Public sector employees, the workforce elite led by state and municipal workers, are now storming legislative chambers to preserve their special status. Wisconsin is the current case study in what happens when the government, a monopoly service provider, confronts the fact that the taxpayer is tapped out and can’t take it anymore—when there simply isn’t enough money.
Those realities are going to result in major adjustments in worker incomes, future pensions, and benefits and their overall standard of living. Let me explain.
Why State and Municipal Governments are in Financial Trouble
As odd as it may seem, state and local governments are in even worse financial shape than the federal government with its parabolic deficits and accumulated debt. The reasons are:
a) States and municipalities don’t have the franchise to create money through entering digits on a computer screen or running the printing press. Quantitative easing is the exclusive prerogative of the federal government. States and municipalities must, by law, balance their operating budgets although capital expenditures can be financed through the sale of bonds, assuming buyers can be found to accept the interest rates offered and the inherent risks of owning such securities.
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