Okay, I know that picking on George Will might seem like cheap fun, but as an oped columnist for the Washington Post we are supposed to take him seriously. Today Will is beating up on states that don’t follow his pro-rich prescriptions focusing on California and my home state of Illinois.
Let me start with my favorite Will line:
“From September through December 2008, the premium that investors demanded before they would buy California debt rather than U.S. Treasurys jumped from 24 to 271 basis points (100 points equals 1 percent). The bond market, the only remaining reality check for state politicians, must be allowed to work.”
Okay, boys and girls, can anyone think of anything that might have affected spreads in the bond market in the fall of 2008? (Hint: Federal Reserve Board Chairman Ben Bernanke and then Treasury Secretary Henry Paulson were running around screaming that the world was about to end.)
That’s right, we had the collapse of Lehman Brothers and a financial freeze-up. The yield on anything that wasn’t U.S. Treasury bonds soared in this period. In other words, Will’s statement here means absolutely nothing — but it is good enough for the Washington Post editorial page.
As far as the Illinois bashing, Will tells us that:
“The Illinois Policy Institute, a limited-government think tank, in a report cheekily titled “Another $54 Billion!?” argues that in addition to the $83 billion in pension underfunding the state acknowledges, there is $54 billion in unfunded retiree health liabilities over the next 30 years.”
Hmmm, $83 billion in unfunded liabilities? That sounds scaaaary. If the oped page imposed any standards on its writers it might have asked Will to express this number as a share of state income over this period, since no one (I mean no one) has any clue how large an expenditure $83 billion is for Illinois over the next 30 years. The answer is that it would be equal to around 0.7 percent of the state’s projected income over this period. That is not trivial, but not exactly the sort of expenditure that implies the immiseration of the population.
Projections of health care costs are highly uncertain. The one thing that we can say is that if protectionists like Will didn’t have such control over policy, we could save an incredible amount of money by purchasing more of our health care from the more efficient systems in other countries. The private health care system is a cesspool of waste and corruption. This raises costs for everyone, including public sector employers.
Will also tells us that it is unrealistic for Illinois to expect any segment of its pension fund investments to produce 8.5 percent yields. Obviously arithmetic was never Will’s strong suit.
Finally Will tells us:
“Illinois’ unemployment rate increased faster than any other state’s in 2011.”
That’s interesting. Let’s compare employment growth in Illinois in 2011 to employment growth in neighboring Wisconsin, which is run by a right-wing favorite: public sector union busting Scott Walker. Since January of 2011 Illinois has created 47,400 jobs, an increase in employment of a bit more than 0.8 percent. That’s not great, but not awful either.
By contrast, Wisconsin lost 14,200 jobs over this period, or neary 0.5 percent of total employment.
If the unemployment rate rose more in this period in Illinois than in Wisconsin than presumably it is because people in Illinois were out looking for work because the state was creating new jobs. By contrast, in Wisconsin workers probably gave up looking, knowing that there were no jobs available.
But the really fun part of the story is that Will had to be careful to specify that he was only talking about the unemployment rate in 2011. The reason is that Illinois’ unemployment rate has fallen by 0.9 percentage points since December of 2011 and is now 0.6 percentage points below its January 2011 level. Including this fact would be the honest thing to do, but hey, this is George Will and the Washington Post oped page.
Economist Dean Baker is co-founder of Center for Economic Policy and Research and writes regularly on CEPR’s Beat the Press blog, where this post first appeared.