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Government budget crises can be painful, but the political rhetoric accompanying these crises can also be fascinating and revealing.
Perhaps the most famous American budget crisis was New York City's, back during the 1970s. When President Gerald Ford was unwilling to bail them out, the famous headline in the New York Daily News read, "Ford to City: Drop Dead."
President Ford caved and bailed them out, after all. The rhetoric worked.
That is why so many other cities and states — not to mention the federal government — have continued on with irresponsible spending, and are now facing new budget crises, with no end in sight.
What would have happened if Ford had stuck to his guns and not set the dangerous precedent of bailing out local irresponsibility with the taxpayers' money? New York would have gone bankrupt. But millions of individuals and organizations go bankrupt without dropping dead.
Bankruptcy conveys the plain facts that political rhetoric tries to conceal. It tells people who depended on the bankrupt government that they can no longer depend on that bankrupt government. It tells the voters who elected that bankrupt government, with its big spending promises, that they made a bad mistake that they would be wise to avoid making again in the future.
Legally, bankruptcy wipes out commitments made to public sector unions, whose extravagant pay and pension contracts are bleeding municipal and state governments dry. Is putting an end to political irresponsibility and legalized union racketeering dropping dead?
Politics being what it is, we are sure to hear all sorts of doomsday rhetoric at the thought of cutbacks in government spending. The poor will be starving in the streets, to hear the politicians and the media tell it.
Party On
But the amount of money it would take to keep the poor from starving in the streets is chump change compared to how much it would take to keep on feeding unions, subsidized businesses and other special interests who are robbing the taxpayers blind.
Letting armies of government employees retire in their 50s, to live for decades on pensions larger than they were making when they were working, costs a lot more than keeping the poor from starving in the streets.
Pouring the taxpayers' money down a thousand bottomless pits of public and private boondoggles costs a lot more than keeping the poor from starving in the streets.
Bankruptcy says: "We just don't have the money." End of discussion.
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Posted By: kwg1(515) on 1/14/2011 | 11:08 PM ET
There are examples all over the private sector for DHBarr's question. Government employees would get the current value of the benefits in a lump sum to be able to roll it to an IRA,the government would save billions on contributions, and those reduced benefits would then reflect the real world. Taxes could actually be reduced. The government could match contributions and still save tons of money.
Posted By: DHBarr(85) on 1/14/2011 | 10:54 PM ET
Somebody please do an analysis of what would happen if we forced public pensions to go from a defined benefit to a 401(k) style system. The solution is to do a forced conversion from defined benefit to 401(k) savings - make the public sector union employees contribute a matching percentage towards their own retirement just like everyone else. If they don't like that system, they can go get jobs in the private sector and we can hire the unemployed to fill their jobs.
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