Saturday, April 23, 2011

Shock Doctrine in Your State Yet?

Because I am on Maine State Treasurer Bruce Poliquin's email list, I received this cheerful message about how the ship is going down and it's all the fault of the pension "debt" burdening Maine. And, by the way, Happy Easter.

I was expecting something of the sort since reading that the U.S. had received a negative rating from Standard & Poor on treasury bonds. Shock doctrine, as you may recall, is Naomi Klein's thesis that the Forces of Greed will jump on a crisis and use the opportunity to line their own pockets at the expense of the people because it's an "emergency."

The real emergency in our state is the failure to tax the rich, to make corporations pay their fair share of taxes, plus shortfalls in federal funds due to the steady drain of Congress spending and borrowing to finance outrageously expensive wars abroad.

The lies being promoted here by Poliquin are to be expected from someone who forgot to change out of his Wall St. dress shoes to attend a public forum at the Skowhegan Community Center when he was running in the Republican primary for governor last year. I am sharing them with you because these same lies are parroted constantly by Fox "News" and other right wing media outlets, and your neighbors are listening. Arm yourself with the facts and look for opportunities to have a conversation about the REAL cause of our fiscal woes.

Water carriers for the Forces of Greed are always going to make misleading arguments. Glaring in this message: that the LePage budget would help solvency of the state's public employee pension funds. In fact, the raids on state employee and educator pension funds are intended to reduce the state's contribution, not shore up the funds. Also that "everyone" will have to suffer to bring budgets into the black. Everyone except Bank of America, Exxon, and the wealthy of Maine who will get to keep an additional $1 million before having to pay any estate tax if LePage and Poliquin's budget passes.

Also, Poliquin is being disingenuous when he claims Maine can't solve the problem like Washington does by printing more money (true about the fed, see a hilarious grim video explaining it here). Maine passed a law requiring the pension fund to be in a certain state of solvency by a certain deadline, and it can pass a law to remove the artificial deadline, too. It can IF it chooses to take a path toward true fiscal health, rather than scaring people into stampeding to the right while slashing and cutting essential programs for the neediest among us along the way.

Here's the email from Poliquin. See if you can spot the conflict of interest as reader Jon Olsen did:
On Monday, global investors delivered what Washington politicians have been unable, or unwilling, to deliver -- seriousness about our surging national debt.

Standard & Poor's, the prominent rating agency, surprised the financial world with its new credit assessment of U.S. Treasury bonds: the previous AAA "stable outlook" was dropped to a "negative outlook."  A negative outlook is not a credit downgrade, but it can lead to one if our federal government's financial situation doesn't improve.  A downgrade would likely cost taxpayers higher interest payments on Treasury bonds sold to raise money to fund government spending.  Investors typically demand a higher interest rate return for buying a lower-credit, higher-risk bond.

There's no free lunch. There's always a day of fiscal reckoning.

Washington has been spending taxpayer dollars at breakneck speed.  Our highly-regulated, highly-taxed domestic economy (vs. other industrialized countries) cannot generate the tax revenues needed to pay for this spending binge.  So, to pay the bills, Washington has racked up a $14 trillion tab -- $14 TRILLION!

To make matters worse, the feds have no plan to pay off the debt. They recklessly print more dollars to pay the interest and principal on the borrowed money (the U.S. Treasury bonds).  This rapid expansion of the supply of money cheapens the value of the dollar, and ultimately leads to inflation - the cruelest tax paid by everyone to purchase everyday needs.

Standard & Poor's critical eye toward the creditworthiness of the federal government pleads for fiscal sanity.  Representative Paul Ryan (R-Wisconsin), who heads the Congressional Budget Committee, has offered a credible path to retire roughly $6 trillion of debt over the next decade.  Because the fiscal can has been kicked down the street for so long, the solution will be very painful.  Everyone will suffer for the past fiscal mismanagement: retirees depending on Social Security; seniors counting on Medicare; the most disadvantaged needing Medicaid; students hoping for a college loan; businesses looking to grow and hire more workers.  However, as we've seen for many years, not addressing our stifling national debt today means confronting an even bigger problem tomorrow.

What can Maine learn from Washington's mistakes?

First, our state government cannot live beyond its means without consequence.  Second, telling the unvarnished truth about our serious fiscal problems helps to solve them.  And, third, not looking at the next election keeps our priorities straight.

The Maine Legislature is now debating Governor LePage's proposed biennial budget.  It includes fair and reasonable reforms to address the $4.3 billion pension debt to pay the retirement benefits for teachers and state employees.  If adopted, these changes will reduce the debt and spiking annual payments (an updated $409 million this next fiscal year) by more than 50%.  This, in turn, will allow state government to live within its means and adequately fund core services like public education and road repair.

There's no silver bullet to save us from the $4.3 billion pension debt.  Unlike Washington, by law Maine must balance its state budget each year.  And, Augusta can't print money for those tempted to do so.

It's now in the hands of the Legislature.

The Legislature will likely vote on the Governor's proposed budget, with or without adjustments, by early June.  Let's hope everyone in state government has the good judgment and discipline to point this ship in a more fiscally prudent direction.  Maine is a small state.  It doesn't take much to change course.

Now, close your eyes and imagine a state government with its long-term fiscal house in order.  A Maine that spends only what it takes in and pays its bills on time, including the $4.3 billion pension debt.  One that borrows less and balances its books without gimmicks.  One of those handful of states that spends less, taxes less, and regulates less.  A fiscally stable Maine that attracts fiscally responsible entrepreneurs who create jobs for our young workers. A place where quality of life includes a healthy paycheck.
Thank you and Happy Easter!

Bruce L. Poliquin
Maine State Treasurer
(Bruce Poliquin's comments are as State Treasurer, and not as a trustee of the Maine Public Employees Retirement System)

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