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Townhall...
Political Statistics
By Thomas Sowell
When someone gives you a check and the bank informs you that there are
insufficient funds, who do you get mad at? In your own life, you get
mad at the guy who gave you a check that bounced, not at the bank. But,
in politics, you get mad at whoever tells you that there is no money.
One of the secrets of the growth of the welfare state is that
politicians get a lot of mileage out of making promises, without
setting aside enough money to fulfill those promises.
When Congress votes for all sorts of benefits, without voting for
enough taxes to pay for them, they get the support of those who have
been promised the benefits, without getting grief from the taxpayers.
It’s strictly win-win as far as the welfare-state politicians are
concerned. But it is strictly lose-lose, big-time, for the country, as
deficits skyrocket.
Anyone who says that we don’t have the money to pay what was promised
is accused of trying to destroy Social Security, Medicare or
Obamacare-- or whatever other unfunded promises have been made. It is
like blaming the bank for saying that the check bounced.
It is the same story at the state level as in Washington. The lavish
pensions promised to members of public sector unions cannot continue to
be paid because the money is just not there. But who are the unions mad
at? Those who say that the money is not there.
How far short are the states? It varies from one state to another. It
also varies with how large a rate of return the state gets on its
investments with the inadequate amount of money that has been set aside
to cover its promised pensions.
A front page story on the March 28th issue of Investor’s Business Daily
showed plainly, with bar graphs, how big Florida’s shortfall is under
various rates of return on that state’s investments. Florida’s own
estimate of its pension fund’s shortfall is based on assuming that they
will receive a rate of return of 7.75 percent. But what if it turns out
that they don’t get that high a return?
A 6 percent rate of return would more than triple the size of Florida’s
unfunded liability for its employees’ pension. The actual rate of
return that Florida has received over the past decade has been only 2.6
percent. In other words, by simply assuming a far higher future rate of
return on their investments than they have received in the past,
Florida politicians can deceive the public as to how deep a hole the
state’s finances are in.
Political games like this are not confined to Florida. State budgets
and federal budgets are not records of facts. They are projections
based on assumptions. Just by manipulating a few assumptions,
politicians can create a scenario that bears no resemblance to reality.
The “savings” to be made by instituting Obamacare is a product of this
kind of manipulation of assumptions. Even when the people who turn out
the budget projections do an honest job, they are working with the
assumptions given to them by the politicians.
The fact that the end results carry the imprimatur of the Congressional
Budget Office-- or of some comparable state agency or reputable private
accounting firm-- means absolutely nothing.
When Florida arbitrarily assumes that it is going to get a future rate
of return on its pension fund investment that is roughly three times
what its past returns have been, that is the same nonsense as when the
feds assume that Congress will cut half a billion dollars out of
Medicare to finance ObamaCare.
We would probably be better off if there were no Congressional Budget
Office to lend its credibility to data based on hopelessly unrealistic
assumptions fed to them by politicians.
One of the reasons why a federal “balanced budget” amendment is
unlikely to do what many of its advocates claim is that a budget is
just a plan for the future. It does not have to bear any resemblance to
the realities of either the past or the future.
We do not need reassurances that do not reassure, whether these
reassurances are in numbers or in words. No small part of the reason
for the economic collapse we have been through is that federally
designated rating agencies reassured investors that many
mortgage-backed securities were safe, when they were not.
Not only investors, but the whole economy, would have been better off
without these reassurances. “Caveat emptor” would be better advice for
both investors and voters.
Read it at Townhall
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