October 26, 2013

DESPITE 2009’S PITCHFORK KABUKI, the Blue Model needs Wall Street to Survive.

The cycle of dependence on Wall Street usually follows a pattern. Public employee union leaders demand generous benefits as the price of their political support; politicians promise things like higher future pay and early retirement. Wary of public backlash, however, these officials don’t advocate cutting services or raising taxes to cover the shiny new pay packages they have established. The discrepancy between benefits promised and funds available becomes unbridgeable. Desperate to keep from falling too far behind, pension funds turn to the risky side of Wall Street, which gets rich off the panic. All too often, the Wall Street solution to blue model imperatives leaves taxpayers and pensioners stranded.

Fingers have been pointed at both sides. A piece in Rolling Stone last month argued that slimy “Gordon Gekko wanna-be[s]” have basically been stealing money in the dead of night from honest, hard-working pensioners. A piece from AEI this week shot back that pension funds are forced to approach Wall Street hat in hand by the self-serving politicians who make unaffordable promises in the first place.

Yes, those responsible for public pensions dug themselves into this hole, but the more interesting story concerns the confluence of interests between blue politicians, union leaders, and Wall Street. It’s unsurprising that few Democrats are willing to acknowledge this; the alliance doesn’t inspire confidence in the blue model’s sustainability or in the political base that supports it.

Nope. And a strain of Tea Party populism in the GOP would attack this coalition, and the corruption it has brought.

UPDATE: Related: Valerie Jarrett: Often Whispered About, But Never Challenged. “Jarrett, an old Chicago friend of both Barack and Michelle Obama, appears to exercise such extraordinary influence she is sometimes quietly referred to as ‘Rasputin’ on Capitol Hill, a reference to the mystical monk who held sway over Russia’s Czar Nicholas as he increasingly lost touch with reality during World War I.”

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