A blog post by the Cato Institute raises an interesting question: What happens when taxpayers can’t afford to pay the salaries and benefits of the expanding government workforce? The obvious answer is, "Taxpayers can always afford it." We’ll just likely end up debating the meaning of the word "afford" as much as President Clinton debated the meaning of the word "is." At any rate, the post from Tad DeHaven (former deputy director of the Indiana OMB, btw) is worthwhile:
Dennis Cauchon of USA Today and Stephane Fitch of Forbes recently penned articles on the excessive nature of state and local government employee benefits and the threat taxpayers face as a result.
First, Cauchon reports that “State and local governments have set aside virtually no money to pay $1 trillion or more in medical benefits for retired civil servants…With bills coming due as Baby Boomers start to retire, states, cities, school districts and other governments may be forced to raise taxes, cut benefits or both — a task made especially difficult in an economic downturn.”
I would add that the task of cutting benefits for government employees is especially difficult because state and local politicians are generally beholden to the government employee unions. Even those policymakers not predisposed to carry water for the unions are hesitant to ruffle the feathers of a sizable voting block, not to mention a vocal one that still has a lot of regular citizens conned into believing government employees are underpaid, selfless, public “servants.” Trust me, I’ve witnessed this game first hand.
Cauchon also spotlights the big picture problem: “These medical costs are part of a larger burden taxpayers face in providing health care for an aging population. The federal government has a $1.2 trillion unfunded obligation to pay medical costs for retired federal workers and military personnel. Medicare and Social Security push the nation’s unfunded promises above $50 trillion.” He also notes that the same private sector employees who pay for these benefits via taxes are not so lucky: “Unlike private companies, most governments subsidize health insurance for retired employees.”