Romney’s proposals, he said, would cut investments in education, leaving one million students without scholarships and reducing financial aid to nearly 10 million."


California, Illinois and student loans, Pell Grants and such have one exact same thing in common. They advocate and depend on government to find solutions to our country's and citizens' enormous financial and economic problems. But they don't bother to say how they will pay for them. Not even a hint.

California has huge unfunded public sector pension liabilities, as does Illinois. So the government answer is more government control and programs for private sector workers in California. Here's my suggestion. Clean up your act, California, with respect to public sector pensions before extending a "helping hand"to the private sector.

Illinois has an $83 billion unfunded pension liability. So the answer is some undisclosed direct democracy effort by taking the issue to the people for resolution --- someday, somehow and in some way. But not yet.

Here's a suggestion. If Illinois is now paying $5 billion annually for public pensions, why not just make it $10 billion instead.That extra $5 billion would represent the interest on borrowing $83 billion at 6% interest. It wouldn't pay off any of the principal, of course, but it would be a start. And for taxpayers, what's another $5 billion in taxes per year?

Same with President Obama and his offer to students to help them pay for college. Why not just make college free and give the students a government job at the same time? Then just send the bill to the taxpayers -- the future ones, of course and not the current voters. In the end, they'll get it anyway. Come to think of it, aren't these future taxpayers the very same students he's "helping" today? How ironic!

Summing Up

We the People seem to like an individual choice driven and freedom based, security oriented and government dependent socialistic society. 

We want the false security of government subsidies and loan guarantees, but we don't want to have to pay for them with taxes. We want somebody else to pay the bills. Apparently that means sending the bill to future generations of Americans, aka our kids and grandkids.

What needs to happen NOW is for We the People to decide how we'll pay for what the government spends at the time the government commits to spending the money. Not sometime later but NOW.

If California, Illinois and the President would simply start following that common sense idea and practice, we would all see just how deep the financial hole is and how extremely difficult and painful, if not impossible, it will be to get ourselves out of that hole anytime soon, if ever.

Only then will the sheer stupidity of offering government mandated free lunches and fairy tale security for one and all come to an end. 

It can't happen soon enough.

Thanks. Bob.

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