Constituent Perspectives and Why Each Matters
Borrowing by governments is an important issue because the process and the decisions are often subject to political manipulation and motivations with the potential to benefit one group, or constituent, at the expense of another.
Such is the case with our new class of entitlement debts, commonly referred to a "unfunded liabilities". As the name implies, these are liabilities for future payments, retirement benefits, which should have been pre-funded with dedicated investment savings during the working careers of the beneficiaries - but were not – with the expectation that future generation of taxpayers would willingly shoulder the obligation.
Any time a government knowingly elects to confer benefits and privileges upon one generation, with the express expectation that some unknowing, future generation will be picking up the tab – that's BIG a problem.
Here at Informed Majority, we believe this is a critical issue of our time. We believe this is a matter to be resolved between the generations. We have devoted this section to a practical discussion and exploration of the issue from the perspectives of the different constituent groups involved.
Intergenerational equity is a term to describe the notion that each generation must operate as good stewards, cognizant of their impacts on the lives of future generations and accepting of the notion that no generation should be allowed to unduly burden the lives and economic opportunities of future generations.
Trends over the past half century have shown a clear rise in the awareness of good stewardship, most notably in the area of environmental protections. Likewise, we have witnessed improvements in human rights and improved living standards, and expanding programs of social insurance in most countries around the world.
What is less clear, however, is how we are doing as financial stewards for our future generations of citizens. It is important for us to ask: "Are the benefits being conferred upon the current generation designed in a fashion to be financially and economically sustainable by future generations?" While all the evidence is not yet in, common sense tells us that government programs which confer more in lifetime benefits to current recipients than contributions received – is neither equitable nor sustainable.
Viewed politically, we are nation of constituents – each with its own unique perspective and concerns. At the same time we are nation of equals with a shared obligation to defend the common good. In the context of this natural tension, it is essential that all constituents have a clear understanding and acceptance of the economic consequences of current government policy.
Understanding and acceptance is only possible when the public is presented with a clear picture and careful explanation of the issues on the table and the consequences of each. Most importantly, it is imperative that each program be accompanied by an easily understood model of the proposed spending together with a model showing how the program is to be funded.
In particular, any program which is not self-funding on a contemporary basis or which involves borrowing, or direct financial support of future generations - must be clearly disclosed and thoughtfully debated to insure that one generation is not entitled to undue benefits at the expense of some future generation.
At the heart of our democratic model rests an implicit assumption of Trust – trust between the citizen and their government – trust that such government will be conducted only with the consent of the governed.
It is our collective belief in, and trust of, this proposition that underpins our allegiance to the Constitution and assent to the laws upon which this nation is founded. Fundamental to this trust was the simplicity of the document itself, together with the very limited, enumerated powers granted to the government, and the explicit understanding that "no money shall be drawn from the treasury, but in consequence of appropriations made by law."
Fast forward to the 21st Century, and we find a government grown so large that it literally dominates the nation's economy. More importantly, we find a government which has completely re-written the notion of fiduciary financial responsibility and what it means to have a treasury.
A careful inspection of our Nation's finances reveals a government which has plundered the Nation's treasury and squandered the public trust through uncontrolled and underreported spending on current retirement entitlements – all at the expense of future generations of Americans. Is this to be final legacy of our current generation of political leadership?
When the System Fails – No One Escapes the Damage & We All Share the Pain
Whether you work in the Private Sector or in the Public Sector – it makes no difference. You should be worried. We should all be worried.
For when we lose trust, when we lose confidence in our government's ability to lead – then everyone suffers.
- Is it fair to future generations that they should be burdened with the debts of our generation's creation? Primarily through the generosity of federal entitlement programs, spending (rather than saving) the payments received from future beneficiaries, we have empowered our government to spend far more that it takes in. This model was created in a time of unprecedented prosperity and growth followingi the conclusion of World War II and is no longer sustainable today.
- We are often reminded of President Kennedy's inaugural address of 1961, and his now famous "Ask not what your country can do for you, but you can do for your country". Today, it is increasingly difficult to find much evidence of that sentiment in the average citizen.
- Together, we face a choice. Do we blindly continue down this path, knowing full well that it is not sustainabe and will impose unrealistic and unsupportable burdens on our children, or do wevstep up and speak out - demandng of our leaders a new path forward, a path built upon a model that will serve not only our generation, but generations to come?
Expect More of Your Elected Leaders
Whether coming from a background as Private Sector Employer or Employee, or Public Sector Administrator or Employee, our elected leaders should have clear, thoughtful answers for today's fiscal problems that overshadow government operations as every level of government.
Unfunded Liabilities present a very real challenge to the ongoing operations of our government institutions, the general health of our communities and the fate of our Nation. How we have arrived at the edge of the current fiscal abyss, in which our aggregate unfunded liabilities approach some $100 trillion, is the subject of legitimate discussion and thoughtful debate.
Going forward, the options for readjusting our national debt cannot be limited. The situation calls for bold, thoughtful, bi-partisan leadership.
But most importantly, the conversations must begin now. Awkward and unpleasant as they may be, the failure of our leaders to address the reality of our circumstances is more damaging yet.
How can we honestly suggest that we are a government of, by and for the people if we can't even bring ourselves to address the common problems facing us today?
Whether as a Citizen Taxpayer or Elected Political leader, how can you be expected to ask the important questions about problems of which you know virtually nothing, and to which you have never been formally introduced or made aware?
If you are not confident in addressing the structural deficits facing your community, then perhaps you should think twice before running for office. Viewed from the perspective of our elected leaders, there are many good reasons why transparency in reporting and robust discussion of the financial consequences of alternative programs and policies are of long-term importance to your community and its future planning options.
- Transparency in financial reporting affords the necessary clarity and focus required to conduct a thoughtful and meaningful debate of the issues.
- Understanding of the financial components of the budget is helpful, even necessary, in prioritizing the issued to be addressed.
- The creation or passing-on of deferred expense and imposition of unfunded mandates – with a clear explanation of their ramifications to future generation – is fundamentally unfair to future generations. Such practices are also deceitful to both citizen taxpayers and public employees alike. Such practices hold the very real potential for destroying the essential integrity and trust upon which our form of representative government is built. Continued unchecked, such practices render the process illegitimate and erode the very foundations of our democracy.
As a child growing up in the United States, we are taught to believe in our government and trust our elected leaders. Today, however, that equation is being put to the ultimate test. In city after city, and state after state, we are finding governments which are living beyond their means. Increasingly, we find a system of government reporting which is outmoded, broken and failing in its basic responsibility to accurately reflect the true cost of current operations. In city after city and state after state, our largest cost of government – employee compensation and post-retirement benefits – are being systematically underreported, with the result that future generations of America's youth will be saddled with a financial burden not of their making. The current situation is clearly not sustainable, does not conform to American standards of intergenerational fairness and demands resolution.
Generous as has been our current generation of seniors, our current system of entitlements is no longer sustainable. Clearly, we cannot unwind and abandon a half-century of commitments to our seniors, but there is no doubt that a frank and honest conversation is long overdue. Since inception, our systems of Social Security and Medicare have over-promise, over-delivered and under-collected – with the result that our available trust fund resources are woefully short of what is required to fund the promises made to our current generation of seniors. Not to distract the conversation, as some have, by describing it as a ponzi scheme – but the reality is that it's not an unrealistic comparison. Bottom line is that the last three generations have accepted far more from the system than they have contributed, and It doesn't take a rocket scientist to realize that situation cannot go on forever. The challenge is how we are going to address this inevitable problem. The real question before today's generation of adults is: "How will we choose to address and resolve the problem which we have allowed to develop on our watch?"
Public Sector Administrators & Management
Departmental managers and administrators play crucial roles in assuring the efficient conduct of our public agencies and institutions. Well-functioning and energized workplaces serve the best interests of the employees, their customers, their governing boards, and the taxpayer. Over the long terms, it is essential fact that the interests of all parties must converge – otherwise an imbalance results and associated consequences ensue. Over the long run, the organization must be adaptable and responsible to the challenges that come with growth and change.
A key component to long term sustainability is a robust system of management reporting and financial controls presented in a manner that is both consistent, transparent and informative from the perspective of management. Reports which provide rigorous performance standards and meaningful measurements of departmental performance and productivity – over time – are essential. Likewise, comparable measures of departmental financial results, presented in accordance with rigorous managerial accounting and financial reporting standards.
It is essential, therefore, that managers and administrators take all necessary steps to insure the quality and usefulness of all public reporting to help insure the best long terms consequences for their employees, their customers, their agency directors and taxpayers alike.
A culture that willfully accepts and condones the use of outmoded, bureaucratic standards of practice that do not measure up to contemporary expectations of best practices in the financial and accounting community can no longer be condoned. The same is true of those outside agencies and audit companies who are engaged to audit departmental performance on behalf of the agency, its directors and the taxpayer. New realities demand new practices.
At the end of the day, that which a supervisor, manager, director or taxpayer is not told is something for which they cannot be held to account.
Public Sector Employees
Reliable as has been the notion that government employment somehow confers the assurances of a guaranteed career, together with lifetime pension and benefits - that assumption is no longer supported by the facts. City after city, and county after county, we find a pattern of willful neglect to provide the funding necessary to support the promises that have been made. At some point, there must come the realization that our cities, our counties and our states – in their respective roles as public employers – have woefully failed to deliver on that promise. The current situation has resulted in a giant question mark, for employees and taxpayers alike, as to how we got here and who should be held accountable (and to what degree) for resolving this fiscal nightmare.
Our government's current approach, which relies on accounting gimmicks to push off the day of reckoning to some future generations of taxpayers, is fundamentally unfair and quintessentially un-American. Elected leaders, employees and taxpayers alike must demand an equitable resolution of the current impasse.
In the meantime, public sector employees should no longer assume that government employment confers any special guarantees of continuing employment or protections against the type of fiscal mismanagement that might leave their employer unable to fund promised pensions and other post- employment benefits.
As is the case for public sector administrators and managers, it has now become encumbant on all public sector employees to approach their individual career tracks with this same awareness that new realities demand new practices. All employees have an obligation, both to themselves and their families, to maintain a realistic view of their future employment prospects. In the case of public sector employment, such prospects are most often determined by continuing justification for services in relationship to the reliability of dedicated and reliable sources of funding.
For how much longer is it safe to assume that any agency or bureau will remain an assured source of employment, absent a sustainable and reliable source of funding? As important, and perhaps moreso, is the reliability and security of post-retirement benefits. One need ask: "If the funding necessary to support the benefits has not been formally and adequately set aside, and entrusted to an independent trust or fiduciary, how secure are the associated benefits?"
Such perspectives are essential if the management of our agencies and departments are to have a "real, open and honest" relationship with their employees.
In essence, when an employee reads the annual report of their employer and sees that the employer has chronically failed to make contributions to a retirement plan or a post-employment benefits plan – it becomes their responsibility to demand an explanation. And, pending a suitable explanation, it becomes their responsibility to determine whether they continue to work for such employer.
As with the case of the departmental manager and the employee, so too it becomes the responsibility of the Union Manager, as an agent for the employee, to effectively negotiate and provide accurate and reliable guidance to their membership in the case of employers who are failing to make adequate contributions to fund agreed upon contributions to previously agreed retirement plans. In the absence of regular and sustained contributions, sufficient to fund future retirement obligations, one imagines it should be a duty of the advising negotiator to notify the membership directly of such failures.
In this manner, again, the employee and the Union are protected from continuing in good faith with employers who are no longer in position to support their commitments.
Following these practices, negotiators will be best positioned to provide accurate and timely feedback to agency directors and council representatives. Confronting the directors and council representative in such direct fashion serves to frame budget negotiations in no uncertain terms, thereby forcing mandatory budget adjustments with evidence of additional funding, or resulting in clear directives for mandatory staffing adjustments. Such practices would remove the cloud of doubt and provide certainty for administrators, directors, employees and taxpayers alike.