Grassroot Perspective: Public Pensions’ Talent Drain, Clintonian Tax Confusion, and More

Scanning the week’s national news, views and clues with you and yours in mind

By Malia Hill

Quote of the Week:
“There can be no liberty unless there is economic liberty”— Margaret Thatcher

Each week, we’ll be monitoring the web to find the most interesting, challenging, or important items for those who are concerned about liberty, accountability, and big government.  Here are some of the highlights from the past week:

The Talent Cost of Pension Liability

Most of our warnings about the continuing pension crisis in Hawaii has focused on the straightforward economic consequences—the debt, the budget issues, the probability that this will all end in painful tax hikes and their accompanying ripple effect on the local economy.  It’s not a happy picture, so perhaps we can be excused for overlooking some of the unseen costs of the current state pension system, even if they are equally important to the future of this state.  And the key word is definitely “future.”  The problem of a youth “brain drain” is always a concern, more especially for places as geographically isolated as Hawaii.  And as this study from the Urban Institute explains, that is one of the unseen consequences of a pension system that provides little incentive for young talent (who will certainly be stuck with the bill for the current pension system, but see little hope of reaping the same benefits before fiscal reality forces the state to make cuts) to join the ranks of state employees.

In fact, one must wonder whether the current system is really good for attracting, keeping, or promoting talented workers at all.  The report goes on to say that, “It discriminates, albeit legally, against many younger and senior workers, discouraging them from either entering or continuing with public service. Meanwhile, many middle-aged workers, regardless of skill level, become locked into government employment because they would forfeit temporarily high pension benefits and, hence, total compensation by leaving before retirement age. “  So if the current pension system is not good for the economy, not good for the taxpayers, and doesn’t even provide an incentive for the best workers, who is it working for?  Aside from the politicians who can get a lot of mileage

Clintonian Tax Confusion

As we march ever closer to Obama’s Taxmageddon, liberal strategy on “selling” higher taxes to us regular folk has taken an interesting turn—attempting to claim that the prosperity of the Clinton years was due to his tax increase.  Counter-intuitive?  Yes.  Also wildly inaccurate.

As Charles Kadlec explains in Forbes, the boom years of the ‘90s where not due to Clinton’s tax increases, but rather by his backpedaling and reforms (many of which were passed by a Republican Congress and signed by an ever-savvy Clinton).  Little things like welfare reform, tax cuts, limited federal spending, and strong and stable dollar.  Of course, given Clinton’s knack for getting credit both where it’s due and where it’s not, he’s probably primarily concerned with making sure that his name comes before the phrase “90s boom years.”  The current President, however, should be less concerned with spin and more concerned with enacting policies that don’t link his name forever to the word “recession.”

Trains in Vain

What is it about rail?  I’m beginning to believe that mass transit trains are like catnip for politicians.  And the more expensive, more useless, and more prone to failure they are, the better.  If I stood on the floor of the Senate and proposed a high speed rail line linking my house to the 7-11 down the street, I think they would just start throwing cash at me.

As Tad DeHaven explains here, rail is an expensive proposition in itself, but adding the federal government to the equation has simply created a kind of money laundering scheme wherein taxpayers in one state get to help pay for useless, expensive projects in another.  It’s like we’re franchising poor planning via the taxpayer’s pocketbook.  Did you know that they have poured tens of millions of dollars into a “commuter” rail in Alaska that carried all of 412,000 passengers last year?  The project has been re-funded for two more years at $62 million.  If ridership stays about the same, then we, the people, will be paying $75.24 for every ride on a train in Alaska.  Even actual extortionists would blush at that scam—but it’s just par for the course in the federal rail racket.

Weighing the Risks

We live in uncertain times.  And I don’t just mean that rhetorically.  Economists at Stanford and the University of Chicago have noted that uncertainty about the economy is at a 30-year high.  This may seem like an obvious statement—considering how things have been going, how could one be anything other than uncertain?  But there are real costs and consequences to that feeling.  As John Goodman explains, that economic uncertainty—about the looming tax increase, the possible costs of Obamacare, probable regulations and other constraints on business—all have a real effect in slowing the recovery.  Let this be a lesson to everyone running for election this year—vague promises and more of the same aren’t going to cut it.  We need someone who has a real, definitive, and actionable plan to help stimulate the economy.  (Quick tip for those who think bigger government is the answer—I think we have effectively established that this is not the kind of thing that can be solved by generous applications of taxpayer dollars.)

The Only Industry That Needs a Real Production Decline

As anyone who has worked in the public sector knows, one of the most difficult things to handle is how to quantify “success.”  Private sector businesses have easily grasped and measured things like profit and expenses.  But how does one measure how successful an agricultural department or social services project has been?  Not that they don’t try to find quantifiable ways to evaluate progress, but in the end, there’s a certain level of subjectivity to the exercise.  Take Congress, for example.  A politician’s raison d’etre is to pass laws.  So we could measure effectiveness by how many laws they passed.  But as Paul Gregory points out, that’s not necessarily a good thing.  For one thing, there’s the fact that such an analysis overlooks the critical factor of whether they’re passing good laws or bad. The politician may feel the need to pass laws to justify his job, but we elected him only to protect or promote certain ideas.  For those who would like to see a return of thoughtfulness and restraint to our political leadership, government is one industry that could use a significant slowdown in “productivity.”

Views expressed in this column are intended to promote creative thought, educate, and, we hope, prompt comment. Accordingly, thoughts expressed do not necessarily reflect the official position of Grassroot Institute of Hawaii or the author.

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