Governor McDonnell’s consistently inept fumbling in each state finance proposal should be an object lesson for tax cut cultists. Privatization of the ABC stores and the VRS budget slight of hand are prime object lessons. But even so, the unchallenged persistence of insistence is a convincing argument maintaining the illusion.
Privatization of the ABC stores is a case study in a political promise without foundation that has morphed from a windfall for transportation to a simple implementation of free market orthodoxy. Underfunding the Virginia Retirement System (VRS) has gone from the illusion of a budget surplus to the realization that a “loan” was made without consideration of or requirement for a practical repayment plan. In both cases the obligation can is being kicked down the road with a rationalization that some fundamental principle is being employed that trumps reality. Adjust your meme and say it often enough, and so it seems, it is remembered as your original justification.
Try this at home: run your credit card balance up a limit that was established in different times. Then, don’t pay the bill and inform the company that due to the fact that the limit was set under conditions unlike today’s (a fact beyond your control, after all), you have no obligation to pay the full balance and the card company must cover the difference PLUS let you defer your payments. That’s how the state is treating its obligation to its employees. It has allowed the obligation to state employees to exceed its current projected ability to pay, is asking them to pay the difference AND deferring funding the obligation. This is worse than robbing Peter to pay Paul. It is robbing Peter to pay Paul and telling Peter to match our payment to Paul on the promise Paul is holding it all for Peter.
Once again, there’s a lot of history here that is being brushed aside. The current retirement system was the product of bad times and it looks like the new plan will have been a product of bad times and have current employees pay for the promise made to earlier employees to make up for their bad times. See? But who can be certain if the fundamental assumptions of the defined-benefit plan are valid? And that is one reason why the concept of migrating toward 401(k) plans is a non-starter. Forget that the whole “privatizing” retirement plans is another grifter sham, there is an obligation to participants in the VRS and someone is going to honor it, even if themselves, alone; even if it is by forfieting promised benefits.
Why the Democratic Party and Virginia Democrats are not shredding Bob McDonnell can only be explained either by their own paucity of business and finance acumen or by pusillanimity. Why Delegate Bob Purkey (R-82nd), who you can be certain knew better once and probably still does (veteran of the once venerable Merrill Lynch that he is), isn’t calling him out is also clear. Regardless, Governor McDonnell is responsible for this fraud and just because he is smarter than Democrats does not give him license to steal. For now, his redundant rhetoric provides sufficient smoke to hide the mirror.
Oh, and for the tax cultists, the lesson is this: there is no free lunch.
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