There has been lots of analysis and discussion about the recall election of Gov. Walker in Wisconsin and the meaning of the outcome. We’ve done a fair amount here and it’s all worthy reading. However, regardless of how the left or the right spin the results there is a real basic issue that sits at the core of this vote: pensions and other guaranteed benefits of public employees.
Let’s frame the issue first and then try to break it down.
During the “tech boom” of the 1990s, public-sector unions used collective bargaining to secure generous, guaranteed benefits that include health insurance and pension provisions. While the economy was expanding by 4.5%+ (GDP annual percentage growth rate) per year, tax revenues were expanding and the politicians at the time saw no issue with the payments. They didn’t have any long-term vision of the potential impact of such a decision, including what would happen when the country’s population demographic has a large segment retiring and making use of said benefits at a time when the economy slows and contracts (-3.5% GDP in 2009).
A Pew Center report examined the states’ financial statuses with regards to their pension and retiree health benefits. In one year (2008 to 2009), the gap of what states had set aside for public employees’ retirement benefits had grown by 26% to over $1 Trillion. They found that states had roughly 5% saved towards their obligations for retiree health benefits and pension plan funding declined from 84% funded to 78% funded in that same year.
So why does this matter for the Wisconsin vote? Look at the Volgi’s analysis below and then think of the question that faced voters: should we back someone who is trying to address the state’s financial situation by taking on the elephant-in-the-room issue of public-sector union benefits possibly, therefore, easing more funds from the state tax revenue for other public interest items such as education, parks, libraries and roads?
Conservatives fall pretty much into that camp and then the remaining voters become divided. The larger, looming question is does this portend the November presidential election. Clearly, the media has done a 180º turn but I’m not so sure voters won’t think that this is a major concern that the Obama Administration hasn’t addressed. As I’ve seen on liberal Facebook posts, the liberals will couch it that Obama is trying to add jobs and tackle the economy but a simple question or two debunks that:
1. Please describe the President’s last two federal budgets and how they were received by Congress.
2. What definitive measures has the President pushed forward to address the economy?
1. Both increased the federal spending levels and received zero votes in Congress.
2. None – in fact, budget economists scoring the Obama Affordable Health Care Act and the administration itself admitted that it increased the federal debt. Increased health care benefit costs – exactly one of two elephants facing the state economies and the other is the pensions which one could equate to Social Security. Another program that the president has done nothing to address.