Is This How The Era of Big Government Becomes Over?

President Bill Clinton could appropriate the memes and the rhetoric of his political opposition better than anyone else I remember hearing speak. His trademark example was his 1996 State of The Union Address which featured the money quote. “The Era of Big Government is over.”

This exemplifies the typical fantasy rhetoric that pervades in State of The Union addresses. Big Government is no more over than the pervasive poverty and social deviance that it claimed to be at war against. Honest reform is not going to end big government. It will die when the words “Game Over. Epic Fail.” Scroll across the screen of the fiscal playstation.

This Marxian withering of the state may have just begun to occur in statehouses across the land. State pensions strive to have 80% of their current liabilities funded at all times. David Frum has taken a break from his anti-Governor Palin Jihad to point out that this is not the current state of affairs in a growing number of America’s statehouses.

Frum, in his efforts to maintain the minimum hours of flying time to keep his license as a Conservative Pundit, points to an article entitled Market slide batters state pension funds. According to the data herein, 20 of the nations 50 states have underfunded pensions in accordance with the 80% standard. That was in 2007, before AIG became RIP.

Girard Miller points out that the average state funding ratio could fall from 85% to 65% by 2009. He writes an article in Governing.com that lays out the unpleasant “so what” consequences from this statistic.

The results will become painfully visible with the 2009 round of actuarial reports which would show the average public pension plan's funding ratio dropping from 85 percent to somewhere closer to 65 percent before "actuarial smoothing." Unless stock prices recover significantly before then, the average plan's unfunded actuarial accrued liabilities will more than double, and taxpayers will be presented with sharply increased costs to maintain the pension plans.

At this point, Saul of Tarsus needs to find some more taxpayers to squeeze. Pension funds have a legal obligation to meet any Defined Benefits promised by their benefit plans. This is also true of the escalating health care costs that they cover with defined benefit health plans as well.

The law states clearly that the dollars have to materialize when promised. They would normally attempt to pass the buck for ten years or so by issuing state debt in the amount of the shortfall they were required amortize. This assumes the existence of two things: a strong state credit rating and a viable market for government paper.

Mr. Logic can complain about the non-existence of this funding to no avail. Volume III of Kapital proves famously imprecise as to what we can expect to eat for supper, once the state has finished its withering stage.

J. Kyle Bass of Hayman Investors gives us a rough draft of what Karl Marx’s neglected secular Book of Revelations should have read.

In the U.S. alone, with Lehman, AIG, Bear Stearns, Fannie, Freddie, WaMu, IndyMac, Countrywide, and the rest of the companies that have failed to date (any many more "on deck"), there are $8 TRILLLION of assets already in receivership, conservatorship, liquidation, or "parked" with a big brother. Do you think the Government will be successful in purchasing illiquid assets off of the balance sheets of troubled companies? The odds (and the assets) are against them. Even if the Government invests equity to fill the "hole" that is created upon the sale of these assets, it leaves the same nefarious management teams in place to continue the problem by taking the money and levering it up again. The only way to solve this problem is to go THROUGH IT. We know it isn't politically popular or even popular on Wall St, but the fact is that the U.S. and the world need a Darwinian flush to rebuild our foundations and become even stronger on the backside of this mess. HT: Dealbreaker.com

We may need the aforementioned Darwinian Flush, but nobody will elect a government running on the platform of “This town needs an enema, and you, Mr. Taxpayer will drink deeply from the hose.” That, however, is exactly what will happen if the mean state pension plan loses 20% of its funding ratio.

That leaves Oregon, North Carolina, Florida, Delaware, and New York still dutifully cutting the pension checks. It’s those other 52 states of Obamerica that we will be enjoined to massively bail out. But that’s ok, according to Barney Frank. He offers us the following advice on how we’ll fix these pension problems lurking just beneath the surface.

I think at this point there needs to be a focus on an immediate increase in spending and I think this is a time when deficit fear has to take a second seat . . . I believe later on there should be tax increases. Speaking personally, I think there are a lot of very rich people out there whom we can tax at a point down the road and recover some of the money. HT: The Corner At NRO

According to the law, according to the Social Gospel and according to the faddish ideologies of our day, this money has to be expropriated. Joe the Plumber does not want you to use his wallet as an ATM. The government will not allow itself to run out of bread before the end of the circus.

Somehow, this cannot end well. Barney Frank is practically daring the rich and powerful to “go John Galt.” That leaves a lot of genuinely decent people; who did their best to do their duty, with unfunded pensions and perhaps perpetually deferred retirements to look forward to. This scenario could very well end with tomorrow’s Douglas MacArthur, dispersing a Bonus Army of disenchanted Obama voters; demanding their middle class tax cuts.