Governments’ Bad Investments
Unions and local governments simply have to be held to account for their bad investments.
By Iain Murray at American Spectator
EXCERPTS:
This may be the final proof that the ongoing financial crisis is not a crisis of free markets, as populist politicians and media have characterized it. The municipal debt crisis is a political crisis, one created by politicians making bad decisions with taxpayer money in order to funnel it to their cronies and supporters.
For union-friendly politicians, this was a sweet deal. They could reward their labor supporters with generous benefits, while passing the buck of raising taxes to pay for those benefits on to their successors years into the future. Now those bills are coming due.
Sen. Robert Casey (D., Pa.) and Rep. Earl Pomeroy (D., N.D.) are sponsoring legislation to allow the Pension Benefit Guaranty Corporation (PBGC) to engineer a taxpayer-funded bailout of the Teamsters’ pension fund. If enacted, the Casey-Pomeroy bill could set a precedent to have federal taxpayers bail out the states.
That would be a disaster. It will turn the PBGC into a pension fund variant of Fannie Mae and Freddie Mac, the two government entities most to blame for the original financial crisis.
However, Congress has made it difficult for local governments to go into bankruptcy. If America is to break the vicious cycle of bad public investment, that needs to change.
The new Congress will need to recognize that streamlined bankruptcy procedures for states and municipalities are badly needed, and to pass such procedures within its first 100 days.
FULL STORY
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