Media

There’s no way for local governments to avoid default on their bonds. Most states are in the same boat. In some cases, government retirement systems are taking up almost all of the revenue, and government workers have rigged the system to ensure plush sinecures:

DeMaio reports that 70 percent of San Diego's payroll budget goes to benefits for retirees, which leaves little for current employees. In the private sector, any company with this imbalance would find itself answering to a bankruptcy judge. But in the public sector, which operates mainly for the benefit of the people in the system, services get cut so the employees and retirees don't have to scale back their lifestyles. The report found that some San Diego pensioners are receiving four public pensions at once, many are receiving more in retirement than they earned while working, and some politicians are receiving retirement payments at age 35.

Read the Report Here.

Used to be, government work didn’t pay all that well, but it was secure. Now, it’s secure AND it pays better than the private sector ever did or could possibly hope to.

Thing is, government cannot create any jobs. Every dollar it takes in is necessarily reduced by overhead and administrative costs (the costs of filtering the dollars through government employees), and that assumes it puts any of that money back into the private sector at all. There are no factories owned by cities, counties, or states. They cannot make anything.

All government can do in the marketplace is regulate or create/maintain public improvements. Those may add some value, but certainly not above a 1:1 ratio at best, and that does not account for the overhead costs of employing government workers. Nor does it account for the absurd pensions one sees in places like San Diego (not an isolated incident, I’m certain).

Our economy was so phenomenally productive that it caused a glut of tax dollars and a corresponding bloat of public sector employment/benefits packages to in essence hide the fact that the public sector didn’t need so much tax revenue. Huge public employee voting blocs ensured that they were given prime benefits. These benefits were structured to use the most public dollars, while the service side of whatever government agency it was remained at a bare minimum level of functioning. Now, with an economic downturn, the bare minimum of public services again stands first in line for cuts, while the public employees ensure that their unrealistic benefits packages remain untouched.

Problem is, municipalities and states cannot print money, and no one will buy their bonds. It’s systemically unsustainable. Time to buy some credit default swaps on municipal bonds, because Chapter 9, here we come.

Read Article Here.