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Lessons for U.S. in the Greek debt crisis

Commentator Todd Buchholz

TEXT OF COMMENTARY

Kai Ryssdal: Ever since the Greek debt crisis started brewing a couple of months ago, there have been comparisons to the U.S. How the European Union is having to bail out one of its member states, while there are some American states in just as much trouble as the Greeks.

Commentator Todd Buchholz says the analogy is more on the nose than we know.


Todd Buchholz: I'm trying to figure out the difference between California and Greece. Our coastal climate is Mediterranean. Our governor used to look like Hercules. Our public employees threaten strikes. And our finances smell like yesterday's fish haul.

Greeks must pay higher interest rates than Germans. And in Europe, it looks as if Germany and France will end up bailing out Greece. But who will bail out Californians? Texans?

California's jobless rate is 12.6 percent compared to just 8.2 for Texas. And it's not just a big state on the West Coast. Tiny states in the East like Rhode Island, hobbled with a budget gap nearly 25 percent of state GDP!

Here's the problem: States like Rhode Island, California, Massachusetts, New York and New Jersey have been chasing away private jobs and paying public union employees too much. Each year about 100,000 private workers in California pack up their woodies, strap surfboards to the roof and drive east into the desert where there's no ocean! It's "California, Here We Go!"

How do these states chase away jobs? Well, they all rank near the top for the highest tax rate.

Because public pensions are so large, in some states it seems as if half the people go to work each morning just to prop up the other half. And the public workers -- prison guards, teachers, nurses, asphalt repairmen -- are highly organized and brilliant at scare tactics.

In California, all Governor Schwarzenegger has to do is mumble through his cigar that we need to cut spending, and the radio airwaves buzz with slick commercials warning governor wants to pull the plug on grandma, fire great teachers and then give felons jobs as school playground monitors.

Schwarzenegger played Kindergarten Cop in the movies, but he's been under house arrest since he took office. Just like the rest of us in this golden state and in states throughout the U.S. that better learn some lessons from the fall of Greece.

RYSSDAL: Economist Todd Buchholz was an adviser to the first President Bush. His most recent book is called "New Ideas From Dead CEOs."

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Regarding the statement that a government spending cut will "... then give felons jobs as school playground monitors" -- we actually have a felon (a drug offense committed 20 years ago) doing exactly that job at my son's public school. And the world didn't end as a result! In fact, I can -- and do -- trust this person with my kid's life. Remember that if you aren't prepared to needlessly lock people like that up forever AND you want them to have options other than going back to crime, they HAVE to be able to work and participate in society.

This is THE most striking and truthful comparison of our country's financial woes, I've heard all year. I'm sending it to everyone I know!

I live in Rhode Island, a state in a situation similar to California. Our legislators are corrupt and controlled by public employee unions and the social services industry.

Anyone who does not see the connection between this kind of control and ballooning budget deficits is living in a fantasy land.

Like our own families must, our governments have to cut back and live within the means of the people of the state.

Productive people can and will move to states that get it.

Todd Buchholz's commentary retreads the same old tired bromides we hear from the right: the privileged poor and middle classes garner benefits they didn't earn at the expense of the "poor" wealthy who watch their hard earned compensation siphoned off to the undeserving. This reasoning of course assumes that the bulk of Americans -- i.e. the poor and middle class -- get fairly compensated to begin with and that the wealthy have truly earned what they make. Time and again we are smacked in the face with the fallacy of this argument: do I really need to bring up the executive bonuses given to the leaders of failing banks that received TARP funds? Buchholz and his ilk can continue to drink the conservative Kool Aid but please stop giving them a forum with which to sell its "benefits" to me.

The only possible response to this article is Amen.

It's nice to have a commentator who actually makes sense once in a while. The problem outlined here is both better and worse than it appears. Better, in that it's possible for a courageous and sensible politician to start fixing it, as Governor Christie in New Jersey is doing this year. But worse, because this cancer affects our federal government too, not just individual states.

Todd mentioned that 100,000 private sector residents were moving out of the state every year primarily due to taxes and complications from paying public workers too much.

Wrong. The single biggest reason is because California- and the East Coast for that matter- are STILL even after a housing correction overpriced. I live in the Bay Area, make a 6-figure income, yet a house around here is still pushing $500,000. The same house in Austin TX is $150,000 or less. That's why we're moving there next year along with many, many other young professional families.

I could care less what public workers get paid. I just want a house I can afford.

I question the editorial decision making process and apparent lack of critical thinking in providing a forum for Todd Buchholz on 5/11/10. Mr. Buchholz was selling his latest book and the idea that �government is too big.� California�s woes are not a result of the �public sector� unions or compensation rates. Nor are they a result of the corporate tax structure. On Mr. Buchholz�s �hit list� example of public employees causing a drain on California were teachers. Teacher�s in California make on average $63,640 a year. The cost of living index is 135.1 in California compared to a state like Texas were it is 90.1 - so yes teachers need to make more here (see the Federal Cost of Living Index). An accountant at Northrop-Grumman in southern California makes over $110,000 and a chain grocery store manager makes over $90,000 per year. So who has more responsibility or a harder job, the public sector teacher or these private sector employees? If your research staff did any analysis they would also find that within California�s tax structure the corporate tax rate is 8.84% with eleven other states having higher rates (including Alaska at 9.4%). California is a mess because we overly depend on personal income tax which in California is overly dependant on capital gains/profits from the stock market - which crashed. Note the timing and scale correlations between California�s budget woes and the Great Recession. Mr. Buchholz has a vested interest in �small government� with limited regulations and enforcement. As a hedge fund manager Mr. Buchholz would naturally have no desire to have more robust regulation of Wall Street. This Milton Freeman theory of unfettered �free markets� as interpreted as limited government / limited regulatory oversight has landed us in two huge messes we as tax payers will be paying for years- the recession/bail-out (a form of corporate welfare) and the BP/Halliburton oil disaster. Mr. Buchholz and his friends also have a vested interest in �smaller government� because it means contracting out government/public sector projects and jobs to the private sector such as the contracts to Kellogg Brown and Root (a unit of the Halliburton) to provide housing for soldiers in Iraq, etc. The Army couldn�t do this job? Mr. Buchholz�s comments are left to stand as facts because no counter views were provided. I expected more from Marketplace journalism standards.

The title (Lessons for US in the Greek Debt Crisis) had little to do with the commentary. There is a lesson for us: the Greeks spent more than they had, without a plan to pay it back, and now their country is bankrupt. Yes, we should learn from this, but I'm skeptical that we will.

So really, this can be summarized as the usual right-wing rhetoric about how we should care only about making money for private enterprise and not care about the greater social good? What about responsibility? What exactly is the point in having this guy on every time, other than to annoy listeners?

Unions aren't evil, social programs aren't wrong, and not all taxes are bad (it's called responsibility). There are plenty of issues in California and many of them can be solved with a Constitutional Convention in which everyone agrees to fund future ballot questions - right or left. But using the soapbox to spout Bush Junior's/Bush Senior's rhetoric about how great it would be if we just cared about ourselves helps nobody at all.

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