The Next Crisis Is Here
The Next Crisis Is Here The city of Vallejo is in bankruptcy due to excessive pensions and other benefits given to its municipal unions. This practice of granting huge pay increases and benefits to unionized municipal and other government workers is the crisis that has not yet hit the media but which is severely harming the economic recovery. Many government workers now earn considerably more than private sector counterparts performing the same work. Vallejo is simply the canary in the coal mine. A fireman earns $171,000. He also has a pension based on his last year of wages and a healthcare program for life. Yet if you listen to the unions and politicians we are supposed to help the poor municipal workers like teachers and firemen. Where I have my beach house school teachers earn $95,000 for 9 months of 8-4:00 hours. They also have pensions and healthcare. The result of all this is that local and state taxes have to rise, services have to be reduced, and the local economy is badly harmed because there is no money for infrastructure, better services or economic development. Towns like Vallejo cut back, raise taxes and deteriorate further in a death spiral. Police jobs are reduced and crime rises, further discouraging business and economic growth. New York City and Times Sq proved that by adding cops, reducing crime and revitalizing the area, business flocks in, tax revenue is generated and people return to retailers and entertainment. This demonstrates how these excessive pensions and other union benefits and wages negatively affect real estate values and development in places like Vallejo and many towns across America. Whatever good may be done by the Fed and other steps to generally try to improve the economy is being severely restrained at the local level by the unions greed and power. They payoff the politicians with campaign contributions, free campaign workers and publicity, and in other ways. Yet when developers or corporations undertake similar efforts to influence political outcomes or real estate development, it is considered by the media to be undue influence and corruption. The unions are protected by Congress and Obama who took over $400 million of union payoffs for his campaign. Now we see how they were protected in the healthcare bill along with the tort lawyers. More towns and cities will be filing bankruptcy over the next two years, more taxes will be raised, and your real estate projects will suffer more harm along with the economy. The big pension funds like Calpers are not going to be able to cover the liabilities to workers. The result is going to be higher taxes to help pay to cover these obligations. Less capital will be made available to invest in real estate. There is a massive transfer of wealth form the earners to the unions and Obama and Pelosi are doing all they can to encourage and protect the unions. If we do not push for major reform of the municipal employee pensions and other benefits, it will do severe harm to the real estate recovery.