Broadcast locally on Philadelphia’s 990 AM WNTP this Wednesday, Wall Street Journal writer Allysia Finley made her debut on Bill Bennett’s Morning in America to comment on budget pressures confronting deep blue states across the country.
Bennett and Finley began by discussing her recent article on the response of a local police union to the efforts of City Manager Bob Deis to balance the municipal budget in Stockton, California.
“…They’re using these kind of intimidation tactics to basically protect their retirement benefits and make sure that these city managers or city council members don’t modify their benefits in Stockton which Californians and some others may recall declared bankruptcy over the summer.” Finley said.
She then recounted the local police union’s purchase of a house next door to the city manager and its subsequent decision to launch a rackety renovation project.
“The city manager’s wife complained about the noise. I guess [they] had even damaged some of…the city manager's trees when they had done the renovation. Of course the union claimed…the house was an ‘investment.’”
Finley went on to note the ultimate outcome was the city manager assenting to not touch the pensions of current workers and the police union agreeing to sell the house they had bought.
Bennett then turned the discussion to California more broadly, asking, “…Is there hope for California, can they get the pension system under control? Can [Governor] Jerry Brown get the budget under control?”
“I think Jerry Brown actually may want to do some reforms along the margins but I don’t think he’ll be able to given how strong the public employee unions are and…the stranglehold they have over the legislature. Now that you have a two-thirds [Democrat majority] in California there’s really nothing stopping them.” she answered.
“First of all they’ve got a lot of structural debt that they’re carrying over from previous years’ budgets that they’ve used various gimmicks to close and eliminate their deficits. And then they’ve just got these – some estimates put the unfunded liabilities for retiree health benefits and pensions around $400 billion. And then that’s not including local pension and retiree health benefit liabilities. So it’s going to be tough for them in a couple years.” Finley continued.
She went on to explain that California was not in straits as dire as Illinois since The Golden State still maintained concentrations of wealth in places like Silicon Valley. However, she speculated debt would remain a drag on California’s economy and the resultant tax burden would produce a two-tiered rich/poor society as middle and upper-middle class families relocate to other states.
Confirmation fights & blue state bailouts
This topic dovetails into a conversation on December 10th between Bill Bennett and The Claremont Institute’s Steve Hayward about a curious component of last month's fiscal cliff negotiations.
And it addresses an issue which Senate Republicans might raise as a major point of contention as President Obama presses to replace current Treasury Secretary Tim Geithner with White House Chief of Staff Jack Lew.
Perhaps the most interesting facet of the interview was conjecture from Hayward about why Obama’s initial fiscal cliff proposal presented by Treasury Secretary Tim Geithner on December 2nd called for “at least $50 billion” of increased stimulus spending.
“It’s too small to be a real economic stimulus. I’m convinced it is a cloak for a state bailout for California, Illinois, New York – it’s a blue state bailout is what it is…” Hayward contended.
When queried on why Hayward believed the money would be used in this fashion he replied, “It’s just my suspicion. I mean, it’s not enough to be a genuine economic jolt even in pure Keynesian terms if you believe in that theory. So what’s it there for? Well, it’s very non-specific. It’s just a general proposal from Obama right now. I’m sure they’ll call it ‘investment’ – ‘bridges and highways’ or something like that. But my suspicion is this has to be a bailout slush fund.”
“They can’t let the blue state model fail.” Hayward concluded.
“Which it’s doing.” Bennett added.
Kudlow and the cabinet
Upcoming cabinet confirmation hearings will present Senate Republicans with a forum they have lacked since the suspension of efforts to pass budgets through the upper chamber on a regular basis. And perhaps the most insistent voice on conservative talk radio urging resistance to Lew’s nomination has been Larry Kudlow.
In fact, Kudlow authored a piece for National Review criticizing Lew’s unwillingness to reform entitlements and cut spending while referring to the Treasury Department nominee as a left-wing “spear-carrier” – a charge he reiterated during his radio program broadcast locally on 770 AM WABC this Saturday.
Kudlow directed his advice for Republicans to House Speaker John Boehner. But, the Obama administration appears to be attempting to arrange upcoming cabinet fights (and the clash over the debt ceiling) strategically. And, Senate Republicans would do well to imitate this tact with respect to White House nominees – confronting them in ways that anticipates and attempts to frame policy clashes on the horizon.
Hayward may have been correct about the Obama administration’s proposed “stimulus” spending during fiscal cliff negotiations; it could well have been the opening stages of laying the foundation for finding a pretext to launch a blue state bailout in 2013.
Yet, even if this was not the president’s intent the fiscal woes of these states aren’t going anywhere.
And if the Obama administration is looking to provoke a series of confirmation battles as part of a larger effort to weaken the GOP, the Republicans would do well to fight with an eye turned towards the future rather than Hamlet’s “undiscovered country.”
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