I have only one question for the editors of the Washington Post about their reaction piece to the Illinois Supreme Court’s decision that the legislature’s strategy for dealing with the state’s pension problem was unconstitutional:
We don’t have any good advice for Mr. Rauner, but the lessons are clear enough: No state should ever get into such a financial trap in the first place. Elected officials should make only promises their states can afford to keep.
Why? Why should they behave that way? The guy who makes unfulfillable promises gets elected and re-elected, again and again and again. The guy who doesn’t won’t make it through the front gate.
The clear problem here is that, just as with the financial crisis, everybody is operating based on their incentives and it will culminate in disaster. During the housing bubble there was a cynical slogan: IBGYBG. “I’ll be gone; you’ll be gone”. We’ll make a lot of money and by the time the nickel drops we’ll both have left town. It’s the same here.
The only way to change this is to change the incentives. I can think of a dozen ways to do that and every single one of them would be opposed by powerful constituencies for which they are a matter of life and death.