While Feds Dawdle, States Tackle Fiscal Problems
Democrats in Washington declare that they will absolutely, positively allow no changes whatever in the nation’s unsustainable entitlement programs – Social Security and Medicare.
But out in the states, politicians of both parties aren’t averting their gaze from impending fiscal crises. They are working to change policies that put state governments on an unsustainable trajectory.
The most obvious example was the passage of a right-to-work law last week in Michigan, the birthplace of the United Auto Workers union.
This was retaliation for a failed power grab by both the UAW and public sector unions – Proposition 2, which would have enshrined collective bargaining in the state constitution.
Michigan voters defeated Prop 2 last month by a 58 to 42 percent margin. It won in the two counties that include the effectively bankrupt cities of Detroit and Flint. It lost in the other 81 counties.
Right-to-work means that no one can be forced to join a union. The law also stops the automatic deduction of union dues from public employees' paychecks – which is to say, taxpayer funding of the public employee unions that have driven costs and pensions on an unsustainable path.
Gov. Rick Snyder was initially reluctant to push right-to-work. But he saw that neighboring Indiana was attracting new jobs after it passed right-to-work last winter, while Michigan was losing jobs.
Michigan’s law is similar to Wisconsin Gov. Scott Walker’s law limiting public employee unions' bargaining powers and stopping the automatic flow of taxpayer money to union treasuries. Unions there protested, but Walker prevailed in a June 2012 recall election.
The Michigan and Wisconsin laws were partisan Republican measures, opposed by all local Democrats. Republicans have leverage elsewhere, as well.
They hold the governorships and legislative majorities in 24 states with 52 percent of the nation’s population (25 states with 53 percent if you count Nebraska with its nonpartisan single-chamber legislature). They also hold governorships but not legislative majorities in five more states with 6 percent of the nation’s population.
In contrast, only 13 states with 30 percent of the nation’s people have Democratic governors and legislatures. But even where Democrats are dominant there are stirrings of reform.
Consider Rhode Island, where Democratic state Treasurer Gina Raimondo has worked to limit the state’s unsustainable pension obligations. The state pension fund is currently paying out more to retirees than it’s taking in from current employees, and instead of getting an 8.25 percent return on investments, it has been getting 2.5 percent.
Rhode Island has hired Democrat super-lawyer David Boies to bring a lawsuit to reduce the state’s pension obligations. “There’s no contract,” Boies said. “Even if there was a contract, the state, pursuing the public interest, has the right to modify contracts.”
Or consider New Jersey, where Republican Gov. Chris Christie has famously opposed the public employee unions. He has formed a coalition with Democratic legislators with roots in private-sector unions.
Those Democrats, like Christie, argue that public employees should not get far more generous benefits and pensions than the taxpayers who are paying for them.
Another example is the state of Washington, where last week two Democrats joined with Republicans to form a new governing coalition in the state Senate. That wouldn’t have happened four years ago, when Democrats had a 31-18 edge.
But in the Obama years that margin was whittled down to 26-23, and with two defections the new coalition is ahead 25-24. It installed a supporter of charter schools and critic of teacher unions as education chairman and a skeptic on Obamacare as health care chairman.
If you look back on the great conservative public policy successes of the 1990s, welfare reform and crime control, the initiative came from the states and localities, mostly from Republican governors and mayors, but from many Democrats, as well.
Something similar seems to be happening on pensions and union contracts. A few large states, notably California and Illinois, are trying to solve their problems by raising taxes. The result seems to be unemployment above the national average.
But in many states, reform is taking hold, led by Republicans in some cases but by Democrats, as well. The fiscal squeeze is felt more urgently in the states: They can’t print money and can’t count on Ben Bernanke’s Federal Reserve to buy 70 percent of their bonds.
Some Democrats in Congress recognize that entitlement programs are on an unsustainable path. But they’re not saying much in public.
Meanwhile, Barack Obama seems to be heeding the advice of those who say entitlements must never, never be reformed.
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