Tuesday, June 2, 2020

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IN MY OPINION:

Heroes Act Only Rewards Bad Behavior, Poor Governance

“That which gets rewarded, gets repeated” is a principle equally applicable in business management, dog training and public policy.

As to the latter, when politicians and bureaucrats are rewarded with more money after wasting the taxpayer dollars they already receive, what makes anyone think their behavior will change?

The Democrat-controlled House of Representatives has passed a staggering $3 trillion stimulus plan called the Heroes Act. Nearly a trillion of that is slated for state and municipal governments.

While the previous relief package called the CARES Act helped the private sector, a good chunk of that also went to state and local governments for mass transit, Medicaid costs and direct dollars to local budgets that were related—more or less—to the pandemic.

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But the Democrats’ new proposal envisions a huge portion of bailout dollars that are unrestricted.

The good news for taxpayers is that the Heroes Act is DOA in the United States Senate, at least in its current form. Led by Mitch the Impaler, the Republican-controlled body will undoubtedly pare it down and—hopefully—place many conditions on the release of the funds that will incentivize good behavior, not bad.

Given that there are infinite examples of governing malfeasance in California, the federal government could make several reasonable demands as a condition for receiving additional relief funds.

First and foremost is pension reform. It is well known that public-sector labor controls the California Legislature and Office of the Governor. The alphabet soup of unions—CTA, SEIU, CCPOA, PECG, etc.—provide the current political establishment with what they need most: campaign contributions.

For that reason, pension reform has been virtually impossible, leaving California’s public employee pension funds woefully underfunded.

Even pro-labor Jerry Brown was only able to achieve very modest reform in 2013.

States that are well-managed have a legitimate complaint that they should not be forced to contribute to bail out mismanaged states.

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David McIntosh, head of Club for Growth, expressed this sentiment concisely last week, writing, “As Congress considers what to include in the next phase of coronavirus relief, Nancy Pelosi and the Democrats have pushed for $875 billion in taxpayer money to go to bail out irresponsible states and local governments. Why should taxpayers in well-managed states like Florida under Governor Ron DeSantis be on the hook for bailing out poorly run states like New York under liberal Governor Andrew Cuomo and California under Socialist Governor Gavin Newsom?”

The anger is justified and therefore so are the proposed reforms. An easy solution would be for the feds to require that all states convert to a defined contribution pension plan for all new hires. Over time, the financial risk to taxpayers in liberal states would diminish.

Also helpful would be federal incentives to states to impose dollar limits on pension benefits. California’s “$100,000 Club,” a list of public retirees receiving over $100,000 annually, has exploded in recent years to over 26,000 retirees, a 13-fold increase since 2005.

Pension reform should not be the only requirement imposed by the federal government. California wastes money by the bucketful and compounds that waste with foolish regulations and mandates on the private sector.

The federal government could make the logical argument that a full economic recovery for the nation as a whole requires removing the shackles from those who actually generate the taxes that states claim they need.

Newsom’s proposed budget is unlikely to help motivate federal relief.

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Rather than deal with waste, fraud and abuse, the governor has engaged in a form of legal extortion. He publicly stated that if Washington fails to give the state enough help, police officers, firefighters and health care workers are “the first ones to be laid off by cities and counties.”

What are federal appropriators to think when confronted with this bluff?

It is reminiscent of the politically incorrect scene in Blazing Saddles when the sheriff holds a gun to his own head and threatens to pull the trigger.

In demanding additional relief funds from the federal government, California needs to tread carefully.

Right now, even many Republicans in Congress are sympathetic to the pleas for some local government subsidies.

But the urgency of the need may diminish, particularly if the economy recovers faster than many anticipated.

A well-known Democratic consultant famously said, “Never let a crisis go to waste.”

The problem for the Democrats seeking massive subsidies for local governments is that the crisis might dissipate and whatever leverage they have might disappear with it.