Tag Archives: Public Sector

Commentary

Harvard economist says stimulus was designed to reward Democrat constituencies

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EVERYONE  PLEASE GO VOTE TODAY! (NOVEMBER 2nd, 2010)

Hans Bader at the Competitive Enterprise Institute comments on a new published paper by Harvard economist Jeffrey Miron, which explains why the stimulus failed to stimulate the economy and to create more jobs.

The paper is here. (PDF)

Excerpt:

Harvard economist Jeffrey Miron explains why the $800 billion stimulus package failed in a recent article.

What’s interesting about Dr. Miron’s critique is that he shows how the stimulus was a failure even if you take for granted liberal assumptions about economic policy (such as Keynesian economic theory), since it was so badly designed and executed that it failed to achieve its goals, spending wastefully while failing to revive the economy.  Indeed, the stimulus was so poorly tailored to the economy (and the goal of reducing unemployment) that Miron concludes that it was designed to reward politically connected “constituencies” and special-interest groups, like public-employee unions, rather than being focused on ”economic stimulus.”

Other Harvard economics professors like Robert Barro have also criticized the stimulus package. Barro called it “the worst bill that has been put forward since the 1930s.”  Former Obama economic advisor Martin Feldstein, a Harvard professor who is a big believer in stimulus packages in principle, said that the stimulus designed by Obama and congressional Democrats was “poorly done”

Much stimulus money has been wasted.  It has gone to prisoners and dead people, wasteful welfare spending, abandoned bridges to nowhere, and unnecessary government buildings.  The stimulus subsidized foreign green jobs and wiped out jobs in America’s export sector.

The “’stimulus’ is not the road to economic recovery. It’s the problem, not the solution, writes Nobel Prize winning economist Vernon L. Smith.” Other Nobel Laureates like Gary Becker have also criticized the stimulus package.  200 economists signed a statement publicly opposing the stimulus package in an ad published in the Washington Post and New York Times.

So the stimulus bill was a failure because it was not designed to grow the economy or create jobs.

What was the real purpose of the stimulus bill?

George Mason University professor Veronique de Rugy looked at recovery.org and found that Democrat districts got more stimulus money than Republican districts.

Here’s the first chart:

Stimulus spending by voting district affiliation
Stimulus spending by voting district affiliation

She writes:

…based on my new analysis of the Recovery.org data, Democratic districts are getting 1.8 times more money on average than Republican districts. Using Recovery.gov data, and cleaning it up seriously to be able to use it, we find that Republican districts are getting on average $260.6 million in stimulus awards while democratic districts are getting on average $471.5 million. The average is award per district is $385.9 million.

Interestingly, my data also confirms that the stimulus funds are not allocated based on unemployment rates or even variations in unemployment rates. So basically,  if the administration believes that government spending can create jobs, the allocation of the funds doesn’t show it.

And here’s the second chart showing which government departments got stimulus money.

Stimulus spending by government department
Stimulus spending by government agency

She writes:

Based on the Recovery.gov data, more than two third of the 594,754.3 jobs “created or saved” with the stimulus funds were “created or saved” in the Department of Education (see chart).  Basically, what the administration meant by shovel ready projects was funding for your next door teacher.

[…]A third of all union jobs are in Education

33 percent of the education industry is unionized

The union boss, Andy Stern, was appointed to be on the president’s debt commission.

The stimulus bill was never about stimulating the economy. It was about rewarding Democrat special interest groups. Remember, people who disagree with Obama are his “enemies”. And that means he isn’t there to govern for all the people equally. He’s there to reward his people. With Your Money.

News

New Jersey turnpike wasted millions on perks

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From Fox New York.

Excerpt:

Auditors say the New Jersey Turnpike Authority wasted $43 million on unneeded perks and bonuses.  In one case, an employee with a base salary of $73,469 earned $321,985 when all payouts and bonuses were included.

The audit says that toll dollars From the New Jersey Turnpike and the Garden State Parkway were spent on items ranging from an employee bowling league to employee bonuses for working on birthdays and holidays.

It took place as tolls were being increased.

The biggest expense uncovered in the audit was $30 million in unjustified bonuses to employees and management in 2008 and 2009 without consideration of performance.

One example was paying employees overtime for removing snow and working holidays and then giving additional “snow removal bonuses” and “holiday bonuses.”

The Comptroller’s Office audit released Tuesday says taxpayers also paid $430,000 for free E-ZPass transponders for employees to get to work and nearly $90,000 in scholarships for workers’ kids.

The audit shows turnpike authority employees got bonuses and overtime for working their birthdays and holidays.

Comptroller Matt Boxer says tolls are set for another increase in 2012.

[…]Another audit finding was that employees were allowed to cash out a portion of their unused sick and vacation days at the end of the year to circumvent the current $15,000 limit for sick leave payouts upon retirement.  That cost $3.8 million a year.

New Jersey is a hard blue state. Deep, deep blue.

If a private company did something crazy wasting money like this, they would be out of business because their prices would be higher when compared to their competitors. That’s why government is inefficient and wasteful – it has no competitors. We need to keep everything possible in the private sector and have transparency, accountability and whistleblower protections to contain government corruption and fraud.

News

In France, unionized thugs riot against maturity and responsibility

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Here’s a story about the public sector union riots in France from Bloomberg News. (H/T Mary)

Excerpt:

French refineries remained shut, trains were on half service, schools closed and gas stations ran dry as unions held their fourth strike in two months against President Nicolas Sarkozy’s plan to raise the retirement age.

Sarkozy has refused to retreat from a proposal to increase the retirement age for a full pension to 67 from 65. His plan would bring France closer to Germany and the U.S., which are moving toward setting 67 as the full-retirement age, according to the Organization for Economic Cooperation and Development.

The French Senate is set to vote on the pension measure this week, giving final parliamentary approval to a plan to eliminate the retirement-system deficit by 2018.

“This reform had been postponed for too long and the deadline couldn’t be push further anymore,” Sarkozy said at a press conference in Deauville, France. “I hope that everyone stays calm so that things don’t go beyond certain limits. We cannot live without gasoline. I will see to it with the security forces that public order is guaranteed.”

Some protests turned violent, with youths today fighting police in the Paris suburb of Nanterre. In Lyon, some demonstrators broke shop windows and pillaged stores, L’Express magazine said on its website. Television reports showed snaking lines of drivers waiting to fill up on gas as about a quarter of the country’s 12,000 service stations carried signs saying they’d run out of fuel.

Government ministers said France has enough fuel to last several weeks and that they’ll continue to use police to break up barricades at oil depots.

[…]France’s 12 refineries have been on strike for a week, and no crude is arriving at the ports of Marseille, Le Havre and Nantes.

[…]Exxon Mobil Corp. declared “force majeure,” in France, saying it will be unable to meet some of its oil supply obligations and that it has begun shutting down its Gravenchon refinery, the larger of its two oil-processors in the country.

“A complete shutdown of the refinery is now under way,” Catherine Brun, an Exxon spokeswoman in Paris, said by phone today. “We cannot deliver products out of tanks.”

Total SA, the country’s biggest oil company, said a quarter of the 4,000 service stations it operates in France face shortages of one or more fuel products because of the strike.

[…]In France, the average retiree gets a net 65 percent of his average qualifying wage in government pension payouts, compared with 61.5 percent in Germany, 47 percent in the U.S. and 44 percent in Britain, according to the OECD.

I’m not sure why, but the word “extortion” pops into my mind. Or maybe I was thinking of “arrested development”. What is it called when grown men and women refuse to grow up and take responsibility for their own lives and insist on receiving entitlements provided by their harder-working neighbors?

Could a public sector union pension crisis happen here in the USA? Well, consider this article from The Economist, a radically-left-wing pro-Obama magazine. (H/T ECM)

Excerpt:

CHUCK REED is the Democratic mayor of San Jose, California. You might expect him to be an ally of public-sector workers, a powerful lobby in the Golden State. But last month, at a hearing on pension reform held by the Little Hoover Commission, which monitors the state’s government, Mr Reed lamented his crippling public-pensions bill. “City payments for retirement benefits have tripled over the last ten years even though our workforce has declined dramatically, and we have billions of dollars in unfunded liabilities that the taxpayers must pay,” he said.

Mr Reed estimated that the average cost to his city of employing a police officer or firefighter was $180,000 a year. Not only can such workers retire at 50, but some enjoy annual pension payments greater than their salaries. They are also entitled to cost-of-living increases of 3% a year, health and dental insurance for life and lump-sum payments for unused sick leave that could reach hundreds of thousands of dollars.

Plenty of similar bills are looming in America’s public sector: in municipalities, in the federal government, and especially at state level. Defined-benefit pensions, which link retirement income to salary, are expensive promises to keep. The private sector has been switching to defined-contribution plans, in which employees bear the investment risk. But the public sector has barely begun to adjust, and has built up a huge liability to its staff. Worse, it has not funded the promises properly.

Joshua Rauh, of the Kellogg School of Management at Northwestern University, and Robert Novy-Marx, of the University of Rochester, estimate that the states’ pension shortfall may be as much as $3.4 trillion and that municipalities have a hole of $574 billion. Mr Rauh calculates that seven states will have exhausted their pension assets by 2020—even if they make a return of 8%, a common assumption that looks wildly optimistic. Half will run out of money by 2027. If pension promises are to be kept, this will place immense strain on taxes. Several have promised annual payments that will absorb more than 30% of their tax revenues after their pension funds are exhausted (see chart 1).

Now the problem is making headlines, especially in California, where taxpayer groups have been highlighting the generous pensions of some former employees. More than 9,000 beneficiaries of CalPERS, the largest state retirement plan, receive more than $100,000 a year.

The stage is set for conflict between public-sector workers and taxpayers. Because almost all states are required to balance their budgets, any extra pension contributions they make to mend a deficit will come at the expense of other citizens. Utah has calculated it will have to commit 10% of its general fund for 25 years to pay for the effects of the 2008 stockmarket crash. But attempts to reduce the cost of pensions are being challenged in court and will be opposed by trade unions, which still have plenty of members in the public sector.

It’s not good for people to go through life becoming more and more accustomed to bailouts and redistributed wealth from their neighbors. Everyone should have to earn their own money and provide for themselves during their own retirement years. It’s not good to be dependent on other people – it’s better to make your own way in the world, and to share with others who have less than you do.