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The New Financial Class War?
Earlier
this week, I read an interesting comment by Damien Hoffman, Are
Private and Public Employees Headed for War?:
American Enterprise
Institute President Arthur C. Brooks might be an emerging leader of
the intellectual side of the Tea Party movement (Cf. the emotional
side). He raises an interesting point I have been hearing a
lot lately by people in states with massive public pension
liabilities: “The disparity [between public and private sector
benefits] is so large and so unfair, a day of reckoning is coming.”
When
I was recently visiting family in New Jersey, all they could discuss
was their animosity toward police officers retiring in their 40′s with full
pensions, teachers receiving 4% a year raises despite the economic
recession, and politicians who keep signing contracts for more
unsustainable and unfundable public sector compensation programs. Given
the anger coupled with their very reasonable insights, I could easily
see how this issue will reach an ugly head.
However, one thing
Brooks and many private sector employees fail to also consider are the ~10 million private pensioned people lobbying hard
for a government bailout. And I don’t think anyone has yet
forgotten the Trillions in liabilities we are all sharing for the private
finance sector bailout in 2008 and 2009.
Thus, I don’t think
this is a public versus private sector issue as much as an issue of
people incorrectly believing that 1) there are guarantees in
capitalism, and 2) taxpayers can sustain irrational retirement benefits
for public sector retirees.There are NO
Guarantees in CapitalismI repeat: there are no
guarantees in capitalism. If the US is to recreate one of the greatest
economies in the world, we must end the practice of aiding businesses
and programs which would otherwise go bankrupt without government
subsidy. Once guarantees are offered to a privileged group of people, a
society ends up in the current tit-for-tat gameplay currently reaching
elevated heights in the US.
Of course, there must be exceptions
for certain programs which provide legitimate social value for the
statistically small percentage of people who genuinely need it. But
insofar as guaranteeing survival in the private marketplace or
irrational retirement benefits in the public sector, the government
must end these practices now before we follow the same path as ancient
Rome.
The death spiral is as such:
First, public sector
employees see private sector companies receiving generous taxpayer aid
for all types of unfair reasons. Then, the private sector sees public
workers retiring after 15-20 years with full pensions at insane rates
based on trickery (e.g., padded time sheets with unnecessary overtime),
paid-up medical with zero to infinitesimal worker contributions, and
other outrageous benefits which seem like they were added to the public
budgets during a real life trip through Tim Burton’s Alice in
Wonderland.
After that, the private sector lashes back
because there’s no justice in using tax dollars to provide one set of
workers with a better standard of living than another set of equally
deserving workers. This game goes back and forth until the parents step
in and quash the childish nonsense.Taxpayers
Cannot Sustain Irrational Public Sector BenefitsIn
addition to getting back to Adam Smith’s authentic version of
capitalism — not crony capitalism or corporate socialism — the public
sector must recognize that 1 + 1 = 2. Therefore, public budgets must be
based on realistic tax burdens. No one I know debates whether we need
teachers or police officers. However, they do question whether a 40-year
old police officer really needs so much tax payer support as to have a
Hummer, live in the wealthiest neighborhood in town, etc.
Moreover,
there is a major problem with military officers marrying friends
simply so the tax payer will send benefits to the new “spouses”. Anyone
who has spent any time around the military knows there is a huge
cancer of scams such as this being perpetrated against the taxpayers.
Rather than nickel and dime our nation’s protectors, let’s take care of
the honest ones more generously while rooting out those who are
stealing from the system.Those Are Fighting
WordsArthur C. Brooks’ new book The
Battle: How the Fight between Free Enterprise and Big Government Will
Shape America’s Futureis gaining a head of steam.
If the anger continues to spread on both sides, I would agree that our
nation’s workers are on a path to war.
While I
share many concerns raised in this article, let me also present the
flip side of this capitalistic view of retirement benefits that you will
never see in mainstream media.
Guns & Butter had another
outstanding interview with Michael Hudson on Europe's
Financial Class War Against Labor, Industry and Government:
"Europe's
Financial Class War Against Labor, Industry and Government" with Dr.
Michael Hudson. Economic crisis in Europe created by predatory
lending; European Central Bank stranglehold on the Eurozone; the Euro;
foreign banks decimate Greece's social structure; Marx's industrial
capital versus fictitious capital; Latvia as a model for the rest of
Europe; Hudson's financial and fiscal plan for Latvia; the Cold War and
its ruinous effect on progressive economic thought.
Take
the time to listen to Michael Hudson below. There are few people in
this world who understand the new financial class war more than him. I
don't agree with everything he says, but his analysis is devastatingly
brilliant. An absolute must listen interview.
»
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Thanks, bud, for setting the Rag dood straight.
I applaud Leo for including the item on Prof. Hudson, the most brilliant Western economist (and so few real ones actually around today) who has gotten it right for forty years or more.
His first book, Super Imperialism, said it all back in 1972 (so please don't waste any money on that fraud's (John Perkin's mea culpa) Confessions of an Economic Hit Slut!
But the American Enterprise 'toot has always been the lobbyists for the hedge fund owners, period. Of course they're spewing all sorts of nonsense -- and if the public sector has it appreciably good, might be because that's the last American sector which is actively unionized.
That massive (and possible Extinction Level Event) gusher of BP's doing in the soon-to-be- Dead Gulf of Mexico, was the result of a non-union oil rig!
Those horrific events of miners dying -- at non-union mines!
Beginning to notice any kind of pattern here.....it's always divide and conquer with the ruling elites --- that's why the guillotine is the only answer.
And I sincerely doubt any president, at this point, (especially one who spent 12 years in the University of Chicago system which is HQ Central of the neocon globalist movement) is going to effect any real change.
Both countries practice Mercantilism.
we must end the practice of aiding businesses and programs which would otherwise go bankrupt without government subsidy
Yeah, all of them, not just private sector employees;
big pharma
big oil
coal and gas miners (leasing on public lands)
airlines
car manufacturers
timber interests
mining interests
highway subsidies
I could go on and on.
Dont talk to me about austerity when the top tax bracket is 35%, and there is a Social Security tax cap at $90K.
Sure, pensions are out of hand, but so are private sector bonuses. This is just a smokescreen to keep the masses fighting among ourselves.
social security cap last year was $106,800. It goes up every year.
How true. Let's not forget the big businesses that make tons of money from government contracts and moves off shore to pay little to no federal tax. What about all of the savings these same companies have by eliminating defined benefit / contribution pensions and health care benefits. Where are the American jobs they claim to create? Just how many offshore jobs have been created by American and European companies? Millions no doubt?
If you to look at the class war, you can start with all of the tax breaks, government contracts, salaries and pensions of the the upper class. Eliminate the Reagan, Bush & Bush tax cuts, fairly tax all business conducted in the US regardless aand then tell me how what the budget looks like.
Class war what a farce, as W. Buffet has said "My class has already won."
There is no such thing as a corporate tax, only another cost that gets passed along to the end consumer. You benefit from their tax avoidance through cheaper products.
I don't contest your other claims, however.
Thank You. After building and selling 3 multi million dollar businesses, I finally realise that I should have accepted a position in the civil service, when it was offered to me after exiting B. School. I would have made far more money on a risk adjusted basis, since all I would need to do is curb my drinking, exercise and reduce stress, thereby extending my lifespan. I cannot think of a better way of doing this than sitting in a government office where output has no correlation to results, and measuring productivity/contribution is irrelevant. Nearly all so-called services provided by government are overpriced, often valueless, and only accepted by taxpayers due to threats, of coercion and government diktat. This is why I no longer live in the US, but in tax free climate where civil servants are paid 'directly' for results. Si me ayudas,you te ayudare, as they say in Spanish.
I'm getting out-earned by whining fucking teachers, great. Thanks for the ego boost, CB.
Public sector employees when my dad was one took lower pay than the private sector in exchange for a pension. Now, it appears they not only get more salary but the gold-plated benefits as well.
Burn it all down. And YES, FIRE ALL THE FUCKING teachers, firemen, and police officers. I'm TIRED of hearing how we simply have to bow down before this Holy Trinity or else the sky will fall.
Cheeky.
That chart is mind-boggling!
Madness, graphically illustrated.
If these number are paid, it will be in the context where a loaf of bread costs $10,000. On sale, day-old bread.
I eagerly look forward to seeing our first millionaire teacher. My teachers only made about $40k per annum, but I'm sure Illinois's getting its money's worth. Looking at Mr. Codell, by my math, that's about 13 years from now.
2007 + 14 × [1 + LN(1000000/885327) / LN(885327/343345)] ≈ 2023
Based on the above, now find the probability that Illinois sinks under the weight of its own stupidity by then.
That probability is 23.26%. And no, I'm not joking; thats the actual probability.
CMAVision Sovereign Risk Monitor?
That's 5Y CDS. 13 years out is probably uglier. ;)
I dont think they derive anything longer than a 10y, but if they do its probably hovering within 500-600 range.
V
Ah, I see you've changed tops. I guess the green one was getting pretty sweaty?
That's a "V" recovery I can believe in!
Besides the "fight between free enterprise and big government" we are now treated to a grand battle between "established" free enterprise and a new breed of entrepreneurs. At stake: will NASA keep awarding uncontested cost-plus contracts to its MIC friends, or open bidding to everyone -- including spaceflight startups with the courage of their convictions who are prepared to risk it all on real innovation.
The battle lines have been drawn. On one side is Obama (yes, I know, but even he can be right sometime) and on the other are powerful political friends of old-guard contractors (with huge payrolls in important states), plus a retired astronaut and true American hero, now sadly reduced to fighting the future.
How this plays out will tell a lot about what kind of country we really want to be.
Somehow everthing in my original comment got overlooked by responding speed readers.
Let me restate: Obama wants to open up NASA contracts to upstart companies with new ideas, old fashioned Yankee can-do attitude, and cost/performance based budgets typical of someone spending their own money. Some of these outfits have achieved sub-orbital flight at less cost than NASA would typically spend on a 20,000 page five year study to do the same thing.
Obama wants to open up bidding to these companies. That is the only thing I am giving him credit for; the rest of his record so far is abominable. But there is a lot of political resistance to this one attempt give real free enterprise a chance to lead America's future in space exploration.
Takeaway points: (1) not defending Obama except on this issue (2) not attacking Republicans since "big aerospace" owns both parties.
Many of the guaranteed payments of these pensions are "riskless" as U.S. treasuries. (Why do you think Obama wants another$50 Billion for state governments.)
Another little secret in state an local government budgets are the current contribution rates to the pension systems. Currently, some governements are paying 15%- 20%+ of current salaries to the government pension systems. (If an employee is making $100,000 per year, an additional $15-20k+ per year is going to pay into the pension systems.) This doesn't even include the employee's contribution rate to the pension (if they are paying into the system). To get an idea of the magnitude of these numbers, just multiply these numbers by the millions of government employees throughout the USA.
A lot of U.S. state linked government pensions are secured by state law and state constitution "guarantees." Because of stakeholders pushing the issue, some constitutions were amended to create these guarantees during the last 30 years.
Some pension systems can raise contribution rates on employees, but the other half of the annual contribution equation is usually employer contribution rates (vis., the government). And, if the sponsoring governement does not pay its required contribution rate, or there are not enough funds to pay pensions, some states have laws where the pension system can and must access funds from the state treasury after tax revenues are collected but before any other disbursements are made.
Not a bad game for these pensions. Heads (great returns = > lower contribution rates and higher pensions) the pensioners' win! Tails (poor returns = > higher taxpayer funded contribution rates and guaranteed pension payments by taxpayers) the taxpayers' lose.
"God Bless America" - Michael Keaton, Night Shift, 1982.
seventree,
" is Obama (yes, I know, but even he can be right sometime)"
When, and about What?,THE OTHER SIDE, has lined his pockets as well...and not just a little.
All one has to do is look at the donations at Election cycles for POTUS, and you will easily see both sides getting cash from THE OTHER SIDE.
Example......Obama, has recieved MORE contributuions from BP, than ANY OTHER MEMBER OF CONGRESS..
Well, there goes the Big oil theory about them in bed w/ the GOP.
It's called CYA.
>How this plays out will tell a lot about what kind of country we really want to be.
I think mostly we would all really like to be a country that doesn't end up looking like Zimbabwe.
Mack, Zimbabwe has a black man as " dear leader"..there is no similarity with USA,
we have a semi- black, Indonesian wannabe Muslim hand puppet. totally different .
"socialism works until it runs out of other peoples money"
Ahhhhmmm, I was referring to their "third world status", their hyperinflation, their starvation. You know, things that matter unlike race or religion. But thanks for playing along.
Looks like your position is clear. "Obama done it."
"capitalism works until it runs away with all the peoples money"