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In his latest column, which we published today, Paul Krugman takes to task state and local governments for slowing the economic recovery – by making budget cuts.
“The federal government has been pursuing what amount to contractionary policies as the last vestiges of the Obama stimulus fade out, but the big cuts have come at the state and local level,” the New York Times columnist writes. “These state and local cuts have led to a sharp fall in both government employment and government spending on goods and services, exerting a powerful drag on the economy as a whole.”
It’s no secret that Krugman is one of the true champions of Keynesian economics and has long argued that what the federal government has needed to do to get the economy back on its feet is to provide more stimulus money - not tighten its belt.
But what he fails to acknowledge in his column are two things: One, that state and local governments, by law, are not allowed to run deficits like the federal government. And two, state and local governments are also laboring under the huge financial burdens created by unsustainable pensions and other retirement benefits.
I doubt Stockton, which is facing bankruptcy, another $20 million deficit and a near mutiny of its city workers over attempts to trim pay and benefits, wants to hear that it needs to stop being “a powerful drag on the economy” and start spending money.
Last night, Sonoma decided to seek a half-cent sales tax to meet its financial challenges. Meanwhile, Sonoma County is facing a $16 million deficit while Santa Rosa is preparing to lay off four workers due to the governor’s decision to dissolve redevelopment agencies across the state. What choice do cities and counties have?
- Paul Gullixson
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We all notice that “Tom Lynch” never returned to discuss the criminality of government continuing to fund excess law enforcement operations while the FBI Annual Crime Report continues to show falling crime rates year after year.
Yes, Tom, it is a crime against the public to steal our money and then spend that money on govt operations that are already over funded as evidenced by the FBI annual report.
I say “steal” our money because nobody is paying taxes “voluntarily” despite what the government bureaucrats claim. Taxes are theft by coercion.
But, you see, govt cannot coerce and intimidate the public without an army of cops on the streets, right?
If you’ve read Krugman’s columns or seen his pathetic performance on talk shows, you already know the guy is a self-centered weasel. Why pay attention to anything this biased hack says or writes?
@Money Grubber
I wasn’t aware that any of our homeless friends had won a Nobel Prize in Economics.
Isn’t that The Plan? The next Federal bailout will be “Too-Big-to-Fail State of California”, but only after we’ve spent billions advancing their “smart” agenda.
Tom Lynch admits he seeks to maintain law enforcement yet lacks the courage to discuss the falling crime rate year after year as documented by the Annual FBI Crime Report studies.
Yes, you are a public employee by your own admission.
Try again, Tom. Discuss why you support steady levels of law enforcement spending in the face of falling crime rates.
Its easy to mutter about “sustainable” levels of government but you lack the courage to discuss cutting un-necessary government operations such as an overstaffed and over perked law enforcement operation.
The federal government recorded its worst monthly deficit in history in February, according to a preliminary report Wednesday from the Congressional Budget Office that said the deficit in fiscal year 2012 is already more than half a trillion dollars.
The nonpartisan agency projected the government will run a deficit of $229 billion in February, the highest monthly figure ever. The previous high was $223 billion a year ago, in February 2011.
It is the 41st straight month the government has run a deficit — itself a record streak that dates back to the final months of President George W. Bush’s tenure. Before now, the longest streak on record was 11 months.
For all of fiscal year 2012, which began Oct. 1, the budget analysts said the government has raised $869 billion in revenue but spent $1.5 trillion so far.
Mr. Obama last month released a budget that showed the government averaging $1 trillion deficits for the rest of this decade. House Republicans are working to write the
http://www.washingtontimes.com/news/2012/mar/8/govt-sets-record-deficit-february/
So, yeah, let’s have the Federal government borrow some more and give it to the state and local governments to they don’t have to cut back on their spending.
@ Money Grubber
I do not “mutter” and am not a public employee (unless you consider $75/meeting twice a month as a Sonoma County Planning Commissioner being a public employee :)
As to definition of “essential services” I by all means include roads and infrastructure, along with mental health services, schools, law enforcement, environmental protection, parks, etc.
Many consider “essential services” those functions we have relegated government to provide, to serve our community with our tax dollars…but this system has become a debacle with a great need to reinvent how government services can be more sustainable.
Tom Lynch mutters about “the demise of essential services.”
Yet like all public employees, he conveniently never mentions just what he calls “essential.”
While the FBI Annual Crime Report has documented a dropping crime rate across California and across the country each year for years, Sonoma County continues to fund law enforcement at unreasonably high levels.
The 7 most serious crimes have fallen each year for years. And those FBI statistics are compiled using actual police inputs so they are accurate. Far more accurate than the lies originating out of the various police labor unions.
While we have an army of cops on the job, our roads are crumbling and our bridges are in disrepair.
Its a prioritizing issue, Tommy.
In the link I provided it shows the CalPers vesting rates per year for employees.
It was once very very sustainable, and generous, in the minds of prior workers.
The over reaching is a Baby Boomer Generation thing.
Calpers base vesting schedule:
1932 1.43% at 65, (avg life expectancy in 1932 = 63.5)
1945 1.67 at 65, (life expectancy 67.9)
1962 Health Benefits added, (life expectancy 73.4)
1968 automatic COLA’s added, (life expectancy 74.0)
1970 2.00% at 60, (life expectancy 74.7)
1999 2.50% at 63, (life expectancy 76.7)
Note, this does not include the completely out of control 3% at 50 vesting for Public Safety and I the chart did not provide the maximu amounts one could expect, (90% for Public Safety today).
As you can tell, when CalPers was started, a 30 year employee could expect 43.5% of their salary…but few would collect.
In 1999 a 30 year employee could expect 75% of their salary for at least 14 years.
Last I checked the CalPers member life expectancy was the same for all members at around 82 years of age.
You can see how a modest system became an unsustainable one due to over reaching.
Lets be Reasonable’s post shows exactly why we are in this mess & why we’ll likely never get out of it.
These sentiments are shared by the “majority” of voters who believe that “we have a revenue problem, NOT a spending problem.”
Never mind all the waste & corruption in Government, it either doesn’t really exist or it’s a minor, manageable issue that is blown out of proportion by Conservatives who only want less taxes for the rich & less services for the needy.
I understand this point of view & I wish it were true.
But it really doesn’t matter anymore for two reasons…
1. We past “broke” a long time ago.
2. The ONLY people who will be elected & re-elected are tax & spend liberals who like George Bush, see no problem growing the debt, borrowing more & more money to finance wealth re-distribution.
When we were simply re-distributing wealth, this worked.
But we ran out of other people’s money 14 trillion dollars ago.
Krugman is a nervous little marxist who is usually looked upon as a guru by the PD editorial staff. He is the darling of leftist economic theory.
To see the PD critical of his understanding of local government is bizarre.
In California the state and local governments have played a very large hand in the deep depression/recession that continues by continuing to keep income, sales and property taxes at or near the top of the heap in the country. Big California government’s answer to falling revenue is to increase taxes, thereby driving more business away from the state and keeping a stagnant economy ongoing.
The public sector unions control the state legislature and most of the local government legislative bodies. They will not allow their surrogates in Sacramento to even introduce bills to reform the public pension disaster.
Only the liberal press in this country continue to pay attention to Krugman and his antiquated dated ideas.
In Sonoma County most employers’ retirement contribution for employees is simply the required 7.65% Social Security and Medicare.
For Sonoma County Government, the contribution is about $140 Million on top of a $300 Million payroll, toward Social Security, Retiree Medical, Pensions, Pension Obligation Bonds, 401(a)’s for management and elected, etc.
Not included in that is the fact for the last 5 years SCERA (Sonoma County Employee Retirement Assn.), has averaged a return of 1%/year with a shortfall of 7% of their target rate. What this means is an additional $150 Million of unfunded pension obligation adding to the unfunded liability each year.
The County is on the hook to guarantee the $2.2 Billion pension liability a 7.75% rate of return. When SCERA fails to meet this rate, we then have to pay it back the balance over the next 20 years at 7.75% rate of return, $150 Million loss equals $300 Million principal and interest over the next twenty years.
So, essentially in 2011 Sonoma County paid out $140 Million, and incurred future principal and interest debt $300 Million. Total toward “retirement benefits” on $300 Million payroll…$440 Million or about $1.46 per $1.00 of payroll.
Granted there are still a few employers out there kicking in 3-5% for a 401k. Average private employer .0765 per $1.00 payroll…Sonoma County payout over the next twenty years is about 19 times the private sectors average contribution.
Little wonder in Sonoma County we have seen a dramatic demise of all the essential services this county used to be able to provide for geneations, as we lay off more and more or our younger workers to pay for it.
What Gullixson fails to acknowledge in this column is that money grows on trees only in the minds of left wing journalists. (please, a mirror for both Paul’s) Since 2007 over two thousand employers have left California taking 109,000 jobs with them because of our State government’s progressive, tax agenda. Also the cost of services for illegal immigrants in California is 10.5 billion a year. Perhaps it’s time for editor Paul to start connecting the dots.
Here is further news on failed government. Los Angeles is out of cash.
LA Times
Today
“L.A. budget chief says city cannot pay raises promised to 20,000″
Money Grubber – extra thumbs up
Jim Bennett – extra thumbs up
Mockingbird – punch to the face
Republican, Democrat all the same – political corruption. It is our system that is broken. The government is failing because it wasnt designed this way. Our forefathers never intended the broad powers the government has, and even used specific language to try to prevent this escalation and goliath it has become. The politicians were pursuaded by some lobbyists and paved the road for mandatory changes in the way all the banks had to do business. They conformed and schemed to survive against each other. The government is as much to blame if not more since they were self appointed to protect against exactly what happened and they failed. Blame Bush, go ahead, but you Obama voters ask if he has changed anything other than the deficit. He’s just another hack.
When people are laid off of good paying jobs they either end up on unemployment or often in a lower paying job without benefits. Every time this happens IT IS A HIT TO THE LOCAL ECONOMY. This is basicly what Krugman is saying. It sends the economy downward and makes it harder to recover. Public employees tend to be paid a living wage with benefits. Public employees are big stimulators of the local economy and local businesses. When an employee has to pay for their own benefits that’s more money taken out of the economy stimulating business and other job creation. Getting benefits and pensions, IN LIEU OF WAGES, is often why people want to work in government jobs. IT’S NOT THE PAY.
The real culprits to our current economic calamity are the big banks and other financial institutions who gambled with all our money (pensions & 401K & other investments). They deceived, lied, sold garbage investments knowingly, issued bad mortgages knowingly, botched the mortgage paperwork and foreclosed inappropriately. Now the public has been brainwashed into thinking it was public employees and unions who are the cause of all this grief. While the rich are hoarding trillions in cash, where the wealth of this country is concentrated in the top 1%, we are out of jobs, taking salary and benefit cuts, small businesses are folding and the middleclass is losing ground daily. To add insult to injury, WE BAILED THESE FINANCIAL INSTITUTIONS OUT WITH OUR TAX MONEY. They got their big bonuses and large salaries and did not invest in jobs as expected. Thanks, Bush, for making sure no strings or accountability was attached to the TARP funds.
Our local government is indeed responsible for the extent of our economic stall.
They have aligned us with the same dark cabal that is behind our orchestrated crash and those around the world.
If Italy doesn’t want to participate in their extortion leverage, what are they gonna do-call them ‘terrorists’ too?
Try to force one of their Goldman Sachs puppets in there?
Our ICLEI membership ALIGNS us with these people.
It is through ICLEI that they impose their will on OUR community.
Their Agenda is to socially engineer our undoing;
civally and fiscally.
THAT’S why desireable California has the 2nd highest unemployment in America.
We have 11.2% unemployment, approx. 3% over the National avg..
Business’ are leaving in droves over the oppressive, over reaching regs. and taxes.
Where are they going?
Texas is leading, folowed by Ariz., Colorado, Nevada even Florida.
The ‘Plan’ is working, and our ‘public servants’ are on the program.
Many of us would like to have a discussion about our ICLEI membership.
We are asking the ICLEI QUESTION like towns across the country, in fact over 50 have kicked ICLEI out.
However we are the leading template for the whole Country, right here in Sonoma County.
Kinda makes ‘ya feel special, huh?
Thought I would add this since its in line with the article subject.
TODAY IN LOS ANGELES, CA:
“”The Los Angeles County Superior Court system is expected to lay off about 350 employees in June and “restructure” more than 50 courtrooms because of deep cuts in funding by the state, according to a memo obtained Tuesday by The Times.”"
See the chart on the attachment on Page 24 that shows State Retirement Costs as Percent of General Fund Expenditures.
During the 80′s through 2010 Pensions ate up about 3% of the budget.
The percentage for 2011/2012 is forecasted by the California Department of Finance to increase beyond 6% and more so in the future.
http://www.lhc.ca.gov/studies/204/Report204.pdf
The “true” costs have yet to be borne in California due to underfunding and an enormous expansion of benefits (retroactive mind you) in the early 2000′s.
The “hope” that the historical runup in the stock market of the past 30 years will continue for the next 30 years, as Baby Boomers retire and become nonproductive, is a pipe dream.
Of course government, at all levels, needs to cut after the trillions borrowed and spent on stimulus failed to do anything of consequence.
At some point someone needs to pay the piper.
Where does it say in the State Constitution or within the Federal Constitution that government has an intended role to play in manipulating the economy one way or another?
Answer: Neither document has that stipulation.
Paul Krugman is allowed his single opinion. But his opinion is worth no more than the homeless guy’s opinion who lives in the bushes down the street. Why bother to even debate it?
Paul,
Krugman was not advocating local government borrow more money, he was saying that the Feds should borrow the money and give it to the states / local governments as part of a stimulus package. And while pension costs are rising, they are actually not currently above the historical norm as a percentage of government spending. The real difference between now and Reagan’s recession is the housing collapse. Both State and local government depend on property tax revenue for a large chunk of their revenue. That revenue source first rose dramatically, then fell even faster. This roller-coaster is what is hurting local governments. Sales tax was hit at the same time (making the problem worse), but that has already bottomed out and is now rising. With prop 13, even when house prices start to rise again, it may be awhile before local government sees any increase.