Welcome to Greece!

I’ve been saying for months we are headed in the direction of Greece, and if we don’t cut back spending and curb the entitlement state, we are headed for a future of riots in the streets over the cuts that must be done to avoid sovereign bankruptcy.  Several of you have been calling me crazy – no doubt you will stick your head in the sand and continue to call me crazy.

We are there as of today.  In Wisconsin, the governor is trying to pass a budget that will among other things, closes the budget gap, requires public employees to contribute to their benefits package, and limits the public unions collective bargaining right to pay packages only.  This is all in an effort to avoid defaulting on the State’s obligations without raising taxes in a way that would destroy the state’s economy.  As a result…

  • Teachers are on strike refusing to work
  • People are protesting in the streets
  • Police are looking for democratic lawmakers who are refusing to vote on the measure
  • Governor threatens to use National Guard to keep state operations running

Welcome to Europe my friends!  Perhaps the tipping point has begun.  We are witnessing civil unrest and protest against the idea of living within our means.  Apparently those protesting in Wisconsin would rather have their state default on its debt, causing tens of thousands of layoffs, school closings, and public safety disasters, rather than pitch in like the rest of us who do pay for a small amount of the medical and pension benefits we receive.

So if the choices are;

  • Massive public sector layoffs and services cuts
  • Massive tax increases
  • Small increases in the amount of money public employees contribute to their medical and pension benefits

Which would you choose?

Guest Blogger Jeff

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11 responses to “Welcome to Greece!

  1. Guest Blogger Jeff or shall I call you Jeff Blogger the Great?

    It strikes me that politicians are in a conundrum. Let’s face it, politicians have messed up the economy royally. Anyone can see that. In some cases they over-regulate, in others they under-regulate. In all cases they over-spend on things we need and things we don’t.

    So then, why are we surprised that things are where they are. I can’t say that I am surprised. In fact, I am surprised it took this long.

    This really comes down to lobbying… doesn’t it? If you want government to stay out of your hair and give you great tax incentives, just do what the Oil Industry did… lobby and throw money at the politicians. Let’s face it, campaigns are expensive. Politicians are victims themselves… aren’t they?

    So then why not take on the unions? They have been vilified just as much as the politicians. Who can blame public opinion? They cut special deals with Democrats to exempt themselves from the “Cadillac Heath Care Plan Tax”. If you listen to conservative talk radio, it is clear that they are the root of all evil… being communist and all.

    I mean let’s face it, when cuts need to happen, we really don’t have “shared sacrifice”. If you are on top, you stay on top. That’s the American Way. Let’s convince the regular working person that “we” all need to take it on the chin for Uncle Sam. However, let’s be honest about who “we” is… right? I mean we really can’t have anyone at the top be part of that “we”… gosh no! I mean these large industrial age companies that really don’t understand innovation can’t be asked to compete without help from Uncle Sam can they?

    So grab your Ouzo and make a toast to the unions in honor of Marie Antoinette. Come on… grab your glass and repeat after me… “Let them eat cake!”

  2. Honestly, it’s commentary like this that’s pretty much convinced me to give up on PoliTalk. There used to be a sense of balance and finding the middle, but it seems to have been replaced by fact-free appeals to emotion like the one above. Because I’ve posted here in the past, though, I still get updates via e-mail.

    In order to make my pointt, I can rewrite the above as:

    “So if the choices are:

    Massive public sector layoffs and services cuts
    Minor tax increases on the wealthiest 1% of Wisconsin residents and businesses
    Devastating increases in the amount of money public employees contribute to their medical and pension benefits, along with structural weakening of the institutions that created and sustain America’s middle class.

    Which would you choose?”

    See how that works? No facts, just political dog-whistling. Add to that a bit of speculative character assassination (the protesters in Wisconsin “would rather have their state default on its debt … than pitch in like the rest of us”) and you pretty much have a right-wing blog going here.

    What might be useful and interesting is a meta-conversation on the purpose of the blog and the podcast. I know the podcast used to say something about “getting beyond the old stereotypes” — sorry, I haven’t been listening much since you took your hard right turn — but the stuff I see here is full of stereotypes.

    So what gives, guys? What distinguishes PoliTalk from the other places where I can read about the evil selfishness of union members being trumped by the noble motives of Scott Walker?

  3. I really shouldn’t do this, but: It now appears that the situation in Wisconsin is wholly different than Scott Walker is painting it.

    http://host.madison.com/ct/news/opinion/editorial/article_61064e9a-27b0-5f28-b6d1-a57c8b2aaaf6.html

    Wisconsin was on track to end the fiscal year with a surplus, not a deficit. The problem is that Walker pushed through “$140 million in new spending for special-interest groups in January. If the Legislature were simply to rescind Walker’s new spending schemes — or delay their implementation until they are offset by fresh revenues — the “crisis” would not exist.”

    Is it any wonder that the populace is in an uproar, and recall petitions are already beginning to circulate?

  4. Not sure WI resembles Greece; not sure Greece in reality is much of a European country outside of location (although itonce fell under the designation of Near East, when Britannia ruled the waves, and it was barely crawling out from under the Turks). Not sure the “world on fire” Glenn Beck intro was needed, although fiscal discipline issues are always pretty significant.

    One thing about the Greeks, some did raise an interesting question – Why should they pay for others’ scams? They didn’t lie about debt?

    Same could be said for Ireland – Why assume the liabilities of the banks in order to keep DB and/or other German banks happy? Iceland didn’t and is recovering (so I heard).

    I suspect the governor is taking advantage of a fiscal crisis (a la “don’t let a good crisis go to waste”), to push an anti-union agenda. Now that does resonate in many quarters – heck, heard the chamber of commerce types complain about unions, taxes and regulations for over 30 years now.

    In answer to your question though, probably a little of all the above is good –
    Raise taxes (or user fees) a little;
    Pair back on spending a little;
    Have the government employees contribute a little (at least set the precedent)

  5. Paul – thanks for re-joining, and hopefully we can keep you. Remember it takes views from both sides to get to the middle ground. Everyone once in a while you need to let a flaming blog fly, and you’re right, it does not always help, but it feels good.

    The fact is that unions are the largest lobbying force in America, and they are border-line for-profit organizations, existing for the enrichment of their employees. Not at all unlike private commercial concerns. Ironically, this too is part of the greatness of a capitalist system. Everyone has the right to form entities that look out for their own best interests. The SEIU is perhaps the most powerful of these organizations in the country.

    So lets start making the distinctions that allow us to have this conversation without vilifying teachers, fire-fighters, etc..

    And to start we need to be brutally honest

    To our public sector workers…

    1. You’ve had a good ride
    1. High level of job security
    2. Free medical
    3. Free pensions

    Please understand, almost no-where in the private sector does this happen. According to the Cato Institute, for all employment categories except for Lawyers, public sector workers make on average 34% more than their equivalents in the private sector, and enjoy 70% more generous benefits. A couple studies on this can be found here.

    So while there once was an argument that these hardworking folks made substantial financial sacrifices to protect our safety and educate our youth, that is no longer the case. These worthy and important jobs are generously rewarded beyond what State’s financially can afford. And that’s the real point, – “beyond what State’s financially can afford”. Its not a judgment, its just a fact.

    So while those in the private sector pay almost entirely for their own retirement, and many thousands of dollars per year for their medical benefits, tax-dollars pay 100% for the public sector. Is that really fair?

    So does that make public union workers bad people? No absolutely not – everyone has the right to negotiate for the best deal they can get. But union structure has evolved to stack the deck in favor of union executives and union structure, in much the same way that lack of good regulations stacks the deck in favor of traders who can make millions while destroying the financial system. Both are wrong. One leads to taxpayer bailouts of banks, and the other will lead to taxpayer bailouts of States.

    The employees of Lehman Brothers and Bear Stearns paid the price for the rampant greed and irresponsibility of their executives, they lost their jobs, unfortunately there is no other fiscally responsible alternative but for public sector workers to bear the brunt of the bad outcomes for Governors making bad deals with unions.

    I genuinely implore our public sector friends and neighbors to understand that all we ask of you is to make the same sacrifices private sector workers have been making for generations, pay for some of your retirement (not even 100% like we do, just a little), and contribute to your healthcare (again not all – just a little)

    The real blame here lies with the federal and state government for allowing the union structure to exist in its current form, then signing bad deals with unions that they have no way to pay for, even if they did fully fund the pension programs. We cannot blame a rank-in-file union members if a union boss cut a deal that their State cannot afford. Unfortunately though, we do have to roll it back.

    In closing, I’ll echo Michael comments. We need to do a little bit of everything. The answer can’t only be “tax the rich” – yeah – give the government more money – they manage it so well. The answer has to be Michael’s – a little bit of everything. I’d call what Governor Walker is asking for as definitely falling into the “little” category. Lots of littles over time, will add up to bigs.

    Guest Blogger Jeff

  6. Politicians are the problem here. They pick targets based on politics. Yes, the cuts need to happen, but on a much broader basis. If I was a union teacher in Wisconsin, how do I know I am not being singled out without seeing that everyone is taking a hit?

    In 2009, farm subsidies in Wisconsin exceeded $240 million. Shouldn’t we be concerned that we are subsidizing Wisconsin to make provolone? No, really, they make provolone there. My Italian grandmother would throw me out of the house if I brought that over. I’m serious about this, we subsidize corn, soy, milk just to name a few. In fact, in 2009, the USDA forked out (punn intended) $16,349,321,919 in subsidies which has, as an unintended consequence, made fast food (that makes us fat) cheaper than it would be without government intervention. Here is an example of what happens:

    1. We subsidize milk
    2. The producers are incented to produce more than the market needs
    3. There is a glut in the market
    4. The producers end up finding new ways to position their products to sell the excess
    5. We end up with provolone made in Wisconsin

    Given that, it is hard for me to blame a union protester in Wisconsin right now. Let’s get real about what has to happen. ALL of these sweetheart deals (and yes the unions have their share) need to be cut. But let’s not put it on the backs of just one group.

    Wisconsin cheddar anyone?

  7. Here here Glenn! – and don’t forget oil subsidies, the first that need to go.

    The problem is that you have to do it linearly, and discreetly, or else you have 10,000 page bills that try to do everything. We do need decisive executive actions at all levels without some big bargain that makes us all feel good but does not really do much – like the great tax compromise for instance which did nothing but increase our national debt by $1Trillion by letting the republicans trade tax cuts for letting the democrats spend more.

    FYI – public unions in Washington just agreed to 3% pay cuts and contributions to their benefits to help close the budget gap in the State of Washington. Many are willing to do their share to get society back in balance.

  8. This article should be called Welcome to Peak Oil! Exxon announced today that it is refining more oil than it can find. So we better get a new perspective because we will not see the economy return. Any increase in productivity will be met with higher oil prices which will kill everything. This must be why Obama is pushing so hard for new investment. Infinite growth has met limited resources and we need to come to grips with this. No longer can we assume that growth will inevitably happen. This year its pensions, next year it will be something else, and on and on. The whole basis of the financial system is being shaken and we need to adjust or these fights will happen every year.

  9. exactly – Cut baby cut!

  10. GBJ,
    Are you against all infrastructure investment?

  11. No – I’m for priorities. I’m willing to cede to the will of the majority, even if I’m not in it, as long as we keep to a hard spending cap and goals to reduce the debt. Cut the discretionary budget and defense budget by 20-30%, put a cap on it and build all the bridges, tanks, and hopefully wind farms you want, just don’t spend a dime more than what is allocated. Then tackle entitlements and tax code reform. This is called prioritizing. Had we been doing this in the past, we could invest a little extra on more borrowed money, but since we did not, we should not borrow any more.

    If we prioritized, we’d have healthcare for everyone a long time ago.

    Also as a side note to Paul’s article on Walker. Its the $3.8billion Wisconsin budget gap for next fiscal year that he’s worried about, not entirely this one. Looking myopically only to what is right in front of us is what got us into this mess. Focus on this years and next years elections have been the problem.

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