From the “This is not a good thing” department

7Jun/100

From the “This is not a good thing” department

A short headline over the weekend noted that the rating agency, Fitch, has downgraded the credit rating of Connecticut from AA+ to AA; despite the fact that the state is the richest, per capita, in the nation. What does this mean? Well, in the short term it means that Connecticut will have to pay higher interest rates for the money it wishes to borrow. That in turn will reduce the share of state tax revenues that can actually be applied to the various state programs. No doubt, as is the usual ploy of politicians, there will be high visibility press conferences where they regrettably hand wring and bemoan that the pinch will be reflected first by reductions in the budgets for first responders; police, firefighters and EMTs. I mean, naturally these essential services are the first cut instead of, you know, more, er, discretionary expenses.

How long before the same occurs in, say, New York or California? Here in NY, the Albany politicians are in denial, unable to come to any sane compromises on the state budget; which forces governance by a serious of measures, similar to U.S. Congressional continuing resolutions, drafted by the governor. Just as with the Congress, the assembly's primary job is to pass a yearly budget for the state; and just like Congress, they have failed miserably. Remember when this was one of the national Democrat talking points, the inability of the RETHUG! Congress to do their job responsibly?

In California though, people are starting to wise up to what is really driving the budget shortfalls. The public is starting to get hip to the high costs associated with public employees union member's pay, pensions, and perks.

Despite record high membership and dues, and years of unparalleled clout in state capitols, public sector unions find themselves on the defensive, desperately trying to hold on to past gains in the face of a skeptical press and angry voters. So far has the zeitgeist shifted against them that, on one recent weekend, government employees were the butt of a Saturday Night Live skit, followed, the next day, by a New York Times magazine cover article proclaiming the “Teachers’ Unions’ Last Stand.”

Public unions’ traditional strength–the ability to finance their members’ rising pay and benefits through tax increases–has become a liability. Although private sector unions always have had to worry that consumers will resist rising prices for their goods, public sector unions have benefited from the fact that taxpayers can’t choose–they are, in effect, “captive consumers.”

Captive indeed. I'd say more like economic terrorists really, because they are holding the taxpayer's wallets hostage ! California's budget shortfall is astronomical, so it will be interesting to see what the voters in arguably the nations most progressive state say about this via the ballot box.

But, it's an important question indeed, one that's facing the nation as a whole. Especially since our national debt is poised to overtake, and indeed surpass, GDP by 2012.

President Barack Obama is poised to increase the U.S. debt to a level that exceeds the value of the nation’s annual economic output, a step toward what Bill Gross called a “debt super cycle.”

I can asure you that a "debt super cycle" is not a good thing. And instinctively, the public knows as well too, as evidenced by the results of this Gallup poll in which terrorism and public debt tie as the most worrisome issues to Americans when considering threats to the future well-being of the U.S. In light of this increasing public awareness, Tyler Durden at Zerohedge wonders aloud:

We hope the president will finally address this untenable collision course during one of his daily TV appearances in the upcoming weeks, instead of ruminating on last week's terrific(ally bad) NFP report.

He's going to have to do something, once this chart starts to get more widespread play.

Click to enlarge

While it's clear that the rate of increase of the national debt steepened under Bush, it has gone Parabolic under Obama; a fact that may take some of the wind out of the sails of the, "I BLAME BOOOOOOOOOOOOOSH!", crowd. But they'll still try to throw that up against the wall and see of it sticks.

But this brings me to a larger point. In the upcoming finger pointing marathons regarding just who is responsible for the incredibly high national debt they'll be a lot of talk about how RETHUGS! are responsible owing to their dastardly , demagoguish, tax cuts over the years with which they unfairly "bought" elections. That's pure poppycock, of course, because spending could have been reduced at any point along the line to bring expenditures back in line with revenues-even for the sacred cows of entitlements. But, you know, eeeeevvvolll Booooooooosh! who resided in the pocket of big business and corporate interests only wanted to reform social security because he hated old people and chilrunz-especially the non white ones...

Also, there'll be the usual recriminations about "Wars of ADVENTURE!" and gratuitous defense spending over the years. But the inconvenient truth is that the ever shrinking defense budget, even including war expenditures, is but a fraction of the debt incurred due to entitlements and discretionary spending. I experienced this firsthand when President Clinton decreased the number of fighter squadrons in the Navy in favor of more versatile fighter/attack units-part of his questionable "peace dividend", which was just another excuse to cut the defense budget. Indeed, one of the fave talking points of the lefties is that the wars in Iraq and Afghanistan will ultimately entail an extra trillion dollars of expense to the treasury. But those same folks ignore the nearly 4 trillion dollars added to the debt during the same time period due to increases in the Dept of Ed and Medicare part D.

And under O'Bammy? I can't decide whether he is truly doing what all good statists and Keynsians believe is right, or if this is Cloward-Piven writ large. Maybe, though, he's just good ol' Big Spending Barry thinkin' he's lettin' the good times roll. God only knows, and He ain't telling!

But, just as local government officials always respond to public calls for tax and budget reductions with emergency services cuts first, you can be sure that, at the national level, socialist Democrats will respond to the need for debt reduction by demanding further cuts in expenditures in the one area that is constitutionally mandated.

The time has come to call their bluff on this maneuver. We need to remind them of the words of Robert Goodloe Harper in response to the XYZ affair; "Millions for Defense, but not one cent in tribute". And, they need to be made to understand that we're smart enough to realize that a reduction in line item increases do not equal cuts, and that instead of increasing the number of public employees-union members all-they need to take, and spend, less of our tax dollars so that the private sector engine of enterprise can create more sustainable jobs across the nation.