Income and Wealth Inequality, The Good, The Bad, and The Ugly – Part Two: The Bad by Peter Burrows 5/4/16 elburropete@gmail.com – silvercityburro.com (Note: I somehow failed to enter this blog back in May of 2016. It has been retyped and entered 3/20/2020. Still apt.) 

Bernie Sanders is on to something when he says the top one percent of American workers are screwing the rest of us royally, and it’s all because they enjoy special privileges and protections from the government.  The system is rigged, all right.   

Where Bernie is wrong is saying it’s only one percent. It’s closer to seven percent. Here’s how I figure it:  The number of state, local and federal civilian workers is about 17 million. (1) Add almost seven million retired government workers and the number is about 24 million, or seven percent of the total population of 324 million. (2) This is the REAL “one percent.”

This privileged group of fat cats is under-worked, overpaid, impossible to fire, retired too early and retired too generously. Most are unionized, and most are Democrats. Some enjoy job security that is absolutely scandalous.(3)  They form the backbone of the Democrat Party, supplying money, volunteers and party officials. Attend a meeting of your local Democrat Party and there they are: Government workers, active and retired, federal, state and local.  Don’t forget: School teachers and college professors are BIG in this group.

These people enjoy the REAL income inequality we should do something about, not the meritorious inequality that Bernie et al hyperventilate about. I suspect part of the “one percent” meme is a smoke screen to divert attention from the inequality government workers enjoy, at taxpayers’ expense. This pay inequality is for the most part undeserved and simply a function of politicians buying the votes of government employees.

The clueless Republicans should make this inequality an issue, and they should also raise the moral issue that part of the public payrolls are essentially involuntary donations to the Democrat Party from taxpayers who aren’t Democrats. Union dues, after all, come out of the workers’ pay that first comes out of the taxpayers’ pockets.

We’re not talking trivial stuff here.  At the federal level, a Cato Institute study last year put the average difference in pay AND benefits at an astounding $52,000 per year, which amounts to federal employees receiving 78% more than workers in comparable private jobs.  The author of the study summed it up pretty well: “The federal government has become an island of secure and high-paid employment, separated from the ocean of average Americans competing in the economy.” (4)

At the state and local level, things are not much better. The Bureau of Labor Statistics puts the total cost of a state or local worker at 45% more than for an equivalent private sector worker. (5) In fact, the state and local government jobs are by far the bigger problem. While the number of civilian employees at the federal level has been surprisingly flat for the last twenty years or so at about 2.7 million, state and local government employment has gone from six million in the 1950’s to over 19 million today. (6)

Let me be clear about a number of things. First, I don’t blame the workers. They are taking advantage of a good deal that they individually had little to do with. At a recent visit to my dermatologist, while he was carving and freezing spots on my haggard old visage, he was opining that he should have gone to work for the VA years ago and I was saying I should have gone to work for the IRS. Why, instead of sitting in his office, we’d probably both be sitting on deck chairs enjoying a Caribbean cruise and blah, blah, blah. Hindsight.

Second, not all government workers are Democrats. I know two Republicans in good health who retired, in their 50’s, from good government jobs and both are very active in Republican politics.  Both should still be on the job, but that’s just my opinion, one they would both take issue with, to put it mildly.

Third, some government workers are worth every penny they are paid. Cops come to mind, some teachers, plenty of health workers, and the occasional conscientious vin ordinaire bureaucrat. But the 634 school custodians, a.k.a. janitors, who made over $100,000 per year in New York City for the school year 2013-2014? (7) Not them.  Also, not Chicago school teachers, whose median salary is $71,017, of which only two percent goes toward their fat pensions. This is outrageous considering that almost 92 percent of the Chicago schools have over half their students NOT proficient in reading or math for their grade level. (8)

The Republicans share the blame for this inequity in government pay. When in control in Washington, D.C., they’ve done nothing to rein in Federal worker compensation, and today there are 32 states with Republican governors and Rauner of Illinois is the only one I know of who’s tried to get a handle on state pensions – unsuccessfully, I might add.

A good start would be to tie state and local retirement outlays to the age requirements in the Social Security system.  For example, a state worker spends thirty years on the job, is 52, fully vested and wants to retire. Well, congratulations and Bon Voyage! Oh, by the way, your retirement checks won’t start showing up in your mailbox until you are 62, or 67 or whatever the Social Security ages are for partial and full payment. It’s a thought.

The huge problem of unfunded pension/benefit obligations is beginning to get noticed. At least a couple of states, New Jersey and Illinois, have obligations that are simply unsolvable short of bankruptcy, an escape hatch states are not legally able to pursue.  Cities have the bankruptcy option but will first raise taxes, as is happening in Chicago, and then turn to their state governments for bailouts, and then from there will join their state governments in the queue to get the Federal government to foot bail-outs. Bet on it.

I can hear the arguments now: If they did it for General Motors, they can do it for Poughkeepsie (or wherever.) If this is allowed to happen, the unions representing state and local workers will have pulled off a major tax swindle: Negotiate state and local labor contracts that pay the moon and send the bill to Washington.

To prevent this, the stated need the potion of bankruptcy law protection. Bankruptcy allows contracts to be rewritten or even annulled, including pension agreements.  The Federal law disallowing state bankruptcies should be changed, but I’m not sure it will ever happen.  Too many retirees will flock to D.C. to tell their tales of impending doom, many of them absolutely true.

FI don’t know how this problem can be solved without a lot of pain. Perhaps some sort of grandfathering scheme for pensioners with reasonable benefits, some sort of claw-back for pensioners with unreasonable benefits, but SOMETHING has to be done.

Allowing states to declare bankruptcy still wouldn’t do anything about the Federal workers and their fat pay and fatter retirement benefits. Maybe Bernie will start bitching about this inequality, the inequality that government can, and should, do something about. I’m not holding my breath.

(1) http://blogs.wsj.com/economics/2014/11/07/the-federal-government-now-employs-the-fewest-people-since-1966/                                                                                                                    (2) I tried, hard, to get a number for all retired government workers, state, local and Federal. The best I could do is to use a number, seven million, implied in an article in the Wall Street Journal, 12/29/15, “States’ Pension Woes Split Democrats and Union Allies” by Timothy W. Martin and Kris Maher.                                                                                              (3) http://nypost.com/2016/01/17/city-pays-exiled-teachers-to-snooze-as-rubber-rooms-return/                                                                                                                                                  (4) http://freebeacon.com/issues/study-government-workers-make-78-percent-more-than-private-sector/                                                                                                                                     (5) http://www.breitbart.com/big-government/2014/03/13/government-workers-cost-45-more-than-private-sector/                                                                                                                    (6) ibid (1)                                                                                                                                                (7) “Most New York City Custodians Do Really, Really Well” by Matt Vespa, Townhall 9/21/15                                                                                                                                                    (8) http://townhall.com/columnists/timbenson/2016/01/13/thanks-to-teachers-union-chicago-public-schools-are-a-perpetualmotion-machine-of-mediocrity-n2103697                  (9) http://chicago.cbslocal.com/2016/02/01/pension-bill-on-hold-despite-rauner-cullerton-agreement/