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The Volcker Alliance

#1 User is offline   y66 

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Posted 2015-June-09, 14:28

Excerpt from Volcker Sees Hidden Peril In State Budgets

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Paul A. Volcker, the former Federal Reserve chairman widely credited with taming inflation in the 1980s, has found what he considers a new economic scourge to battle: shoddy state budgets that he contends push costs into the future for other generations of taxpayers to pay.

When the states live beyond their means in this way, Mr. Volcker said on Monday, their budgets may seem balanced every year, but they are in fact piling up hidden mountains of unpaid bills. The invisible mountains grow bigger every year and eventually become crushing — something that seems to be happening in several states this summer as lawmakers find themselves at a loss to close their deficits.

“The never-ending sense of crisis leads to stop-and-go funding of vital programs,” Mr. Volcker said in his first report on state finances since establishing the Volcker Alliance, a foundation devoted to rebuilding public trust in government at the federal, state and local levels.

Budget proposals drive the debate over state spending, Mr. Volcker said. But they show only one year’s proposed cash outlays, not the accumulated costs from the past or the bills being deferred for the future. Budgets show that the costs of government are increasing each year, he said, but they mask the true picture.

That makes it nearly impossible to have a coherent public debate about priorities and fairness, Mr. Volcker said, adding, “These practices make budget trade-offs indecipherable.”

As a result, bridges and roads are being left to crumble, public schools and state universities are being starved, “rainy day” funds are being drained, and public workers are counting on pension plans that may melt down at some point, the report said. City and county services, like courthouses and jails, are being battered, too, because they get much of their money from the states.

Asked whether this might prove to be as big a problem as the self-feeding vicious cycle of inflation and stagnation that he faced as Fed chairman from 1979 to 1987, Mr. Volcker laughed and said, “It’s a different problem.”

“It’s like termites eating at a structure,” he added. “The building hasn’t fallen down yet. But if you get enough termites, the building’s going to get pretty rickety.”

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The Volcker Alliance works in partnership with educational institutions, governmental organizations, businesses, and public interest enterprises to energize networks of change leaders committed to action. Support our mission by subscribing to our newsletter, connecting on social media, exploring career opportunities at the Alliance, or making a financial contribution.

If you lose all hope, you can always find it again -- Richard Ford in The Sportswriter
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#2 User is offline   nige1 

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Posted 2015-June-09, 23:01

In the UK, successive governments went for disastrous privatisations and private finance initiatives (PFIs). They defer costs to future generations and hand over key strategic operations to off-shore companies.
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#3 User is offline   kenberg 

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Posted 2015-June-10, 07:47

I had not heard of the Volcker group. I will be very interested in looking over what they have to say.

Hidden state debts are a seriously interesting concept. I have a direct interest in this since the state deposits money in my bank account every month. The deal was this: I had seven percent of my salary taken out every month, the state made a contribution as well, and it all went to a fund that would provide this revenue for me in my "old age". In theory, it was fully funded and simply was part of a benefits package. It would not, in theory, burden future generations because of the full funding. The first hint of a problem (the first one I saw) was some years back when the guy overseeing the fund got fired or went to jail after it turned out that some of the money that was supposed to be there wasn't there. But there have also been the usual political games. A pile of money is just too tempting.

I don't know if this is the sort of thing that is being addressed but I hope that it is. For a young me, the thinking did not go much past "Ok, you offer this deal, I accept this deal". Now I wonder if the deal will work as promised. My father died when he was 77 (I am 76) and his finances were getting a bit tight. My aren't, but a collapse of the promised pension would be a problem, no doubt.
Ken
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