Krugman's WPA: The First Rule of Bailout Club Is to Never Say the Word "Pension"


Your daily reminder of the intellectual/public policy universe we live in (read: come back Woody Guthrie, come back to us now), comes care of New York Times columnist Paul Krugman:

So our best hope now is for a somewhat cheaper program that generates more jobs for the buck. Such a program should shy away from measures, like general tax cuts, that at best lead only indirectly to job creation, with many possible disconnects along the way. Instead, it should consist of measures that more or less directly save or add jobs.

One such measure would be another round of aid to beleaguered state and local governments, which have seen their tax receipts plunge and which, unlike the federal government, can't borrow to cover a temporary shortfall. More aid would help avoid both a drastic worsening of public services (especially education) and the elimination of hundreds of thousands of jobs.

Meanwhile, the federal government could provide jobs by … providing jobs. It's time for at least a small-scale version of the New Deal's Works Progress Administration, one that would offer relatively low-paying (but much better than nothing) public-service employment. There would be accusations that the government was creating make-work jobs, but the W.P.A. left many solid achievements in its wake. And the key point is that direct public employment can create a lot of jobs at relatively low cost. In a proposal to be released today, the Economic Policy Institute, a progressive think tank, argues that spending $40 billion a year for three years on public-service employment would create a million jobs, which sounds about right.

Love that "about right"….Here's what I don't understand: How is that tax cuts "only indirectly" lead to job creation, compared to bailing out fiscally irresponsible states that, on average, expanded their budgets by 80 percent from 2002-2007? State bailouts aren't "creating" jobs in any significant sense, they are–once again!–ensuring that incompetent teachers still don't get fired. All while locking in the gold-plated and actuarily insane pension promises to existing, unfirable state employees.

Talk about "many possible disconnects"….Krugman and his intellectual/policy ilk (who have their hands much closer to the levers of power than you or I ever will) are asking taxpayers to not just accept but double down on ever-declining returns on investment so that the White House's favorite visitor, Andy Stern, can say "democracy is an ugly thing" all the way to the bank.

Any time one of your friends forwards you a Krugmanesque argument to bail out every state government, forever, send them not only our classic May 2007 cover story (pictured), but this New York Times link, from July:

Local governments in New York State face an unprecedented increase in pension costs that will force them to triple their contributions to the state pension system over the next six years, according to an analysis prepared by the comptroller's office.

By 2015, pension costs borne by local governments upstate, on Long Island and in New York City's suburbs will exceed $8 billion a year, compared with $2.6 billion last year, under the analysis, which was circulated to legislative and county leaders and obtained by The New York Times this month.

The analysis predicts that counties will have to contribute an amount equal to nearly one-third of their civilian payrolls to the state pension system and more than 40 percent of their payrolls for police and fire departments.