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BAILOUTS AND PUBLIC PENSIONS |
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Written by Sarah Palin
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Tuesday, 07 December 2010 |
Do insolvent states actually believe other states should bail them out?
In June 2009, I was invited to introduce Michael Reagan at an event in Anchorage.
In my remarks as Governor of Alaska, I warned against President Obama's
debt-ridden stimulus bill and its effect on all our state budgets.
I believed that the bill's benefits would be limited because government
would grow exponentially, and I warned that the package was equivalent to a federal bribe with fat strings attached
that created new unfunded mandates for state governments. At the time, most
state legislatures, including Alaska's,
chose to ignore that warning.
I predicted that states like California
would soon be coming to the federal government asking for a bailout.
After I gave that speech, I remember the mocking I received for
predicting California and other
big government states would continue to spend recklessly and yet expect others
to bail them out. The naysayers in the media went a bit wild in their condemnation
of my sounding that alarm.
Well, fast forward to today. We now know that the nearly trillion dollar
stimulus package didn't lead to the job growth promised by President Obama;
instead it left already struggling state governments even deeper in debt because
now they are on the hook to continue programs and projects that were started by
these "free" federal funds.
So now, as predicted, folks in Washington
and in over-spending state capitols are whispering
the dreaded "b-word": bailouts - for individual states!
American taxpayers should not be
expected to bail out wasteful state governments. Fiscally liberal states
spent years running away from the hard decisions that could have put their
finances on a more solid footing. Now they expect taxpayers from other states
to bail them out, which will allow them to postpone the tough decisions they
should have made ages ago and continue spending like there's no tomorrow.
Most Americans would say these states
have made their bed and now they've got to lie in it. They accepted federal
dollars and did not voice opposition to the unfunded federal mandates, and they
even re-elected politicians who foisted debt-ridden programs on them that could
never be sustained.
Instead of coming to D.C. cap in hand asking for more "free" money, they
should follow the example of their more prudent sister states and take the
necessary steps to sort out their own finances. They must start by reforming their insolvent pension systems.
Many states have multi-billion dollar unfunded pension liability problems
that they have refused to address for many years. They've deferred their
spending problems, assuming the problem deferred would be an issue avoided;
instead, it's resulted in a crisis invited.
These states still won't reform their costly defined benefit systems for
fear of offending the powerful public sector unions. Sooner or later, their
pension systems will collapse unless they do what states like Alaska did, which
is to swap unsustainable defined
benefits, which are more like glorified Ponzi schemes, for a more prudent
defined contributions system.
My home state made the switch from defined benefits to a defined
contribution system, and as governor, I introduced a number of measures to
build on that successful transition, while also addressing the issue of the
remaining funding shortfall by prioritizing budgets to wrap our financial arms
around this too-long ignored debt problem.
When my state ran a surplus because we incentivized businesses, I didn't
spend it on fun and glamorous pet projects for lawmakers - though that would
have made me quite popular with the earmark crowd.
In fact, I vetoed more excessive spending than any governor in our state's
history, and I used the state's surplus to bring our financial house in order
by paying down our unfunded pension plans that some other governors wanted to
ignore.
This fiscal prudence didn't make me popular with the state legislature. In
addition to vetoing hundreds of millions of dollars in wasteful spending, I put
billions of dollars into savings accounts for future rainy days, much like
most American families do in responsibly planning for the future. I also enacted a hiring freeze and brought
the education budget under control through a commitment to forward-funding.
I returned much of the surplus back to the people (it was their money to start with!) through tax relief and energy
rebates. I had proven as the mayor of the fastest growing city in the state
that tax cuts incentivize business growth, and though the state legislature
overrode some of my veto cuts and thwarted an additional tax relief request of
mine, the public was supportive of efforts to rein in its government.
It's one thing to veto spending and reduce the size of government when your
state is broke. I did it when my state was flush with revenue from a surplus -
though I had to fight politicians who wanted to spend like there was no
tomorrow.
It's not easy to tell people no and make them act fiscally responsible and
cut spending when the money is rolling in and your state is only 50 years shy
of being a territory and everyone is yelling at you to spend while the money is
there to build.
My point is, if I could fight this fight in Alaska
at a time of surplus, then other governors can and should be able to do the
same at a time when their states are facing bankruptcy and postponing this
fight is no longer an option.
So, let's not continue to reward irresponsible political behavior. Instead
of handing out more federal dollars, let's give the governors of these
debt-ridden states some free advice.
Shake off the pressure from public
sector unions to cave on this issue. Put up with the full page newspaper
attack ads, the hate-filled rhetoric, and the other union strong arm tactics
that I, too, had to put up with while fighting those who don't believe a state
needs to live within its means.
Stand up to the special interests that
are bankrupting your states. You may not be elected Miss Congeniality for
fighting to get your fiscal houses in order; but in the long run, the people
who hired you to do the right thing will appreciate your prudence and fiscal
conservatism.
As Michael Reagan's dad once said, "We hear much of special interest groups.
Well, our concern must be for a special interest group that has been too long
neglected.... ‘We the people'..."
The people deserve leaders who will make the tough decisions to secure the
future prosperity of their states.
Sarah Palin
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