The further to the left or the right you move, the more your lens on life distorts.

Sunday, August 02, 2015

Improvident Fools and Crooks

For many years, those of us who have believed that the blue model of governance is the road to financial ruin have argued that big government and the profligate spending it encourages would ultimately result in bankruptcy. When coupled with public sector unions that negotiate unrealistic entitlements (pensions) for their members (with politicians who the unions vote into office), the blue governance model is a toxic brew indeed.

Whether it's Detroit, Los Angeles or Chicago, the liabilities that have accrued as a result of irresponsible Democratic leadership are irrefutable and economically dangerous. Of course, the Democrats in those locales fervently believe that Democrats in Washington with save them with a bailout of taxpayer money from states that have been more responsible. And they may be right.

Now we learn that Puerto Rico—still another example of the blue model, will default on its government bonds and is close to bankruptcy. Walter Russel Mead comments:
The Puerto Rico meltdown is going to be brutal: Many of the bonds are held by Puerto Rican retirees, either directly or as part of pension fund portfolios. Moreover, the island is a typical example of blue model governance, with a bloated state that doesn’t perform effectively, public sector unions out of control, and lots of poor people who depend on a government that doesn’t serve them very well. And on top of all this, there are no bankruptcy provisions that would enable an orderly restructuring.

Ultimately, bankrupt blue cities and states and their pension funds will troop to Washington with their hands out, begging for bailouts. Already we’ve seen a leading New Jersey state Democrat call for a $1 trillion federal bailout fund for pensions. The political pressures around the issue will be intense. Some (mostly Republicans) won’t want to give a single dime to the improvident fools and crooks who created this mess. Others (mostly Democrats) will insist on no-fault bailouts, arguing that social justice demands nothing less than an infinite willingness to pour money down ratholes, so long as those ratholes are Democrat-run.
The people who champion the blue model are indeed "improvident fools and crooks." Their strategy is effective: (1) convince a significant subset of the population that they are 'victims' and are entitled to a vast array of government largess; (2) provide that largess and then increase it every year, encouraging more and more people to partake; (3) guarantee wonderful (but unsupportable) benefits to public sector workers; (4) initially, raise taxes to support those benefits; (5) watch as those who are being taxed to death flee to a more tax-friendly locales; (6) begin to panic as funds run dry and entitlements cannot be met; (7) default on bonds arguing that only 'rich people' hold the bonds and they can afford to be stiffed; (8) ask the feds for a bailout, crying that "circumstances out of our control" are to blame.

This insidious process is happening with greater frequency as Democrats gain leadership and legislative control of major urban centers and blue states across the United States. The shrinking numbers of responsible taxpayers will be asked for bailouts again and again. If refused, the "improvident fools and crooks" will blame heartless people who "won't share the burden." In reality, it's a lot more like responsible people who refuse to be dragged into stupid and irresponsible behavior.