The Government Returns to Fiscal Sanity
I generally avoid political posts on my finance blog. But, the recall election in Wisconsin offers such dramatic implications for the future of our nation, it deserves some objective analysis. Being a registered Independent voter, I intend to do just that. If you are looking for political spin, try the TV news.
It’s all about the Budget Deficits
I have posted consistently about the unsustainable budget deficits and the underfunded public pensions. As I predicted two years ago, this issue is finally coming to a head, because it is starting to burden states and bankrupt municipalities. The State of California alone has a $16 billion deficit and dozens of cities and counties are in or facing bankruptcy. Cities as large as San Diego, San Jose, New York and Washington DC have rapidly growing deficits that must be addressed.
Voters in the cities of San Diego and San Jose, CA both passed initiatives in Tuesday’s election to curb pension costs and they won with very high majorities. Voters have come to realize the escalating costs (and abuses) of public pensions threaten their city’s solvency and public services. The reforms were fair to and respectful of public workers, while making fiscal sense to the cities. This is why they likely passed by such a high percentage.
Changes in Wisconsin
One thing that has really surprised me about Wisconsin in the past year is how quickly public employees have abandoned public unions. Since union dues are no longer automatically withheld from their paychecks, almost half of the public employees have chosen to leave the union. The looming budget deficit has disappeared and administrators have more flexibility to run their school districts.
- Wisconsin’s projected $3.6 billion budget deficit is now a surplus
- Wisconsin membership in AFSCME dropped from 63,577 to 34,942
- Almost 38% of union households voted against recalling Gov. Walker
Right to Work
Having worked almost five years in a union job, I understand all about the dynamics and politics of unions. Although I loved the union wages and benefits, I didn’t necessarily like the union. In fact, I hated it. They caused a lot of friction between employees and the company. They created a lot of lucrative perks for themselves from member’s dues. It made me wonder why I was forced to join a union.
- Should employees be forced to join a union and pay dues to hold a job?
- Should they be forced to contribute to candidates they don’t support?
- Should the Government automatically deduct employee’s union dues?
- Should unions force employees into holding public votes (Card Check)?
Leaders & Followers
What happened to political courage? Who will take on tough issues and do what’s right for voters? In my opinion, most elected officials have questionable ethics and shifting loyalties. Politicians are transfixed on polls and paralyzed by special interests. There are very few in office who have any real courage. President Obama’s no-show in Wisconsin demonstrates that courage and loyalty are in short supply. This is a state that elected him by a wide margin a few short years ago. This is a state he needs to carry in the next election. He can’t afford to be tainted by this loss, so he abandoned the union machine that supported him, in their hour of need.
Two-Party Paralysis
When you look beneath the raucous protests, the bitter personal attacks and the partisan political bickering, Wisconsin is just a microcosm of what is wrong with our two-party political system. The Republicans and Democrats are locked in a life and death struggle for dominance, while the economy and taxpayers become the casualty. There is never any though of sensible compromise or consideration for others with differing beliefs.
I would love to see a viable third party break the partisan stalemate and eliminate the duopoly on our political process. The level of discontent is growing among voters. They are ready for real hope and change. We only need more leaders with courage to step forward and make it happen.
The Bottom Line
The bottom line is that politicians now represent lobbyists and special interests, instead of voters. Political parties are the gatekeepers to power, distributors of donations and facilitators of corruption. Governor Scott Walker did what he promised for the voters of Wisconsin, while facing a vicious backlash from an entrenched special interest. I commend him on his fortitude.
“We need leaders of courage.”
Scott Walker – Governor of Wisconsin
Recommended Reading
Barbara Friedberg – How to Invest and Get Rich (Slowly)
Balance Junkie – Is Financial Planning an Art or a Science
Online AI Blog – Financial Advice that’s Absolutely, Positively Guaranteed
This post was featured on the Carnival of Personal Finance over at Nerd Wallet. This week my post won the coveted Editor’s Choice. If you aren’t familiar with the Carnival of Personal Finance, you need to check it out. It’s the best place on the web to get your financial advice.
I have no problem with fiscal responsibility! I have walked the talk for 40 years. The problem with most politicians is they do things for lobbyists, to get re-elected and donors which defies logic. I would love to see real problem solving that does not adhere to party lines and other influences.
It seems to me that the two parties are getting more and more entrenched. The special interests they represent are a big reason they can’t compromise. They don’t want to lose their campaign donations and don’t have the backbone to tell the special interest they can’t have everything they want.
It would be great to see other states wake up and emulate Wisconson seeing this massive turnaround in budget projections. Do you know of other states walking this line?
My understanding is that Ohio, which is a pro union state, voted against less-drastic reforms than Wisconsin. Their economy has been devastated as manufacturing has fled the area and taken many jobs to pro-business states.
California is the real bellweather state in my opinion. Governor Schwarzenegger tried these reforms a couple of years ago, but they failed by a small margin of voters. The reform votes in San Diego and San Jose were overwhelming this election. San Jose is a fairly liberal city and their initiative passed by an even wider margin than in San Diego. I think we have finally reached the tipping point on this issue.
“I would love to see a viable third party break the partisan stalemate and eliminate the duopoly on our political process.” YES! This is exactly what I’ve been preaching–to mostly deaf ears–for years. I resolved to vote for serious third party candidates several election cycles ago. People tell me–“but you’re wasting your vote!” My reaction: What’s really a waste is voting for a candidate who will change nothing, when so much clearly needs to be changed.
The politicians mirror the electorate. If/when the citizens demand reform and action on fiscal catastrophes in the making, it’ll happen. Before then, it won’t.
Kurt,
People told me that same thing when I voted for Ross Perot. That’s when I became an Independent and I have been ever since. I have seen recent polls where 28% of voters now consider themselves Independent. They are really frustrated with the career candidates from both parties.
Great read. You hit the nail on the head. It is amazing to see how many people are leaving the unions given a choice. We might be on the verge of a new party however I believe the Tea Party has been doing a wonderful job of cleaning up the Republican Party.
The TEA Party has been very successful in getting Republican outsiders elected. They took Massachusetts with Scott Brown and helped get Arlen Spector voted out in Pennsylvania, after he changed parties. They also helped to get Dick Lugar out of office.
I’m hoping this trend continues in the upcoming election. We need someone to hold politicians accountable, by voting them out or we will never have a voice equal to special interests. The higher the number of Independent voters, the better chance we will have of representation in Congress.
I live in San Diego and I’m really excited by the reforms. I think a 401k moving forward is very responsible, and existing employees will see no changes. It bothers me that there is such an entitlement culture out there that is just not fiscally responsible.
Hi College Investor.
I was hoping someone would chime in from San Diego or San Jose. Even though I live in Orange County, I listen to some San Diego radio stations and I could hear the campaign commercials. I was glad for you guys, when it passed by a landslide.
“The bottom line is that politicians now represent lobbyists and special interests, instead of voters.”
You hit the nail on the head. Enough said.
The only way to change it is to either reform campaign fiancing or vote out enough incumbents that they realize money won’t buy an election.
Good post. The California stuff is mind boggling just as was Wisconsin-the numbers are so staggering. These elections that just passed have given me a little hope for the future.
Thanks for stopping by Cil.
I am a lot more hopeful as well. I just wish California could have figured it out before it became such a disaster.
It is true that public employee unions have placed a burden on state an local governments. But the main attempt by Scott Walker is to reduce the power of unions in elections 45 million dollars was poured into the recall election in wisconsin to re elect Scott Walker. The same could be said for voter ID laws passed in many states. I have no problem with requiring any citizen to provide proof that they are eligible to vote but a voter ID is not necessary to prove your identity. Their is no doubt the primary reason for the voter ID laws being passed in many states is to repress the vote of democratic voters.
I would have liked to see the changes in Wisconsin happen in a much less divisive manner, like the initiatives in San Diego and San Jose. But, each side was so bitterly entrenched in their positions that reasonable compromise was impossible.
As an English friend of mine once said, “Once you raise your flag and draw your sword, there’s no graceful way to back down.”
Nice article. Here in Indiana, right to work legislation was just passed last year and just took effect yesterday (July 1st). Our Governor (Mitch Daniels) has done a lot of good things fiscally by using a common-sense budget.
Unfortunately, I see no such thing happening at the federal level.
Thanks for stopping by Justin.
I forgot to mention Indiana, even though I read about your Right to Work legislation and balanced budget. In my opinion, the right to work is a fundamental freedom. Working union should be a choice for each employee, not a mandate.
I wish California would get its fiscal act together, like Wisconsin and Indiana. We have horrible career politicians, who are tied to special interests, especially the public employee unions. It is really hurting our awesome state. I think it is finally starting to change, based on what just happened in San Diego and San Jose.
As for the Federal level, I predict big changes there too. Voters are concerned about the huge deficit and after this election, they will expect it to come down.