POWIP Piece of Work In Progress – Former Abode of Dan Collins

Promises will be broken

...but whose promises will be broken first?

In my last post, I talked about some of the methods various long-term promises are made more likely to be held, through various regulatory requirements and guaranty funds. And I ended by asking why the public unions have seemed so sure that their promises would be kept, even in the face of governmental financial disaster. There's no guaranty funds for public pensions. What if the state runs out of money and the inadequate funds built up are depleted? Will public pensioners not get their money?

"That can never happen!", I've heard. "You can increase taxes!"

But what if the taxpayers resist? Heck, what if the taxpayers move away to where you can't get at them? Will benefits get cut to current employees and pensioners?

"It's in the state constitution! You can't cut them!"

How does the state constitution magically create the right to money that does not exist?

Various state constitutions have been interpreted to say that the moment one starts working for the state, pension benefits can never be altered... downward. They've been altered upward many times, without much concern that this wouldn't actually come to fruition. After all, it's in the state constitution! It must be paid!

Well, to paraphrase my sister when she was little, if you "don't got the money of", it's not going to get paid.

"La la la la, never happens!"

Let's tell that to the pensioners of Prichard, Alabama, who haven't been paid since September 2009. At all.

But they're just peanuts compared to the unfunded liabilities in Illinois, California, New Jersey, and and and.... what might happen there?

Victor Davis Hanson thinks the bond-holders of California and the taxpayers are the ones who are going to get screwed, but I don't agree. The taxpayers in California have been screwed for years, and they've been moving out, being replaced by illegal aliens who aren't exactly the rich to be soaked. Not much more money to be squeezed from that stone - if they do tax the rich of Hollywood, those rich will suddenly discover that they're the residents of Nevada or Texas. Funny how that works.

As for screwing over the bond-holders, that's a trick that works.... once. Hope you don't need any continuing cash, California. If they go that route [full default], they have to be sure they do a pay-as-you-go routine. Also, screwing vendors and contractors can work only in the short-term; if they see that there's more than just delayed payment, but actual non-payment, the goods and services will no longer be supplied. Private entities have only so much money they can waste on customers who don't pay, even if it is the state.

So while public employee unions are in denial, there indeed is a new class war, and the public unions are being cast as the haves, no longer the downtrodden have-nots. One might say there are no easy choices, but I've seen that even Democrats are turning on the public unions, first hitting the easy stuff [changing pensions for people who don't work for the state yet, cracking down on benefits fraud, making early retirement by disability harder to get, not making contributions to pension funds and thus making pension busts more likely, restricting pension eligibility], but I have no doubt the "hard stuff" is coming.

Professor Bainbridge doesn't see an end to the Democratic Party's thrall to public unions. I agree with him that fiscal sanity from state Dems will not come as long as that symbiosis exists... but I don't think it will last much longer. The SEIU is starting a third party in NC, as they no longer can count on Dems there [ok, NC has never been all that hot on unions, Dem or Repub]. While unions thought the money they bring in to pick their political bosses would protect them, Jon Corzine's loss in NJ proved that union support and union money is not enough to save one's political career... even in NJ.

I'm not surprised by a union third party. They can't go to the Republicans, and Democratic politicians want to be elected... and there's no hiding financial shenanigans right now. When the water drains out of the pond, you see all the junk that was thrown in there, and you can't throw more in without everyone seeing it. [yes, yes, let's ignore the federal level for now. I will look at the bailout-ability of the public pensions, and it's not exactly out of the question... but so many piggies have already hogged the resources. Last to the sow gets to suck hind tit.]

But who knows? Perhaps Andy Stern's retirement is not a sign of weakness, but a move towards more power... perhaps the party can go on.

Or perhaps not.

Maybe the length of the Great Recession will convince many that promises made need to be adequately provided for at the time they're made, rather than prior times when a short-term fix was made and people hoped for the water to rise again.

Meep

Meep is a member of the Irish Catholic mafia, having a suspiciously high number of green-eyed, red-haired friends. While she doesn’t have red hair herself [except when she goes into the sun (rare for any vampire)], she does have green eyes. She’s a raving Papist and is a life actuary on the side [i.e., she counts dead people]. An amateur pain-in-the-ass [willing to go pro!], she likes covering retirement, mortality, math, and education issues.