New Class Warfare?

by Chuck on June 17, 2010 · 0 comments

There is a new storm brewing on the horizon you all should be aware of: That of the approximately 10 million private pensioners lobbying for a government bailout. None of us have forgotten the trillions of our tax dollars spent on the private financial sector bailouts of 2008 and 2009. Well, that’s just the tip of the iceberg.

We have police and firemen retiring in their early 40s on full pensions, teachers (and school administrators) receiving guaranteed annual raises (not based on merit) despite the recession, and our politicians continually agreeing to unsustainable (and unfundable) public sector compensation programs.  The Tea Party movement has seen this coming, and you should be aware of it, too.

We are a Capitalist Society – There are NO Guarantees

To quote Damien Hoffman of the Wall St. Cheat Sheet, “There are no guarantees in Capitalism.  If the U.S. 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 U.S.”

Granted, there are programs providing significant value to a small percentage of people that really need the assistance.  However, guaranteeing survival in the private market or permitting outlandish retirement benefits in the public sector are a direct path to the same fate as ancient Rome.

It used to be that a person contemplating going to work in the public sector would work for less wages than his private sector counterpart, but had a nicer retirement and benefit package to offset the wage disparity.  This has changed, in that public sector wages have caught up with (and in many cases, surpassed) those in the private sector, while the public sector fringe benefits have gotten even fatter.

The tit-for-tat mentality works this way:

The public sector employees aren’t blind, and see the bailout money flowing to the public sector for a lot of stupid reasons… much of which lines the pockets of upper management in the form of bonuses.

Then, the private sector sees public employees retiring after 15+ years with full pensions at ridiculous rates (much of which is based on trumped up timekeeping methodology), fully paid medical benefits with little or no worker contribution, and other completely outrageous benefits dreamed up by the labor unions.  This is on top of the wage rate, which in most cases matches that of the private sector.

The private sector then pushes back because they see the waste of tax dollars used to prop up the public sector’s ever increasing standard of living.  The tit-for-tat continues until rational people intervene and stop the BS.

The Insane Public Sector Fringe Benefits Must Cease

The public sector needs to learn basic math.  More importantly, so do the legislators that cave in to the public sector labor unions’ demands.  Organized Labor must be forced out of the public sector, or else there will never be a balanced budget or sustainable tax burden to pay for the continued increases in public sector benefit packages.  This applies at the Federal, State and Local levels.  Government must set the pay scales (similar to the old Federal “GS” system), where promotion and raises are based on time and merit.  Public sector employees must start contributing to their own retirement plans, and the employee contributions must constitute the bulk of the funding.  The High-3* system needs to be retired, being replaced with something similar to the private sector’s 401(k) system, where the pension amount is determined by employee/taxpayer contributions, without regard to how much the employee earned in his/her highest 3 years of compensation.  A change to this type of system would give the public sector employee total control of their retirement fund, thus preventing the Government and Unions from using retirement fund money to fund their pet projects.

Labor Unions Need To Wise Up

Yo… Organized Labor… do you hear me?  My name is John Q. Taxpayer, and I’m mad as Hell and am not gonna take it any more.  Wanna know why?  I’ll tell you:

LABOR UNIONS ARE A MAJOR CAUSE OF THE CURRENT ECONOMIC MESS

That’s right… it’s YOUR FAULT.

When $1,600 of the current cost of a GM vehicle goes toward paying legacy costs (i.e., mostly retiree health and pension benefits), that’s a sign of a major problem.  Assuming the average price of a GM vehicle is $25,000, the cost of retiree health and pension benefits comprises 6.4% of that vehicle’s price and is paying benefits for people that no longer work for GM.  That’s a problem, don’t you think?

39.5% of California’s General Fund expenditures goes toward K-12 education, and 82.9% of that pays teacher and staff salaries and benefits.  In 2006-2007 salaries for classroom teachers accounted for 39.5 percent of school expenditures; salaries for other school staff, including counselors, principals, and secretaries, accounted for 24.4 percent; and employee benefits, including retirement and health benefits, accounted for 19.0 percent.  That’s right… 19% of California’s education budget pays for retirement benefits.  When added to administrative costs, 43.4% of the budget goes toward what we in the private sector call G&A (General and Administrative Expenses).  If a private sector company had G&A expenses of 43.4%, it would be bankrupt because it couldn’t compete in the market.  Oh gee…. look at GM and Chrysler.

For the record, I believe Organized Labor once had its place in this nation.  But those days are over.  We have Federal Labor and Minimum Wage laws that protect the Worker.  The American worker doesn’t need a union to look out for his or her best interests.  What the American worker needs to do is get a better education so they’re better equipped to negotiate their own best deal with their potential employers.

In 2009, just over 16 million Americans are union members, accounting for approximately 12.4% of the workforce.  Organized labor believes that new legislation such as the Employee Free Choice Act (EFCA aka Card Check) will give workers a better opportunity to join the union movement. Opponents feel it’s nothing more than pressure tactics on non-unionized employees.  If you take out the public sector, unions are practically irrelevant, representing just 7.8% of the private sector workforce.

More concerning is the influence unions have through their pension funds. A study done by New York University professor Ashwini Agarwal found that AFL-CIO (the central federation of labor unions in the U.S.) affiliated pension fund assets total $100 billion, with 46% invested in domestic equities (as of September 30, 2006). In 2006, union-related funds were responsible for 295 out of 699 shareholder proposals. It also found that AFL-CIO funds became much less combative when the union no longer represented a company’s employees.

If you have a union pension, take a very close look at the investments. You can bet they’re playing retired workers against the current workers in a sophisticated game of chicken. Don’t let it happen. Unions increasingly find themselves in a conflict of interest today, in that they claim to represent the worker, when in reality they only represent themselves using their (unearned) influence to buy political favors by contributing to political campaigns.  It’s a cat and mouse game that politicians would do well to beware of (and this includes you, Mr. Obama, with your cozy relationship with SEIU).  Conflict of interest works both ways.

Of course, this is just One Man’s View.  Your comments are, as always, most welcome.

, entitlements , Fiscal Responsibility , government intervention , Taxes , Tea Party

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