That Used to Be Us_ How America Fell Behind in thted and How We Can Come Back - Friedman, Thomas L. & Mandelbaum, Michael [96]
To be sure, there are many reasons states and cities find themselves in fiscal crises these days—not just overspending and under-taxing in good times but also runaway health-care costs from federal mandates that the states cannot finance anymore—but there is no question that the overly generous contracts of public-service workers in the last decade belong on that list. Union members in the private sector know that their employers can go broke at any time, which does temper their demands. Public-sector union workers, by contrast, work for city and state monopolies that can never go out of business, and the workers get to play a role in electing the officials who can grant them increases in pay and benefits. To their credit, many public-service employees have been willing to absorb cutbacks as long as the sacrifice has been shared.
In sum, national, state, and local economic and fiscal policies over the last two decades added up to a bipartisan flight from prudence, common sense, and reality that has created an enormous challenge for the United States. If you were a trustee running a private pension fund and you had made the assumptions that state and local Democrats made—about the returns their investments would yield forever—you would have been fired by now. If you were a trustee running a private pension fund and had made the assumptions that national Republicans made—that deficits don’t matter if they are the result of tax cuts—you would have been institutionalized by now.
Unfortunately, people holding those views have dominated American political life for at least the last twenty years, one offering an economics based on wishful math, the other an economics based on no math at all. Now the only solution to the problem they jointly created is a prolonged and far from painless period of adjustment to reality.
“When you look at the data on things like spending and deficits and the debt-ceiling limit, you will see that starting in the 1980s we lost our way,” said David Walker, the former U.S. comptroller general, a debt expert, and the author of Comeback America: Turning the Country Around and Restoring Fiscal Responsibility. “Then we temporarily regained our senses starting in the early 1990s under President Bush 41 and again under President Clinton.” These two presidents, one a Republican and one a Democrat, added Walker, did three things in common: “One, they supported the imposition of tough statutory budget controls that kept government from making more promises, when it had already made more promises than it could keep; in addition, they each imposed tough but realistic discretionary spending caps that included defense and security spending. Two, they did not expand entitlement programs, which is arguably the most imprudent thing you can do.” And third, Walker added, both Bush 41 and Clinton “broke campaign promises in connection with taxes when they saw the reality of our fiscal situation. So we had one Republican and one Democrat who each batted a thousand. Then Bush 43 came along and totally struck out.” President George W. Bush, noted Walker, let the statutory budget controls expire at the end of 2002, he expanded entitlements—with Medicare prescription drugs—“and he never broke his campaign promise to cut taxes. Obama so far is the same thing, but he can still change course.”
One way or another, we are all going to have to pay for this. The only questions left are these, framed by the Washington Post business columnist Steven Pearlstein (February 22, 2011):
Will the pain come in the form of prolonged high unemployment? Or wage and salary cuts? Or reduction in the value of homes and financial assets? Or loss of ownership of American companies? Or price inflation? Or higher taxes? Or reductions in government services and benefits?