Politicians across the country are using heaping doses of the politics of envy to try to arouse the anger of workers. However, their targets are not the corporate CEOs pulling down tens of millions of dollars a year in pay and bonuses. Nor is it the Wall Street crew that got incredibly rich inflating the housing bubble and then took government handouts to stay alive through the bust. The targets of these politicians' wrath are school teachers, firefighters and other public sector workers.
They are outraged that many of these workers still earn enough to support a middle-class family. Even more outrageous, many of these workers have traditionally defined benefit pensions that assure them of a modicum of comfort in retirement. Having managed to ensure that most workers in the private sector did not benefit much from economic growth over the last three decades, the same upward redistributionist crew is turning their guns on public sector workers.
There are two major deceptions in their story. First, after working to eliminate traditional pensions in the private sector, they now tell us that getting a pension in the form of a guaranteed benefit is hugely more valuable than having the same money placed in a 401(k)-type defined contribution account. Second, after shoving stock down everyone's throat in the bubble years, they now tell us we cannot expect a very good return from investing pension funds in the market.
Starting with the pension story, it is really touching to hear conservatives singing the virtues of defined benefit pensions. They argue that if a state or local government puts $1,000 a year in a defined benefit pension and guarantees the market return for its workers, this is hugely more valuable than if it takes the same $1,000 a year and puts it into a 401(k) type account.
Since most public sector workers still have defined benefit pensions, this is a central part of their story about public sector workers being overpaid. By their calculations, the $1,000 that a government puts into a defined benefit pension today should be counted as being worth close to $2,000 since the government guarantees the return. Doing the math this way goes a long way toward showing that public sector workers are overpaid.
There are a few points that jump out here. First, it is amazing to hear many of the same people who touted the replacement of defined benefit pensions with 401(k) accounts now tell us about the great value of a guaranteed pension. When we do the math their way, it means that ordinary workers have even less to show from economic growth over the last three decades, since so many workers have lost pensions in this period.
The complaints of these conservative economists also make great reading when put side by side with their plans to privatize Social Security and get rid of its guaranteed benefit. When we were talking about cutting back protections for hundreds of millions of workers and their families we were not supposed to take into account the value of a guaranteed benefit. Now that we are talking about cutting the pay of public sector workers, it is essential to include the value of the guarantee in the calculation. Is it any wonder that so many people have contempt for economists?
Finally, it is important to keep our eye on the ball here. The extra value comes from the guarantee. There is no gain to the government if it replaces pensions with 401(k) accounts as many have advocated and some governments have done. The argument is not that the state is paying too much; the argument is that the worker is getting too much because of the value of the guarantee. If we eliminate a guaranteed benefit we have just taken away the workers' retirement security, we have not saved the taxpayers a penny.
The other part of the story is the claim that the returns being assumed by public pensions on their investments are overly optimistic. This one is really, really painful.
Some of us were making this argument at the top of our lungs back in the late '90s, when price to earnings ratios in the stock market were over 30. We continued to make this argument in the last decade when price to earnings ratios were still well into the 20s, far above historic averages. However we couldn't get anyone to listen back then, because the complaint about exaggerated stock returns did not fit the agenda of the upward redistributionists.
Now that the upward redistributionists have put the attack on public pensions at the top of their agenda it is convenient to raise concerns about overly-optimistic returns. However, now that the stock market has plunged (pensions have already taken their hits) their concerns are wrong. In fact, pension funds are being very reasonable in their return projections. Those familiar with arithmetic know that it would be almost impossible for them to earn a substantial lower rate of return, barring a complete collapse of the economy.
So, welcome to the latest episode in the long-running battle to redistribute ever more income to the rich. Having already achieved great success in depressing the pay of workers throughout the private sector, the call is to cut the pay and benefits of workers in the public sector. Won't you join the cause?
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A VAST amount of the money spent at the local level is derived from property tax - sales tax - and various user fees. These revenues are not subject to the profits of nor derived from the profits of large Corporations.
These monies are derived from the pocket of that part of the 99% who work in the private sector and add value to goods and services.
The REAL war at the local level is NOT between giant Corporations and the local public worker.
The real adversaries in that divide are the public service worker whose salary and benefit package cost normally exceeds 70% of the locals budget and the people and small local businesses who are being hammered by property tax and sales tax.
The public worker who is effectively paid with a slice of private sector value adding jobs is taking more from the puddle than the local tax payer can afford. To blame that on giant and distant corporations is simply a misleading and useless argument that simply diverts attention from the real point where the wheel touches the ground.
Public sector employees gamed the system in the past in California. Some of the abuses have since been stopped. But the pensions are still too damn high.
Read Peter Nowicki's story here: http://whostolemycareer.com/posts/92/3286-the-curious-case-of-peter-nowicki.html
The public employee unions have brought the wrath of the public on themselves. The unions, especially the public safety unions, were just too greedy.
Until private sector workers stand up for themselves by voting out all incumbents in *all* elections, save their money, refuse to incur debt and give themselves a pension, nothing will change.
Finally - NO....public workers do NOT pay their own wages and pensions (duh) - they can be paid their after tax salary with no taxes and nothing changes (ie pay a $60K cop who pays $15K in taxes - $45K instead and nothing changes). Tax private sector workers at 0% and it is literally game over.
A $50,000 pension taken over 30 years is $1.5 Million - a winning lottery ticket for every cop, teacher, firefighter in the nation - at the expense of much higher property taxes, income taxes (state) and sales tax.
I will try however to get you at the starting line.
Private income is derived from and contributes to production. It is self sustaining.
Public income is also derived from production .... However it is not self sustaining because it adds no production to the mix.
So .. One adds economic value ... The other takes from that value.
It behooves those adding value to be careful how much they pay lest they end up working only for the public sectors benefit.
Hardly an objective ending.
CEO's who are overpaid are taking from ownership not the public -- Public Employees take from their fellow 99%.
When the "help" pressures the economic well being of the people paying the "help" it becomes time to change the financial equation.
Remember when government employees were civil servants?
Remember when you graduated with your degree and the last job that you would look for was a job in public service?
Remember you said you wouldn't work that type of job because they were over worked and under-paid?
Remember when you demanded a smaller government but complained about the poor quality of service when ever you had to conduct business with them?
Remember when you went to conduct some type of business with the government and was amazed by all the handicapped people working there?
Remember when you had a mind of your own and understood the true value public servants other than politicians?
The write in particular mentioned teachers, firefighters, and police. It is interesting to note that these three groups are largely paid by local tax, normally property based. It can be further inferred that because of the major funding source is in fact working America and that working America is apparently taking issue with local budgets, that just perhaps working America has an issue with the cost of its Public Workers.
In my area, a generally healthy economic region, there is a huge outcry at the cost and rate of increase in local budgets. As matter of fact the outcry has become so loud that most areas public entities have limited increases to under a couple of percent and in some cases actually decreased the budget.
In every instance of belt tightening the loudest yell has come from Union reps. It is of course their job to preserve these jobs and associated costs. HOWEVER ...
Where we seem to often miss the point is that the entity paying for these jobs is essentially one that has a responsibility to get the service performed with the least people and at the least cost reasonable. Government should NEVER be viewed as a job service.
A lot of the "incentives" are a result of a need to overcome the disincentives of the tax structure. The solution is not going to be found in increasing a businesses cost -- The result of that is aptly illustrated in the ongoing flight of production which has left us with basically a service economy.
It should also be noted that the majority of those grants do not originate at the local level -- They are state and federal. Still grants b of little consequence to the local budget. PROPERTY tax breaks on the other hand do impact local budgets. Even then those breaks are normally temporary reductions of tax and still add to the local budget more than the empty lot being replaced, and usually at a rate that exceeds the cost to a town county. In fact studies in our town (we are not the only town that have conducted them with the same result) clearly show that a housing development or apartment complex exert a much larger cost in excess of property tax than a commercial venture does. This is largely because of the cost impact on those specific services you mention.
Continued
BUT -- AGAIN -- I do agree that the tax breaks need to stop --- To make that work however will require a comprehensive tax overhaul and that is simply not on the horizon on either the right, the left, or the middle.
I stand by my statement .....
I do not know if public workers are over paid ,,,, BUT ... They ARE paid more than the current system can afford.
and really ..... Without comprehensive overhaul this is the system we are stuck with.
The rich want to see just how low they can go with the salaries and benefits of the workers.
And too many working stiff Repug voters do NOT get it.
http://redtape.msnbc.msn.com/_news/2010/10/05/6345539-20-government-workers-with-super-sized-pay
In California: A pension check and an unemployment check ?
There's no hard data on these special kinds of double dippers, but to give you a flavor, reporter Robert Lewis found that 53 former sheriff's deputies in Sacramento County collected a total of $300,000 in unemployment benefits last year, along with their regular pensions.
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In Illinois suburb, a $435K parks director with a $166K pension
In Highland Park, Ill., a northern Chicago suburb, park district Executive Director Ralph Volpe and the local parks commission provide an instructive example. Volpe's salary in 2008 was $164,000, but the commission added $270,000 in bonuses. That raise was nice, but even nicer was the step up in his pension, which is based on an his last-year salary. The bonuses helped bump Volpe's pension up by more than $50,000 per year. The $166,000 he'll make annually now that he's retired exceeds his top base salary for the job.
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Clarkstown, N.Y. -- an average salary of $150,000
Disclosures that retiring police Capt. Thomas Purtill pulled down $543,000 last year –- tops for all municipal workers in New York state. Purtill wasn't alone: Four of the top 10 municipal workers among the state's 1,500 municipalities were Clarkstown cops. Nearly 150 of Clarkstown's 173-member police force earned six figure salaries in 2009, not including overtime, for an average salary of $151,000.
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And now it is the turn of the public sector workers.
****Isn't it so nice that lots of workers will be paid so little? {sarcasm}
At least the Repug working class will also deal with the consequences of a race to the bottom for wages and benefits.
It wouldn't be "fair" if only the Dems suffered.
{sarcasm}
Just saying.......
It seems that many only consider one greedy if they SUCCESSFULLY chase money -- Those who chase money and lose are too often painted as victims when they are in fact simply people who lost the chase.
Perhaps true... of companies offered pensions. But at no time in our country's history did a majority of employers offer pensions. Thus, when companies first recognized as a potential means to contribute tax-deferred income for retirement, it was a new benefit for many, if not most, workers in the U.S.
P.S.: The 401(k) was not first conceived as a supplemental investment to the traditional pension plan. It was conceived as a means to reduce one individual's tax obligation. As Annie Savoy would say, "You can look it up."
It does not reduce your tax obligation as the taxes are deferred to when you withdraw the money from the account.
My first career job out of college had a traditional penison and you had the option of the "suplemental" 401k in addtion to it
In Calif , teachers in private schools get paid far less than public school teachers and have far less generous pensions.
Despite alleged austerity , federal spending is up under Obama and employment in the private sector is way down.
There are prison psychiatrists in Calif making over $800,000 . How much would they get in the private sector. .Many constuction workers and other bue collar types seek govt jobs in Calif because they will work little and get paid more than in the private sector.
Prison guards in Ca can start working at 40 and retire at 50 with almost 100% of their former pay.
Spending on govt employee pay and benefits is up by over two thirds in Ca in the last decade
Just kidding my ex-coworker's saw the writing on the walls, went to work for the city of fort Wayne. They are laughing all the way to the bank, lot's of controllable O.T., gravy work, all of them getting fatter as we speak.
I don't blame them, they are reaping what we have sewn, poor work ethic, lack of accountability, top notch union negotiated wages and benefits. As long as people don't remind us that we are paying for that "I'm not upset"