Commentary and Criticism about the National Education Association
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Some Financial Stuff Before I Get to the Point
When the U.S. government promises retirees that that their Social Security and Medicare benefits will always be paid no matter how dire budget talks get in Washington, they are technically telling the truth.
I use the word "technically" for reasons explained below.
You see, the U.S. government will never run out of money. That's right. If it doesn't have enough, it can always borrow whatever it needs.
Now you may rightly ask: "What will happen if no one wants to lend money to our government at some point?" But this is still not a problem because the Federal Reserve (our Central Bank) will lend as much money as necessary to the U.S. Treasury so that all bills can be paid.
Now wait a minute there. Are you saying that the Federal Reserve has a bottomless bank account?
Sort of. If the Federal Reserve doesn't actually have money to lend to the U.S. Treasury, it can just create it in unlimited quantities out of nothing.
There is a great video which explains this process in more detail at the Peak Prosperity website - Chapter Eight: The Fed - Money Creation
Back to the Point of This Blog Post
Unlike our Federal Government, states cannot print money to solve their individual debt problems. This is a huge problem because public employee retirement systems in many states not only don't have enough money in them to pay future retirees, they also have no hope of every getting enough money.
Governments have simply promised too many benefits that they can't afford.
The only possible way out is expressed very succinctly by Carl Dincesen his article "Creditworthiness of New York and Illinois: One is Bankrupt":
"Retired public employees might understand that it is better to negotiate a fair agreement than to demand one the employer can’t afford."
That is a nice way of saying exactly what the title of this blog post reads.
The NEA is constantly suggesting that its members contact politicians to get more benefits. But as I wrote on my other blog njea-info.org - you can't get blood from a stone.
Teachers will need to be super flexible in negotiations if they want to save the system. Taking a hard line is selfish and will simply destroy the retirement system sooner rather than later.