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Saturday, May 15, 2010

Greece Syndrome Defined

The fiscal equivalent of Stockholm Syndrome:
A term used to describe a paradoxical psychological phenomenon wherein government officials express adulation and have positive feelings toward unsustainable union contracts that appear irrational in light of the danger or risk posed by such contracts to the government.
Our politicians are hostages, they just don't know it. Hence, our federal jobs policy is geared towards subsidizing unsustainable state and local union contracts which states and local governments cannot afford:

Despite President Obama's pledge for honest budgeting and billions of dollars in stimulus money spent to save teachers' jobs, the Education Department is asking for off-the-books emergency funding to keep local districts from laying off school teachers next school year.

Education Secretary Arne Duncan sent Democratic lawmakers a request Thursday to pass a $26 billion emergency supplemental to fund up to 300,000 teachers' jobs that he says will otherwise be lost in the fall.
It never ends. When do we get to stop subsidizing jobs we "saved or created"?

This is nothing more than a subsidy to teachers' unions to put off the hard fiscal decisions which must be made in order to put state and local budgets on a self-sustaining basis.

In many, if not most, of these school districts, the teachers' unions have rejected compromises which could have saved these jobs without federal subsidies, but would have required modifications to benefits which are unaffordable.

I have documented this problem in Rhode Island in numerous posts.

Once again, I have been proven right about the charade we call "jobs saved or created" under the Stimulus Plan.

Here's my prior analysis from February, commemorating the one-year anniversary of the Stimulus Plan), One Year Ago I Saved The Economy:

....[a]t most, we had subsidies to state governments to perpetuate completely unsustainable budgets drowning in union-related labor costs and pensions, and infrastructure projects notorious for cost overruns. No jobs were created or saved; unless of course the federal government is going to continue to subsidize these jobs indefinitely.

And it has come to pass.

Forcing state and local governments to get their fiscal acts together is not anti-teacher or even anti-union. The current system is a house of cards which will collapse unless serious reforms are enacted. Delaying those reforms through federal subsidies treats the symptom, but not the disease.

The Obama administration is suffering from Greece Syndrome. The end will not be pretty. It will be local bankruptcies, broken promises to retirees, and social unrest.

Update: Here is an excerpt from a reader letter at Powerline blog about Chris Christie's attempt to restore fiscal sanity in New Jersey.:
I think you have to have lived in NJ for a while to really appreciate what Christie is trying to do. You might be surprised to learn that there are four branches of government in NJ: executive, legislative, judicial, and NJEA (NJ Education Association -- the teachers' union). Of the four, the last one is the most powerful. Never in the 30 years that I have been here has anyone had the cojones to face off with the NJEA.
Related Posts:
Is This The Way Out For States On Retiree Benefits?
Unions Pushing States Toward Broken Promises
High Taxes And Union Pensions Are Killing Rhode Island. Duh!

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  1. It is not a house that will collapse but one that IS collapsing... and it is happening fast. Let's look back of the last eight days.

    A "flash crash" in the equity markets triggered mainly by the fear of default on sovereign debt by the EU PIIG nations ended yesterday with everyone talking about whether the US itself is another Greece. In only eight days, a regional problem in Greece has left questioning the very viability of the global economy.

    Last Friday, those of us who watch and study the markets felt very certain that Monday would see a major rally once the EU nations (and most importantly the IMF aka the US) announced a major rescue plan for Greece. What they announced was more robust than expected. But it was announcement that the EU was dead once we realized that its robustness was due to the IMF contributions which itself signaled that the US was subsidizing the EU. Don't believe for a second those claims that the US taxpayer is not on the hook for these IMF bailouts.

    Today, we are are reflecting on Volker's statement about the likely death of the Euro and Bank of England Governor Melvyn King's statement about the US being another Greece. The latter was an astonishingly bold "skip to the chase" moment. The world's central banks are desperate.

    We haven't had time to make an orderly mental transition from the make-believe world of "animal spirits" and "green shoots" and "bigger debt solutions to catastrophically big debt problems" but we are now staring the very possible collapse of the world economy that we have known.

    These IS no viable global economy, at least not the one-world-without-borders fantasy our global elites have been bum-rushing the world into without public discussion. That dream is dead so what do we do? We start thinking as Americans again and do our best to salvage whatever we can of the culture that made us great and offered the world hope.

    We are in trouble no matter what we do. But if we are going escape the hell-hole gaping before us, we are going to have to make those sacrifices needed to shrink our government.

    We are the only country on earth that has everything it needs to survive on its own. And we have the best military the world has ever seen. We now need to have that national discussion about personal sacrifice. We are not going to save the world by being that world's last bank to bankrupt itself. We need to save ourselves if we are going to save the free world.

  2. BTW, CA also has four branches (maybe five if you consider the prison guards union) with the teachers unions being untouchable.

  3. Is Christie the wave of the future? Seems as though taxpayers are receptive. Lord I hope so. Any one who has run a household budget can see the fiscal disaster coming.

  4. Here's a thought: Cut loose any teachers who don't have a degree or practical experience in the subject they teach. That eliminates most ed-school folks right out of the box. Less social justice and more algebra. Problem solved.

  5. That fourth branch of government exists everywhere because elected officials allow the teacher's unions to hold the rest of us hostage. It's time to take back our schools as well as our country. Kick them all out. Good for Christie.

  6. I don't think the politicians are the hostages. The teachers unions are the kidnappers, our children are the hostages, and the politicians are the bagmen.

  7. Great post and great comments.

    I love how the Lib.s jumped all over Bush for his "arrogant policies" towards the "rest of the world", and ripped American exceptionalism, but somehow the Lib.s have no problem with the Dem.s printing all the money they want, borrowing trillions of dollars without any intention of ever paying it back or ending their spendthrift ways. And think about it really, if we weren't borrowing so much money from the Chinese, Japanese, etc., developing nations and emerging markets would have much more access to capital and wouldn't be crowded out...

    So, shouldn't the Lib.'s really be asking why some people around the world are living in huts without running water (i.e., ahem Obama's half-brother), while our fat-cat public school teachers, union members and government employees get to live high on the hog?

  8. Well, let's not forget:

    Government employee = Master.
    Everyone else = Tax Slave.

    You don't expect our overlords to suffer like the common man, do you?

    All they gotta do is ride this out for another few years until no one is paying attention again, and government emplyee retirements will get bumped doen to 50 years of age.,

  9. I've got a little list...they never will be missed

    but they will default on their mortgages and
    credit cards, and collect unemployment benefits.

    look both ways before crossing the street. :)

  10. Voters are childish and elect people who promise to say "Yes." Rational adults cannot be elected, since they would not hesitate to say "No" when appropriate.

  11. They want 26 Billion dollars to save jobs that schools are reporting will be lost in order to continue to receive federal funding. How do I know this? A director of a local charter school told me this is how they are justifying their federal grants. Every month they report to the federal government that their grant money saved all of their teacher's jobs and that the grant needs to continue so that the job's can continue to be saved. HMMM....