Wednesday, February 23, 2011

As The World Burns...

The Middle East is in a state of unprecedented upheaval that could plunge the world into war. Europe is in chaos due to vast budget shortfalls. Oil prices are poised to breach the ceiling previously known. The dollar is primed for collapse, and several currencies are being touted as a possible new trading standard.

Meanwhile, in America, public sector unions are fighting for their life to retain the influence they hold in deciding how public money will be spent. And their supporters are pulling out all the stops. Pro-union lawmakers are going AWOL and shirking the civic responsibility they have sworn to uphold. Our pro-union president is seeking to apply his federal influence in the fray, though he has no Constitutional right to do so. And pro-union lawmakers call for blood in the streets to get what they want.

But aside from unscrupulous union supporters, what is being done in Wisconsin is exactly how our government was meant to work. The state's budget shortfall has been directly linked to the collective bargaining rights of the unions in that state: strong-arming unions manipulated politicians to promise more in deferred benefits than it is possible to pay now that the bill is due. To reconcile this, officials have been elected by the people to plug the fiscal hole that the unions have created. To do this, Governor Walker of Wisconsin has suggested that public servants begin contributing 5.8% to their own pension funds, and that they pay for 12% of their healthcare premiums. Oh yeah, and the unions have to give up the collective bargaining rights that led to this mess in the first place.

This is all to be voted upon by elected officials, and it is constitutionally sound. Consider this to be our republic's way of giving shareholders, i.e., taxpayers, a say in how the business they have invested in is run.

Democrats are crying foul in this instance because Republican leaning police and firefighters in Wisconsin were not asked to make any such adjustments. It is as if they believe that unions and the entire public sector of Wisconsin should all be subject to equal accountability for the collective public pension problems, regardless of which segment caused the problems or which segments have performed better than others. (Need more proof that Democrats today are socialists?) But the fact is, it is entirely possible that the state funded teachers' pension is collapsing while that may not be the case for firefighters and cops who rely on city or county pensions.

The municipal troubles in our nation are incredibly different everywhere you look, so the problems in Wisconsin do not necessarily translate to problems in California, while problems in California don't necessarily translate to problems in Texas. And beyond that, Texas' problems don't necessarily translate to Dallas or Houston's problems. And even further beyond that, Houston firefighters' problems don't necessarily translate to Houston police officers' problems.

The issue certainly isn't black and white. So we need to be reasonable, and allow each city and state to take their own approach to handle the problems with public sector pay and benefits based on the type and severity of each problem. However, we also need to be steadfast in addressing these problems, because is clear that most municipalities, if not all, do have problems that endanger taxpayers.

If there is one universal flaw in public compensation, it is the very notion of the defined benefit. There can be no question that defined benefits cannot exist with birth rates and life expentancies as they are* without perpetually increasing tax liabilty. In my opinion, they must be amended across the board in favor of defined contribution plans. How quickly that transition must take place will depend upon the solvency, or lack thereof, of each municipality.

But we who would seek to amend troubled defined benefit programs are not calling for blood in the streets like the pro-union Democratic legislators that are so quick to decry the "hate speech" on talk radio while implicitly suggesting pure violence in the name of their cause. As much as we in the private sector would like to end public sector unions' noxious existence, we instead choose to elect politicians that would fulfill our wishes constitutionally, and right each ship, respectively.

And Walker is just doing what he was elected by the people to do; right the fiscal ship of Wisconsin. Of course, given that there are idiots among the protesting teachers holding signs that say "Egypt supports Wisconsin workers," maybe the proper action for Walker should be to just fire them all and hire from among the millions of unemployed to take their place. If teachers there think that protesting against a ~5% contribution to the retirement fund they will eventually collect is anything like revolting against a Middle Eastern Islamic dictatorship, the replacements could not possibly be any dumber than the teachers they already employ.

William Sullivan

* William G. Shipman, a leading global expert regarding Social Security, is one of many voices heralding the unsustainable nature of defined benefit plans, and is currently working with legislators to reform Social Security for the private sector. You will find incredible evidence of the flawed nature of defined benefits in today's world here.

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