Worldview: More on the cost of reality

I love that the debate over stripping public unions of the collective bargaining rights has degenerated into an argument, essentially, about protecting union negotiated entitlements. In embracing this debate, both sides have distracted themselves from reality again–that is, the thing that is going to happen whether unions can bargain for entitlements or not.

I will focus on Ohio because I am far more familiar with its finances than I am with Wisconsin’s, but I believe the problems are similar in each state.

Various researchers, including the states own Office of Budget and Management, project that Ohio budgeted to spend somewhere between $5 and $10 billion more than it will collect in tax revenue in 2011. This reality is part of a general trend around the country that has states spending more than they tax even as they find their ability to borrow more and more limited by declining credit ratings due to the immense amount of money they have already borrowed.

This state of affairs threatens to become a crisis for Ohio because the state could have no capacity to fund the programs and services it has obligated itself to fund at the levels it promised to fund them as soon as this year. Nowhere is this potential crisis more evident than in public schools.

There is also a hard place for this state financial crisis to land: many school districts are already broke or are so close to being broke that the difference is irrelevant if funding gets cut by the state. According to the Ohio Auditor of State (.pdf), 15 districts are currently under fiscal watch or emergency, while 60 more just emerged from such a status on 1 January 2011. Around the state, districts are warning that, even if new levies pass this year, the districts will be forced to make cuts and lay off teachers.

So, while so many people seem to be focusing on the question of whether teachers–and other public workers–have the right to bargain contracts, most people seem to be ignoring the fact there may be nothing for them to bargain those contracts with.

This reality is because of the fact that Ohio is broke. It’s not just in 2011 either. Some budget estimates show Ohio running deficits of $5 to $8 billion for the next 10 years, deficits the state has no funds to cover and which it may not be able to borrow to make up for.

It is from these conditions that the anti-bargaining law originated. Republican lawmakers in Ohio–and Wisconsin, Indiana, and Tennessee–see public unions as a target of opportunity in what is going to prove to be a decade long budget battle to somehow preserve the financial sovereignty of their state. There are, in my opinion, all kinds of problems with the law and with the approach the Republicans have used, yet no one can deny that part of the problem faced by states, municipalities, and school districts right now is the cost of union negotiated compensation packages those entities simply do not have the capacity to pay.

If these entities do not have the capacity to pay, it does not matter if the unions have the right to collectively bargain or not. I suspect that, within the next few years, entire school districts and smaller municipalities are simply going to fold–disincorporate, which is essentially bankruptcy–because they no longer have the capacity to maintain even a fundamental level of the services they are supposed to provide. At that point, even if teachers, police, and firefighters have contracts, it will not matter because the entity they have a contract with has ceased to exist.

From my point of view, if legislators and unions alike want to prove they have their constituents best interests in mind, it is a resolution to this disastrous state of affairs that they would be debating instead of whether unions can collectively bargain contracts with failing entities. Yet, instead they debate about the fringes while the core is collapsing, and when it is done, all of their effort will have been expended for nothing.

DLH

Read more at my Worldview site...

Worldview: The cost of reality

I’ve been watching the progress of the collective bargaining revocation bills in Wisconsin and Ohio with great curiosity and not a small amount of amusement. What I see on all sides of this debate is a failure to deal with reality.

Teacher’s unions fail to understand that there is no more money. Wisconsin is in the hole $2.2 billion. Ohio is in the hole $7 billion. Those deficits are only the ones for 2011. Sure, they are just trying to protect their own, but at what cost? What else has to get cut to protect them? Who else has to pay?

On the other hand, you have the conservative law makers and those who elected them. They claim union busting–because that’s what revoking state collective bargaining agreements really is–will save the tax payers millions. That’s true, but so would cutting state programs, especially the costly social welfare programs even conservatives are addicted to.

The problem, as I see it, is that nobody wants to admit the truth: we’re not going to get out of these problems with selective, politically motivated cuts. Instead, we’re going to have to make far-reaching, across the board cuts at all levels of government that will last decades, and those cuts will only serve to allow us to tread water.

Unfortunately, no one is listening. Liberals and progressives want to tax more and spend more. Conservatives want to attack their political opponents’ pet programs without doing anything real to face the problems. Libertarians are too wild-eyed and disorganized to do anything other than make incoherent noises.

In the midst of all of this, our nation is failing. Our currency is devaluing. Our economy is not creating jobs. More than half our citizens effectively do not pay taxes, and the other half are paying so much they can’t make anything happen. Our tax system penalizes success. Our laws make starting and maintaining businesses unnecessarily complex. This year, local, state, and federal governments will spend between $2.5 and $3 trillion more dollars than they collect in taxes. The total US debt burden carried by all levels of governments could exceed $25 trillion–or twice the entire GDP of the US in 2011.

If we really want to fix the problems that got us here, we have to end–no, destroy–the disincentive to perform, succeed, and innovate on the strengths of our own merits. We have to wipe out the notion that we can somehow treat every individual and situation as some kind of an average and deal with reality in all its uniqueness and complexity. For the first time in decades, we have to think, act, and react in accordance with the situation we have, not the one we are convinced we should have. We have to return the bulk of control to the individual and stop expecting governments to take care of us.

And all of these solutions are going to happen whether we want them to or not. We cannot continue what we are doing because what we are doing is failing. The question that remains is whether we participate in the process by which the next thing comes into being or whether we stand and watch as the terms are dictated to us.

I suspect most will do the latter, which is why I’m pretty sure you should be getting ready for some really tough times ahead.

DLH

Read more at my Worldview site...