Tag Archives: Public Sector

Why is America so much more prosperous than other nations?

It occurred to me that young people are being taught in government-run schools that central planning of the economy by the federal government works better than allowing states to decide policy for themselves. Naturally, the students – lacking life experience and at the mercy of the unionized teacher’s grading pen – have no choice except to be indoctrinated. But what are the facts?

The genius of America is that the Founding Fathers allowed the federal government to only have power in certain areas of life. Other areas of policy were delegated to the states. This allows states to try different policies to see what works best, or even just what works best for them. Then the other states have the option to emulate that success, or continue doing what doesn’t work. States that do what works will see more success, with more businesses and people migrating to their states. States that persist in doing what doesn’t work will see business and taxpayers flee. That is the genius of America’s design.

Federalism encourages states to operate according to the “principle of subsidiarity”, which is an economic principle that states that problems are best solved at the lowest level possible (individual -> family -> church – > business -> community -> local government -> state government -> federal government). This is because the people at the lowest level have the most KNOWLEDGE about how to solve the problem.

Case study: right-to-work laws

Let’s look at an example – unions and right to work laws. Starting after world war 2, some states decided to pass right to work laws. These laws allowed workers to decide for themselves whether to join a union or not. Since workers had the choice about whether to join the union, the union had to care about the workers and advocate for them, instead of enriching themselves at the expense of the workers via corruption and thuggery.

Here is how different states adopted right to work laws at different times:

Map of states showing adoption of right-to-work laws
Map of states showing adoption of right-to-work laws

What happened in these states? Well job creating businesses started to move from forced-union-membership states to right-to-work states. Why? Because unions were stopping them from innovating. Companies would figure out new ways to improve productivity, such as using machines and computers. But the unions would step in and insist that the old ways were best. The unions wanted their union members to just be able to do the same job, e.g. – pulling a lever over and over, for the entire 35 years of their career. And the unions wanted their members to be paid like a software engineer or a doctor for pulling a lever over and over. The unions also wanted to make sure that underperforming workers could never be fired, or replaced. And so on. Companies realized that they couldn’t compete in a global market like this, so they got up and left for right-to-work states.

Here’s what happened next:

Rates of employment in forced union states vs right to work states
Rates of employment in forced union states vs right to work states

States with right-to-work laws never said that there couldn’t be unions, only that workers wouldn’t have to join a union to work. And in right-to-work states, not only did workers not join unions, they voted not to unionize at all. This resulted in a massive decline in private sector unions in America:

Decline in private sector union membership
Decline in private sector union membership

As a result of job creating businesses not being hampered by union corruption and thuggery, American businesses quickly outpaced their rivals in forced union membership states in productivity, as measured by GDP. They also outpaced the productivity per worker in other economically illiterate countries. Why? Because allowing companies to innovate meant that workers were using more machinery and computers to do their jobs. They learned new skills. Underperforming workers could be replaced with workers who were willing to grow and adapt. Non-union workers higher productivity allowed them to find other jobs if they were laid off.

Right to work states innovate, creating more skilled workers
Right to work states innovate, creating more skilled workers

The job security of the American worker comes from his improved worker productivity – not from the union. Not only did unemployment go down in right to work states (more jobs!) but salaries and benefits also increases, as companies had to compete with each other for workers. However, companies were ok with paying more for workers, because they would rather pay ONLY the workers who deserved it, rather than pay one rate for all union workers, regardless of performance.

This article from the far-left New York Times explains how slaries and benefits rise when job creators move to right-to-work states: Income Rises When Right-to-Work Laws Are Passed because job creators must offer workers a lot in order to get them to sign. Not just salaries and benefits, but realistic development plans to grow the workers skills, making them even more resistant to layoffs and economic downturns.

Quote:

While some persons may favor right-to-work laws largely on philosophical grounds (people should have the freedom to decide whether they want to belong to a union or not), the major reason I support such laws is that they seem to promote prosperity — specifically, higher incomes. Real personal income in the right-to-work states rose nearly twice as much as in other states from 1970 and 2013.

To be sure, most of that reflected higher population growth in right-to-work states — there was massive in-migration to these states from the states denying workers the right to not join a union. Yet even after correcting for population growth, income per person on average rose somewhat more in the right to work jurisdictions. Capital moves to right-to-work states with a more stable labor environment, and that increases labor demand and, ultimately, income and wages.

Although unions mostly died out in the private sector, the ones that remained actually functioned well as unions – focusing on their workers instead of enriching union bosses. They had to, because if they didn’t, then the workers would just opt out of them. The only places where unions still survive is in the public sector, i.e. – government. This is because government is (by law) a monopoly, where consumers have no choice except to accept the garbage that they are offered. They can’t go anywhere else for a lower price, or a better product, or a better service. Public sector unions are immune to innovation, because they lobby the government to prevent any improvement or accountability.

Here is an example of a public sector union’s effort to “help the customer”:

Political contributions by the American Federation of Teachers union
Political contributions by the American Federation of Teachers union

And here’s what those efforts to “help the customer” produced for the customer:

Education spending has tripled since 1970
Education spending has tripled since 1970

They aren’t really helping the customer, are they? What they do is collect dues, enrich their union leaders, intimidate their opponents with threats and force, and then give money to secular left politicians to prevent their customers from opting out of a system that doesn’t produce higher quality and lower prices for the customer. The secular left politicians pass laws that prevent the customers (parents) from being able to get a better product (education for their children) for a lower price. We should abolish public sector unions in order to get the benefits for the customer that we see in the private sector.

Labor unions donated $765 million between 2012 and 2016, and 99% went to left-wing groups

Political contributions by the American Federation of Teachers union
Political contributions by the American Federation of Teachers union

Astonishing article from the Daily Signal.

Excerpt:

Unions across the country donated $765 million to various organizations over the last four years, and 99 percent of that cash went to liberal-leaning causes.

Labor unions gave $764,952,394 to left-wing special interests between 2012 and 2016, according to the Center for Union Facts. Of the nearly $765 million, 99 percent of union political contributions went to left-wing causes. The Center for Union Facts compiled a comprehensive database of information about labor unions in the United States: outlining union spending, salary information, dues revenue data, and more using data from the U.S. Department of Labor.

Examples of who gets the money:

The department’s data show between 2012 and 2016, roughly $240 million went to left-wing political groups. Labor unions gave $77 million to special-interest groups and another $13 million to environmental groups. Over $25 million went to groups like the Coalition of Black Trade Unionists, the National Association for the Advancement of Colored People, and the Rainbow PUSH Coalition.

During this same time frame, almost $307 million went to the Democratic Party and aligned groups, including Media Matters, the Clinton Foundation, Mi Familia Vota, the National Democratic Club, the Advocacy Fund, Progressive Democrats of America, and Planned Parenthood.

[…]Here’s how much a few pro-abortion groups received from labor unions since 2007, according to Luka Ladan, communications director for the Center for Union Facts:

  • Planned Parenthood: $1.18 million
  • Emily’s List: $810,000
  • NARAL Pro-Choice America: $45,000

Examples of who gives the money:

Here are the dollar amounts since 2007 that a few labor unions have given for abortion lobby funding:

  • American Federation of Teachers: $1,150,000
  • American Federation of State, County, and Municipal Employees: $520,100
  • International Association of Firefighters: $10,000
  • Service Employees International Union: $180,000
  • United Association: $40,000
  • United Auto Workers: $100,000
  • United Food and Commercial Workers International Union: $35,000

Teachers, non-import auto workers, government employees. All pro-abortion. I never buy cars made by union employees, I’d just be funding abortionists.

I think there was a time in America’s history where unions were actually doing some good, but that time has long gone. We can’t allow labor unions to take the country in the direction of Greece and Venezuela, otherwise none of us will have jobs, and we’ll be selling our bodies for food, like they do in other communist countries. I would like to see some legislation banning public sector unions outright, and then a national right to work law should finish off the private sector unions, since rank-and-file private sector union workers are typical not radical leftists. We definitely need a national voucher law to get the money out of the public schools and back into the hands of parents.

Whenever well-meaning people vote for more taxpayer more for union-dominated fields like education, keep in mind that a  significant portion of this money gets funneled back into anti-American causes. Be careful about wanting to spending more taxpayer money “for the children”, because it often turns out to just be more taxpayer money for the Planned Parenthood, or for the Clinton Foundation, etc.

Government-run health care system to kill child against the wishes of his parents

The National Health Service is government-run socialist health care
The National Health Service is government-run socialist health care

I was asked to blog about this story by Trina, and so I will.

Here is the straight news story from Fox News:

The mother and father of a brain-damaged 11-month-old baby on Friday were sitting bedside with the boy after losing a legal battle that would have kept the boy on life support.

The Wall Street Journal reported that doctors at the Great Ormond Street Hospital for Children in London, who are caring for Charlie Gard received permission from a court to discontinue life support.

The boy’s parents objected to the decision and wanted to take him to the U.S. for an unproven, experimental therapy.

[…]On Tuesday, the parents lost a bid to take Charlie to the U.S. for trial therapy when the European Court of Human Rights sided with earlier rulings that continued treatment would cause “significant harm” and that life support should end. 

The ECHR decision followed other decisions by British courts, all of which sided against the parents. The courts decided that the government-run NHS health care system should kill the child, rather than allowing the parents to bring the child to the US to try the experimental treatment.

National Review summarizes the reasoning of the judges:

According to the Honourable Mr. Justice Nicholas Francis of the High Court’s Family Division, who authored the decision subsequently upheld by the higher courts, death is “in Charlie’s best interests.” There was no “scientific basis” for believing that Charlie would respond positively to the experimental American treatment; meanwhile, there is “unanimity among the experts from whom I have heard that nucleoside therapy cannot reverse structural brain damage.” “If,” wrote Justice Francis, “Charlie’s damaged brain function cannot be improved, as all agree, then how can he be any better off than he is now?” It was “with a heavy heart,” the judge said, that he sided with the doctors. Charlie should be permitted “to die with dignity.”

[…]So it was that successive courts in the United Kingdom and in Europe simultaneously found that Connie Yates and Chris Gard had devoted themselves unhesitatingly to their son’s welfare for ten months, and also that Yates and Gard could not be trusted to act in their son’s best interests.

Connie Yates and Chris Gard pay the salaries of this leftist judges and leftist NHS doctors. If these judges were elected, and these doctors were in the private sector, then the parents’ wishes would matter. But since the money disappeared in taxes, there is no accountability. The government actors have already collected the money from the parents, and now they don’t care what the parents want any more. They won’t even let them bring their child to the United States for treatment that their primitive government-run system can’t offer.

But it’s worse than that – the NHS won’t even let the parents take the child home to die.

Hot Air explains:

The couple had raised nearly £1.4 million for that effort, which would have ended NHS involvement in the case, but the courts decided that they — and not the parents — were in position to decide that death rather than potential treatment was what was best for the child. Now the parents cannot even take the baby home to allow him to die there rather than in hospital, even though they pledged to cover all the costs.

[…]In a single-payer system such as NHS, the courts have clearly ruled that the state has more standing on whether to allow someone to die than the person or his/her nearest relations. And now, the state — through its socialized-medicine providers — refuse to even allow the death to take place under the circumstances desired by the family.

Lest you think that this is an isolated incident, there are a number of other failures of socialized medicine linked in this article by libertarian Daniel Mitchell, writing for CNS News. When Obamacare was being debated, I was easily able to find dozens of NHS horror stories. Just imagine that the losers at the post office or the bureau of motor vehicles were providing you with health care. That’s the NHS. They don’t care about you, they’ve already got their money from your taxes. They have no competition from other players in a free market, so they don’t care. THEY DON’T CARE.

I should note that the UK’s socialized medicine system does allow young women to get breast enlargements, and women also get free IVF treatment. All paid for by taxpayers, of course. The first duty of politicians is to get re-elected. When you put health care in the hands of politicians, they use health care to redistribute taxpayer money in order to buy votes.

How exposed is your state to the problem of underfunded pensions?

I am thinking about moving to a new state in the future, and one of the factors I am considering is underfunded pension liabilities. This basically refers to the ability of a state to pay out pensions to retiring public sector employees going forward. I’m going to tell you everything you need to know to solve this problem in this post.

First, Investors Business Daily explains the problem:

A new report by Hoover Institution Senior Fellow Joshua Rauh shows that, unless action is taken soon, many local governments could face bankruptcy because they can’t meet their pension obligations.

[…]The problem is surprisingly simple: States and cities overestimate returns on their pension fund investments, while systematically underfunding them. The result is a growing deficit that will require massive tax hikes or dramatic and painful cuts in government services and promised pensions to public workers.

Rauh’s study looked at 564 state and local pension systems, representing $4.8 trillion in pension liabilities and $3.6 trillion in assets — for an apparent current deficit of just $1.19 trillion.

So far, so good. But Rauh notes the average expected return on pension assets is about 7.6% — which means a doubling every 9.5 years. He calls that assumption “wildly optimistic,” and says a more realistic assumption would be the Treasury bond rate of 3% or lower — less than half the expected return.

Unless pension managers, politicians and voters do something now, the unfunded liabilities of the national system will continue to grow out of control, reaching $3.4 trillion in just 10 years. States and cities across the country would have to raise taxes massively to keep from becoming insolvent.

Right now, state and local governments set aside about 7.3% of revenues for public pensions. To keep the funding gap from exploding and taking down governments across the nation, pension spending would have to rise to  17.5% of revenues on average — roughly equal to a 240% tax increase.

How did things get so bad? Generations of feckless politicians have refused to face down public employee unions, which have negotiated massively expensive pensions for their members while concealing their true cost. Politicians have gone along with it because, heck, it’s not their money and anyway, the problems will take place long after they’re out of office. That’s where we are now.

States and cities will come under intense pressure to raise taxes on local citizens to pay for this travesty. Instead, they should get rid of the public employee unions that have plundered the public for too long and have made local government inefficient, expensive and dysfunctional. If not, they can expect to face the same economy-crippling effects as Detroit, San Bernardino and a number of other cities have — financial insolvency.

Now, obviously states with kick-ass governors like Scott Walker of Wisconsin are not going to have the same exposure to such problems as incompetent governors like Maggie Hassan of New Hampshire. Scott Walker know how to rein in public sector unions.

Let’s get the numbers to confirm this hypothesis.

Bloomberg has the numbers:

Bloomberg ranked 49 U.S. states based on their pension funding ratios in 2014 under GASB 25. (Delaware is not included because of insufficient data for GASB 25.)

Here are the best states… Wisconsin is 100% funded:

States with the best-funded pension liiabilities
States with the best-funded pension liiabilities

And actually there is a comprehensive analysis of the fiscal solvency of all the states right here from George Mason University.

Here’s the map:

Overall fiscal solvency by state
Overall fiscal solvency by state

I notice that the deep blue states like California, Massachusetts, Illinois, Connecticut, New Jersey, etc. are just horrible states. No wonder everyone is fleeing them in droves. Socialism doesn’t work. Eventually, the money runs out.

So, if you’re thinking of moving to a new state, look at that. And if you don’t want to move, then vote for governors like Scott Walker who will take on public sector unions – otherwise, you’re headed for a big tax hike in the future, to pay for the big spending liberals of the past.

Good news: Venezuela and Argentina eject socialist governments

Political Map of South America
Political Map of South America

Investors Business Daily has some good news for us. The Democrat Party of Venezuela has been CRUSHED in a recent election.

Excerpt:

Venezuela’s voters delivered a sledgehammer blow to the country’s ruling Chavista socialists Sunday, winning a likely supermajority in the National Assembly. It’s a great awakening from a 17-year nightmare.

Given the past two decades of near-victories, electoral fraud, chicanery and fractious political opposition mistakes, many Venezuelans are still in disbelief at the scale of the victory in the nation’s legislative elections, which have decisively handed one of Venezuela’s leading governing bodies over to the democratic, pro-free-market opposition.

As this was written, the opposition, known by its Spanish initials MUD, had declared a 112-seat, or two-thirds, supermajority in the National Assembly as a result of Sunday’s vote. The Chavistas won just 46 seats.

It’s total victory in legislative terms and will enable the legislature to throw out politicized Supreme Court justices and appoint honest ones.

The new Congress can also boot corrupt election officials and appoint fair ones. And they will even be able to declare President Nicolas Maduro — the late dictator Hugo Chavez’s hand-picked successor — mentally unstable and unfit for office, or remove him for incompetence. They can also stop his executive orders dead.

The Congress also will have the power to free the 71 or so political prisoners now rotting in Chavista dungeons without trial, including top opposition leader Leopoldo Lopez. And Venezuela’s central bank will stop destroying the country’s money, now nearly worthless.

[…]Most important, the leftist government’s mismanagement of the economy — through currency controls that prevented imports of spare parts, created shortages of basics such as toilet paper and devastated the health care system — and the central bank’s infamous money-printing spree, which has pushed Venezuelan inflation to near 700%, made ordinary life for Venezuelans hellish. There also was corruption, with as much as 1 trillion dollars in oil earnings stolen or misappropriated over the years by high-living Chavista elites, whose lavish lifestyles mocked ordinary, poor Venezuelans.

Top it with the monstrous infiltration of the country by the drug lords, and the likelihood of an electoral housecleaning was perfectly clear.

Still, an element of disbelief remains, given how dirty the Chavista rulers have played their democracy game.

They have broken election rules, violated ballot secrecy, shut voters out and banned popular candidates from running. Many of those dirty tricks were evident in this election, too — the Chavistas illegally extended voting hours and campaigned at polling stations, to cite just a couple of examples.

But the opposition won anyway — with turnout so high, at 74.5%, and margins of victory so wide that the election was impossible to steal.

It helped that the the opposition had the wind at its back with the disastrous result of socialism. But it also helped that MUD had improved its electoral game over the years, learning from each near-miss election.

It also helped that MUD had strong leaders such as Maria Corina Machado and put out strong candidates with a clear, unified message — often summed up as “Down with the left.” And with all the pain of 17 years, it helped most of all that they never lost heart.

There is literally no different between the socialists of Venezuela and the Democrat Party in the United States. They are in lock step on every issue. Should the Democrat Party continue to hold power in America, we can look forward to a reckoning like this one in the future.

Two socialists shake hands: Barack Obama and Hugo Chavez
Two socialists shake hands: Barack Obama and Hugo Chavez

The Wall Street Journal says that the whole country is basically in the grip of ignorant socialists at every level, so there is lots to do.

Excerpt:

Pulling out of that death spiral, economists say, will require a series of painful and unpopular adjustments, rolling back more than a decade of populist and statist policies. Among the measures needed is raising the price of the world’s cheapest gasoline—which goes for less than one U.S. penny a gallon—overhauling a cumbersome and inefficient foreign-exchange system, and cutting generous social programs on which Venezuela’s poor depend.

[…]The government still controls more than 20 governorships, hundreds of mayors, the judiciary, much of the press and all auditing agencies. It will be up to Mr. Maduro whether to take steps to stabilize the economy, like loosening currency or price controls.

It’s not just Venezuela that has hit bottom under socialism. Recently, the people of Argentina also threw out their socialists after years and years of disastrous leftist policies.

The Chicago Tribune reports on last month’s election in Argentina.

Excerpt:

Under the current president, Cristina Fernandez, Argentina has become an international financial pariah. The country defaulted on debt last year in a long-running feud with hedge funds — remarkably, that was the eighth default in Argentina’s history.

Fernandez refused to settle. That’s left the country to squeak by in isolation, using protectionism and capital controls in a quixotic battle with globalism. The economy is stagnant, foreign currency reserves are dwindling and the inflation rate is around 30 percent. Last week, American Airlines said it stopped accepting pesos for ticket sales because it was tired of collecting revenue it couldn’t convert to dollars.

At times Argentina has embraced trade and economic openness, only to slip back into bad habits thanks to populist Peronistas like Fernandez. Macri, a conservative, wants to re-establish free market principles, but there are a lot of details he didn’t fully explain before his November victory because they will require some short-term pain, and he wanted to win the election.

Everything Macri is talking about makes sense. He says he will lift the capital controls that have wrecked the peso’s credibility. Like other backwaters it shouldn’t resemble, Argentina has a thriving black market because the government insists the peso is worth a lot more than its actual value. Freeing the currency would devalue it, a first step toward making Argentina more competitive.

The next big step would be to negotiate a settlement with the hedge funds that bought up Argentina’s debt after its previous default in 2002 and demand repayment. Fernandez got political mileage from attacking the “vultures,” but Macri seems to understand Argentina can’t get unstuck when it’s essentially shut out of international capital markets. He sounds like he wants to do a deal.

Macri’s got a tremendous balancing act to pull off: He’ll need to cut spending and reduce taxes without destroying the country’s big social safety net, while walking the country through a devaluation.

This is how countries that are ruled for a prolonged period by the political left eventually end up. I know so many of you lose heart and think that there is no hope, but there is hope. Even in countries where the left is running everything from the universities, to the judiciaries, to the mainstream media, there is hope.

Over the last 7 years, Obama added $10 trillion to the national debt. And although few of his Democrat low-information voters know about that, they will be able to tell the difference between prosperity and poverty when the United States reaches the Venezuela / Argentina tipping point. There comes a time when there are no more bailouts for the economics deniers. Reality wins in the end.