What Happens When the Goose Stops Laying Golden Eggs?
- 28 Jun 2011
- Written by Greg Nelson
MAKING THE TOUGH DECISIONS - My wife and I decided it was time to prepare a trust so we’d know where our assets would go after we die, and our heirs wouldn’t have to spend years in probate court.This required an admission that we don’t live forever, and that we needed to grow up and do some long-range planning.
The attorney helping us with the process strongly recommended that no money or valuable property be given to heirs until they reach the age of 30.
His 40 years of experience convinced him that teenagers and twenty-somethings don’t use our gifts wisely.
At that age, he warned, people have trouble seeing beyond the moment. Thoughts never enter their minds about investing for the future of their children to come, preparing for the hard times that always occur in a cyclical economy, and giving thought to their retirement years.
With financial problems prevalent at so many levels of government, it’s becoming very clear that too many of our elected officials act like teenagers when it comes to handling the public’s money.
I was startled to read an interview with former Mayor Richard Riordan in The Bond Buyer.
He warned about the dire consequences that could result if city officials aren’t willing to take the tough steps needed to control the exploding costs of government.
The reporter was quick to point out that Riordan’s administration contributed to the problem by approving lucrative wage and benefit packages for city employees.
Aside from not recommending any specific tough solutions, but who better to do so that an ex-mayor, Riordan explained that it was an affluent time when he was mayor. “If I could have foreseen everything that happened I would have acted differently,” he added.
And therein lays an ongoing problem with elected officials, collectively. There is little motivation to focus on long-term planning beyond their next election.
Before and after being mayor, Riordan was a successful businessman. He knew that economies run in cycles – bearish and bullish with periods of stagnation tossed in.
There is no way that he honestly could have believed that the economy of the city would only continue rise to in order to keep with the new pension costs.
He wasn’t a teenager as mayor, but yet he made promises about putting more cops on the street, eliminating potholes from the city, and the list went on.
Only when pushed to the edge of the cliff, where we are now, will city councils and mayors make those tough decisions that are guaranteed to tick off politically influential interest groups.
I’m not just picking on Los Angeles. Our state legislators have stuck their heads even deeper into the sand. It’s a cultural problem.
All this should help us appreciate the efforts of council members like Bill Rosendahl, Paul Krekorian, and Tony Cardenas who have been asking probing questions about the risks and benefits of selling bonds that would allow the building of a football stadium downtown.
The bonds would produce $350 million in cash, but would cost taxpayers between $850 million and $1.4 billion by the time they’re paid off 30 years later, depending upon who’s doing the guesstimating and which interest rate they used.
No one is clear yet about how city coffers would be protected from the economic ups and downs that are certain to occur during that time, to say nothing of what would guarantee that there will be a football team playing there all that time.
This wouldn’t be the first time that the city assumes that the goose will continue to lay golden eggs forever, or at least as long as they are in office.
The developer doesn’t like people questioning his verbal promises and rosy self-generated projections, but neither did Bernie Madoff.
We should applaud the elected officials who want to do the kind of due diligence that they would do if it were their own money being invested.
Tags: Richard Riordan, teenagers, mayor, city council, Los Angeles, pension costs, hard times, tough decisions
Vol 9 Issue 51
Pub: June 28, 2011