Friday, February 28, 2014

Strong towns don't have pension problems

Joe Nocera and Rana Foroohar were talking about municipal pension woes this morning. Or at least that's what Charlie Herman told them it was about. Really, it was about budgets and commitments. It's the same thing when Stephanie Miner talks about pensions, or Andrew Cuomo talks about taxes, or Steve Aquario talks about Medicaid, or Chris Carey talks about tolls on the Tappan Zee Bridge. It's not about pensions or taxes or tolls or Medicaid. It's about the fact that states, counties, cities and towns have committed to spend money, but the taxes and tolls coming in don't cover those commitments.

Politicians love to do this. In fact, the system is so set up for it that people thought I was nuts when I asked if governments ever save up for big infrastructure projects. And two former mayors of Huntington, West Virginia thought Chuck Marohn was nuts when he suggested that projects should even be judged on whether they can be expected to generate enough revenue to pay off their bonds. Everyone likes to make promises for the next generation, whether it's pensions, Medicaid, infrastructure, borrowing, low taxes or low inflation.

Eventually someone has to acknowledge that the previous generations overpromised and that at least one of these promises has to be broken. There's a smart way to do this, and a stupid way, and a dishonest way. The smart way to is to openly list the promises and prioritize them. The stupid way is to notice one or two promises that you'd like to break and focus on those while remaining blissfully oblivious to the fact that other commitments exist. The dishonest way is to pretend that you don't realize about the other commitments and hope nobody points them out.

Foroohar acknowledges this in the financial sector: in her Time column, she wrote, "My worry was always that, as in parts of Europe or Latin America or even California cities that have gone bankrupt, pensioners [in Detroit] would be left holding a disproportionate share of the burden of cuts, while other creditors took less of a haircut." But it's true beyond finance, in other promises made by these states, counties and cities.

The fact is that most American cities made a series of really stupid decisions in the late twentieth century. They relocated valuable infrastructure like canals and railroads out of their downtowns, so those downtowns were no longer "on the way." They built oppressive, noisy highways through those downtowns, allowing drivers to shoot through on their way to someplace else. They copied zoning codes that outlawed mixed-use neighborhoods, and gutted the mixed-use neighborhoods that existed with highways and "urban renewal." Then they built other highways to bypass the downtowns, and subsidized development in the suburbs. I happen to be particularly familiar with Syracuse's tragic flailings in this regard, but you can see the same pattern in Albany, Buffalo or Binghamton, and all over Rockland County.

The people who ran these municipal governments borrowed money to build these highways and other infrastructure. They promised to pay it back with interest (Nocera noted that this was missing from the pension discussions). They promised their residents that no matter how far they spread out, no matter how much they drove, they could still count on roads, bridges, power, water and sewers. They promised that the government would pay for all that indefinitely and somehow keep taxes and tolls low. Oh yeah, and they promised their city workers secure retirements, and their poor people healthcare.

Of all these promises, Cuomo focuses on taxes, Miner focuses on pensions, Aquario focuses on Medicaid and Carey focuses on tolls. We may actually wind up with cheap taxes and tolls while cutting pensions and Medicaid, and that may get these guys elected to powerful political offices for many years. But you and I know that it won't actually solve the real problem: we can't afford to maintain the sprawl that's sucking the revenues out of our hollowed-out cities and towns. And we can't afford to pay back the money our parents borrowed to build that sprawl.

These four are not handling these overpromises the smart way, so that means they're either handling them the stupid way or the dishonest way. Hanlon's razor says "Never attribute to malice that which is adequately explained by stupidity," and I know of no evidence that Cuomo, Miner, Aquario and Carey are lying, power-hungry, heartless crooks. For now I have to assume that they're simply incompetent idiots with a particular blind spot for the ugly sprawl that is choking the life out of the many lovely towns of my home state.


neroden@gmail said...

I think there's plenty of evidence that Andrew Cuomo is a lying, power-hungry, heartless crook. He's been talking out of both sides of his mouth repeatedly, not least when it comes to fracking.

He didn't even bother to show up for the Governor's debate on time. And of course he decided to gerrymander the State Senate for the benefit of the opposition party. Does that smell dishonest to you? It does to me.

This is only the start. He has *repeatedly* refused to listen to local government officials. They have explained to him over and over again that their property tax levels are driven entirely by state mandates. His response? Asinine "property tax cap" garbage, and *increased* state mandates.
Even the Republicans in the State Senate aren't tolerating this bullshit any more.

Don't get me started on what he's been doing within the Democratic Party organization. The local committees are not happy with his jackassery at all.

The more I study Andrew Cuomo, the more the words "lying, power-hungry, heartless crook" fit.

neroden@gmail said...

Aquario, on the other hand, is fundamentally correct. New York is the only state in the US which has counties pay ANY Medicaid costs, and New York is the only state which funds Medicaid with property taxes.

Most states fund Medicaid out of income tax or sales tax, at the state level. This works better. Aquario is simply advising that the state, which requires the Medicaid spending, should be responsible for the taxes which are associated with it.

You can spot a crook like Cuomo by the "making it somebody else's problem" dodge: he requires that the counties pay for Medicaid (they didn't choose to pay for it!) and then claims to be concerned about the county property tax levels (which he caused).

Aquario is trying to make the state, which is responsible for deciding Medicaid benefit levels, responsible for the Medicaid costs. This is the only way to get any sort of accountability at the state level.