Walter Russell Mead links to a New York Times article saying that the local government in the Empire State is basically broke and getting deeper in the hole by the minute. Mead observes that while the NYT reports the dire facts it averts its eyes from the conclusion that what can’t go on won’t, and preferred to allude to an expected financial counter-attack by Steiner … er forces from Albany to save the day.
Gov. Andrew M. Cuomo is suggesting new strategies, proposing in his budget to allow municipalities like Albany to receive millions of dollars more in state aid over the next fiscal year in exchange for receiving less in the future. The governor is also proposing that the state assume a greater share of Medicaid cost increases borne by local governments, and that state and local governments be allowed to reduce the pension benefits of future public workers.
But as Richard Brodsky, a former assemblyman who is advising Yonkers says, “these municipalities will not recover when the economy recovers”. That’s how deep the hole they are in is.
Mead claims it is yet another example of the failing Blue Model, which is broken so badly even its proponents know it can’t keep going. But without another horse to ride they’ll keep going on the same faltering nag until it dies under them. Then they’ll eat it.
Mead said, “while the Times carefully avoided drawing any indelicate conclusions that might upset its liberal readership, the review of government finance at the state and local level reveals an appalling picture of blue model thinking at its worst. New York state and local politicians, egged on by public sector unions, have dug the state into such a deep hole that it will be hard to emerge.” The ratings agencies are downgrading the municipal bonds, raising the prospect of Greece in New York State.
And the unions — along with the pro-bankruptcy wing of the Democratic Party — want to keep digging.
The reality is that from Long Island to Buffalo, New York cities and counties face severe and growing fiscal woes. The chief drivers of the crisis: blue sweetheart programs that are out of control: state pensions, Medicaid, and retiree health costs.
Example: New York City’s annual out of pocket pension costs have ballooned from $1.5 billion a year ten years ago to $8 billion today. This is the cost of the lies New York politicians have told their sheep like constituents for many years, promising fat pensions to workers while refusing to raise taxes to put enough money away for when the bills come due. According to the eye popping numbers in the Times, 3 percent of New York city property tax revenues went to pay pension costs in 2001; 35 percent of those revenues will go to pensions by 2015.
Just how entrenched the public sector unions are was illustrated by a Wall Street Journal article three days ago. It dealt with another flagship of the Blue Model, Detroit. The article said “with Detroit projected to run out of money in May, Mayor Dave Bing is calling on Michigan’s governor to give the city a loan rather than appoint a financial overseer who would have broad power to cut costs and break union contracts.”
The governor is under political pressure from various groups, including unions and Democratic lawmakers at the state and federal level, not to appoint a manager for Detroit.
As ever, racism was invoked. “Opponents of putting Detroit under the control of an emergency manager say it would disenfranchise the city’s mostly minority population.”
But that still doesn’t answer the question of what happens when the money runs out and Detroit burns through the loan that it can never pay back. Mead says the well is dry. “But the feds can’t — and won’t — pay up.” They’re in a bigger hole themselves. But so what: the impossibility of conjuring money out of thin air is not nearly so infeasible as the one thing that definitely won’t happen, at least voluntarily — ever — which is that the Blue Model should give up its gains.
There is among some people the actual belief that even when the system actually runs out of money it can keep going on forever — like Wile E. Coyote after running past the edge of a cliff — for so long as nobody looks down. The physical implementation of the Wile E. Coyote strategy consists in simply printing more money and doing whatever is necessary to keep the music playing.
It’s sometimes been argued that if reality really had any actual existence then Europe would be to hell and gone by now, and probably California too. It hasn’t happened so maybe reality doesn’t exist. It’s worth a hope anyhow. “There’s a lot of ruin in a nation,” Adam Smith once said. Maybe, it is thought, an inexhaustible amount of ruin.
Detroit’s loan application reminds me of an acquaintance who borrowed some money from me years ago. Months after he promised to pay, I casually reminded him of the debt to which he cheerfully replied, “if I had any money to pay you would I have borrowed in the first place?” You had to admit he had a point. Detroit should certainly be lent the money without any expectation of repayment. After all, if it had any money to pay back its debts, would they be borrowing any to begin with?
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