April 9, 2011
The Price of Government Employees
One of the world's more pressing problems is sovereign debt. From Japan to Greece to America, the debts run up by governments are forcing painful choices.
But some think we needn't make hard choices. They think things can go on as before and that government can take on even more debt and start up even more public programs. Some are unwilling to make any sacrifices; they don't want to give up anything.
In America as in Europe, those most averse to change are government employees. The evidence for this has been seen recently in states trying to get control of their deficits. Wisconsin is the prime example, where protesting government employees, teachers, students, unionists, and a few anarchists occupied the state Capitol for weeks.
The big issue for state employees in Wisconsin was the loss of collective bargaining. Wisconsin needed to scale back collective bargaining so that it can control runaway benefit costs and so that bad employees can be fired without incurring huge legal bills. States wanting to cut their deficits must address spending; they can't just raise taxes, as residents and businesses will decamp for other states.
To see what the states are up against, watch the video of filmmaker Michael Moore on March 5 in Madison, where he delivered a speech (transcript) to thousands of protesters, inflaming their passions and class resentments, telling them that America is "awash" in cash -- "It's just that it's not in your hands."
The cost of personnel is one of the biggest expenses for a state (or for any enterprise). If a state can't control what it pays for employees, it's unlikely to get control of its budget. In his April 1 article "We've Become a Nation of Takers, Not Makers" for The Wall Street Journal, Stephen Moore relates that the annual cost of employees to state and local governments is $1 trillion, almost half their budgets. Here's more Moore:
If you want to understand better why so many states -- from New York to Wisconsin to California -- are teetering on the brink of bankruptcy, consider this depressing statistic: Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government.
The mushrooming number of government employees isn't the only problem, however; government employees have higher average compensation than private sector workers. Some contend that this is false. But a recent study from The Heritage Foundation by Jason Richwine and Andrew Biggs confirms it. And on April 4 in a related article at NRO, they write:
Sadly, it's easier to put out a dozen poor studies than to get a single analysis right. But many fights on public-sector pay are yet to come in states around the country. Taxpayers and their advocates need to be ready to counter false claims about government pay.
The dollar impact of employee costs on government deficits isn't the only issue -- there's the issue of equity:
Borrowing money to pay for current government spending involves deferred taxation. And when elected officials make contracts with unions to pay for open-ended pensions and benefits, they are again kicking taxation off to the future. The problem is that one of the parties to these decisions -- the party that will fulfill such government promises -- was not represented: the future taxpayer. So deficit spending and open-ended benefits for government employees are a form of "taxation without representation."
In postponing taxation, politicians make a claim on the earnings of the future taxpayer for the purpose of handing out free goodies to the current taxpayer. Government contracts with government employees should only extend for the term of those officials approving such contracts, or two years. The next electorate may vote in officials who wouldn't sign such agreements. This is why "defined benefit" pensions have got to go. Such pensions are neither fair for the future taxpayer nor for the public employees who may lose their pensions. Better to own your pension than to rely on the willingness of future taxpayers to fulfill promises to which they didn't agree. Better to take the money and run.
If it is true that no Congress can bind a future Congress, then how can any Congress bind a future electorate or the future taxpayer? For that matter, how binding is any contract made for someone who didn't agree to it? Not even Congress should presume to sign agreements that others must fulfill -- except for the voters that gave them power.
If current taxpayers are unwilling to pay the price for current government, then scale back current spending. But don't make future generations into tax slaves.
Change may be OK for the rest of America, but not for government employees. They don't appreciate the gravity of the sovereign debt crisis, or that bankruptcy looms, or that ruin is at hand. If money is short, that's your problem.
So as The Judge so elegantly puts it on Freedom Watch: "Does the government work for us or do we work for the government?"
Jon N. Hall is a programmer/analyst from Kansas City.