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Monday, February 04, 2008

I Want Al To Run For President

No, no, not Al Gore. He seems quite loopy to me. This Al:
Three friends from the local congregation were asked, "When you're in
your casket, and friends and congregation members are mourning over you,
what would you like them to say?"
Artie said: "I would like them to say I was a wonderful husband, a fine
spiritual leader, and a great family man."
Eugene commented: "I would like them to say I was a wonderful teacher
and servant of God who made a huge difference in people's lives."
Al said: "I'd like them to say, "Look, he's moving!"
I like the way this Al thinks (hat tip Lance). He knows how to focus on the main issue. Instead, for candidates we've got a bunch of people on the left and right who do not have a clue as to the main issues, much less focus on them. This one's going to get ugly.

So we're proposing a 3.1 Trillion federal budget, are we? And most of the spending in that is for entitlement programs, and we all know we are going to be spending a lot more on Social Security and Medicare. It boggles the mind. It's fine to say that you want to help people, but how does anyone propose to pay for the new programs they are proposing?

It's time to get serious, isn't it? Treasury receipts are cooling down fast. FUT (which is only charged on non-government employees) is about at 2000 levels. Over the last few months corporate income tax receipts have dropped significantly YoY, and now Withheld Income and Employment Taxes are following. That plus the proposed "stimulus" program of $146 billion account for most of the expansion in the deficit.

State budgets are going to take a big hit, and they are going to have to begin cutting back. This will have an ever-increasing impact on GDP over the next several years, largely because these are a group of better jobs than the private sector is creating. Comparing government to non-government wages and benefits shows that the disparity is growing:
State and local government workers are enjoying major gains in compensation, pushing the value of their average wages and benefits far ahead of private workers, a USA TODAY analysis of federal data shows.

The gap is widening every year, rising by an average $1.02 an hour last year and $2.45 an hour over the past three years. The better pay and benefits for public employees come as private-sector workers face stagnant wages and rising unemployment.

State and local government workers now earn an average of $39.50 per hour in total compensation, reports the Bureau of Labor Statistics (BLS). Private workers earn an average of $26.09 an hour.

Benefits are a big reason for the gap.
You can't expand public sector benefits to private sector employees without figuring how to pay for it. You are not going to be able to garnish the wages of those $10 an hour employees to do it, and there's no way to make insurance affordable for a big chunk of people who don't have it without the government paying for it. You can't expand Medicare to younger people when we haven't even figured out how to pay for it for the oncoming retiree bulge, and when private sector insurance subsidizes health-care given to Medicare recipients. As a higher percentage of the population goes on Medicare and Medicaid, the remaining private payers are paying a higher and higher percentage of the costs. If you put everyone on Medicare, then you are going to have hike Medicare reimbursement rates significantly to keep the doctors, hospitals and clinics in business.

It's not just state and local workers. The federal employees get paid very well and have excellent benefits. There are a lot of employees who get paid very well who are government contractors, so the federal government's contribution is larger than shown.

There are two fundamental imbalances in our economy. The first is that government keeps expanding in relation to the private sector. The second is that we have to deal with the demographics of an aging population. No one wants to really deal with any of these issues, but they start even before the Baby Boomers get into the retirement programs. In our economy, older workers are the first to be laid off in downturns. Very few people in their 60's continue in private employment unless it's at places like WalMart.

So it sure looks like the older workers are going to find themselves on the sidelines, unable to afford insurance (which is very expensive for them), and working at really low-level jobs in disproportionate numbers.

Here's a graph for you, compiled from Treasury receipts. There is no other way I can interpret the data than to state that private sector employment is just not increasing at all. In the last two years it has begun to decline.


Looks like its time to start off-shoring our public sector jobs, lol.
I'm sure there are plenty of overpaid government workers, but one reason for the averages moving apart is that so much government work is being outsourced. The $9/hour people who answer the phones for the DMV get moved to "private" and the $30/hour people who administer the contract stay in "public."

Although I'm a practicing capitalist, I'm not sure this outsourcing is generally a good thing. The reason the private sector works better is the existence of competition, not some private-sector magic, and you really can't have competition in things like DMVs and air traffic control
At least you aren't suggesting that there will be more nursing jobs soon as the boomers retire ;) People in government don't get this one. They will tell you that you just raise the retirement age without telling you exactly what jobs people are supposed to work in until they turn 70. They don't understand how hard it is to find one that will hire you in your upper 50s. And there is that other thing no one likes to talk about. As you age, you lose stamina too. If we talk about things like that, then employers will simply stop hiring older folks. There was a time when you could expect to be at the top of your earnings in your 50s. Now, you'd better expect things to drop off after your 40s.
David - it depends, and that's the truth. Outsourcing your security, etc, may not be a good thing. Lowest dollar bids sometimes translate into really bad service.

MAB - it's going to happen.

Teri - yup. The real theory is that most people will have to take early retirement. It's a way to cut benefits without overtly cutting them.
the current reasoning seems to be that we need to cut taxes on corporations and the wealthy,have another martini and hope for a plague.
Plagues aren't profitable....
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