22 January 2011

Of Bankruptcy and the States

OK, go grab your morning coffee or evening beer, make yourself comfortable and read this.  All the way through.  I'll wait.

OK.  Deep Breath, this is going to be challenging to connect the dots, the issue is very complex.   Basically what we have in this article is an admission the states will not be able to fulfill their pension liabilities to the public sector employees.  Why?  Well, as NJ Governor Chris Christie can easily explain “the contracts have been, and continue to be, unsustainable”.    The pension and benefits provided to Local, State, and Federal employees are unsustainably generous.  Period.  The contracts over the past several decades have consistently been written with increasing power of Public Sector Unions.  The Unions elect the politicians, the politicians support the contracts, the contracts are supported by the fiscal tax policies of the politicians.     The unions have gained exponential power and promises have been made (within those contracts) that cannot be fulfilled.


What has been thrown out is an idea is for States to be given the right of bankruptcy.  Thereby nullifying the pension contracts, and wiping out the obligation, allowing the state to begin again with more reasonable contract obligations.  More reasonable means much lower.  Obviously all those current, and retired, public sector workers would be subject to serious reductions, or elimination, in retirement pay and benefits.


The unions are not going to let Obama, or his administration allow that to happen.  They own him.  He owes them.   Not just Obama, but, Pelosi, Reid, and virtually every Democrat in office is in debt to the Unions for their election support.  Without union support the vast majority of Democrats would not be in office.   Hence, you see Obama making moves, and drawing up plans, with union bosses.    This move to begin discussion on State’s ability to go bankrupt is Obama getting out ahead of the issue.   Perhaps to even structure, assemble, and organize the process by which unions can be protected against a state’s ability to go insolvent.  Obama will protect the unions by insuring a bankruptcy mechanism will never allow a State to renegotiate, or disolve, its obligation to the union.   In order to insure this protection he will begin by structuring a system to protect the unions interest.  This “system” would inevitably be created to undermine, and nullify, the ability of a state to remove the toxic tenticles of union contractual obligations.  
RTWT.  As many times as you have to for it to sink in.  And keep an eagle eye on this whole process--it stinks on many levels.

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