The Reality That "We Are Out of Money" Makes Some Headway, Some Backway


Here's the New York Times, in a house editorial, discussing the fiscal red hole oozing outwards from the Empire State capital city of Albany:

Most state employees pay only 3 percent of their salaries to their pensions, half the level of most state employees elsewhere. Their health insurance payments are about half those in the private sector.

In all, the salaries and benefits of state employees add up to $18.5 billion, or a fifth of New York's operating budget. Unless those costs are reined in, New York will find itself unable to provide even essential services.

To point out these alarming facts is not to be anti- union, or anti-worker.

The Times then goes on to note a few things, such as:

The average salary for New York's full-time state employees in 2009 (even before the last round of raises) was $63,382, well above the state's average personal income that year of $46,957….

New employees can still retire with full benefits at 62, while most American workers must wait until 65. They can still drive up pension payments by earning overtime in their final years, up to a $15,000 cap. And most important, they have to contribute only 3 percent of their pay to their pension; the national norm for public employees is double that….

Current state employees pay 10 percent of their health insurance premiums for single policies, and 25 percent for family policies, which is roughly in line with national averages for the public sector. But it is considerably less than most private workers pay — 20 percent and 30 percent, respectively.

More here.

The Times, needless to say, goes out of its way to accuse Republicans writ large of "trying to break the unions" even as it lays out a pretty strong case that the unions have succeeded in breaking the state. And that the answer to all NY's problems may involve jacking tax rates on one of the highest-taxes jurisdictions in the country.

But what the Times grants on the one hand, it waves away with the other. Because just last week, the paper of record ran this house editorial excoriating politicians who suggest the country has a balance-sheet problem with the title, "The Hollow Cry of 'Broke'":

It's all obfuscating nonsense, of course, a scare tactic employed for political ends. A country with a deficit is not necessarily any more "broke" than a family with a mortgage or a college loan. And states have to balance their budgets. Though it may disappoint many conservatives, there will be no federal or state bankruptcies.

The federal deficit is too large for comfort, and most states are struggling to balance their books. Some of that is because of excessive spending, and much is because the recession has driven down tax revenues. But a substantial part was caused by deliberate decisions by state and federal lawmakers to drain government of resources by handing out huge tax cuts, mostly to the rich. As governments begin to stagger from the self-induced hemorrhaging, Republican politicians like Mr. Boehner and Mr. Walker cry poverty and use it as an excuse to break unions and kill programs they never liked in flush years.

You know what? It isn't obfuscating nonsense to say that "we're broke," as a number of politicians (notably the Speaker of the House and the governor of Wisconsin) have said of late. States can't go bankrupt because there are laws against such things and because they have to balance their budgets one way or another, typically through selling debt and pulling various sorts of accounting tricks. The U.S. government is sitting on trillions (with a T!) of accumulated debt that isn't going anywhere soon. Except sky high, since we continue to run annual deficits and benefit (relatively) from low-interest rates on the debt.

And given the fact that since 1950, the feds have collected an average of 18 percent of GDP while spending around 20 percent of GDP, don't expect anything to get better until they adopt something like this solution. For an understanding of how state government binge and splurge, go here.

But if the feds are like a family with a mortgage, we're about to get socked with a balloon payment (let's call them entitlements) that's gonna kick the jams out unless we change our wicked, wicked ways. Semantic debate was boring when the Times confined it to William Safire columns. But when you start playing semantics about whether or not the states and feds are on collision courses with basic math. And we, the gentle, good-smelling taxpayers, are tied to the fiscal railroad tracks. Or something.

Reason.com on We Are Out of Money.