Fausta's Blog

American and Latin American Politics, Society, and Culture

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Entitled… to what?

Sal Bommarito writes on A Sense of Entitlement, and what happens when it replaces real need,

It is disturbing that avid supporters of the downtrodden in Congress believe altruistic government support programs are entitlements, something people have a right to receive. It is not true. To this point, our nation has been so successful that we have been able to support many who cannot work and some who do not want to work. Welfare will change in the coming months, and many lucrative, yet unproductive, programs for the poor may be slashed.
America can no longer be as altruistic as it has been historically. Bad habits and waste must be rooted out and eliminated for our government to provide a high level of support services to the needy.

Read the whole thing.

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Where the money is: Soaring government salaries

While unemployment soars across the country, More federal workers’ pay tops $150,000

The number of federal workers earning $150,000 or more a year has soared tenfold in the past five years and doubled since President Obama took office, a USA TODAY analysis finds.

TigerHawk explains why this is bad,

the most suspect of the foregoing factoids relates to widespread above-inflation increases for the longstanding employees. This reverses the structure of private sector compensation, which goes up largely (i) to perceived top-performers at risk of being snapped up by other companies, and (ii) to attract perceived top-performers from other companies. Average performers usually stay with a company or leave it for reasons largely unrelated to pay, and the longer they stick around the more you know that they are motivated by non-monetary benefits.

The soaring government pay is itself a measure of bad management. Why? Because compensation efficiency is one important measure of managerial effectiveness. An effective executive does such a good job of motivating his employees that they will tolerate a large gulf between what they are actually paid and what they might get from a competitor because the non-monetary benefits of staying put outweigh the increased monetary compensation available by switching jobs. If an executive only loses employees who are bid away with large increases, you know he or she is doing a better job of leading and managing than an executive who loses people for little or no increase.

Nobody in government seems to understand that basic point.

And we are stuck with the bills, not only for their current salaries, but also for their pensions and their permanent benefits, too.

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Getting a grip on the debt

The top story in today’s Wall Street Journal:
Fed Global Backlash Grows
China and Russia Join Germany in Scolding; Obama Defends Move as Pro-Growth

Global controversy mounted over the Federal Reserve’s decision to pump billions of dollars into the U.S. economy, with President Barack Obama defending the move as China, Russia and the euro zone added to a chorus of criticism.

The Fed’s decision to buy $600 billion in U.S. Treasury bonds and therefore flood the financial system with money after last year’s stimulus is an inherently inflationary measure.

Why should we be alarmed?

Recently, Dave Cote, CEO of Honeywell, gave a speech to the Chamber of Commerce that you should read and watch:

Bruce McQuain posted on the speech,

For instance, the discussion about China’s defense expenditures being paid for by our interest payments.  Cotes points out that if spending remains unchanged through 2020, we’ll be paying almost a trillion dollars in interest a year.   At this point, foreign governments own 45% of our 9 trillion in debt.  China owns at least a trillion of it.  And there’s no end in sight of the sale of government debt here.

The last point Cote makes that echoes Dales warning is about how quickly this will happen if we don’t do something.

While the problem builds slowly and inexorably, financial markets respond abruptly. When that decline does happen, it won’t be a case of minor monthly changes that give us 15 months to adjust. The hurt will come overnight as the herd moves against us. And then it’s too late.

That could happen at any time without warning triggered, as Dale points out, by some seemingly insignificant occurrence that normally would receive only passing attention. I don’t think, for the most part, people understand that very important point or they’d be beating down the doors of Congress.

Look at today’s headline above. Cote is not speaking empty words.

As Nick Schulz said,

It’s impressive to see a guy running a $36 billion firm develop a level of detailed policy knowledge that would put most congressmen to shame.

After you watch the speech and read it, make sure to look at the slides.

Cote ought to be is in Obama’s debt commission.

Cote poses the question,

Do We Still Have The Political Will To Be A Great Country?

And to do what it will take?

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The end result of the welfare state

I was going to write about the French riots, the British spending cuts and layoffs, and the German budget but Monty at Ace’s did it better than anything I can come up with:

This is our future

This is our future if we don’t change our ways.

Exhibit A: England faces the largest budget cuts since World War II.

Exhibit B: France is tearing itself apart over a move to bring state pensions under control.

This is the end result of the welfare-state. The Europeans (and Democrats here at home) want a utopia where all needs are met, all the hungry are fed, all the children warm and safe, all the sick made whole, all the evil punished and the innocent made free, a land where all is peace and all live in harmony. Instead, the welfare-state is waste and weakness and impoverishment and upheaval and ennui. It is generational warfare, class warfare, enormous debts, squalor, meanness, shortages, selfishness. It is, at base, the end of civil society. Communist economies fall faster because they take the poison pure; it takes the merely socialist ones more time to sicken and die.

Go read the whole thing.

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It’s not the tax cuts, it’s the spending

James Pethokoukis drives the point home:

even with all the tax cuts extended, government revenue would still rise well above its historical average of roughly 18 percent since World War Two.

Instead, it’s historically unprecedented government spending that’s behind the projected debt explosion. As the CBO itself puts it:

As a result, revenues would grow only slightly faster than the economy, equaling 22 percent of GDP by 2080. Slowly growing revenues combined with sharply rising expenditures would create an explosive fiscal situation. Under the spending and revenue policies incorporated in this scenario, federal debt would surpass 100 percent of GDP in 2023 and exceed 200 percent of GDP by the late 2030s.

And although the Wagnerians think they are marching along with History, they somehow seem to have missed a generation of growing American skepticism about the size and scope of government, beginning with the Reagan Revolution in the 1980s. More recently, there’s been widespread revulsion at the Obama spending orgy and his monstrous deficits, evidenced by tea parties and polls today and perhaps by vote totals in November.

Let’s do our best that it does.

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Spendthrift Nanny

David Warren writes about the European Union’s bankrupt states:
The Nanny State Has Blown the Bank

The Nanny State has blown the bank. She, or it, has done so everywhere. Even after appropriating half of every national income with taxes both direct and indirect, and after offloading the costs of cumbersome do-good schemes onto businesses through convoluted regulations, Nanny is reduced to printing money.

From the liquidators’ point of view, however, the problem is rather more complicated: the debtors are more hostile than the creditors. Thanks to democracy, and the power of “the people,” under the inspiration of demagogues, to appropriate each other’s wealth, there seems no chance of a smooth disposition.

Our debts have been rephrased as “entitlements.” They are the fiscal dimension of “human rights.” Everyone has a “right” to a pension, and to much else besides, regardless of whether he put his share into the piggy; or whether Nanny absconded with what he did put in.

Those who prudently saved against the contingencies of this world, have subtly numbered themselves among “the rich.” And, “tax the rich” is the received solution. For generations now, “progressive” politicians, imposing “progressive” tax systems, have been making an example of the prudent. The cultivation and manipulation of envy is at the heart of all political schemes for income redistribution, and parties of the Left have been building their client base upon it.

Hence the gradual division of every electorate between the Party of Entitlement, and the Party of Tax Cuts: the one to increase spending, the other to limit revenue, until the gap between income and expenditure has grown to oceanic proportions. In a pinch, the government pulls both ways at once, as poor hapless Obama is now doing because his Party of Entitlement is about to be mooshed in the U.S. midterm elections. In addition to more ruinous “stimulus” spending, he is now promising tax cuts (for everyone but “the rich”).

There, as here, the chariot of state is driving over the cliff.

Warren wonders if the Tea Partiers in the USA will be able to stop the trend here.

However, the only solution is

That measure is, quite frankly, the complete dismantlement of the Nanny State, and the restoration of the status quo ante — governments focused on the provision of national defence, and domestically on the machinery of law and order. Full stop.

We’ll find out soon enough.

Hat tip: Adam.

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Enough of that

Rasmussen survey says,
Most Americans Not Willing To Pay Higher Taxes For Public Employees, Entitlement Programs

The latest Rasmussen Reports national telephone survey of Adults shows that only 19% would be willing to pay higher taxes to avoid layoffs of state employees. Sixty-nine percent (69%) say they would not be willing to pay more in taxes for this reason. Another 11% are undecided.

Adults feel similarly when it comes to funding entitlement programs. Twenty-two percent (22%) would pay higher taxes to prevent cuts in entitlement programs for low-income Americans. Sixty-three percent (63%) say they would not pay more to keep these programs afloat. Another 15% are undecided.

I have not seen the methodology of the survey, but the people I talk to very much feel the same way.

Both the large numbers of government employees and the entitlement programs are directly related to out-of-control government spending.

And we the taxpayers are “up to here” with that.

James Joyner says,

Amusingly, though, the same people who want more cops want fewer government workers, even though cops work for the government.

James may find it amusing and contradictory but the tax-paying public are tired of bloating bureaucracies getting more bloated, and during a recession/depression as we are in now, a large segment of the population is feeling the squeeze and can’t afford yet another tax hike – which is coming effective January 1, 2011 when the Bush tax cuts expire.

Policemen, however, enforce the law during times of boom and during depressions, when crime is perceived as more likely to increase.

As John Hinderaker points out,

In some states, public employees are undeterred. Illinois is on the verge of bankruptcy, now in worse danger of default, apparently, than California, yet its public employee union members have been awarded pay raises totaling 14% over the next 12 months.

One outstanding exception is the governor of Puerto Rico, who has slashed the government payroll drastically in the past year.

What it comes down to is, it’s not the deficits; it’s the spending

Cut spending, cut taxes, and you promote growth.

Whether you add more policemen or not, that is the underlying issue.

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