FRONT PAGE CONTRIBUTOR
Many Miles Away From Syria
The Worse Things Than Syria That We Need To Take Action On
We can lay the viper-struck waste that is Syria aside for the nonce. Unless the House of Representatives holds an epic fold, we aren’t going to Syria with Congressional authorization. If we currently have 187 Neas, 33 Yeas and 215 Undecideds, a 435 vote session should end up about 290 Nea to 145 Yea. Also, we have much, much bigger things to worry about.
Like the ginormous undersea volcano discovered somewhere near Japan, the failure of America’s states and municipalities to intelligently plan for retirement funding will arise to smite us. It would seem the municipal bankruptcy of Detroit set off a rumble that the bond markets providing funding for US cities have felt. Walter Russell Mead describes the bad ju-ju below.
Detroit’s bankruptcy is obviously tragic for many of the pensioners and investors with a stake in the city’s finances, but the key question for the rest of the country has always been whether Detroit’s troubles would ripple through the bond market and hit other cities. This is no small matter, as many other cash-strapped municipalities rely heavily on general-obligation bonds to borrow money at a relatively low interest rate. Detroit’s bankruptcy, along with other factors, appears to have touched off a broad rejection of municipal bonds for the time being.
Of course this is not *just* an awareness of what happened to Detroit. A large number of cities and municipalities have been politically bullied into making unsustainable promises to government workers with regards to benefits and pensions. I wrote a while back about how this had hamstrung Rhode Island.
This (revenue shortfall) leaves the state 5.85% short of a full bank account on an annual basis. They now pay 10% of the State Budget to fill public pension holes. Ceteris Paribus, they will pay out 19.78% (more or less 20%) in twelve more years. In twenty-four more years, that liability will jump to 40% of Rhode Island’s current budget.
My logical fallacy in those back-of-the-envelope liability calculations was the ceteris paribus assumption. Ceteris not only ain’t paribus, it’s getting increasingly screwed as time goes by. In order to have taxpayers for a state, county or municipality to tax, there is a requirement for workers. Demographics, Obamacare, and a general death of the Protestant Work ethic in a bonfire are making this requirement increasingly difficult to reach. Details follow below.
“[T]he number of unemployed persons, at 11.3 million, and the unemployment rate, at 7.3 percent, changed little in August,” the report notes. “The civilian labor force participation rate edged down to 63.2 percent in August,” the report adds. In fact, and this is worth noting, the last time the labor force participation rate was this low was in August 1978:
This, of course, is the root of the problem. Everyone gets to retire, no one has to work and The Sugar-Plum Fairy will happily cut the pensions checks. That works about as well as Obamacare. If you like your pension plan, have six kids, teach them to work like Hercules and you can improve your odds of keeping it. This, much more than Syria, presents an existential problem that our government should be endeavoring to help solve.