Wednesday, November 10, 2010
Over the last month, France has been wracked by a series of protests and strikes that threaten the nation's economy. Angry mobs set fires and battled with police as strikes shut down the country's rail system, buses, oil refineries, ports and garbage collection.
Why? The government announced it would raise the retirement age from 60 to 62.
France, like most European nations, has an expensive government social system funded by high taxes on citizens and employers. The costs are more than many national governments can handle and threatens to bring down the European Union. The nation of Greece is virtually bankrupt.
When French President Nicolas Sarkozy tried to bring the costs of social programs under control, thousands took to the streets clashing with police and shutting down major cities. Nonetheless, the pension reforms passed by a large margin and are set to take effect later this year.
As hard as it was to initiate pension changes, unfortunately it is only the start for the debt-ridden European countries.
Throughout Europe, people have grown accustomed to depending on government for almost everything they do: health care, education, retirement -even leisure time. For example, the French government mandates that every worker is entitled to at least five weeks of paid vacation. The problem with these generous entitlements is that somebody has to pay for them. Eventually, it becomes impossible to pay the bill.
So what does all this have to do with America? The same thing could happen to us if we don't change our ways.
First, President Obama must look at Europe another way. Rather than moving toward European-style entitlements, he must look at the disastrous consequences of those policies. The voters told those elected on Nov. 2 they want the government to get its budget under control and quit mortgaging our grandchildren's future.
How can we in Washington avoid a similar fate? It's not all that complicated. We should not commit to an obligation unless we have a repayment plan and set aside the money to make the required payments. Voters told our state leaders to reset government and live within the revenues available.
As difficult and painful as it is, this is not rocket science. Every family knows you shouldn't continuously borrow money to pay your bills. For some reason, our federal government can't seem to learn the same lesson. We go on a trillion-dollar spending spree and borrow money from China so we can spend even more. The politicians' answer: Leave the debt for our children and grandchildren to pay.
Washington state, like most local and state governments, already has pension problems. According to a report in the Seattle Post-Intelligencer earlier this year, our state is facing a $6 billion unfunded pension liability - money legislators promised to retired teachers and government workers. But those same lawmakers often fail to make the required payments into the retirement systems because there's no money. And next year, Washington is facing a $3 billion budget deficit.
If the governor and state legislators can't fund the pensions and programs they've created, then they need to make changes. That was what the Priorities and Price of Government (POG) was all about in 2003, and it started the process of prioritizing what the state spends its money on and ties spending to the tax and fee revenue the state collects.
Our leaders need to identify which services government must provide, shed the rest and find new and more innovative ways to deliver vital services.
Voters are not in the mood to raise taxes. They sent that message loud and clear on Nov. 2. Vive la Washington!
Don Brunell is the president of the Association of Washington Business.