Christian B. Corrigan: Detroit a wake-up call for Kansas
08/05/2013 12:00 AM
08/02/2013 5:19 PM
In his push for aggressive free-market reforms for Kansas, Gov. Sam Brownback has rightfully touted the prosperity of states such as Texas and Florida. Yet changing the status quo has been a surprisingly arduous task. The opposition has been conveniently devoid of a salient alternative for creating growth, choosing instead to channel President Obama’s class-warfare rhetoric.
Employing euphemisms such as “middle-of-the-road” and epithets like “tax cuts for the rich” allows these critics to mask the failures of their own policy prescriptions. It is time for Kansans to focus on the unsavory products of excessive government.
Detroit, a once-mighty city exemplifying American productivity and ingenuity turned ghost town, recently declared bankruptcy due to what could ultimately total $20 billion in debts and unfunded liabilities. Struggling to even provide basic services to its residents (a rapidly evaporating population of now only 700,000 – down 25 percent over the past decade), the city owes more than $9 billion in unfunded pension and retirement benefits to public employees.
High income and property taxes, oppressive regulation and unsustainable labor costs in both the public and private sectors have turned Detroit into what an Investor’s Business Daily editorial called “the rotten fruit of uncontested progressive socialism.”
Some erroneously blame globalization for Detroit’s woes. Aside from the undeniable fact that foreign competition and labor have made automobiles more affordable for American consumers, they overlook that companies such as Nissan and Volkswagen have invested billions in manufacturing plants in low-tax, right-to-work states such as Tennessee. The average autoworker in Tennessee makes $80,000 per year in salary and benefits. Before the recession, the average unionized worker at the big three in Detroit was making $130,000.
As financial and human capital fled for greener pastures, Detroit’s political establishment continued to make unsustainable commitments to public-sector employees funded by more debt and more taxes, followed of course by more population flight. And look what this vicious cycle hath wrought: 75,000 abandoned structures, 16 percent unemployment, 47 percent illiteracy, 58-minute response time for high-priority 911 calls, and a fire department that has resorted to letting vacant buildings burn.
Though Kansas is in nowhere near the peril of Detroit, this bankruptcy presages the eventual result of progressive economics and should serve as a cautionary tale.
A May 2013 study by the Kansas Policy Institute found that the Kansas Public Employees Retirement System is among the most underfunded in the country and may not meet pension obligations over the next decade. Kansas has one of the highest ratios of public employees relative to its population size in the country. Of course, nearly every year for the past decade, legislators and special-interest groups backed lawsuits demanding increased funding for our biggest state expenditure, education. Meanwhile, the growth rate for Kansas’ gross domestic product, payroll jobs and population significantly lagged behind the national average.
This is not to disparage public employees or argue against investing in education. On the contrary, the way to afford good public schools and services is by attracting businesses, jobs and taxpayers. And the way to ensure that public pension benefits are not cut in a future bankruptcy proceeding (as will likely happen in Detroit) is by crafting a sustainable system in line with the private sector.
Market forces are always at work, forcing businesses to offer better products at lower prices, or go under; the same concept applies to states competing for residents. The arrogance of policymakers believing that they can resist these forces, much less control them, is what Nobel Prize-winning economist Friedrich Hayek termed the “fatal conceit.” Detroit and many others are finding that out the hard way. Let’s hope Wichita and Kansas will avoid the same fate.
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