Battle Looms Over Huge Costs of Public Pensions … There's a class war coming to the world of government pensions. The haves are retirees who were once state or municipal workers. Their seemingly guaranteed and ever- escalating monthly pension benefits are breaking budgets nationwide. The have-nots are taxpayers who don't have generous pensions. Their 401(k)s or individual retirement accounts have taken a real beating in recent years and are not guaranteed. And soon, many of those people will be paying higher taxes or getting fewer state services as their states put more money aside to cover those pension checks. At stake is at least $1 trillion. That's trillion, with a "t," as in titanic and terrifying. – New York Times
Dominant Social Theme: Austerity is necessary at home and abroad.
Free-Market Analysis: We have commented on the eventual unraveling of the pact between the state and its public employees before. Now, apparently, it is starting to become a reality. For decades the West, both Europe and America, has maintained the fiction that government was a nurturing necessity, but all that is ending. An elaboration on the dominant social theme, if there is one, would be, "It is necessary to rein in benefits so all may prosper equally."
In fact, as we have written many times before, what is ending is "dreamtime" – the idea that the Western regulatory democracies are either benevolent or democratic. This meme (the essential goodness of Leviathan) has been elaborated on for at least the past century. In fact, it goes back much farther than that in other incarnations such as "the white man's burden," etc.
The idea, always, is to dress naked power in the modest cloth of admirable intentions. Today, we see this most obviously in the rhetoric surrounding America's serial wars. The war in Afghanistan, for instance, is being waged, variably, to raise Afghans out of the poverty in which they abide or, more recently, to liberate women from the brutality and rapine of male Afghan society.
But no matter what, the state itself is to be portrayed as a provider and nurturer. It would be funny, were it not sad, to watch this meme play out in modernity. Over and over, notably in the US, as legislators of both parties have move to socialize more chunks of the economy, the depredations have been treated with a kind of canonical rhetoric. Books are written about such milestones. Every small murder of the free-market is profiled with a kind of breathless adulation.
When Vice-President Joe Biden whispered to President Barack Obama at the signing of the recent health care package (which further socialized one-sixth of the American economy) that the 2,000 page "law" was a big f—ckin' deal," he was only indulging in rote hyperbole (unless he was merely referring to the bill's massive size). No, it is common in the current American media dystopia. Endless books and articles are written that celebrate each political "hit" – a tradition that goes back at least as far President Theodore Roosevelt, and probably farther than that.
The smug, anti-market prose of the "muckrakers" predated this trend, in fact, but it really hit its stride with Franklin Delano Roosevelt. This American President, with his thuggish attacks on the Supreme Court and his strategy to expand federal control by prying open the Interstate Commerce Clause has created a federal government with no effective limits on its power. Forgotten is the idea that the Constitution was written in an affirmative fashion, explaining the powers that the US government HAD, rather than the ones it didn't.
We don't think, of course, that the rhetoric that has surrounded the depredations of the modern state is any coincidence. The mainstream media, as we try to show regularly, presents dominant social themes that reinforce and provide justification for the power elites' endless attempted acquisitions of power and wealth via fear-based promotions. The positioning such acquisitions as advancements for the larger populace is part of the plan, from our point of view.
When the Federal Reserve was set up, there were probably many articles celebrating its inception (along with a number that didn't). Certainly, the American people were told that the Fed's presence would ensure that depressions would be shallow and that the banking industry would finally be secure. The graduated income tax that became law that same year was positioned as a populist bill that would remove excess income from the very wealthy without having an impact on the broad middle class.
Neither the Fed nor the income tax have worked out as planned, at least not for the citizens they were supposedly to have benefited. Likewise, so many other "benefits" that the regulatory state has bestowed on its citizens have proven a kind of poison chalice. The stock market itself was supposed to provide people with wealth and even a secure retirement. Modern Baby Boomers have found that not to be the case.
Meanwhile, the vast surges of fiat money have created whole industries, including the computer industry, but inevitably, the boom turns to a bust and millions who have been attracted to the latest industrial craze are left without jobs. The modern fiat-money economy (of the past century) turns out to have been as effective at removing employment opportunities as creating them.
But hot money flows do more than create ephemeral jobs. Mercantilist central banking tends to organize societies, inevitably along authoritarian lines. People get sucked into "white collar" roles in such areas as teaching, advertising or various kinds of government work including policing and firefighting. Only later, perhaps much later, does the true nature of the system become evident. These professional occupations for the most part reinforce the power of the state and that is their primary function.
We have called the past 100 years a "dreamtime" in which misleading memes were regularly thrown up to justify every advancement of the state and every retreat of freedom. One of the last areas that has remained untarnished by the growing realization that the state cannot and will not keep its promises, is the area of "public service." Public workers, union members and state employees of all stripes have enjoyed tremendous benefits and salaries over the past decades. In fact, the benefits have built over time.
But like everything else, the promise of a secure berth in state service, is gradually yielding to the inexorable mathematics of demographic and monetary reality. This is not, of course, a trend confined to the United States or even Britain. Austerity is a fact of life in Europe as well, especially among the Southern PIGS. We have, in the past, decried the austerity meme in Europe, pointing out that the EU's enthusiastic proselytizing was at least a bit hypocritical – and aimed at increasing control over Europe's restless tribes. But there is no denying that the state cannot provide what it claimed it would.
This is how the modern state has worked. It has spread its largess far and wide and no segment of society has benefited more than those engaged in "public service." But here is our question: With the majority of individuals in the West, and certainly in America gradually coming to the realization that the security offered by Western mercantilist monetary stimulation is drawing to a close, and with the bastion of state support (public sector employees) beginning to realize the same thing, where is the support for the continued expansion of regulatory democracy going to come from?
There is a trade off here. In return for taxes that have attacked the middle class inexorably, in return for the grievous ups and downs of a fiat money economy, in return for putting up with a virtual tidal wave of endlessly elaborated laws and regulations, Western citizens have expected some level of personal and professional security. It is more and more evident that Western societies, as currently configured, cannot continue to support this fundamental bargain. Public sector workers were the state's final bulwark, its last true believers. But as these workers also become disabused, who will speak for the modern state? And who will support it?