The Cookie Jar

By James Schaefer.

  A headline in today’s Wall Street Journal (September 16, 2010) reads, “California: Schwarzenegger in Talks to Borrow From CalPERS“.  CalPERS, a quarter-trillion dollars large, is the California Public Employees Retirement fund.  The Governator wants a loan of “just” $2 billion from this vast fund to shore up part of California’s $19 billion budget deficit for FY 2010-2011.  The article states, ” . . . if the idea goes through, the state would repay CalPERS over many years.”

Everyone wants to believe that governments are honey pots, but the truth is that it’s  future taxpayerswho will be repaying CalPERS over many years—if anyone is foolish enough to go along with the scheme.   It’s only been 8 years, after all, since a massive San Diego scandal that revolved around similar issues.  And San Diego was merely failing to make its required contributions to the City Employees Retirement System;  it wasn’t actually reaching into the plan to take money out! 

This is just the beginning of the story.  Does anyone truly believe that a Sacramento grab of CalPERS money, if allowed, would stop at only $2 billion, or would only be a one-time event?  Once a precedent is set to use it for the general fund, it would be difficult for future politicians to keep their hands out of the cookie jar.

Perhaps Sacramento figures that most taxpayers will be none the wiser, and have not figured out that they and their children will be on the hook for paying back that debt some years down the road.

There is current discussion on the national level regarding the pending insolvency of Social Security, for a decision made in 1969 to bring the trust fund “on budget” and make the surplus available to help fund the rest of government.  Whether we’re talking about the San Diego retirement system, the California retirement system, or the Social Security retirement system, the principle is always the same;  once you promise to make large future payments to retirees, you’d better start socking away very large amounts of money to guarantee that you’ll be able to make the payments.  If you don’t, those future retirees will go to war with future taxpayers to force them to fork over the money.

Future taxpayers might well retort that they didn’t make any such promises, and that the promises were far too large.  When politicians scheme to push problems into the future, we’re likely to get a future full of problems.

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