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The Paralysis of the State

By DAVID BROOKS

Published: October 12, 2010

Sometimes a local issue perfectly illuminates a larger national problem. Such is the case with the opposition of the New Jersey governor, Chris Christie, to construction of a new tunnel between his state and New York.

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Both sides are right. But what nobody seems to be asking is: Why are important projects now unaffordable? Decades ago, when the federal and state governments were much smaller, they had the means to undertake gigantic new projects, like the Interstate Highway System and the space program. But now, when governments are bigger, they don’t.

The answer is what Jonathan Rauch of the National Journal once called demosclerosis. Over the past few decades, governments have become entwined in a series of arrangements that drain money from productive uses and direct it toward unproductive ones.

New Jersey can’t afford to build its tunnel, but benefits packages for the state’s employees are 41 percent more expensive than those offered by the average Fortune 500 company. These benefits costs are rising by 16 percent a year.

New York City has to strain to finance its schools but must support 10,000 former cops who have retired before age 50.

California can’t afford new water projects, but state cops often receive 90 percent of their salaries when they retire at 50. The average corrections officer there makes $70,000 a year in base salary and $100,000 with overtime (California spends more on its prison system than on its schools).

States across the nation will be paralyzed for the rest of our lives because they face unfunded pension obligations that, if counted accurately, amount to $2 trillion — or $87,000 per plan participant.

All in all, governments can’t promote future prosperity because they are strangling on their own self-indulgence.

 

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And, many who retired gamed the system by mounting their overtime hours in the last few years before retirement, thereby gaming the calculus of retirement income formula.

The issue is not that they have good benefits, the issue i how widely different and cushy the benefits and and how much burden it places on the economy. 

Even if the States reform their benefit structure for government employees, we are still left with the commitment that is already accrued towards the population that is already retired.  Also it is not easy to modify the benefit structure for existing set of employees -- although it can be done.  In the government sector, the unions are quite strong and active; this also comes into play in a big way in any proposal to reform the government benefit structures.

-- Edited by Sanders on Tuesday 12th of October 2010 10:25:12 PM