The sky has fallen

Hey, we’ve got a brilliant idea! If any of you are struggling to make ends meet because your income is too small and your debts are too large, just propose to the bank to forgive all your loans. Next, turn around and ask the same bank to give you a $40,000 loan so you can get a fresh start.

This may not seem as ridiculous as it sounds, since some very smart and powerful people are suggesting the same thing with the retirement account. If they think it’s a plausible idea, why not try it yourself. If it does work, your debts will be forgiven and you will have money in the bank. The worst thing the bank can do is tell you “no,” and maybe have a good laugh afterwards.

We hope you realize that we are just joking about going to the bank; however, after the Governor’s latest attempt to bail the CNMI out of its financial woes, a similar idea is being seriously considered. The piggy bank the government is looking to loot, though, is the people’s retirement account!

This has been in the news so often in the past few days, and we did not plan to add our two cents worth, because a lot of good comments have already been expressed. However, after one letter to the editor supporting the bill, it concerned us that there might be some people who think that this is a good idea.

When we came to Saipan in 1997, we were surprised at the generosity of the retirement program. It just appeared too good to be true. Nine years later, it is being declared too good to continue. Granted, the program does need to be overhauled, but the current bill is not the solution. The short-term benefits to the government would create long-term problems for people depending on the Fund.

It’s interesting that we have changed course 180 degrees in the last few months. Remember the full-page ads by the previous Governor with the headline: “The Sky is Not Falling.” Back then we were told that things are “pretty darn good,” and there was no need to worry. However, only the most naïve bought into this line.

Well, the message now is that the sky has fallen. Instead of trying to “stay the course” the Governor is trying to save a sinking ship. Everything that is not essential and has not been bolted down is being tossed overboard, and the crew is getting a dock in pay.

Desperately poor, Third World countries are routinely forgiven their debts. Is the CNMI admitting to this level of financial responsibility? What message does this convey to others when we try to do businesses with them?

Yes, other countries have done the same thing to their retirement programs, but with disastrous results. Consider the U.S. Social (In)Security System. Efforts have been made to revamp the system, because the number of retirees will start increasing in 2008 when the baby boom generation begins their mass exodus from the workforce. This has been a concern of both the Federal Reserve Chairman and the President. And it has been a major concern for people who hope to collect from the Fund.

What accelerated this retirement quagmire was when President Clinton raided the Social Security trust fund and spent every penny remaining in the fund on non-pension items. What was done with this money? The same thing this government proposes—pay off some of the debt. During the four-year period from 1998 to 2001, politicians claimed a $557 billion surplus, yet the total national debt increased $438 billion during that period—a difference of nearly $1 trillion. The general government spent more than its general revenues every year and covered it up by siphoning-off all $2.9 trillion surpluses incoming to trust funds and replacing it with IOUs.

Did using this money to pay down the debt work for the U.S. government? When we wrote an article about the debt on September 2004, the U.S. national debt was a mere $7.385 TRILLION. In the last 20 months, the debt has grown to $8,370,567,520,277 (see www.brilling.com/debt_clock/), and the national debt continues to increase by $1.9 BILLION dollars per DAY!

Now, if the NMI Retirement Fund board declares the Fund bankrupt, do we really want Uncle Sam to help us set up a retirement program, since they are doing such a stellar job with their own debt and retirement program?

In another article this week, Karl Reyes said the NMI Retirement Fund Board authorized the drawdown of $1.5 million—the third time in two months—to help pay for pensions. If the bill passes, it will be the death knell for the Retirement Fund. It will cause the board to drawdown more from the reserve account, which will cause the Fund to go into a death spiral.

Cut this article out and stick it to your fridge so that you can’t say you weren’t warned about the consequences of the bill. The Governor has come up with a lot of good initiatives and plans to help the CNMI get on better financial footing; this is not one of them.

(Rik is a business instructor at Northern Marianas College and Janel is the owner of Positively Outrageous Results. They can be contacted at: biz_results@yahoo.com)