The Democrats’ Ponzi scheme
A Democrat-controlled legislature has been deceiving Connecticut residents with a home-grown Ponzi scheme for decades. Named after Charles Ponzi, the swindler of the early 1900s, Ponzi schemes create the appearance of operating a legitimate business by using the money from new investors to deliver fake profits to earlier investors.
Sadly, this is exactly how government operates in Connecticut. Taxes are raised year after year to fund popular giveaways the state can’t afford, rather than investing in the structural reform needed to improve the lives of Connecticut families, even as they struggle to survive in one of the most unaffordable states in the nation.
Consider the economic dynamics of Connecticut today. We have the second highest taxes of any state in the nation. Our energy costs are higher than any state in the contiguous United States. And we have the third highest long-term debt at $85 billion. A quarter of the state’s budget is used just to service this debt — not investing in the future, but paying for the bad decisions of the past. Career politicians running the state’s finances have ignored this exploding debt, opting to spend the money now to garner just enough favor with constituents to win the next election and stay in power. Think of it as going on a massive spending spree while making only the minimum monthly payment on a growing credit card bill. Most households are smart enough to avoid such irrational spending. So, why do we allow our elected officials to do it — and then stick us with the bill?
Despite Gov. Ned Lamont’s calls for a “debt diet,” the state’s unpaid obligations continue to spiral out of control. Connecticut’s state employee pension plan has only enough assets to cover 38 percent of what will be ultimately owed to retirees — the fifth worstfunded plan in the nation, with a whopping $76 billion shortfall! To delay the plan’s imminent collapse, Gov. Lamont and his predecessor Dannel Malloy stretched out pension liabilities all the way to 2045, adding billions of dollars of debt onto the backs of our children and grandchildren.
In the interim, the state pension plan is its own version of a Ponzi scheme, with the money that is withheld from active workers’ paychecks put not toward their own retirement but toward current benefits to those already retired. What happens when the game of musical chairs stops, current employees retire and there is nothing left? Democrat leaders have essentially said they’ll figure that out later — providing small comfort to state workers who are counting on this money for their retirement.
For now, the politicians are able to pretend the crisis doesn’t exist because of two realities not of their making. One, Connecticut is getting an unprecedented $6 billion allocation from President Biden’s COVID relief spending spree — funded with our federal tax dollars. Second, surging tax receipts from an all-time-high stock market have expanded Connecticut’s
rainy day fund to more than $3 billion.
But both of these are one-time events, rather than recurring revenue. And come the next budget cycle, when this brief reprieve recedes, we will once again face a crisis of unsustainable debt levels and a $2.2 billion budget shortfall compounded by a host of new programs sponsored by Democrat leaders today that they will no longer have the money to fund tomorrow.
Considering the long-term budget crisis, you would think the governor and his fellow Democrats would use the current temporary surpluses to pay down debt. Instead, they continue to make government bigger and spend more, and the Democrats try to raise taxes yet again — this time by $3.2 billion over three years.
As just one example, the Connecticut Democrats’ spending plan would raise $1 billion in new taxes and put that into an “investment fund” for “building wealth in underserved communities” and “reducing income inequality.” The investments will be overseen by a nine-person commission — chaired by the governor and appointed entirely by his party leadership, rather than voted on by the legislature with open hearings and public debate.
Although those may be noble goals, they are being hijacked to create a slush fund to stuff the pockets of Democratic allies while the public is left in the dark. This is the very definition of a rigged system.
Every Ponzi scheme in history has eventually collapsed under its own weight when the amount of debt exceeds the ability of current participants to service it. In Connecticut, fixed costs from Medicaid, retiree health care, debt service, pension contributions and the like now make up 52 percent of the state’s annual budget. With more than half of new money being used to pay off old obligations, the state’s Ponzi scheme can’t be that far away from a horrible tipping point.
Deferring payments further into the future won’t solve the problem. Neither will building big slush funds for insiders to direct to whatever projects suit their best interests. Reigning in out-of-control spending, creating incentives for businesses to move here, revitalizing our cities and creating jobs will. This is precisely what we elect our legislators to do on our behalf.
But for more than a year now, under the COVID-19 emergency declaration, one person has had unilateral authority to make all major decisions affecting the people of Connecticut: Gov. Ned Lamont. This has resulted in one of the most sluggish state economies in the nation and the seventh highest number of COVID-related deaths nationwide.
It’s time for the governor to let the legislature resume its normal role of spending oversight, cost control, allocating money to where it’s needed most and providing input on public safety. In other words, it’s time to return democracy to the state of Connecticut.
Charles Ponzi himself couldn’t have created a more ingenious scheme than Connecticut’s ruling class have managed to put together. And while the politicians in Hartford may never admit their house of cards is ready to collapse, state residents struggling to make ends meet feel the tremors every day.