Mitch McConnell is right about refusing to bail out bloated blue-state pensions
Senate majority leader Mitch McConnell is taking tons of flak, even from members of his own party, for telling free-spending blue city and state governments, which were already reeling under massive unfunded pension liabilities, that they weren't going to get bailouts under the pretext of coronavirus stimulus. Here's the flavor:
...cops, firefighters and healthcare workers makes McConnell the Marie Antoinette of the Senate.— Rep. Pete King (@RepPeteKing) April 23, 2020
Here's the news item from the New York Times:
WASHINGTON — Senator Mitch McConnell took a hard line on Wednesday against giving cash-short states more federal aid in future emergency pandemic relief legislation, saying that those suffering steep shortfalls amid the coronavirus crisis should instead consider bankruptcy.
"I think this whole business of additional assistance for state and local governments needs to be thoroughly evaluated," Mr. McConnell, Republican of Kentucky and the majority leader, said in an interview with the conservative radio host Hugh Hewitt. "There's not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations."
Here's McConnell's actual quote from his website:
I said yesterday we're going to push the pause button here, because I think this whole business of additional assistance for state and local governments needs to be thoroughly evaluated. You raised yourself the important issue of what states have done, many of them have done to themselves with their pension programs. There's not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.
Here's why it's obnoxious: he's already gotten two of these stimulus packages through — the $2-trillion post-coronvirus stimulus, and yesterday's $484-billion small business stimulus, which ought to be enough to give anyone pause as to how they're going to be paid back. For blue cities and states to demand bailouts, too, is effectively calling for a bailout of everything, something that's bound to get our U.S. debt into the zillions, not the trillions.
From McConnell's website's cited interview with Hugh Hewitt (you can hear it here), it's pretty clear that's exactly what he's thinking about:
We haven't had much discussion about adding $2.7 trillion dollars to the national debt, and the way that could indeed also threaten the future of the country.
The only solution is ultimately to begin to open up. I was encouraged the White House Taskforce set up Phase 1. Many governors are now looking at beginning to carefully reopen. And I think that's the only way we can ultimately solve this problem, is to begin the process of getting back to normal.
Like Puerto Rico in the wake of its recent hurricanes, it was bankrupt to start with, not bankrupt in the wake of the unforeseen hurricanes, and the reason was mismanagement. In the private sector, such mismanagement has consequences, and it's called "bankruptcy." The Puerto Rican governments, who had mismanaged not only their finances, but their massive aid packages, too, had been insistent on getting a bailout for their own baseline mismanagement on the pretext of disaster relief.
That's what these blue city and state one-party Democratic governments are trying to pull now: a get-out-of-bankruptcy-free card to cover up for the consequences of their bad economic decisions and a license to go right on doing what they have been doing, which is hiring bureaucrats and spending lavishly on them, always making the private sector pay.
We already know that most of these civil servants are drawing six-figure salaries way out of proportion to their education, talents, or academic achievements, such as they are found in the private sector. This dynamic is clear enough in the Washington, D.C. area, where federal civil servants live off the fat of the land and have a far higher median income than the rest of the country — those little peasants who support them with their taxes. They retire in their 40s and 50s and are set for life with six- and seven-figure pensions that, unlike in the private sector, they don't have to contribute to. On top of this, unlike the private sector again, they have complete job security. No matter what they do, no matter how little they work, they never have to worry about getting fired or laid off. In the past, a career as a bureaucrat was a trade-off: bureaucrats earned less money than the private sector but had more job security. Today, being a bureaucrat is the easiest road to getting rich without working too hard.
That's nice work if you can get it, but it's fundamentally unsustainable to have a bureaucratic class living at a far higher level than the citizens who must support them. It's why taxes and the cost of living are so high in California, New York, and other solid blue enclaves. With that imbalance going on, eventually, people flee. After all, why should any productive member of society stay around and pay bloated bureaucrat pensions when they can move to another state with no such massive taxation? It explains why blue cities welcome illegal aliens as a stopgap because they can keep the illusion of high population numbers, except that most are only productive at a low level and the value of their work and taxes (if they pay taxes at all) is never going to pay for those big bureaucratic pensions, they are basically the importation of poverty. That keeps federal money flowing in as well as expanding bureaucracies to 'serve' them, but it doesn't fund the pension coffers the way now-fleeing middle class taxpayers are expected to do.
The whole dynamic is compounded by the public employee union problem — bureaucrat salaries get high in the first place based on Democratic politicians being unwilling to stand up to public employee demands and insist on public pensions being proportionate to tax receipts and the median income. That's why we constantly hear of state prison psychologists drawing million-dollar salaries and pensions, and cops double-dipping on the pension front and making six-figure salaries before retiring at age 40. Politicians constantly roundheeling to public employee union demands is useful to corrupt Democratic pols in these all-blue enclaves because it leads to campaign contributions from the unions. One hand washes the other.
All of these reasons are the long-term and building reasons why these blue cities and states are in trouble financially and can't pay their pensions.
The business bailouts, by contrast, were compensation for a vibrant economy shut down in the interests of containing a pandemic. These businesses had been functioning, they had been making money, they had been paying taxes, and it all came to a screeching halt based on the coronavirus import from China and the government's interest in shutting down the economy to prevent the spread of disease. There was no long-building fiscal pathologies going on, this was a black swan event.
McConnell is right to see the dynamics of these blue city bailout demands and call a stop to them. Because if he doesn't, they will never learn that if you want to run a place where productive people want to live, you need to lower taxes and get serious about improving the quality of life for the private sector, not prioritize the interests of the campaign-donating bureaucrat class. If these places get bailed out, a message will be sent that they can go right back to doing what they had been doing and spend as though there is no tomorrow.
To heck with that. Mitch McConnell is right and should stand his ground in order to end these blue city and state pathologies that already have been going on too long.
Image credit: Mitch McConnell, Senate.gov, public domain.