Commentary / Coronavirus / Economic Developments


David Dayen of The American Prospect is not very much impressed by Nancy Pelosi’s latest dog’s-breakfast spending bill:

The bill is modeled after all the pre-pandemic omnibus legislation that bundled together dozens of ideas (remember H.R.1?), sent over to Mitch McConnell’s legislative graveyard and immediately forgotten. It’s not a particularly good public relations strategy because there’s nothing to latch onto, just a jumble of ideas. And it hasn’t worked as a negotiating strategy either. It reflects the real incoherence of the Democratic position; they don’t have any organizing principle about how to fight the economic crisis other than to throw a bunch of words on a page.

I hope Mr. Dayen will forgive my saying so, but he isn’t wrong about that.

The so-called HEROES Act — and, please, please, please, can we finally stop with the sophomoric acronyms? — is another wish list from the House Democrats. It contains the usual Democratic wish-list items, one of the more expensive of which is a proposal to shunt vast streams of federal revenue into badly managed states and cities in order to buy them out of their self-inflicted financial troubles. More than $1 trillion of the $3 trillion package would be in the form of aid to state and local governments, with almost all of that money — $915 billion of it — in unrestricted cash. This will be a great boon to states and cities (largely but not exclusively Democratic) that have hamstrung themselves financially by promising government workers fat pensions and retirement benefits without actually spending the money necessary to fund those programs. States and cities generally cannot go into debt to finance regular operating expenses such as salaries (they do borrow money for infrastructure projects and the like), but they can effectively borrow from their pension systems by promising benefits in the future but using the cash today for other purposes.

That creates real problems. But those problems have almost nothing to do with the coronavirus epidemic and the subsequent economic shutdown. The cities and states have taken on some extra expenses during the public-health emergency, but the biggest effect on their finances will come from lost revenue. There is a case to me made (a reasonable one if not a completely persuasive one) for helping cities and states backfill some of that lost revenue in these extraordinary times, though leaders in states with more responsibly managed finances and well-maintained rainy-day funds object to subsidizing their spendthrift neighbors. That’s a question of “fairness,” which, in politics, means . . . whatever anybody wants it to mean.

The basic problem is financial, not ethical. Many states already are spending more on their retirees than they are on current priorities such as higher education. So out of whack are the state pension systems that the Pew Trusts estimated their 2018 liabilities at more than $1.5 trillion. That doesn’t mean that $1.5 trillion would solve the states’ pension problems — it means that $1.5 trillion would get them to the point where their pension systems are broke rather than laboring under $1.5 trillion in unfunded liabilities. Even with those liabilities gone, the states would be required to continue to make ongoing pension contributions that are heavy today and only getting heavier. The question is: How much do you want to shortchange today’s first-graders and college freshmen in the service of tomorrow’s retired DMV clerks? Round your answer to the nearest trillion dollars.

Uncle Stupid could put off the day of reckoning, but the reckoning is coming. The states are going to have to renegotiate their pension and retirement-benefit plans — even in states that have purported statutory or constitutional guarantees that pensions cannot be reduced. The money isn’t there, it isn’t going to be there, and stamping your feet isn’t going to exnihilate that money into existence.

Again, very little to do with the virus.

But that’s true of most of the so-called HEROES Act. For example, the bill would put federal student-loan repayments (and interest accrual) on pause and make it easier for certain government employees to get their student loans forgiven in exchange for those workers having engaged in the selfless public service of receiving inflated compensation in accountability-free jobs from which they effectively cannot be fired. (How much porn can a government worker watch while on the clock without getting fired? A lot.) The Democrats were pushing for student-loan forgiveness before the coronavirus. They’ll be pushing for it after the coronavirus. The proposal is evergreen.

Student-loan debt is a lot like those unfunded pension liabilities. For one thing, it comes to around the same figure, about $1.5 trillion. For another, it is the result of political money-laundering. Student loans are a way for politicians to spend money on a favored constituency without having to collect taxes, vote on appropriations, or balance a budget. That constituency isn’t young people who want to learn. (Ha.) It is the burgeoning administrative ranks of the U.S. higher-education system, an archipelago of full-employment programs for mediocrities and hacks who can be parked on college payrolls and trusted to vote the right way. Rather than spend money on education and account for the spending, government offers subsidized loans to students, which lets politicians pretend that their spending is an asset, which is how loans show up on the books. It’s nonsense, and it’s obvious nonsense, but it’s how we insist on doing things.

David Dayen of The American Prospect is too kind in calling this a “jumble of ideas.” It is a jumble, but these aren’t ideas. It’s a jumble of ordinary, naked political opportunism, with Pelosi et al. looking for a good opportunity to maximize the transfer of wealth to their constituents and do their allies in Springfield and Sacramento a solid, along with the usual assortment of public-sector union bosses and other special-interest groups.

Find a cure for that virus, and you’ll be on to something.

Reprinted with Permission from - National Review by - Kevin D. Williamson

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