Austerity: Who’s really paying for the great recession?

On Countdown Tuesday night Chris Hayes highlighted the false hope being placed on austerity as a solution to federal, state, and local budget problems. Merriam-Webster announced that the 2010 Word of the Year is Austerity. Defined as “enforced or extreme economy,” it has been presented as a solution to state and local budget shortfalls as we head into the fourth year of the deepest economic downturn since the Great Depression.

Austerity budgets cut at the core infrastructure costs of services provided by local governments. Such cuts weaken our infrastructure of public services ultimately causing them to break under the weight of trying to do too much with too little.

Breaking government, starving the beast, is the goal of anti-government GOP elected officials like Orange County Supervisor John Moorlach, who are now focused on using the ruse of austerity as a means to that end.

Hayes points out in his segment that “in California the public university system, once the envy of the country and engine off upward mobility for millions of middle and working class Californians, is probably facing another round of budget cuts and fee hikes to close a $28 billion budget gap. It has already had to raise fees last year by 32%. In New Jersey, Governor Chris Christie recently hinted in a ’60 Minutes’ interview that his state may default on its pension obligations.”

“If you don’t partner with me to get this done, in ten years you won’t have a pension,” Christie told 60 Minutes.

OC Supervisor John Moorlach - Photo: Chris Prevatt

Sound familiar? It should. Back in May of 2009 in discussing their positions on legislative matters at their Board meeting, Supervisor Moorlach proposed telling the Governor to go ahead and make his day and take funds away from local governments under Prop 1A.

Moorlach said; “it would be kind of fun for the Governor to throw us in that briar patch.” Moorlach added that if the Governor moves forward with that proposal, as much as 40% of the local governments affected may have no choice but to seek Chapter 9 bankruptcy protection. “It would allow for the opportunity to restructure including changes to pension programs like the 3 @ 50 public safety pension benefits.”

But Christie’s statement is also strikingly similar to a more recent one made in Moorlach’s OC Register op-ed a couple weeks ago:

“The choice for union members is simple. Do you wish to cling to your Rolls-Royce pension benefit, not receive a pay raise for the next five to 10 years and risk layoffs of personnel? Or are you willing to adopt a true rollback, and receive a blended benefit, thus reducing the unfunded actuarially accrued liability and, consequently, reducing pension plan contributions, which will free funding up for cost of living pay increases?”

Moorlach falsely claims; “the truth facing municipal managers is that it is the formulas, not the investments, that are causing the ever-increasing contribution requirements.”

Economist Dean Baker has pointed out that “the whole story here is the housing bubble, that was fueled by Wall Street greed, and in Washington by incompetent people like Bernanke and Greenspan not doing their jobs. Now we are faced with the worst economic downturn in 70 years. That is why state and local governments are facing shortfalls. We have “60 Minutes” going oh, this person may be paid too much, and you can find this piece of waste and all that, and the state governments would be fine. This is a contrived story”; Baker said.

 Hayes asked Baker: “I think austerity is appealing, it’s interesting. But it’s appealing to a certain population because it invokes prudence and self restraint. What’s wrong with austerity as an approach to the situation we find ourselves in?”

“It’s at odds with what got us here in the first place,” Baker said. “We can sympathise with not spending more than you earn. we understand that, it makes sense… The problem is the economy faces is not enough demand or spending. We had a housing bubble that was creating a huge amount of demand. That demand has disappeared.”

“Austerity takes us the wrong way. We are going to deal with the shortfall in demand by having less demand,” Baker said. “It’s the wrong solution to this problem.”

The bottom line here is that California, the County of Orange, and our local agencies like cities and school districts, would not be looking at austerity and cutting public employee pay and benefits, including pensions, if the economy had not hit the wall of the great recession. Our economy will navigate its way around that barrier and grow again. This is the simple truth of economics. Economic downturns and upturns are cyclical, and certain. It is all just a matter of time.

Chicken Little John Moorlach

The premise presented by Supervisor Moorlach, and others of similar mind, is that some how our pension obligations are debts that will suddenly all come due and payable at once is simply false. More accurately it is a lie, meant to instill fear and generate support for the larger core goal of the destruction of our infrastructure of qualified public employees focused on delivering public services. Their goal is to eliminate the need for all public employees and turn over the services they provide to businesses with one goal in mind, profit.

Moorlach wants you to believe that public employees and their pensions are the problem. He wants you to believe that eliminating their pensions will magically solve all problems. He is offering a cure to a problem that does not exist under the guise of austerity. His proposed solutions are designed specifically to bankrupt public employee pension plans, by cutting off future participation in the plans. The only way he can be right, is to force the total pension liability to come due in full as soon as possible. By cutting off future participants from joining the current plan, the costs of maintaining the plan are raised to unsustainable proportions.

Moorlach is using austerity, and it’s application to what he describes as over compensated public employees living high on the taxpayer dime, ad the means to achieve the goal of turning all public services over to private contractors, who he believes can do the job better and cheaper. We’ve seen the method to his madness in the outrageous quarter million dollar bonus delivered by the Board of Supervisors to a county contractor for simply doing the bare minimum of the job they were already paid to do.

The recent shutdown of major airports in England are dramatic example of the consequence of contracting out public services. For profit companies running the airports failed to plan for and acquire the resources necessary to deal with heavy snow because it would have cut into their profits.

Moorlach and his conservative colleagues are wrong to use austerity as an excuse to attack public employees and their negotiated benefits because of a recession that we will recover from, and more importantly a recession that public employees are not responsible for. There is no legitimate cause to take the actions Moorlach proposes. Not only will they not solve the problem, they will make it worse.

Below is the video clip of yesterday’s Countdown segment:

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  4 comments for “Austerity: Who’s really paying for the great recession?

  1. junior
    December 22, 2010 at 10:39 am

    Okay Chris – I assume that you are proposing to feed the “beast.”

    With what? The beasties cupboard is bare.

  2. Rampant Corruption
    December 22, 2010 at 4:08 pm

    Well said Chris. Thanks.

    County employee bargaining groups also need to see through the rhetoric. Mr. Moorlach says restructuring pensions will allow for pay increases. The BOS has already gone back on promised pay increases for some bargaining groups. Unfortunately, these bargaining groups have not taken steps to stand up to the BOS.

    Mr. Moorlach and the BOS appear to be moving toward a showdown with the bargaining groups. If they do this, the employees need to be ready to defend their livlihoods and their futures.

    In the mean time, public employees need to be educating their friends and families and the public so we can turn out some educated voters in the next election cycle. It may be a pipe dream, but progressives need to get the message out.

    As far as feeding the beast goes, corporate and property taxes in California are among the lowest in the nation. These taxes should keep pace with inflation. Also, California members of Congress and the Senate need to get behind Internet gaming proposals that will raise significant revenue domestically rather than having that revenue go to governments in Australia and the Carribbean.

  3. junior
    December 22, 2010 at 8:29 pm

    “It may be a pipe dream,” – yup, gotta agree with you there.

    “These taxes should keep pace with inflation.” – a classic moronic statement if I ever heard one. Taxes are a PERCENTAGE of the monetary/revenue/value base – duh!

  4. December 22, 2010 at 11:58 pm

    The solution is not austerity, but rather Glass-Steagall bankruptcy reorganization at the federal level.

    The insane statements:
    “Economic downturns and upturns are cyclical”.
    “… a recession that we will recover from”.

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