Should the criminal statute that applies to Bernie Madoff also apply to public officials?
I don’t know what it is about public officials and Ponzi schemes, but the former finds the latter irresistibly attractive almost everywhere. Maybe it’s the fact that the law lets them get away with it. They get off scott-free when they do the very same thing that landed Bernie Madoff in the hoosegow.
Although national attention tends to focus on Social Security, Medicare and other unfunded federal obligations, many state and local governments are in far worse shape. I believe we are on the cusp of a spate of local bankruptcies. Although states cannot declare bankruptcy, they can default on their debt. In California, this seems almost inevitable.
Did you know that the average state has unfunded retiree benefits equal to more than one-fifth (22%) of the income of its residents? Seven states (Alaska, Ohio, Hawaii, New Jersey, New Mexico, Illinois and Kentucky) have unfunded obligations in excess of one-third of their states’ annual income. In Alaska, it’s about half (48%). Take Ohio, for example. The state needs 41% of all the annual income of its citizens right now — in the bank, earning interest — in order to fund its future obligations. And if it doesn’t do that this year, next year it will need even more.
These are some of the findings of an NCPA study by Courtney Collins and Andrew Rettenmaier. Another finding: The real totals are about twice what these governments are reporting. A third finding: Promised health benefits are the fastest growing component of the unfunded liability.
In fact, seven states (Alaska, Hawaii, Connecticut, Kentucky, New Jersey, Michigan and West Virginia) have unfunded nonpension benefits (mainly health care) in excess of 10% of state income. In Alaska its 20%.
Orange County, California, with $1 billion in unfunded health benefits for retired public employees is an example of the problem. The city of Westminster, Calif., for example, has an unfunded health liability greater than its operating budget. To cover the shortfall it needs almost $700 for every man, woman and child in the city, or almost $2,800 for a family of four. Like most other Orange County cities, however, Westminster is only paying its annual retiree health costs and is contributing nothing to fund future expenses.
Reason Foundation scholar Adam Summers reports that the state of California has $500 billion in unfunded pension, and unfunded health liabilities that have grown fivefold over the past decade (from $1 billion to $5 billion) and will triple (to $15 billion) over the next decade.
An Orange County sheriff-turned-felon gets $2,184 a year in health benefits on top of a $217,457 annual pension. A former assistant sheriff gets $5,466 in health care plus a $231,990 pension.
The state of California is the only state that allows pensions to be based on the last year of work — meaning that overtime for that one year produces extra income for life. Health care benefits for California public employees are also generally lifetime benefits.
Question: Should the criminal statute that applies to Bernie Madoff also apply to public officials who claim these promises are paid for when in fact they are spending the money (just like Madoff) on other things?
Question No. 2: Should the criminal law that applies to people who hawk Madoff-like schemes to gullible investors also apply to newspaper columnists who try to tell us that government Ponzi schemes are fiscally sound?
John C. Goodman is president and CEO of the National Center for Policy Analysis. The Wall Street Journal and the National Journal, among other publications, have called him the "Father of Health Savings Accounts," and the Media Research Center credits him, along with former Sen. Phil Gramm and columnist Bill Kristol with playing the pivotal role in the defeat of the Clinton Administration's plan to overhaul the U.S. health care system. He is also the Kellye Wright Fellow in health care. The mission of the Wright Fellowship is to promote a more patient-centered, consumer-driven health care system. Dr. Goodman's health policy blog is the only right-of-center health care blog on the Internet. It is the only place where pro-free enterprise, private sector solutions to health care problems are routinely examined and debated by top health policy experts throughout the country-conservative, moderate and liberal.
