Friday, January 22, 2010

Time to Put Jabba on a Diet


On Sunday the Statesman Journal ran a front page story that local governments are going to have to pony up an additional 6% or so to pay for PERS contributions and they are wondering where the money is going to come from. www.statesmanjournal.com/apps/pbcs.dll/article?AID=20101240345 Hmmm... let me think. Could it be the Oregon taxpayer? Mais non! C'est impossible! And what a coincidence that this story stays buried by state government until just a few days before the Measure 66-67 election.

This is the latest chapter in Oregon of a larger battle being fought nationally. Daniel Henninger writes an incisive piece in the Wall Street Journal about what went wrong for the Democrats in Massachusetts and frames it in terms of a national battle between the private sector and public unions. He says:

"The central battle in our time is over political primacy. It is a competition between the public sector and the private sector over who defines the work and the institutions that make a nation thrive and grow."

The public sector does not create wealth, it commandeers private wealth for its own purposes. When public employees were allowed to unionize in the 1960s, the Democrats formed an alliance with them. Like any contract there was consideration going both directions: you vote for us and we will make sure that you are very well compensated. Since that time, both state and Federal budgets have consumed an increasing share of total GDP. He goes on to note, however, that:

"But here's the party's self-destroying kicker: Feeding the public unions' wage demands starved other government responsibilities. It ruined our ability to have a useful debate about any other public functions.

Massachusetts' spending fell for mental health, the environment, housing and higher education. The physical infrastructure in blue states is literally falling apart. But look at those public wage and pension-related outlays. Ever upward."

In states with advanced cases of publicunionitis, it is hitting the fan: California, New York, New Jersey, Massachusetts. New Jersey elected a new Republican governor and the Democrats learned to their chagrin that even in Massachusetts, even with Ted Kennedy's seat, the voters have had enough. The citizens are sick of higher and higher taxes to fund the Democrats' Faustian bargain with public employees while the private sector is taking pay cuts, layoffs and worse because of the current recession. I think Senator Brown's election may be a sign of how America is beginning to redress the private vs. public equation.

online.wsj.com/article/SB10001424052748704320104575015010515688120.html?mod=WSJ_Opinion_BelowLEFTSecond


In Oregon, as I previously reported, state spending is up 64.2% in the 2001-2009 period while population growth is only up 10.8%. Private sector employment is actually lower in 2009 than it was in 1999, while public sector employment is up substantially. In other words, a decreasing private sector is funding more and more of the rapidly growing public sector of the economy. It is easy to predict that businesses will begin to flee the state for lower tax states like Idaho. Clark County, Washington in particular will see growth in this region because of no income taxes and proximity to Oregon and no sales tax - the best of both worlds! Eventually, though, if Oregon does not change direction, it will follow California's lead into a fiscal crisis where bankruptcy is the only answer. That would be a sad fate for a state that has always prided itself on its self-reliant pioneer spirit. I'd rather emulate Massachusetts and elect people who are committed to redressing the public/private balance and put Oregon on the path to a sound future for us and our children.


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