Dunkelberg: Let's All Go to Work For the Government, It Pays More, GDP Will Rise

So, it’s more of the same, Washington borrows money (it doesn’t have any money and wont cut other spending to fund the programs) that we have to repay and hands it out to the “favored”.

Just a mere $26 billion this time, for “teachers, cops and firemen”, should we add “in states that have totally mismanaged their fiscal affairs at the expense of states and taxpayers who have not”.

As usual, if you mismanage and screw up, Washington will heap on you funds taken from those who have not. We continue to reward poor performance and tax success, a sure path to a less robust economy. Questions like “Why is Washington subsidizing teacher salaries and retirement benefits in towns that no member of Congress has ever even visited?” are not asked.

The money flows, and unions provide millions of dollars in campaign support. What are the odds that GM can make its $17 billion contribution to the union’s retirement fund that is coming due? Odds are high that taxpayers will be tapped once again.

HPtossed its very successful CEO for an “ethics” violation. Would the Treasury secretary or members of Congress survive in that environment? Would “ethical” federal, state and local politicians allow us to get where we have ended up?

USA Today and the Wall Street Journal reported on the systematic looting of taxpayers by public employees and their pensions. How can a town in California pay a city manager of a town with 40,000 residents compensation of $1.5 million a year or a townof 91 people pay over $500,000 a year in pension benefits plus health care to its retired city manager?

"It is easier to make promises to unions to settle or avoid a strike than to stand up for fiscal responsibility." -Economics Professor, Temple University, William Dunkelberg

The answer is they can’t, but unions will see to it that the taxpayers get the bill.

This happens because state and local governments have no “bottom line” to meet (e.g. you have to make a profit to survive). It is easier to make promises to unions to settle or avoid a strike than to stand up for fiscal responsibility. Not picking up the trash or answering fire alarms or teaching kids is a strong lever. Voters want these services, politicians wont risk re-election to do the right thing. Pay does not have to reflect value provided and is therefore not subjected to market discipline.

And, here we are.

Most of the people earning these salaries or receiving these pension benefits probably feel they deserve them and have built their lifestyles around them. In some cases, their lives will be disrupted when benefits are scaled back out of necessity. But for most, their gains will be protected (often by strong union action). We’ll be lucky if we can even fix this going forward.

“Dual” pay systems have never worked well.

Our political leaders have overpaid for the services we get and will continue to do so, and taxpayers will suffer in the future as they have in the past unless they truly “revolt” and get active, especially at the local level.

William Dunkelberg is Professor of Economics and former Dean, School of Business and Management, Temple University and an Economic Strategist, Boenning & Scattergood and Chief Economist, National Federation of Independent Business.