The current debt ceiling "crisis" has highlighted the fundamental difference between two philosophies of government. The majority of Democrats would like to increase revenue, or as most taxpayers would say, increase taxes. Republicans for the most part would like to cut government spending. Controlling only one house of the legislature put Republicans at a distinct disadvantage. In the recent budget battle they were able to pass a 38 billion dollar reduction, a pitiful amount considering the multi trillion dollar budget. But even this “victory” may have been a chimera. Columnist Jonah Goldberg asserts that after the gimmicks are stripped away the actual reduction amounted to 352 million. Progressives clearly have a different view of the value of money. Former Congressman David Obey is quoted as saying, “It was a lousy $8 million,” in response to criticism of a pork project. Senator Schumer is quoted as saying, “And let me say this to all of the chattering class that so much focuses on those little, tiny, yes, porky amendments, the American people really don’t care.”
Most people, Republicans and Democrats, agree that the current deficit spending is unsustainable. More and more people are becoming aware that we are heading for what columnist Mark Steyn calls a “demographic recession.” Steyn may be somewhat optimistic. It is more likely to lead to a “demographic depression.” Governments: federal, state and local, have committed themselves to generous pension plans and other expenditures that they have absolutely no chance of honoring. These governments will have no choice but to default on their obligations.
The city of Pritchard, Alabama is in the vanguard of the default crisis. 150 retired workers no longer receive their pensions. The city’s population has declined by 40 percent in the last few decades and along with that its tax base. The government of Pritchard could not pay these pensions even if it wanted to. Pritchard is a unique case but it is representative of what in is store for other pension plans. Michael Aguirre, the former San Diego city attorney claims that, “Pritchard is the future.” Aguirre has advised San Diego to declare bankruptcy in order to restructure its pension plan. The California State Teacher’s Retirement System and the California Public Employee’s Retirement System are the nation’s two largest pension systems. Their assets aren’t enough to cover their obligations. According to a Sacramento Bee article, “A recent Manhattan Institute study found that U.S. teacher pension plans need almost $1 trillion more in funding to pay promised benefits.” The fact that these pensions are unsustainable has been obvious for some time. Yet, according to the same article, “The number of educators receiving $100,000-plus annual pensions jumped 650 percent from 2005 to 2011, going from 700 to 5,400.”
The political class and their Nomenklatura live a very comfortable lifestyle regardless of any economic downturn. The government of Bell, California provides an extreme example of how politicians feather their nests. This southern California city of 38,000 was paying its mayor an annual salary of almost $800,000. Other city officials were receiving similar inflated salaries. Their only problem was that they were excessively greedy. Perhaps if the mayor had settled for $400,000, his salary would have gone unnoticed. There are many examples of excessive government salaries. Beverly Hall, the former Atlanta Schools Superintendent received a salary of $415,293 in 2010 and $581,860 in bonuses between 1999 and 2010. In additions she has won numerous awards. She is now under investigation for fraud. The education establishment is riddled with charlatans with bogus credentials from elite universities making six figure salaries. Although not a graduate of an Ivy League university, Otis Mathis, the former president of the Detroit Public Schools board, was supposed to be a role model for students. He had a “learning disability” that prevented him from composing a coherent sentence. The school board was satisfied with his performance until it accepted his resignation after it was reported that he routinely performed inappropriate sex acts during meetings with a colleague.
Wasteful government spending is under attack on a broad front. Politicians and their allies in the media are prepared for the counterattack. Their first approach is to make opponents of tax increases appear heartless. A recent AP article on the recent Minnesota budget battle begins, “The blind are losing reading services. A help line for the elderly has gone silent.” It is good practice to put a human face on the suffering. In this case it is Sonya Mills. Ms. Mills is a 39-year-old mother of eight who will have to do without $3,600 a month in state child-care subsidies. Ms. Mills’ plight might elicit sympathy from a tenured college professor or an AP reporter. However, a man working two jobs to support his family might wonder what other benefit Ms Mills is receiving from the government aside from $42,000 a year in tax free subsidies. If taxpayers cannot be convinced to open their wallets for the government out of compassion, they can be threatened with real cuts. The city of Ann Arbor, Michigan laid off members of its fire department due to budget shortfalls. At the same time it was funding an $850,000 piece of art. When politicians claim that the elderly will not receive their Social Security checks they are attempting to frighten people into supporting tax increases. Only a fool would threaten the defunding of a study to train Chinese prostitutes to drink more responsibly or the defunding of the Cowboy Poetry Festival.
Progressives believe that there is an almost unlimited supply of money. Van Jones claims, “We are not broke. We were robbed and somebody has our money.” In one respect progressives are correct. The Federal Government has an unlimited supply of money with its ability to perform “quantitative easing.” The problem with quantitative easing is that it is a tax: a tax that hits the poor particularly hard. This is explained by John Maynard Keynes who stated, “by a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.”