Paying for the Ponies.
Taxes go up, millages rise, but services go down. Where's the money going? It all boils down to ponies. Ponies? They're little horses that every kid wants. You want to be a big hero? Give a kid a pony. If you want to get elected, or better yet, reelected, you can't go wrong handing out free ponies.
You can give out free ponies a number of ways. First is for the government to buy them directly and give them away. This used to be the favorite method, but it gets expensive because the government ends up running stables. The other way is for the government to require people, generally employers, to provide free ponies. That way the government only has to pay for an army of inspectors to monitor compliance. Actually, there's a third way to get free ponies: unions can demand it as a contract benefit.
Works At First, But There's This Little Problem
So now you have people getting free ponies and you got the credit. There's only one problem. Ponies are expensive to buy, but even more expensive to maintain. You give out a pony and next thing you know, people are back complaining. "Sure you gave me this pony, but who's going to pay for all the oats?" And what good is a pony without a saddle and tack? So the lawyers go around, and eventually some judge says you have to give out a "Rideable" pony. And don't forget the vet bills!
Now let's say you're an employer. You own a yo-yo company. When times were good, you were okay. But now the yo-yo market's gone soft and the costs are awful. You can afford the wood, the varnish and the string, the lathe is paid for. But the ponies! They're killing you with hidden costs. You can't expand your business, hire more people, or research a better yo-yo, because you have to pay into the Pony Fund.
It's Not the Lawyers that Get You, It's the Accountants.
You see, lawyers don't really rule the world; the true kings are accountants. And a good accountant will make you figure out how much the ponies not only cost now, but how much in the future. Over the next 20 years, your business or government department will have to put aside enough money to pay for the ponies you're going to have to buy, as well as the costs of the ponies you've already bought. Plus an inflation factor. This is called your Pony Fund Balance. When there's enough in there to pay for estimated costs and obligations, it's called "funded," and when not it's called "underfunded."
So the yo-yo business is down. Now you have to choose between laying off employees or other costs. But you still have to fully fund the Pony Account. When you look at the balance sheet, you see the ponies are bankrupting you. So if you live in a state where they require ponies, like, say, Michigan, you may leave for one that doesn't, say Indiana. That's called "job loss." Or you don't open up a business in Michigan--that's called "lack of job creation." Fewer businesses can pay for the ponies, so fewer people have jobs, the state's revenue declines, the burden falls more heavily on the remainder.
All Kinds of Ponies.
There are a lot of different ponies in society today. Social Security is one. In Michigan, it’s the Medicaid budget, which is currently eating up 30% of the General Fund and still growing. For General Motors and other automakers, it was employee drug benefits and retiree pensions. In Europe, everybody in the family expects a rideable pony as a human right. That's why Europe's economy has underperformed for years, Germany finally balked at buying ponies for Greece, and Greece has gone up flames in protest.
If you want to know why companies lag and governments are going broke everywhere, it's simple: we're paying for the ponies. Nobody asks where free ponies come from--folks figure the government, or some "rich guy” out there, or the Benefit Fairy. Actually, costs eventually find their way home. You may think a generous politician gave you a pony, but one way or another you're going to get saddled.
