"The most significant threat to our national security is our debt," Admiral Michael Mullen, Chairman, Joint Chiefs of Staff, August 27,2010

Thursday, March 24, 2011

The Faces of Entitlement

As our nation cuts back in Washington and as our states cut back everywhere but Illinois, New York and California, the weeping, wailing and gnashing of teeth of the unions and their only apparent lifeline to the future, public employees, will rise to a level that will make the state capitol gallery in Madison Wisconsin over the last several weeks look like the peanut gallery on the old Howdy Doody show. Public employees constitute about 16% of the nation’s employment. The total workforce, when employed, is about 150 million. With 10% unemployment, those employed drop to about 135 million. Of the 135 million working about 22 million work for state, local and federal governments. Not inconsequential percentages but most certainly nowhere near an adequate minority to justify their howling, whining, threatening and drastic level of complaining which TheFundamentals accurately predicted would happen in its April 9, 2010 essay entitled, “A Modest Suggestion.” http://thefundamentalsus.blogspot.com/2010/04/modest-suggestion.html

Simply put, public employees do not face the discipline of the marketplace which means competition and the fear of going out of business. Private sector workers know you must compete on wages, benefits and pensions and, most importantly, results to survive. On the other hand, without competition, public employees develop an entitlement mentality that is now being challenged by the much larger private workforce which is simply saying, “ENOUGH!!” These private sector worker/taxpayers expect the politicians they are electing to diminish the massive gap in wages, benefits and pensions. These private sector workers/taxpayers are not going to go away regardless of the lies, distortions and distractions created by union organizers like Richard Trumka and Andy Stern and Karen Lewis (see below.)

These three and their ilk are fighting a big uphill battle. Most people who work in the United States work in the private sector for a lot less salary and wages; a lot less benefits and days off and most do not have anything even close to a pension plan that lets them retire with 70 or 80% of their last few years paychecks after 25 or 30 years on the job. They get nothing even close to that kind of pension. More than likely they get to contribute a portion of their lower salary to a defined contribution plan (IRA or 401k) and their employer kicks in 2 – 4% of their paycheck and then the employee gets to invest the money and try to accumulate additional funds to supplement their social security check proceeds which are being discounted if applied for before the age of 66.

So, the gap between government pay and private pay is large; the benefit and days off gap is even larger and the pension/retirement plan gap is off the charts it’s so out of balance.

The disparity must end. There is a large group of current public employee retirees that have been fortunate in getting the excessive payments. The current public employees will face cut backs and will have to contribute more and new government employees will find their benefit and retirement plans much more comparable to the private sector. If they don’t like that situation let them go to their over pensioned predecessors and get some of their loot.   That would be an interesting test of "solidarity."

In the meantime, don’t expect the howling to abate right away. The howlers will demand tax increases on the middle class and the upper class wage earners. And soon the howlers and their union organizers will recognize that the largese they have grown to expect is the direct result of a growing private workforce and they will conclude that the fastest way to achieve more largese is a combination of protectionism, tariffs and currency controls (i.e. trade restrictions.)

Both movements must be fought and must be decided on behalf of the private sector workers. There is no alternative to rebuilding the jobs growth foundation of the American economy than the long overdue cutback of public sector employment numbers, public sector employee wages and benefits and the replacement of the current defined benefit pension programs with a combination of social security and IRA/401k plans. It’s happening just as we predicted. It’s about to be joined at the national level. Folks, the civil "servant" war is underway in America.  The faces or the entitled are shown above.

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