NCPA - National Center for Policy Analysis

THE MONSTER THAT CONSUMED LOS ANGELES: LIBERALISM

May 12, 2010

Los Angeles is chin-deep in California's trickle-down misery, and last week Richard Riordan, who was L.A. mayor from 1993 to 2001, coauthored with Alexander Rubalcava -- an investment adviser -- a Wall Street Journal column declaring the city's fiscal crisis "terminal." They say Mayor Antonio Villaraigosa should "face the fact" that "between now and 2014 the city will likely declare bankruptcy." 

Riordan and Rubalcava say two numbers -- 8 percent and 5,000 -- define the city's crisis: 

  • L.A. has conveniently but unrealistically assumed 8 percent annual growth of the assets of the city's pension funds.
  • Over the last decade, the growth of the two main funds has been 3.5 percent and 2.8 percent.
  • And Villaraigosa added 5,000 people to the city's payroll in his first term. 

Nationwide, government employees are most of what remains of "defined benefit" America, says columnist George F. Will: 

  • More than 80 percent of government workers have defined benefits -- as opposed to defined contribution -- pension plans.
  • Only about 20 percent of private sector workers have defined benefit plans.
  • California's parlous condition owes much to burdensome health care and pension promises negotiated with public employees' unions; these promises are suffocating the state's economic growth. 

Riordan and Rubalcava suggest replacing defined benefit pensions with 401(k) accounts for new public employees.  But when another product of America's immigrant culture, Gov. Arnold Schwarzenegger, tried to do that, public employees' unions squashed the idea.  Riordan and Rubalcava say the retirement age for public employees should be raised from 55 to 65, employees should pay more than the maximum of 9 percent of their salaries for pensions, and the city should end subsidies of up to $1,200 a month for health insurance for those who retire before becoming eligible for Medicare.  But even his ideas for nibbling at the edges of the fiscal problem by privatizing the zoo, the convention center, and city parking lots are opposed by the unions. 

They are government organized as an interest group to lobby itself for ever-larger portions of wealth extracted by the taxing power from the private sector, says Will.  Increasingly, government workers are the electoral base of the party of government.  So Villaraigosa must live with the arithmetic of interest-group liberalism.  

Source: George F. Will, "Trickle-Down Misery in L.A.; Mayor Villaraigosa's nightmare numbers," Newsweek, May 17, 2010. 

For text:

http://www.newsweek.com/id/237640  

For Journal text:

http://online.wsj.com/article/SB10001424052748704608104575218392603082622.html 

 

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