Socialism Works - Not

Been hearing a lot of talk on local radio by the governors of what is referred to here as the tri-state region: New York, New Jersey and Connecticut. All the governors are facing tremendous shortfalls in revenue. Christie in NJ promised that he would not raise taxes because he knows that raising taxes gets people nervous and drives business out of state. He concedes that taxes are too high already and businesses are either leaving or not expanding. Even if he were to lower taxes now, it would take considerable time for a turn-around to kick in. In the meantime, the state is tapped out. It has to cut expenses. This means lay-offs, service cuts and efficiencies. Yet, there are so many basic and federally mandated costs that even the most stripped-down, bare-bones budget would run in excess of the ever shrinking revenue pool. Governor Christie will need Washington’s help in the form of bail-outs (at least until the overall economy improves).

New York’s Patterson is facing a similar dilemma. Plummeting revenues have put the State in a real bind. Patterson has the additional problem of Albany’s legislature having been utterly dysfunctional for many years now. Wrangling over budgets has not only produced red ink, but also bad blood. New Yorkers who can afford it are more than likely to leave the State for lower tax states if they haven’t done so already.

Ditto Connecticut…

One of the biggest problems the states have is unions. As most state workers are unionized, their wages and benefits are not subject to market conditions. Most can expect automatic raises which creates a situation where in these difficult times state workers on average make more than workers in the private sector. As money from the private sector is diverted to the public sector, both public and private sectors can expect at some point to go belly-up.

What you have here in the North-East is the mechanics of a classic tail spin. People are desperately hoping for a deus ex machina intervention. They are hoping for the economy to turn around. Only a growing and vibrant economy can avert the disaster that everyone envisions. Obama promises to turn the economy around; he promises jobs; he promises health care… New York, New Jersey and Connecticut lawmakers’ hopes, all are dangling by a single thread: federal bailouts. They know they are too big to fail and only Washington can print money.

New York’s Bloomberg is upset. He knows that printing money only hastens the fall. His sole hope is a revival on Wall Street. He’s heard the latest Obama proposal of cutting the banks down to size. He knows this would kill any hope of stemming the red ink tsunami that is clearly on its way.

The architecture now in place that predicts what most likely lies ahead is not likely to change for at least the next three years. Insolvency and the electoral process has become a horserace. Insolvency currently has the edge. Ironically, this architecture contains a wild card as well. It’s the people’s resolve to deliberately slow down their horses – not to consume, not to trade, not to expand, not to do anything to advance this crazy system that seems to operate entirely for the benefit of our present political leadership; that seems intent on bleeding us dry for the purpose of advancing some global Utopian hell. The harder they squeeze, the less they can expect to get from us. The end result may turn out to the same, but at least we’ve denied them the right to say, “Socialism works.”