Monday, April 26, 2010

Supporting Public Employees and Jobbing the Public

The DMI Blog waxes eloquent-we kid you not-about the national plight of public employees during the current recession: "Looking at the national economic statistics, you might be able to persuade yourself that the recession is over. But observing local communities – neighborhoods of foreclosed homes, school districts about to lose their teachers, and commercial strips where the bus route just got cut – reveals much more persistent economic pain, and the threat that, with public investment dwindling, things could once again take a turn for the worse."

First of all, with national unemployment running at close to 10%-with the real figure being much higher-only the self deluded would believe that the recession might be over. And, up until now, it has been the public sector that has fared much better in the downturn; and on most indices the public sector workers are doing a lot better than their counterparts in the private workforce: "By every labor market measure, the public sector has done quite well and even expanded during the recession compared to the private sector. This has prompted Michael Jahr of the Mackinac Center to wonder whether recent government policies could lead to a long-run hollowing out of the private sector, i.e. could we be in the early stages of the "Detroitification" of the country?"

But that's not how the drummers see things: "Yesterday, articles in the New York Times reported on the struggle of cities across the country to cope with plunging revenue for education and for transit networks. As many as 300,000 public school employees around the nation could lose their jobs to state funding cuts, according to Secretary of Education Arne Duncan. Charlotte, North Carolina plans to cut 600 of the district’s 9,400 teachers; Los Angeles may lay off 5,200 school employees. Few urban districts have been spared."

Now, can you suppose why cities are experiencing dwindling revenues? Could it have anything to do with an unsupportable tax and regulatory regime? And to cite the plight of California is a tad bit counterintuitive-as Steve Malanga's expose of the role that public sector employees have been playing in making the business climate untenable in the Golden State makes abundantly clear.

As Malanga points out: "The unions’ political triumphs have molded a California in which government workers thrive at the expense of a struggling private sector. The state’s public school teachers are the highest-paid in the nation. Its prison guards can easily earn six-figure salaries. State workers routinely retire at 55 with pensions higher than their base pay for most of their working life. Meanwhile, what was once the most prosperous state now suffers from an unemployment rate far steeper than the nation’s and a flood of firms and jobs escaping high taxes and stifling regulations. This toxic combination—high public-sector employee costs and sagging economic fortunes—has produced recurring budget crises in Sacramento and in virtually every municipality in the state."

But when you've willingly dug yourself into a policy hole-or perhaps driven into a cul du sac-the idea of reversing course simply is unthinkable-and so the clarion call for another stimulus bill, since the first one kept all of the overcompensated public school teachers in their sinecures: "Yet the fact that many cities are just now contemplating severe cuts is actually a victory for public policy. The American Recovery and Reinvestment Act saved 284,000 education jobs, according to the Center on Budget and Policy Priorities, and funded mass transit improvements and expansions nationwide. Policy worked: the problem is that the money ran out before the economic crisis ran its course. We need additional federal investment to meet the continuing need. As I’ve argued before, the Local Jobs for America Act is a strong alternative to a new normal of plummeting public investments. The bill would create or save a million jobs by providing local governments with direct funding to hire or retain teachers, firefighters, bus drivers, police officers, and other critical community workers."

Detroit city here we come. With a national debt in the trillions, and more tax hikes from the progressive elites inevitable-further crippling the possibility for the recovery of the real economic generator of work (the private sector)-DMI looks to pile on; seeing economic success in more tax driven public spending. The following information indicates that this discordant drum beat on behalf of the public work force has an obscene component to it: "According to the U.S. Bureau of Labor Statistics, state and local government salaries are 34 percent higher than those for private sector jobs. Okay, that’s partly because government workers tend to have white-collar jobs. Benefits, 70 percent higher for these workers, are the real rub. And benefits for government retirees are the most flagrant. They’ve become a national scandal, a fiscal nightmare for states, cities, and towns, and an example of unfairness of the sort liberals routinely complain about but are mostly silent about just now."

Here's one anecdote that should curl your hair-even though it doesn't involve the hated Wall Street greed: "In Contra Costa, California, the final salary of one fire chief, 51, was $221,000. He was given an annual, guaranteed pension of $284,000. Another chief, 50, whose final salary was $185,000, got a pension of $241,000. Credit the Contra Costa Times with uncovering this." Or, see what new NJ governor Christie has found: "One retiree, 49, paid “a total of $124,000 towards his retirement pension and health benefits. What will we pay him? $3.3 million in pension payments and health benefits.” A retired teacher paid $62,000. She’ll get “$1.4 million in pension benefits and another $215,000 in health care benefit premiums over her lifetime.”

And one last note. When the DMI's Traub sees education as the, "cornerstone of America’s global economic competitiveness," she elides the fact that the overpaid teacher corps has delivered no such thing-and which is why we keep looking for new and even more expensive ways to figure out how not to leave another single child behind, Race to the Top, anyone?

The continual pump priming of the public sector can't end well for the continued productivity of the American economy The DMI prescription, is a prescription for disaster. Fortunately, the public is beginning to see this Leviathan nightmare pretty clearly.