Meredith Whitney’s Missing Links

“States have papered over the disconnect between tax revenues and spending by issuing unprecedented amounts of debt – some secured by taxes, some by specific revenue (like highway tolls) – and by looting the pensions of their current and future retired state employees.” Meredith Whitney Fate of the States page 65

As concisely as this treatise lays out why states (with California, Illinois, and New Jersey as poster-children) are failing there is something missing from Ms. Whitney’s analysis that I may be in a unique position to add.

Pension and OPEB obligations

Whitney: “Public employees have a reasonable response: If taxpayers don’t like the terms of their union contracts, then they shouldn’t have elected the mayors, school boards, and city council members who approved them.” page 93

Bury: “Taxpayers have no choice in that anyone seeking an office that requires campaigning will need to recompense ‘supporters’ lucratively though in a manner that does not appear to be so, which the actuarial profession has ably provided through their ludicrously understated valuations of pension and OPEB liabilities.”

Building Debt

Whitney: “The school district in Newton, Massachusetts, for example, spent $197 million on a new, bond-financed high school – a veritable superschool boasting an Olympic-size pool, indoor track, climbing wall, dance studio, arts wing, and electronic music center.  Construction costs ran $50 million over budget, and when the new high school finally opened in 2010, the district was suddenly faced with a $6 million budget gap – which it closed by laying off teachers, increasing class size (one Advanced Placement math class had forty-six students), and eliminating classes in Latin and Russian.  Of course, Newton wasn’t alone in tits foolish excess: Many states and municipalities borrowed billions, willfully deluding themselves that the money would materialize from ever-increasing property-tax revenues.” page 58

Bury: “Build anything and you need contractors, lawyers, engineers, and architects.  Run for office and you need money from contractors, lawyers, engineers, and architects.  Even if you don’t need it, if you want that money, you must build it.”

I understand that Ms. Whitney is not a pension actuary nor does she regularly attend Union County freeholder meetings so these links might not be as obvious but they do exist.  Compromised decision-makers willfully ignorant of the havoc bad advice from within their cocoons wreaks upon the general population will continue to set policy until such time as mechanisms exist that expose them to the ridicule and/or retribution their actions deserve.  We are not there yet.

7 responses to this post.

  1. Posted by Javagold on June 7, 2013 at 8:22 pm

    We must render Government obsolete.


  2. Posted by bruce paterson on June 8, 2013 at 5:38 pm

    “Public employees have a reasonable response: If taxpayers don’t like the terms of their union contracts, then they shouldn’t have elected the mayors, school boards, and city council members who approved them.” page 93

    well, if the quote is true from meredith, then that is good news for the 60-70% of the people that do not take prt in voting since they are off the hood from electing the failed officials.. No so good for the rest of us.


    • Posted by Anonymous on June 8, 2013 at 6:21 pm

      The problem is that even one of highest integrity quickly becomes a part of the machine if they want to survive or move up in politics. They also become a part if the overly compensated, non-accountable, non-qualified individuals who have created the mess to begin with. Once all of their perks start they are loathe to give up sucking at the teat of others so they go along and are amply compensated for their poor decisions. Those of us working at private sector jobs or businesses don’t have the time or energy to run for office, school board or town council. That’s why term limits should be mandated so that no one gets to comfortable.


      • Posted by bpaterson on June 12, 2013 at 6:16 pm

        a secondary problem is: those in the public sector rarely come from the private, but start and end working in the public sector. Therefore, they do not understand the intricacies and hardships actually faced in the private sector, and having no comparison come to a conclusion that theirs is a hard job and the largesse is well deserved. They then wonder just what are we complaining about. Can anyone share if any private sector worker reading this work 7 or 7 1/2 hour days? Or can anyone share that public sector workers burn the midnight oil frequently without remuneration?


  3. Posted by Jim on June 10, 2013 at 12:01 pm

    The only solution is collapse.


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