Time for Improved Stewardship

Several interesting data points can be found among three articles in today's Wall Street Journal. (See sources listed below.) As I contemplated these I found myself wondering what happened to the idea of being prepared for a rainy day? What happened to stewardship?

Here are the data points:

1. More than 12 million homeowners, out of about 75 million, have mortgages that exceed the value of their homes. The average negative equity gap is about $40,000. Yikes!

2. Declining state tax revenues are causing budget troubles.

• California faces a budget deficit of $10 billion.


• To help deal with a $2 billion budget deficit, Illinois is slowing down payment of its bills.


• Pennsylvania announced a hiring freeze on September 16 to solve its budget woes. But a few weeks later its deficit grew by nearly $300 million.


• The Employee Benefit Research Institute estimates that the average public sector employee earns 46% more in total compensation than counterparts in private industry. That's because governments spend 60% more per worker on benefits including retirement.


• According to the Pew Charitable Trust, states have about $11 billion saved up to pay some $381 billion in future nonpension benefits such as health care.

3. New York City faces severe declines in revenues as the result of layoffs on Wall Street. During the recent financial bubble many people on Wall Street made lots of money and consequently paid lots of city income taxes. So what did New York City do? It increased its rolls of full-time employees to a record 313,965 as of June 30, 2008. In 2004 the number was about 260,000.

All this begs the question: What were they thinking?

It's time for a renewed emphasis on something that has been allowed to lapse: Stewardship.

Sources:

• "Our Spendthrift States Don't Need a Bailout" - Steve Malanga, senior editor, Manhattan Institutes's City Journal
• "The Public Payroll Always Rises" - Editorial, Wall Street Journal
• "How to Help People Whose Home Values are Underwater" - Martin Feldstein, Harvard professor and chair of Council of Economic Advisers under President Reagan