Across the nation, we are starting to hear from various politicians regarding their concern for the rising and unsustainable pensions and healthcare in the public sector unions. In fact, we are being treated to more of the same game with no real solutions or change. The reason for this lack of improvement is very simple. And in my opinion, the answer is equally simple.
Under current law, there is no way for our cities, counties, and states to declare bankruptcy. The unions have known this ever since we allowed the first public sector workers their “collective rights.” In reality, these rights have done nothing but increase exponentially year after year – along with their pay rates and inefficient work rules. As I said, the problem is simple: we the voters do not understand math, and in particular the rules of exponents. You know, those little numbers placed above and to the right of a given number? They look harmless enough at first glance. And so in our dumbed down electorate today, when faced with an exponent of as little as the number “2″ we fail utterly to understand what it means. I will save the conspiracy theory of how the educators have been planning this ever since the early ’70′s when “new math” was rolled out, since it is of no matter unless we change soon. Suffice to say, it is never too late to learn math, and I recommend it for anyone who feels lost in the numbers today.
As an example of how devastating that little exponent can be, consider this: Our current federal government uses a baseline budget which assumes approximately 8% increase per year across the board. Many local governments get away with even bigger assumptions! Beware! This little assumption results in the total budget to double in less than 10 years. In another 10 years, it will double again! Four times bigger in 20 years. How much has your pay gone up the last 20 years? I bet you wish you were in the government union now. They have actually done even better than that.
Consider that since the FED came into existence, our dollar has lost 94% of its value. That is the flip side of “exponential inflation” vs. “exponential budget increase” vs. “non stop government union give aways”. The only way to win in this game is lock in your pay ahead of time and guarantee that money with laws which protect it. Of course, no private company has the ability to do this. In the old days, a company pension fund really existed and was actually invested in (you guessed it) government-issued bonds and other government-insured instruments. We have never had such liquidity in the public sector. No need. Taxes could always be raised, and anyway, people didn’t really live long enough to enjoy retirement. That game is over. We do live longer now.
Here is the reason we can’t win the debate: We implicitly agree with the underlying assumptions that we can’t possibly go back on our word, even if “our” word was given by inept and corrupt politicians. And this reasoning is reinforced by the various banking/credit rating agencies along with a healthy dose of shame and peer pressure thrown in for good measure. How is it that a populace, which in general is poorer and has a bad credit rating compared to their union counterparts who can’t be fired, has bought into this scam? It is because the general population does not understand exponents and compound interest. If we did, we would not be voting for so many government issued-bonds, which are purchased by the rich, the banks, and “union owned organizations” and to be paid back by taxpayers at high interest, compounding exponentially. The numbers are so unreal, and the descriptions are so misleading that when voting for bond measures, we routinely approve the selling of all sorts of bonds. Do any of you know the formula used to figure your mortgage payments? Even if you did, since it would invariably involve exponents, you would probably not understand it anyway. The bank does! And that is why we are doomed. Exponent ignorance.
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