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    Illinois’ Pensions Catastrophe Is An American Dilemma

    04/09/2012

    Democracy and Power 102: Voters are rationally ignorant.

    Tragically, the vast majority of the voters are rationally ignorant of most government actions.  The public is ignorant of bills, legislation, regulations and taxes that will ultimately impact their lives. 

    The general public is working hard making a living, raising a family and improving their community. The individual voter does not have the time to know all the transactions of government.  It is impossible to stay abreast of all the government actions. 

    Illinois’ Pensions Catastrophe Is An American Dilemma

    The State of Illinois has promised pensions to its employees – a contract.  Illinois has not saved or secured $83 billion to honor these contracts. Therefore, the State of Illinois must extract billions of dollars from present and future taxpayers.  Worse, the Illinois Policy Institute estimates the State of Illinois - the taxpayers - have an additional $54 billion of unfunded health obligations over 30 years.

    How could Illinois pols do this to taxpayers?  Was the question asked by the Chicago Tribune.  

    Answer: 

    Most Americans work hard, raise their children, and participate in their community.  Also, they trust government to be honorable and just.  With the exception of voting and generally knowing the hot political issue of the day, hard working Americans are rationally ignorant of legislation and the political process.  This is rational, they do not have the time to follow and comprehend everything government is doing – for example legislation, regulations and taxes.

    Just the opposite of being rationally ignorant, there are people who come together for the sole purpose of using the power of government to extract special favors.  These are predatory special-interest groups. Big business, big unions, AARP, education, and hundreds more exert enormous time and money to manipulate politicians and the process for their advantage.

    In the past, government employees of Illinois formed a union and began paying dues to become politically powerful.  Next, full time lobbyists hired by the unions became acquainted with every legislator, and gave every friendly legislator campaign donations.  Additionally, the lobbyists stayed in constant contact with legislators and participated in all aspects of the political process. 

    Hence, while the hard working American was raising their family, the government unions were manipulating the enormous power of government to their advantage.  Additionally, the union lobbyists and the politicians were very savvy political operatives.  They knew they could not extract too much too fast from the taxpayers.  They knew a sharp increase in tax rates would have awaken the masses.  So, union lobbyists and the politicians made a deal.  The perfect deception was a contract for “gold plated” pensions and medical benefits for government employees.  This pleased the special interest predators, who would continue to finance the politicians’ campaigns.  Better yet, the hard working American was not taxed – at least not immediately. 

    Because of past manipulations and deceits Illinois has a fiscal crisis.  Last year, in a lame duck session, the legislature increased the income tax by 66 percent.  Today, Illinois has a combination of two solutions – increase tax revenues or default on their promises to government retirees.

    Recently, while only referring to Illinois health insurance fiasco, Governor Pat Quinn acknowledged the immoral past actions of legislators, while avoiding implicating the powerful unions:

    "Previous legislators and previous governors even awarded taxpayer funded health insurance benefits to themselves and 82,000 retirees, where 90 percent of them pay nothing on their insurance premiums. This lack of fiscal accountability has cost us dearly today."

    Most of all, popularly elected governments have this dilemma, e.g., Greece, Illinois, America, and California.  Structural changes to governance must occur.  Otherwise, democracies will be in perpetual financial crisis.  Structural changes should include making the offending politicians responsible.  For example, should former Illinois State Senator Obama be responsible for Illinois’ present crisis?  Most likely.  Many Senators, Representatives and Governors should be held responsible.  How?  Have a law akin to the fiduciary duty of corporate officers to shareholders. 

    America must urgently seek to correct this structural problem. 

    One solution can be immediately implemented.  We can force government to stop funding all pensions and medical benefits – at least for new hires.  Additionally, enact universal savings programs for government and private-sector workers to own and control their retirement and medical plans.  This will stop the predatory unions and complicit politicians.   More important, personal retirement and medical accounts will free all Americans from government manipulation and control.