Budgetary meltdowns in states and municipalities throughout 2011 have made one thing abundantly clear: the Blue Model is slowly bankrupting America at all levels of government. It isn’t just rust belt cities with public unions that are feeling the pain: not even the Pentagon is immune. From the New York Times:
Many who are more worried about cuts, including Mr. Panetta, acknowledge that Pentagon personnel costs are unsustainable and that generous retirement benefits may have to be scaled back to save crucial weapons programs.“If we allow the current trend to continue,” said Arnold L. Punaro, a consultant on a Pentagon advisory group, the Defense Business Board, who has pushed for changes in the military retirement system, “we’re going to turn the Department of Defense into a benefits company that occasionally kills a terrorist.” […]One independent analyst, Todd Harrison of the Center for Strategic and Budgetary Assessments, a nonpartisan policy and research group in Washington, has calculated that if military personnel costs continue rising at the rate they have over the past decade, and overall Pentagon spending does not increase, by 2039 the entire defense budget would be consumed by personnel costs.
The answer, in the Pentagon and elsewhere, can’t just be to cut wages and benefits. There have to be productivity enhancements: municipal governments and the defense bureaucracy have got to get more done with fewer hands. In both kinds of organization the ‘teeth to tail’ ratio is part of the problem: how much of the workforce is getting the mission done as opposed to how much does support and supervision.Automation also has a role to play. Drones don’t need pensions, and neither do computers. Learning how to replace bureaucrats with the appropriate software and hardware solutions is a big part of making government work.Finding alternative ways to fund pensions is also part of the answer. Defined contribution plans will have to replace defined benefit plans at all levels of government, as they have throughout private industry. The general prosperity of the country is the best and ultimately the only guarantee that retirees have that their pensions can be paid; generous programs that include employer matches and tax deferred accrual can give employees a stake in the general prosperity to see them through their golden years.There is no magic bullet that will solve our cost problems in government, but the more the solutions can come from increased productivity, the less has to come from the toxic triangle of lower wages, lower services and higher taxes.