Why are important projects now unaffordable? Decades ago, when the federal and state governments were much smaller, they had the means to undertake gigantic new projects, like the Interstate Highway System and the space program. But now, when governments are bigger, they don’t.
The answer is what Jonathan Rauch of the National Journal once called demosclerosis. Over the past few decades, governments have become entwined in a series of arrangements that drain money from productive uses and direct it toward unproductive ones.
New Jersey can’t afford to build its tunnel, but benefits packages for the state’s employees are 41 percent more expensive than those offered by the average Fortune 500 company. These benefits costs are rising by 16 percent a year.
New York City has to strain to finance its schools but must support 10,000 former cops who have retired before age 50.
California can’t afford new water projects, but state cops often receive 90 percent of their salaries when they retire at 50. The average corrections officer there makes $70,000 a year in base salary and $100,000 with overtime (California spends more on its prison system than on its schools).
States across the nation will be paralyzed for the rest of our lives because they face unfunded pension obligations that, if counted accurately, amount to $2 trillion — or $87,000 per plan participant.
All in all, governments can’t promote future prosperity because they are strangling on their own self-indulgence.
Is this confined to the US? Or is it a general problem?