The Elephant in the Statehouse
State governments and (Republican) Governors currently are going through paroxysms of false hand wringing and despair. They pretend not to know why state budgets are so wildly out of balance. In mock anguish they lament the need to cut education budgets, renege on public employee pensions and cut health benefits for these groups.
Something has to be done to balance state budgets. But the nation can’t simply eliminate all the give-away programs and policies for the wealthy and the big corporations. These are the people and businesses that provide the hand-full of jobs in the U.S. that haven’t yet been moved abroad or phased out in essential cost saving measures.
But wait……there may be yet another (Republican) way out after all. What about all those bloated pension funds and costly health care benefits promised to state employees and their families in return for years of low-paying, unrecognized public service employment? It was the (Democrat [sic]) policies of providing reasonable assurances of old age and health benefits to these public workers that got us into this mess. And, of course, the unions, that allowed public employees to actually bargain for a few insignificant rights. Not in Texas, of course, but in some socialistic northern states.
So if we simply crush those nasty public employee unions, and renege on all those promises to take care of public employees and their families in retirement, we might be able to save the states and balance state budgets without imposing on our rich supporters. After all, these public employees and their families have to be willing to make some sacrifices, just like the Wall Street financiers and mortgage and insurance brokers had to forego multi-billion dollar bonuses for an entire year, in 2009.
The financial crises facing state and local governments were not caused by public employee retirement and benefit programs. They were caused by unregulated and irresponsible profiteering by the people and institutions in control of the major private financial systems of the country, and by individual greed. Under the blind eye of Republican deregulation the “whiz kids” of these entities embarked on one of their most ‘creative’ periods of financial fraud in U.S. and world history. They made Enron, Kenneth Lay, Bernie Ebbers, and Worldcom look like kids playing tinker toys.
The whiz kids invented the derivative. This clever, deliberately misleading financial device created paper values where none previously existed, and permitted financial titans to bundle worthless loans (i.e. loans in or near default) into packages, for sale abroad or to unsuspecting domestic investors. The good loans in the bundle surely would balance out the bad loans and no one would be hurt, or any the wiser.
This enabled the financial whiz kids and their bosses to rake in literally billions of dollars in bonuses annually. And thanks to their friends in the White House and Congress they got to keep an even larger share of the loot than their fathers and mothers. Life was good —– for the whiz kids.
But the fraud couldn’t last forever. The housing bubble was destined to burst and with it the “junk” derivatives loan bundles. Some of the investors in the “junk” bundles began to smell the odor coming from the derivative loan packages they had purchased from the Wall Street whiz kids. Some of them began to demand a refund or a “do over.” Uh, oh……bad news for the whiz kids. They now owned billion dollar mansions and vacation properties of their own and had to make huge mortgage payments. “We need regulatory relief and financial relief,” became the new mantra.
The whiz kids’ fraud of the public and world financial markets was so immense that their fake empire began to shake and soon crumble. Since the whiz kids and their enablers all were against big government interference with private markets, they naturally turned to the government for a rescue, for a bail out. (“Forget the deregulation stuff for now, this is a real emergency and calls for public assistance.”) Holding as their ace-in-the hole the threat of a complete collapse of world finances, they asked for a financial bailout from the same people they had defrauded, the public. “We’re too big to allow to fail. If you don’t rescue us it will cost you more in the long run.”
So the Federal Reserve Bank and the U.S. Treasury and the administration and Congress all joined the Wall Street/corporate bread line and assembled a huge bailout package for the crooks, more than a trillion dollars and counting.
Whew! The huge bonuses were back for the whiz kids,–they only had to survive without them for a little more than a year. And only one financial titan had to file for bankruptcy protection.
The effects of the financial fraud were not limited to Wall Street. The cancer spread to the entire nation. Millions of ordinary people lost their jobs, their homes and all sources of income. Their inability to spend and pay state sales taxes and income taxes helped fuel a financial crisis for the states and for local governments.
So the whiz kids and politicians, federal, state and local, all agreed that it was the state pension funds and health benefits and even Social Security that were responsible for the states’ financial problems. Outlaw unions, renege on state promises, eliminate programs for the needy and suffocate public education. It’s a bitter pill they all hated to inflict but because these items cost taxpayers too much money, it was the only thing that could work. The New York Times joined the juggernaut with an lop-sided, uncontested* editorial you can read here: http://www.nytimes.com/2011/03/06/opinion/06sun1.html?_r=1&nl=todaysheadlines&emc=tha21
WRONG! Here is a simpler, better, honest and fool proof way to solve the states’ financial problems. And the nation and the states are not broke, far from it.
Make those responsible for the problem — Wall Street, mortgage brokers, insurance giants, big corporations and very rich people — pay for the damage they have caused. “You broke it, you bought it.”
Rescind the huge tax breaks given to the richest people in the nation by the Republican administration of George W. Bush and Tom (Felonius) DeLay. Require these heavy contributors to the national debt to pay back the taxes they legitimately owe on the immoral benefits they’ve already received at the expense of the American working class. Require the financial billionaires to refund to the public their fraudulent gains and multi-billion dollar bonuses they received for wrecking the economy. Require the politicians who voted for the huge give away to the rich, to forfeit their own pensions and life time health care to help out the working people of the states and local governments who have been defrauded.
Levy special surcharges on the bloated incomes of the fraudsters to help bail out the states. Require the corporate beneficiaries of government largess to fund unmet state financial needs to pay for legitimate state and local obligations to working people and for education, a cleaner environment and public health.
It isn’t rocket science. Place the blame where it belongs. And it can be done.
All honest and fair minded Americans need to remind their state legislators and congresspersons in forceful terms who their representatives work for and that this is not an oligarchy ruled by the rich for the rich.
*Fox news style ‘fair and balanced’ reporting.
Time for the fat cats to bail out the public sector which truly is too big to be allowed to fail.
There are lots of different components to this problem, but the federal government constantly and irresponsibly spends far more than it takes in, where most states can’t do that but manage to spend every penny during good years leaving them with a real problem during bad years. No sensibly run business does this but unfortunately politician electoral fodder is how much money their ‘bringing their communities’, money which does not come out of thin air. We’re all paying fo this. Alas when we’re all under pressure and revenues are down, their respons is to start increasing taxes.
There is a shell game aura to it, though because these various programs are funded through taxes taken from others, then our taxes are used to fund other people’s pet projects, with the illusion that we’re getting great benefits almost for nothing. But we’re not. We’re just passing to the government the power to control where our money is spent, and those decision are frequently unwise and against our preferences.
The public sector wage/benefit issue is certainly not the only one but it’s not just the madly excessive size of some of these packages that is a problem. In NJ (other states too), politicians raided these funds to buy up votes with more government handouts, only to be caught short (suprise) as time went on. We still need to rethink those packages: they are absurdly high compared to normally negotiated benefits and workplace rules (in many places getting rid of an inept or unnecessary person is almost impossible) probably because the government does not negotiate as aggressively as any business needs to for survival. But I agree about one thing, the pay excesses themselves are only one part of the problem, the whole irresponsible government mindeset is the real problem.
I don’t see how government regulation will help much. This is the same folks who can’t balance a budget or prepare for an inevitable rainy day are hardly the ones qualified to to decide when someone else is being foolish (don’t forget that Fannie Mae and Freddie Mac were neck deep in this mess and didn’t see it coming)
Let’s take a true free market approach: NO CORPORATE WELFARE. Period. No tax breaks, no farm subsidies, no ‘green’ subsidies, no promoting home ownership to people financially unprepared, no oil exploration credits, no bailouts, no affirmative action preferences. Nothing. Let’s let poorly run businesses fail.
While we’re at it let’s really balance the budget. No borrowing from social security, no extending of debt limits, no deciding that certain budgets are ‘off the table’, no using the inflation causing aspects of the FED to help pay future debt. And if we don’t have the money to do something we simply don’t do it
Jay – how can obviously intelligent and basically fair-minded people like yourself continue to fall victim to the big government, unbalanced federal budget bogey man myth? You make some very good points in your post and I commend you for trying to think through these issues. But somewhere along the way you just can’t cross the great divide that compels you to continue to pit “big government” against the people, to see big government as the beast.
If we really balanced the federal budget it would create an economic tsunami that would sink the U.S. economy and half the world with it. The federal budget is a policy tool, used to stabilize the economy not muck it up. Conservative slash and burn tactics only serve to exacerbate the problem and are really rooted in the desire to squeeze the working class and blame it for the failures of the oligarchs who run the country.
What most people don’t realize is that the private sector, those behemoth corporations and financial institutions that are so highly praised for their so-called efficiency, are in far worse shape financially than the federal government. They run deficits on a constant basis that comparatively and colllectively speaking make the U.S. federal deficit look like a small consumer loan.
Sure, there are unnecessary and poorly managed federal and state programs that need to be cleaned up or eliminated. But these pale in comparison to the monster financial and economic screw-ups of America’s ‘elite’ private corporations and financial giants, those who needed a trillion dolllar plus public bailout just to stay afloat in the wake of their own economic malfeasance. But they are able to conceal most of their own failures and financial fraud behind the corporate veil of secrecy. If forced to open their own books to public scrutiny and to balance their own budgets half of them would be required to file for bankruptcy.
These are the bad actors who were and continue to be responsible for the current economic morass in the U.S.
I urge you and other fair minded Americans to look behind their shell game designed to blame public employees and unions for their own screw ups and once again saddle the U.S. working class and poor with paying for the economic chaos they created.
J. Cornehls