Tag: insolvency

Categories
national politics & policies too much government

The Inglorious Mess That Is Greece

Ah, the glory that was Greece! Too bad the modern country is anything but. The nation-​state of Greece is going broke, and going broke spectacularly.

And, dare I say it, instructively?

Everybody’s blaming everybody else, there. But the simple truth of the matter is that the politicians of Greece — both socialist and “conservative” — enticed citizens to go along with a sustained binge of spending, spending far beyond revenues.

And then the government lied to European Union HQ in Brussels about how much it was spending over revenues.

And, you guessed it, Greece continued to borrow even more.

Yes, public spending in Greece was more out-​of-​control than government spending here in America. And that’s why it’s instructive. What is happening right now to Greece is happening elsewhere in Europe — Italy, Spain, Portugal — and is on pace to happen to us, too. 

Greece does have one option the good ol’ US of A doesn’t have: It can go begging to the European Union. So far, saner heads in the EU are saying “no,” but that may not last. 

While we don’t have that option, Greece lacks ours: With the Euro as its standard, it’s constrained from the monetary fiddling that American leaders are tempted with. Inflation. Hyperinflation.

When things get worse here, we’ll hear talk of huge tax hikes, confiscations, and sovereign default. 

But also expect a lot of what Greek politicians did: Lying.

Inglorious, eh?

This is Common Sense. I’m Paul Jacob.

Categories
national politics & policies too much government

Sometimes a Great Prediction

Five years ago, I compared Social Security to the Titanic. Insolvency played the part of fatal iceberg. On Monday I noted that the first stage of insolvency —  projected back then to take place in 2017 — has been refigured to arrive early. This year.

So much for our leaders’ plan of “not putting off till tomorrow what can be put off a decade.” Decades sure aren’t what they used to be.

Neither are the budget numbers politicians throw around. Take the Democrats’ just-​passed medical reform package. Do you really believe it will save us money?

Who’s right depends on the reliability of the reform package’s cost projections. And, from what I can tell, those projections are filled with trickery. 

A typical sleight of hand is to project ten years in advance, and extoll how that decade’s first years don’t add much burden to the taxpayer. But that’s only because chunks of the programs stagger into effect over the first half of the decade.

But before you go poring over the bill’s two thousand and more pages, checking the  numbers, ask yourself: When have government economists correctly predicted costs of a major new entitlement? 

Never.

Take Medicare. Initial projections for catastrophic coverage were half of the real amount; Medicare as a whole grew nine times over its promised size; and the costs of Medicare’s Disproportionate Share Hospital Adjustment program proved 17 times higher than originally predicted.

Congress is in the business of making bad law, not good prophecy.

This is Common Sense. I’m Paul Jacob.

Categories
initiative, referendum, and recall too much government

Pension Tsunami

A humungous national debt. Growing state federal government budget deficits. Social Security and Medicare, running out of funds. All very frightening. But look out: The costs of public employee pensions are walloping city and state budgets — pushing a number of California cities into bankruptcy.

Though the stock market tumble hasn’t helped, the basic problem lies squarely with politicians. They like to increase future benefits to gain political support from public employee unions; they then underfund their lavish promises, the better to hide the fiscal reality from today’s taxpayers.

Politicians keep running from the problem, but a website called PensionTsunami​.com won’t let them hide. The site, run by Californian Jack Dean, offers a steady stream of horror stories:

  • A new report calls the Kansas Public Employee Retirement System “bankrupt.”
  • A Rye, New York, city manager makes $198,000 a year while still collecting a pension for the same job.
  • The chief actuary for the California Public Employees Retirement System admits that current pension costs are “unsustainable.”

All across the country, politicians consistently fail to act. Californians are lucky: They have the voter initiative. The California Foundation for Fiscal Responsibility, a group whose board includes Mr. Dean, is planning a statewide initiative to prevent their approaching tsunami.

This is Common Sense. I’m Paul Jacob.

Categories
Accountability

My Favorite Fix

California is going bankrupt. Behind its economic trouble lies serious political dysfunction.

What to do?

To hear some Golden State legislators and experts talk, the problem can be blamed squarely on the people and their lawmaking power through the state’s initiative process.

While initiatives like Prop 13 and term limits may bedevil the Sacramento insiders, they remain popular among voting Californians. Voters don’t see handing over all power to the politicians as a magic solution.

Others suggest California is so ungovernable that it should be split into two, a North and a South California. Why? To make the insolvent state start completely anew. And to reduce the massive scale of decision-​making in what is by far our country’s most populous state.

I have a better solution, which more and more folks from across the political spectrum seem to be considering. I suggest doubling the size of California’s legislature. Or tripling. Or more.

California’s legislative districts are huge, dwarfing those in other states. The ratio of voters to Assembly reps is 455,000 to one. The ratio of state senators to constituents is 900,000 to one.

The balance of interests between citizens and their representatives is all out of whack. When constituencies grow too large, politicians feel answerable to no one.

Smaller districts give voters more relative power — and legislators relatively less. Now that sounds like the right track.

This is Common Sense. I’m Paul Jacob.