Denial In Boomtown Washington

When you live in a boom town it’s hard to recognize, much less empathize, with problems in other parts of the country. Economic hardship is one of those elements in life that has to truly get in one’s face to make a serious impression. The Great Recession of 2007 that continues today is not regionalized like the 1979-1982 recessions or the 2000 dot com bust. In those retractions large parts of the economy shrunk but other geographical areas suffered less and some prospered greatly (Texas, Oklahoma and Louisiana in 1978- 1980…only to give all back later).

In the Great Recession of 2007 there is only one boomtown left in the United States. Washington, D C. Via Instapundit comes this article at Reason Magazine that succinctly sums up the problem:

We Are Out of Money

American governance won’t begin to inch forward until the political class faces basic facts.

American conservatives, particularly the fiscal variety, tend to hold up the European Union as a model of irresponsible, big-spending economic policy. But consider this: According to E.U. rules, member countries cannot maintain budget deficits above 3 percent of gross domestic product; nor can their total debt rise above 60 percent of GDP. As Veronique de Rugy points out in this issue, the U.S. budget deficit in 2009 was three times the E.U.’s limit, and total debt will zoom past the 60 percent threshold sometime this year. Washington makes Paris look frugal.

In March the federal government created the most expensive new entitlement in four decades, even as the bond rating company Moody’s Investors Service warned that debt levels could soon precipitate a downgrade in U.S. Treasury bonds. The main opposition party fought the bill by decrying “cuts” to Medicare, and it has kept itself at arm’s length from one of the few politicians talking seriously about long-term reform.

Boomtown USA is Washington, DC. Real estate values are up, wages and incomes are up, employment is up, development is up, and rent rates are up. Restaurants are thriving. Professional service firms (attorneys) are hiring. Lobbyists are expanding employment and facilities (despite the recent death of John Murtha). If you lived in a town like this how could a person possibly understand on a personal level how bad it could be in flyover country? The level of resentment and anger toward federal, state and local fiscal policy is bubbling over because there is a fundamental disconnect between the life experiences of those on the government payroll and those on the shrinking private sector payroll. One of the theories floating around about last week’s 1,000 point crash in the stock market is that many investors became unnerved at the sight of Greek rioters burning up the country out of anger at their government.

If you don’t think what happened in Greece can’t happen here consider this from the Reason Magazine article:

The housing bubble, with its tax-generating wealth, was already bursting in 2007. Yet as recently as 2009, Montgomery County, Maryland, decided to make “phantom” cost-of-living increases to the pensions of government workers, linking contributions to salary increases that did not occur. This sweetheart deal, which added more than $7 million to the county’s annual budget (according to The Washington Post), tasted rather bitter at a time when the county’s revenue was falling short of projections by more than $24 million. Yet after one Montgomery County Council member proposed eliminating this sop to the public-sector unions, four of his colleagues joined a rally on the rooftop of the council’s parking garage, leading a crowd of 400 government employees in chants of “We’ve had enough!” and “No justice, no peace.

Even bankruptcy isn’t necessarily a harsh enough reality check. The city of Vallejo, California, went bankrupt in 2008, largely due to impossible-to-meet pension obligations. Although the bankruptcy judge declared that pension contracts were fair game in the reorganization process, the city last December cut just about everything except pension contributions for government employees,…

California, it cannot be stressed enough, isn’t necessarily worse than anywhere else; it’s just bigger (and louder).

For the millions of private sector employees that have already had their salaries and benefits slashed during corporate restructurings that were required to keep firms out of bankruptcy there will be little sympathy for the public employees that demand the status quo. How this will play out is very simple. The private sector will force the issue either at the ballot box or through a time tested method: tax avoidance. Note that I didn’t say tax evasion, which is illegal, but rather tax avoidance, which is legal. The private sector, which is the source of all of the dollars collected by local, state and federal treasuries, will simply deny their various government entities of the money they require to pay for the promises they made to their public employees.

Update: Here is an example of a Boomtown politician that didn’t see it coming:

Senator Robert (Bob) Bennett, Utah Republican was denied re-nomination Saturday after serving three terms in office, and the Utah Tea Party has been credited with pushing him out.

After the vote, a teary eyed Bennett said, “The political atmosphere obviously has been toxic and it’s very clear that some of the votes that I have cast have added to the toxic environment.”

“Don’t take a chance on a newcomer,” Bennett pleaded before the second round of voting. “There’s too much at stake.”

This Republican primary result should alarm all incumbents in Boomtown. The “don’t take a chance on a new comer” because “there’s too much at stake” is quintissential old boy club vernacular. Are any of these guys up for reelection (Republican or Democrat) reading he level of anti incumbency showing up in polling everywhere?

Three Term Republican Senator Robert Bennett Loses Primary: Tea Party Demonstrates That Business As Usual Is Over In Washington
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