Free Markets, Free People

Daily Archives: September 6, 2010


“We are altering the deal. Pray we do not alter it further.”

Over at Instapundit, I see a hard line from a government worker threatened by all this talk of cuts that might be necessary for underfunded pensions:

I’ve been reading your blog for years and I appreciate your nuanced brand of conservatism. But lately, your attack on public pensions has me concerned. Look at it from my perspective:

When I graduated from law school and applied for a job at a Federal agency almost 30 years ago, the deal was simple: “We won’t pay you as much as you might make in the private sector, but you’ll get reasonable pay, great benefits including a generous retirement system, and a reasonable work life.” I took the deal.

{insert various moaning about the sacrifices he has supposedly made here, including such onerous burdens as working at metal desks…}

Apparently though, some people, in and out of government, are no longer happy with the deal. Complaints and warnings about government pensions and pensioners abound. Typically, the narrative is something along the lines of: “Greedy Retired Bureaucrats Still Feeding at the Public Trough as Taxpayers Suffer!”

Well, if you’re concerned about unfunded government liabilities, I agree with you. If you think that government employee pensions are too generous, I’ll listen to what you have to say. But if you just don’t like the deal the government made 30 years ago and want out, I’ll see you in court.

Legally speaking, this guy probably has a point. However, he appears to be missing a much bigger point. The legal right to collect money from a party means nothing if the party simply cannot pay. Both states and the federal government have made promises that they almost certainly can’t pay.

It sounds as though this guy, like many who haven’t thought very deeply about the matter, just assumed that he could find a way to banish such risks from his career. He bought into the fantasy that somehow, some way, government is different.

In the long run, it’s not. Every organization has limits on how it can spend money and the promises it can keep.

Private companies find out pretty quickly when they have reached those limits. For government entities, their monopoly on force and the resultant range of options to collect more money lengthens the feedback cycle, so it takes them longer to realize their mistakes. That just means they get in bigger trouble before the crisis comes.

Employees have been getting shafted by organizations that lost the ability to keep their promises for hundreds of years. I’d like to see this guy tell some Enron folks about his troubles. I don’t think he would get a lot of sympathy.

Yes, legislators have made stupid, stupid promises. In theory, that’s the citizens’ fault because they elected the stupid, short-sighted legislators. However, the citizens are not likely to accept that abstract responsibility. They are going to look at the high tax rates and poor government services in bankrupt states and decide to go elsewhere, as many in California and Michigan have done in recent years.

Almost everybody is going to lose in the debt crisis to come. I’m sorry that someone like Insty’s correspondent, who chose job security over adding value in the more risky free market, now finds out that the security is illusory. That’s life. Those of us in the private sector have always known it. It’s about time government workers understood that you can’t take risk out of life, and that sometimes life isn’t fair.

They also need to prepare themselves for a backlash that’s been building for decades. Government workers, in my experience, work hard and perceive what they do as valuable. This guy seems to be clearly in that camp. However, private citizens have a completely different perception. There’s a reason we have the cliche “good enough for government work”.

When you’ve had a cushy thirty year career with no worries about losing your job, don’t expect a lot of sympathy about your woes from people beset with job insecurity and burdened by high taxes and meddling bureaucrats. Especially when they don’t see what you do as particularly valuable. Drafting and defending new regulations may be hard work, but it doesn’t necessarily add value to society.

This divide in viewpoints is going to come to a head in many places and many ways in the next couple of decades. I know many government workers feel entitled; heck, that kind of entitlement psychology is what leads a lot of them to government work in the first place. However, believing in that entitlement so strongly that you are prepared to thrown your fellow citizens under the bus isn’t going to make the coming conflicts easier.


Recession cafe: today serving Obama economic hash

CNN has a story about a bike store owner who has retrenched and is weathering the recession. Contained in the story is the kernel of the economics of the problem we face and how the administration still doesn’t get it.

Here’s the quote:

Both then and now, D’Amour said the chief problem for small business owners is access to financing. And lawmakers want small businesses to know this complaint is reaching Washington.

President Obama urged Congress last week to move forward on a bill designed to help small businesses, including a $30 billion lending fund to loosen credit lines and $12 billion in tax breaks.

That will help but it won’t solve the problem, said Anne Mathias, director of policy research at Concept Captial.

"It’s not going to bring a rush of people into stores to buy whatever it is these different small businesses have to offer, but it will help," she said. "It’ll help kind of at the back end."

Republicans say the bill won’t have much effect and are urging the president to extend the Bush administration’s tax cuts.

Todd McCracken, the president of the National Small Business Association disagrees.

"Putting money in the pockets of both consumers and small business people so they can take advantage of the opportunities when they come along is crucial," McCracken said Sunday morning on State of the Union with Candy Crowley.

Access to financing, although important, isn’t the base problem. Consumption is – or the lack thereof. Additionally, payroll taxes will be going up for everyone in January (a little known part of allowing the Bush tax cuts to expire).

Question: if you are charged – both short term and long term – with getting the economy moving by implementing policies/laws at a national level, how would you go about it?

Well, in the short term you can provide businesses with all the financing in the world, but unless consumption steps up, it doesn’t do anything useful.  Until buyers are buying, businesses won’t be hiring.

So what’s the best way to quickly boost consumption?  Obviously it is to put more money in the hands of consumers.  And one such way to do that is to cut payroll taxes, or, as has been suggested, have a payroll tax holiday.

That, of course, has been rejected by the Obama administration which feels it would “cost” the government to much money.  They’d rather government “cost” the consumer too much money and the consumer stay home as a result one supposes. 

Instead, the administration is proposing a $100 billion “research and development” credit for businesses.  A couple of observations – that’s not a short term fix and not all businesses engage in R&D. 

The point, of course, is the administration is more concerned about the government revenue stream than the economy and it is, as John McCain has said, just “flailing around”.  It is much more concerned with the “cost” incurred by government necessary to actually have some impact on the economy than it is the “cost” it will impose on the tax payer for it’s future multi-year deficit fueled budgets. 

It refuses the other side of tax cuts – spending cuts.  Instead, it simply intends to shift the burden of its profligacy to you.  And these tax cuts are for show only – a way of claiming to do what the GOP wants without really doing much of anything.  When this tiny and piece meal approach fails to get the dead weight of the economy moving, the left will claim to have tried the right’s prescription and that tax cuts didn’t work.

Anyway, the administration plans to “pay” for this tax credit (oh, so now PAYGO is important) by increasing taxes through closing “tax loopholes” for multinational corporations and some energy companies. This, dear friends, is simply another much desired wolf from the liberal agenda in sheep’s clothing.

The National Tax Payer Union points out that those taxes being proposed as “closing loopholes” will actually make our domestic oil and gas business uncompetitive.   It will, for instance, tax all the revenue Chevron earns (both here and overseas) because Chevron is an American based company but won’t do the same to BP (or Venezuela or China) because BP isn’t an American based company.  Unilateral nonsense like that will put Chevron in an unenviable competitive situation.

Make sense?  Especially in times of recession? Can anyone guess what a Chevron may decide to do (hello Toronto, any office space to lease up there?).  And, of course, the taxes in question will be passed along to the hard pressed consumer with increased prices.  That’ll spur increased consumption, won’t it?

The rest of the proposed economic package is the usual failed stuff – increased infrastructure spending.  The only laudable portion of the package is the proposed extension of the middle class portion of the Bush tax cuts.  But again – that doesn’t put more cash in the pockets of consumers, it simply maintains the status quo.

But the “rich” – tough noogies.  You may have seen administration flunkies out pushing the canard that the tax will only effect 3% of the small businesses out there.   The Wall Street Journal blows that bit of spin out of the water – first by explaining the smoke and mirrors the administration used to produce that number and then pointing out what the number really is:

According to IRS data, fully 48% of the net income of sole proprietorships, partnerships, and S corporations reported on tax returns went to households with incomes above $200,000 in 2007.

So, the proposal by the administration to get the economy moving is maintain the status quo taxes on the middle class (no immediate impact), provide a limited benefit (at best a long term impact) cut to some business in the area of research and development, more infrastructure spending (long term because of the government project process), an increase in taxes on American oil and gas companies (immediate negative impact) and an increase in taxes for 48% of the small businesses in America (immediate negative impact).

If that’s not a bad tasting hash of ideas, I’m not sure what to call it.  And yeah, you can bet your bottom dollar it will get the economy moving.

Excuse my sarcasm, but obviously this is “rocket science” to the administration, and they’re totally baffled by it.  Someone, anyone, tell me why the GOP should support this?

~McQ


Why consider the real problem when you can play the race card

Welcome to post-racial America:

CYNTHIA TUCKER, ATLANTA JOURNAL-CONSTITUTION: Well I think it may help the Democrats in some races this time, Chris, because some of the Tea Party candidates are so extreme. But there is another issue. There is, as Norah said, a whole lot of voter anger, discontent out there. We haven’t talked about the elephant in the room, and I don’t mean the Republicans: race. Changing demographics. Fear of a white minority.

CHRIS MATTHEWS, HOST: That’s so interesting.

TUCKER: Obama’s election has suddenly made many white Americans aware of the loss of a white majority.

MATTHEWS: That’s so interesting.

TUCKER: That’s what this crazy summer has been all about. Anti-mosque construction. Anti-immigrant ravings. It, that fear is very difficult for Obama to overcome.

As Noel Sheppard asks, then how do you explain the fact that 43% of “white America” voted for Obama or that he had 78% approval rating in January 2009 according to Gallup?

And, of course, it couldn’t be the rotten economy, the promise that the trillion dollar stimulus would fix it when it actually seems to have made it worse (or at least had no effect), or that the government took over car companies, has proposed trillion dollar deficit budgets as far as the eye can see, rammed an unpopular health care law down our throats and has seen no leadership whatsoever out of the White House could it?

Nope – it’s all about losing the “white majority” isn’t it?

An amazing conclusion that could only be cobbled together by a professional race baiter. And another in a long line of excuses tendered to explain the massive unpopularity of the liberal agenda.

~McQ