Why we need pandemic recovery commission
Howls of outrage greeted Senate Majority Leader Mitch Mcconnell's suggestion that Congress should resist further funding of insolvent state and local governments because the money would be used “to bail out state pensions” that were never affordable except “by borrowing money from future generations.” Instead, Sen. Mcconnell suggested, perhaps Congress should pass a law allowing states to declare bankruptcy.
New York Gov. Andrew Cuomo immediately countered that the bankruptcy of a large state would lead to fiscal chaos, and called Mcconnell's suggestion “one of the saddest, really dumb comments of all time.” Indeed, the lesson of the 2008 Lehman Brothers bankruptcy was that a bail-out would have been far preferable, less costly as well as less disruptive to markets.
But Mcconnell is correct that many states are fiscally underwater because of irresponsible giveaways to public unions. About 25% of the Illinois state budget goes to pensions, including more than $100,000 annually to 19,000 pensioners, who retired, on average, at age 59. These pensions were often inflated by gimmicks such as spiking overtime in the last years of employment, or by working one day to get credit for an extra year.
In New York, arcane Metropolitan Transportation Authority work rules result in constant extra pay – including an extra day's pay if a commuter rail engineer drives both a diesel and an electric train; two months of paid vacation, holiday and sick days; and overtime for workdays longer than eight hours even if part of a 40-hour week. In 2019, the MTA paid more than $1 billion in overtime.
Cuomo has thrown out rulebooks to deal with COVID-19, and recently mused about the need to clean house: “How do we use this situation and … reimagine and improve and build back better? And you can ask this question on any level. How do we have a better transportation system, a … better public health system … You have telemedicine that we have been very slow on. Why was everybody going to a doctor's office all that time? Why didn't you do it using technology? … Why haven't we incorporated so many of these lessons? Because change is hard, and people are slow. Now is the time to do it.”
Perhaps Mcconnell and Cuomo are not that far apart. Although bankruptcy makes no sense now, because states can hardly be blamed for COVID-19, federal funding could come with an obligation by states to adopt sustainable benefits and work practices for public employees. Why should taxpayers pay for indefensible entitlements? How can Cuomo run “a better transportation system” when rigid work rules prohibit him from making sensible operational choices?
Taxpayers are reeling from these indefensible burdens. The excess baggage in public institutions is hardly limited to public employees. The ship of state founders under the heavy weight of red tape and entitlements that have, at best, only marginal utility to current needs.
Bureaucratic paralysis is the norm, whether to start a new business or to act immediately when a virulent virus appears (public health officials in Seattle were forced to wait for weeks for federal approvals).
Well-intended programs from past decades have evolved into inexcusable entitlements today — such as “carried interest” tax breaks to investment firms and obsessive perfection mandated by special education laws (consuming upward of a third of school budgets).
Government needs to become disciplined again, just as in wartime.
The only practical approach is for Congress to authorize an independent recovery commission with a broad mandate to relieve red tape and recommend ways to clean out unnecessary costs and entitlements.
Philip K. Howard is founder of Common Good.