Why are important projects now unaffordable? This morning the New York Times reports how earlier in the 20th century, when the federal and state governments were much smaller, they had the means to undertake gigantic new projects, like the Interstate Highway System and the space program. But now, when governments are bigger, they don’t. These big infrastructure programs are often critical to not only stimulating the economy, but also driving intelligent, substantial development.
The reason is rather simple: Over the past few decades, governments have become entwined in a series of arrangements that drain money from productive uses and direct it toward unproductive ones, mostly politically driven.
New Jersey can’t afford to build its tunnel, but benefits packages for the state’s employees are 41 percent more expensive than those offered by the average Fortune 500 company. These benefits costs are rising by 16 percent a year. Are yours?
New York City has to strain to finance its schools but supports 10,000 former cops who retired before age 50. Will you retire before 50?
California can’t afford new water projects, but state cops often receive 90 percent of their salaries when they retire at 50. The average corrections officer there makes $70,000 a year in base salary and $100,000 with overtime (California spends more on its prison system than on its schools).
States across the nation will be paralyzed for the rest of our lives because they face unfunded pension obligations that amount to approximately $2 trillion — or $87,000 per plan participant. And remember the life expectancy of human beings has risen dramatically since these policies were enacted.
Another issue in prohibitive construction costs is the effect Unions have had on costs: like governments, Unions’ sense of entitlement has mushroomed and the excesses are strangling progress, hurting our economy and ultimately hurting the union members: think Detroit.
All in all, governments can’t promote future prosperity because they are choking on their own self-indulgence. And when governments cannot afford to take on these projects, everyone suffers, except of course the small group of government beneficiaries of this un-funded excess.
“There are only two solutions'” says Leonard Steinberg, publisher of LUXURYLETTER “1) scale back benefits to market based reality, or 2) raise taxes.”