Thursday, March 17, 2011



Alternate headline: "It's the math, stupid"

Much has been made of the situation in Wisconsin with respect to who was winning, who won, did Scott Walker win the battle but lose the war, etc., etc. It's all a moot point because do you know who, or more precisely, what is winning? Math. Math is winning.

Here's KT on the matter of math and unsustainable liabilities:

Assume for a second that Wisconsin Governor Walker is the worst politician in the history of Man. Assume that he's incapable of making his point with the voters. It doesn't matter. Eventually, he will be replaced by a competent politician and the math will still be there. The Democrats can at best only find a temporary escape from defeat because the force of the argument is numerical, not ideological.

And now, Peggy Noonan on math and unsustainable liabilities:

One estimate of New Jersey's bill for health and pension benefits for state workers over the next 30 years is an astounding $100 billion—money the state literally does not have and cannot get. The very force of the math has the heartening effect of squeezing ideology right out of the story. It doesn't matter if you're a liberal or a conservative, it's all about the numbers, and numbers are sobering things.

And check out this doo-doo that got dropped in California's increasingly cloudy punch bowl a couple of days ago:

California taxpayers just took a huge punch in the nose from the same actuaries who provided the cover for state politicians to spike public employee retirement benefits. The latest shocker comes from California State Controller John Chiang, who just unveiled a new actuarial report
that shows California faces another unfunded debt of $59.9 billion to pay for retiree health and dental benefits over the next 30 years.

Controller Chiang highlighted that the unfunded liability grew during the 2010 fiscal year by $8.1 billion; an amount equal to almost 25 percent of this year’s entire California kindergarten through high school education budget.

Actuaries have aided and abetted the explosion in under-funding of pension and healthcare liabilities for public employee pension plans over the last 10 years. With most public employee pension plans fully funded in 2000, a preposterous actuary study gave assurances that the technology stock market bubble of the 1990s would continue its high returns and never burst.

Unfortunately, both California and the nation have chief executives who don't do math or refuse to acknowledge math.

Back in November, California desired a state government dominated by Democrats. Fair enough. A Democrat (Jerry Brown) as governor and the assembly and state senate firmly in control of the Democrats. Too bad they seem completely unwilling to do some pretty basic math and thus lack the testicular fortitude to confront their cash cows in the public employee unions.

Our President has a once-in-a-generation opportunity to be the post-partisan president he campaigned on but has not come close to fulfilling by working with a Republican-controlled Congress on entitlement reform but he too doesn't want to do Math 101 and has instead cravenly abdicated any leadership role in the budget process.

Democrat, Republican, conservative, independant or liberal. It doesn't matter. At some point, someone has to do the math.

Smart, courageous leaders do math. All the others don't.

* Shameless yet somewhat relevant visual grab


SarahB said...

Great wrap-up...yet sad we are going to have to hit rock-bottom here before the situation changes...especially with Prop 14 in play.

steve said...

Actuaries assumed that pensions would continue to run at 8% ROR like they had in the past.


K T Cat said...

Thanks for the link!

In the end, the Democrats will have no choice but to make the cuts. They might raise taxes here or there, but those won't be enough and the cuts will have to be made. The question remaining is: which tribe of publicly-funded cannibals will come out on top?

Unknown said...

Math only works when the bottom of the well is dry. We are screaming because we can see it close, but they still see a few buckets left.