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Friday, February 05, 2010



Hi All,



While the federal government does not have to balance its budget the states do. For fiscal 2010 the states are facing a 35 billion dollar deficit, with California and Illinois leading the way with 6 and 5 billion respectively. One of the major expenses that the states face is the benefits for public employees.

Here is a quote from a Time Magazine article from 2005.



All pensions and health-care plans are not created equal. At the same time millions of workers in private industry have lost the benefits they once thought they had for life, another group is doing quite nicely, secure in the knowledge that their benefits are protected forever--not by some government agency, but directly by you, the taxpayer.

To understand how this happened consider that you own a company and your employees belong to a union. When you sit down to negotiate you are working with your money. Even if you manage a public company you are working with stockholder monies and you know that your job is on the line if your dividend is reduced. On the other hand if you are a county commissioner negotiating with the public employees you are using tax payer money not yours or the stockholders. The net result of this over time has been better benefits for public employees.



Much of the stimulus money that the government has spent in this past year has gone to states so that they can keep from laying off state employees. As the situation deteriorates the states will need more money and it is my guess that the president will pay off the above mentioned 35 billion using money from the stimulus.



The states will learn from this that they can overspend and fall back on the federal government to bail them out just as the too big to fail banks figured out the same idea.



The long term results of this will be more and more public sector jobs and fewer private sector jobs. Even today the public job salaries average $70,000 per year while private jobs average $40,000. The future will bring more government jobs and fewer private sector jobs. This is not sustainable since government jobs do not produce products and under our economic system all long term growth comes from private employers



John aka Jack