In case you missed it, Gotham Gazette posted an excellent article on the average earnings of workers in their 20s, both in New York City and nationally, over time here. The data show that workers in their 20s today, particularly men, even college graduates (of which there are more), earn less in cash income than they once did, both in New York City and nationally. The situation for non-cash income is even worse. As a result of two tier union contracts and other two-tier personnel policies, my generation was the first to not receive defined benefit pensions. But young people today are unlikely to even receive health insurance, as businesses increasingly hire them as “independent contractors” to deny health insurance to them while providing it to existing employees from prior generations. To this, add the higher student loan amounts today’s graduates are burdened by, generated in part by excessive cost inflation in higher education (which presumably provides more income for more people). Forget the fear that the next generation will not be as well off; it has already happened. And public policies, attentive to the wants of senior citizens to the virtual exclusion of all else, particularly in New York State, pile debts and other burdens on to the future, for those 20-somthings to someday pay. In yet another shot in the generational war, state and local governments are refusing to allow people to know how large those burdens will be.
In addition to debts identified as such, state and local governments have found other ways to hand out benefits today at the expense of tomorrow. The most costly of these are retiree pension and health benefits. Remember, most young people today are less and less likely to receive employer funding for their health care and retirement income while they are working. Public employees, on the other hand, continue to receive promises of ever richer income and health care when they are not working. And why not make such promises if you get the credit today, forcing someone else to sacrifice to pay for them tomorrow? And that’s what state and local governments are doing — promising today to pay huge amounts of money tomorrow, when today’s seniors are gone, at the expense of today’s young people and their children.
The Governmental Accounting Standards Board recently recommended that governments add the future cost of these promises to their books. New York City has estimated that the cost of retiree health care already promised is $50 billion. That is the amount public employees were granted in exchange for work in the past that will be paid in the future, and the amount people in the future will have to pay in taxes with no services and no benefits in return. In response, New York City has begun setting aside money for future retiree health benefits, but it still has only $5 billion against $50 billion in promises. Its pension funds would also be under-funded based on fair accounting, although at least prior generations put aside some money for that. There is no money set aside to cover the pension enrichments that the state legislature keeps passing, without any work being done in exchange for them. The legislature has already passed a retirement at age 55 for teachers and age 50 for transit workers, though vetoes have prevented them from going into effect thus far.
New York City, however, is a pillar of virtue compared with other states. Rather than tell the young the size of the public employee retirement hole their future taxes will be going to, instead of to schools, health care, or transportation, the State of Connecticut is planning to pass a law to drop out of the Governmental Accounting Standards Board. Texas has already done so. The Board may even go out of business, according to the New York Times, due to the reaction to this rule. You may remember that the Financial Accounting Standards Board was similarly threatened with destruction in the 1990s when it recommended that corporations record stock options as an expense. It backed down, allowing top executives to in effect steal trillions from the rest of us in the 1990s. Senior citizens, retired public employees, and top executives continue to get richer, while everyone else gets poorer, and not only do they want an increasingly sweet deal, they demand (and are evidently in a position to demand) that no one find out about it.
According to the Times “Connecticut passed a law in 1993 requiring it to use the accounting rules issued by the governmental board. But the Legislature has delayed putting the rules into effect, because it could not come up with the money. On many occasions it has lacked the means to pay for critical programs, like Medicaid or certain payroll expenses, she said, so it carried them as deficit expenditures. After 14 years, the state had accumulated a total deficit of about $1 billion.” The State Comptroller told this source “adopting the standard board's rules would mean somehow finding a way to pay it down at the rate of about $150 million a year. And lawmakers scrambling to come up with money for tangible programs like schools and highways were simply not interested in ‘coming up with $150 million a year for good accounting purposes.’” Connecticut is the second richest state in the country, and its state and local tax burden is well below ours (though higher than it probably should be).
What does the Connecticut State Comptroller mean “good accounting purposes?” Past residents of the state received $1 billion in services they did not pay for, promising future residents will pay for them later. The State wants to keep deferring theses costs while not telling the young they exist. And then future residents of the state will be worse off by that amount, plus interest. This isn’t a technical issue. It’s a moral issue. From a pragmatic political perspective, it seems, it is always easiest to screw the young and the future. Well the future eventually arrives. And this is just one of dozens of public policy examples of prior generations grabbing more, leaving subsequent generations with less, and demanding — perhaps to improve their self esteem — that they not be forced to admit to the consequences of what they have done, and the young be deceived about it as long as possible. Politicians and media give the customers what they want.
One of the arguments against generational concerns like mine goes something like this. For decades average earnings have risen over time, so those in the future will be better off than people today. So borrowing money, and shifting costs onto future Americans, is “egalitarian” because future Americans will be richer. That is another convenient rationalization which is so useful it must be believed to be even though, as the Gotham Gazette article shows, it isn’t. But those willing to be misleading and hypocritical about the effect of current and past decisions on future well being are far outnumbered by those who simply refuse to discuss it. You can’t expect the generations that chose, in large numbers, single parenthood and divorce over staying together in a less than ideal life to benefit their own children, to care about the next generation in general. Show me the politician, or the publication, that has the balls to say “we have contributed too little, and taken too much, as the expense of the young and those not yet born; they will be significantly less well off as a result; and most of us simply don’t give a damn.”