Posted by
Bill Crawford on Thursday, January 06, 2011 11:33:30 PM
The aftermath of the blizzard in New York City last week should not have been a surprise. In that town, the Transit Unions are famous for their rulebook slowdowns, this is all old hat. But the creatively recreational snow plow effort there (and the delayed garbage pickups that followed) were important. They were a shot across the bow. There's a lot more coming.
You see, the shift of power in Washington, D.C. means the bailout money, the stimulus grants and discretionary federal aid will be drying up now. It will not be a gradual process, folks. If your town has a grant check in hand, cash it now. This would all have happened even if Pelosi remained as House Speaker- everything has limits and everyone knows our debt is approaching 100% of our annual GDP.
In the crazy states, this means that the day of reckoning will be June 30th, the end of most state fiscal years. This means New York, California, Michigan, Illinois, Nevada and Connecticut will all be looking at default.
If any of them default, they will have to apply for restructuring. Here is the kicker: part of the process is that everything fiscal becomes a do over. The states will be renegotiating salaries, benefits and pensions of their public employee base. This is where the behavior of the New York unions comes in: you haven't seen anything yet.
Public union employees are making so much more than their private sector counterparts that it is no longer under the radar. The funny thing is, the last decade has seen a surge in negotiated bennies and pensions instead of salaries- more politically palatable, easier for everybody from a tax standpoint, etc. This means that these unions are walking around thinking that they have already made sacrifices! They think that between salary concessions and layoffs, they are at some sort of equivalence in this recession with the private sector. I kid you not, this is their glorious illusion.
I bring this up because many of them will be called to help out in the coming state fiscal crisis, and they will not give an inch. This is stuff they were promised. They are owed!
Well, they screwed the pooch in a big way. Their parents did it better. They averaged 3.4 children per family. When their union wages became unsustainable at the end of the post WWII 25 year expansion (and by 1970, oh boy, were they!) they got bought out and retired early. All those children entered the workforce and fed their pensions. This generation isn't even having children at the replacement rate (2.1 per family) and they certainly aren't allowing their children to enter the workforce full time until after college (which I happen to agree with the rationality of). How the hell do they expect all this to be paid for? Do they think the whole country is going to learn to live with 50% of their income?
That means they are going to be asked to work longer, and if they insist on retiring, they will be asked to take a hit. The histrionics that will follow will be painful to watch. They will be one step away from a Liverpool soccer match with two bad refs.
Follow up: know your history, folks. Consider your alternatives here. The political right wants to renegotiate your pensions. The left has a history of wanting to option the pension funds into the public treasury. When both sides regard this money as unsustainable, who is your better friend? I think public pensions are overfunded at the same rate their owners are overpaid, but once an agreement is reached, it is still the employee's money. Try getting a concession like that from Valerie Jarrett or Dave Axelrod in the White House. Those people are dangerous.