The Cost of Higher Education rose Twice as Much as Health Care Costs

Posted by PITHOCRATES - August 31st, 2013

Week in Review

It’s bad enough that higher education is programming our kids to become good liberals.  But their getting rich in the process is just rubbing salt into the wound (see College Costs Surge 500% in U.S. Since 1985: Chart of the Day by Michelle Jamrisko & Ilan Kolet posted 8/26/2013 on Bloomberg).

The cost of higher education has surged more than 500 percent since 1985, illustrating why there have been renewed calls for change from both political parties.

The CHART OF THE DAY shows that tuition expenses have increased 538 percent in the 28-year period, compared with a 286 percent jump in medical costs and a 121 percent gain in the consumer price index. The ballooning charges have generated swelling demand for educational loans while threatening to make college unaffordable for domestic and international students.

What expenses does a college have?  There are shelters (i.e., buildings) where students sit and learn.  But shelter costs rose nowhere near the amount going to college did.  So it’s not the buildings.  So what else do colleges have?  That tuition pays for?  Excluding books and living expenses that are above and beyond tuition expenses?  Well, the only other thing they really have are people.

College administrators and college professors.  If the high tuition costs are not due the costs of the buildings on the college campus then we must be paying the people too much.  In pay and benefits.  So let’s crunch some numbers.

The average annual cost for a 4-year public college is about $18,000 (see The Average Cost of a U.S. College Education posted 8/24/2010 in US News and World Repot).  Based on a typical enrollment of 40,000 students that comes to an annual college revenue of $720,000,000.  If the college has $1.5 billion in debt on its books for capital improvements on average at 6% that comes to an annual interest expense of $90 million.  Let’s assume they retire $50 million in debt every year.  And their operating costs (everything else but pay and benefits for administrators and professors) are, say, $25 million.  Subtracting all this from the annual tuition revenue leaves $555 million for pay and benefits each year.  Assuming a professor/administrator for each 20 students that gives us 900 professors/administrators.  Dividing this into that $555 million gives us about $617,000 per professor/administrator annually.

This is just a rough estimate but it does give you an idea about the amount of money we’re talking about here.  Not all professors are making $617,000 but if you’re tenured you’re living well.  Very well.  And administrators typically live far better than tenured professors.  This is what students are going in debt for.  To give a privileged few a life others can only dream about.  Worse, a lot of these students who graduate have an unmarketable degree.  In an economy where employers are looking for people with math and science skills people with degrees in romantic languages or gender studies will not fare well.  But the people who sold them those degrees will be doing very well.  This is why we have a student loan debt problem.  Students took on enormous debt for a degree they can’t use.

Everyone loves to complain about the high cost of health care.  And demand that government do something about it.  Well, they did.  They gave us Obamacare.  Which promises to squeeze hospitals and doctors.  To make them do more for less.  Obamacare is so bad that it is causing some doctors to retire early.  Just so they don’t have to deal with it.  Yet the cost of college has gone up at twice the rate of health care costs.  But where is the outcry over that?  Where are the people demanding that government do something?   To squeeze those universities, professors and administrators?  Why should they get rich at providing education.  If doctors shouldn’t get rich saving lives why should educators be allowed to get rich selling unmarketable degrees?  Just why is it educators can get away with being the greediest of the greedy and escape government scrutiny?

Because they teach their students to be good liberals, that’s why.  And this is so valuable to Democrats that they are willing to raise the taxes on their constituents as much as it takes.  Because without the programming higher education provides few would vote Democrat.

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Britain is looking to sell the Royal Mail to escape Out of Control Pension Costs

Posted by PITHOCRATES - July 13th, 2013

Week in Review

The United States Postal Service isn’t the only postal service flirting with the idea of privatization.  So is the Royal Mail.  And, predictably, some are not happy about making government jobs like private sector jobs (see Royal Mail privatisation ‘will lead to soaring prices and job losses while taxpayer keeps debts’ by Graham Hiscott posted 7/11/2013 on the Mirror).

STAMP prices will soar and jobs will be slashed when the Royal Mail is privatised.

The warning came from critics as the Government announced its controversial plan to kick off a £3billion sale.

It is feared the sell-off could see a big chunk of the company snapped up by foreign investors, with investment banks raking in millions in fees.

So while the Treasury pockets a pre-election windfall, the taxpayer will still be paying for Royal Mail’s £12billion pension deficit.

Chuka Umunna, Labour’s Shadow Business Secretary, said it amounted to “nationalising its debts and privatising its profits”.

This pretty much says it all.  Pension costs are so out of control that the only way the Royal Mail can survive is with huge government subsidies.  And if they cut those subsidies they will have to pay for those pensions with the revenue from stamps.  Which means stamp prices will have to rise to replace those lost subsidies.  So these government workers can continue to enjoy those generous pensions.

Britain has an aging population.  Like most of the developed world.  People are living longer.  Giving them more time to suffer more diseases.  Raising the cost of pensions and health care for retirees.  Ponzi schemes like state pensions worked when there was an expanding population growth rate with more people entering the workforce than were leaving it.  But those days are long gone.  As are the days of defined benefit pension plans.  Where today they only result in unfunded pension obligations.  And companies like the United States Postal Service and the Royal Mail unable to pay their bills.

The reason why unions resist the privatization is that these business models cannot survive in the private sector.  For their labor costs (pay and benefits) far exceed anything available in the private sector.  And the only way they can keep those generous pay and benefit packages is by having the taxpayer subsiding their cost.  But if they go private and it costs $7.50 to mail a utility payment people aren’t going to mail their utility payments anymore.  And people will see the true cost of union labor.  Which means either unions must match the pay and benefit packages they have in the private sector.  Or they will lose all their union jobs.  Because no one is going to pay $7.50 to mail a letter.

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Public Sector Costs are Bankrupting Detroit and Illinois

Posted by PITHOCRATES - June 8th, 2013

Week in Review

Public sector pay and benefits are crushing state governments and cities.  The City of Detroit is probably going to file bankruptcy.  And the State of Illinois just saw its bond rating cut (see Illinois Bond Grade Cut as Lawmakers Can’t Fix Pensions by Tim Jones & Brian Chappatta posted 6/3/2013 on Bloomberg).

Illinois had its credit rating cut one level after lawmakers failed to restructure state pensions saddled with almost $100 billion in unfunded liabilities…

The retirement systems cover state workers, teachers, university employees, judges and lawmakers…

“It is disgraceful that this year’s legislative session ended without a new pension plan,” Treasurer Dan Rutherford, a 58-year-old Republican who is running for governor in 2014, said in a statement. The failure “costs the state millions of dollars each day, plus these downgrades could continue to make borrowing additional funds even more expensive…”

Illinois’s growing pension deficit is “unsustainable,” Fitch analysts led by Karen Krop, a senior director in New York, said in a statement. The inaction by lawmakers raises questions about the state’s ability to deal with “numerous fiscal challenges.” They also cited a growing backlog of unpaid bills and borrowing to cover operational costs, indicating another cut may be forthcoming.

These public sector workers have pay and benefit packages unlike those in the private sector.  Which has to pay for the pay and benefits of both the private and public sectors.  So they keep raising taxes on individuals and businesses.  And our politicians never worry about the long-term consequences.  But they can only tax so much.  People can only pay so much in taxes before they can no longer pay their own bills.  So they start borrowing.  And the more they borrow the more risky they are to loan money to.  The more in debt they go and the greater their spending obligations the higher the interest rates they have to pay to get investors to take a chance on buying their bonds.  Because there’s a very good chance something like this will happen (see Detroit to offer creditors less than 10 percent of what city owes -report by Steve Neavling posted 6/7/2013 on Reuters).

Detroit Emergency Manager Kevyn Orr plans to deliver grim news to the city’s creditors next week: Take less than 10 percent of what the city owes or risk losing it all in a bankruptcy proceeding, the Detroit Free Press reported on Friday…

In his report, Orr stated that the city has run annual deficits of $100 million and more since 2008. Detroit is believed to owe about $17 billion in debts and liabilities.

So on the one hand they beg and plead for investors to loan them money.  So they can pay the overwhelming costs of their public sector in the face of a shrinking tax base.  And then when their finances get so bad that they can’t even service their debt any more they say, “Thank you for your money when we could not raise any ourselves.  And because you took that great risk for us we will reward you by screwing you out of 90 cents of every dollar you loaned us.  But stick around after the bankruptcy.  For once we shed this debt we will need to borrow more to pay for the overwhelming costs of our public sector.”

Detroit had annual deficits of $100 million.  Illinois has $100 billion in unfunded liabilities.  Is it any wonder Fitch lowered their bond rating?  For the state of Illinois has a greater financial problem than the City of Detroit has.  The State of Michigan gave Detroit an emergency manager to fix their problems.  They even offered to buy a city park.  Belle Isle.  To help Detroit get out of the mess they put themselves into.  But Illinois cannot help Illinois.  Only the federal government can.  But will they?  If they do you know California will demand a bailout, too.  As will every other state and city with a crushing public sector cost will.  But the federal government can’t bail out everyone.  Not when they have their own trillion dollar deficit problem to fix.

No.  There is only one way to fix the problems these cities and states are having.  They have to cut their public sector costs.  Which means someone else besides the bondholders will have to take a haircut to put these states and cities back into the black.  Meaning the public sector can no longer enjoy the kind of benefits people in the private sector haven’t enjoyed in decades.

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FT134: “There will always be poor and oppressed people because someone has to vote for liberal Democrats.” —Old Pithy

Posted by PITHOCRATES - September 7th, 2012

Fundamental Truth

Liberal Democrats would Not Like an America without Poor and Oppressed People

In the anti-nuclear power movie The China Syndrome Jack Lemmon’s character wanted to warn everyone about his dangerous nuclear power plant.  He was a control room operator at the plant.  During one event there was a vibration.  The reactor shut down (SCRAM) safely.  But Lemmon’s character did some investigating and found that some safety reports had been falsified.  And in his quest to publicize this fact people died.  So he did the only thing he could.  He locked himself inside the control room at the nuclear power plant.  Requested that the characters played by Michael Douglas and Jane Fonda come down to put him on the air live.  And threatened to create a nuclear catastrophe himself if that didn’t happen.  That’s right, as dangerous as that reactor was he did NOT shut it down.

Odd, really.  He threatened to cause what he was trying to prevent.  Why?  Well, consider what would have happened if he did everything he did with one change.  Instead of threatening his own nuclear catastrophe he shut down that reactor.  So it was safe and could not harm anyone.  If he did that what do you think would have happened?  No one would have brought that news crew (Douglas and Fonda) to the plant.  And plant security would have just broken into the control room and subdued Lemmon.  But because he left the reactor hot and dangerous they didn’t break in and subdue him.  And they brought in that news crew.  Because his threat of causing a nuclear catastrophe gave him power.  While a safe and shutdown reactor gave him no power.

So what do we learn from this?  Sometimes the thing you’re fighting against is the very thing that gives you power.  A purpose.  A reason for getting out of bed in the morning.  Something that gives you a job.  Something that pays the bills.  And it’s just not disgruntled nuclear power plant operators.  Imagine a world with no crime.  If there was no crime we wouldn’t need any police officers.  Something police officers wouldn’t like.  Just as firefighters wouldn’t like a world without fires or accidents.  Just as cardiologists would not like a world without heart disease.  Just as environmentalists would not like a world without global warming.  Just as advocates of affirmative action would not like a world without discrimination.  Just as liberal Democrats would not like an America without poor and oppressed people.

The Poor and Oppressed are a Favorite Constituency of the Federal Government

The more horrible the things people are fighting against the greater are the need for these people.  The Left makes use of this strategy all of the time.  Falling test scores means we need to spend more on education.  As in hiring more teachers.  And paying them more.  This works the other way, too.  When municipalities are running budget deficits because of costly public sector contracts calling for high pay and generous benefits they place a new millage on the ballot.  And warn the people that if they don’t vote ‘yes’ for these higher taxes they will have no choice but to increase the number of rapes, murders and assaults.  As well as increase the number of deaths from fires, heart attacks in the home and car accidents.  Because if the people vote ‘no’ they will lay off police officers and firefighters.  Instead of renegotiating those contracts that are causing their financial problems.  No.  It’s never cutting back on the things that are bankrupting their cities.  It’s always putting the fear of God into their electorate.  So the public sector workers can maintain their generous pay and benefits.

Of course some will say that our teachers, police officers and firefighters don’t get paid that much.  If that’s true then they belong to some real crappy unions.  Because you join a union to get better pay and better benefits.  And you pay union dues for the union’s help in getting better pay and better benefits.  Also, if we didn’t already pay them very well you would know what their pay and benefits were during these millage requests.  For it sure would help their argument for higher pay if most people made more than they did.  Because, let’s face it, we need good teachers, police officers and firefighters.  If we paid them less than most other people everyone would feel guilty and vote ‘yes’ without hesitation.  But during these millage requests they don’t make public their current pay and benefit schedule.  And it’s hard to find this information online.  Because that’s ‘personal’.  Even though we pay them with public money.  Which should tell you something.  They’re paid better than most people.  Because they’re asking for more without telling us how much they currently make.  For it is hard to get sympathy for your pay level when you make more than most other people.

It’s no secret that government workers get better pay and benefit packages than people in the private sector.  Especially in the federal government.  Where federal employment grows by leaps and bounds every year.  And they create ever new programs to fight against something.  So they can keep hiring more people into the federal bureaucracy.  To reward friends and cronies.  And to endear a growing federal government to ever more people.  So they will continuously help to support and promote that sprawling bureaucracy.  Through their votes.  And by making as many people as possible dependent on the government.  Making the poor and oppressed a favorite constituency of the federal government.  As it has been for a very long time.  Despite the numerous battles to end poverty and oppression.

The Liberal Democrat Answer to Poverty is Not a Job but a Government Entitlement

JFK was a tax-cutter.  Just like Ronald Reagan.  They both believed that you had to create a business-friendly environment to create jobs.  Because if a business did well it grew and hired more people.  That’s why both JFK and Ronald Reagan had strong economic growth and low unemployment during their presidencies.  And they each brought in a lot of tax revenue into Washington.  Even with their low tax rates.  So low tax rates are good.  They help businesses grow.  They help people get jobs.  They lower the price of consumer goods so people can buy more for less.  And they bring in more revenue to the government to help those who need help.  Of course liberal Democrats hate this.  Because if everyone is doing well there is no need for all their agencies and programs.  Or them.

Shortly after the assassination of JFK things changed.  LBJ became president.  Who was a big liberal Democrat.  Who declared unconditional war on poverty.  This was in 1964.  The plan was to explode the size of the federal government.  Which is what he did when he gave us the Great Society.  The war on poverty would become one of America’s longest war.  Longer than the wars in Iraq and Afghanistan.  Longer than the Vietnam War.  Even longer than the Cold War.  The war on poverty continues to this day.  Requiring ever more government agencies.  And programs.  Yet they’ve all failed to end poverty.  Proven by the fact that every generation of liberal Democrats running for office is an advocate for the poor and oppressed who have no voice but theirs.

The liberal Democrat answer to poverty is not a job but a government entitlement.  Because jobs lead to lower unemployment.  And less purpose for a liberal Democrat.  Liberals don’t want jobs and low unemployment.  They want high taxes and high unemployment.  So they can matter.  And make a difference.  So they can have a cushy job with high pay and generous benefits.  So they attack tax cuts.  They attack any lowering of regulatory costs.  And anything else that would help businesses create jobs.  Which would take the poor and oppressed away from them.  They don’t want people to be rugged and independent.  They want them needy and dependent.  And they want as many people as possible to be needy and dependent.  Even if it leads to a little rioting.  Especially if it leads to a little rioting.  For a little level of danger can be useful.  As it can be in a nuclear power plant in an anti-nuclear power movie.  Because it’s very hard to get taxpayers to vote for people that want to increase your taxes and make your lives more costly.  While some liberals genuinely care about making people’s lives better many more are like Jack Lemmon in The China Syndrome.  Who understand that they must maintain a certain level of poverty and oppression in the nation.  Or they will have no power.  As no one will vote for them.  Because if you’re in the business of ending poverty and oppression you need a certain level of poverty and oppression to fight against.  Always.

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Obama Attacks Colleges for High Tuition Costs and Irks College Administrators

Posted by PITHOCRATES - January 28th, 2012

Week in Review

In an odd move President Obama has attacked colleges for the high tuition costs.  Odd because colleges overwhelmingly support Democrat candidates.  Colleges are like public sector unions for all intents and purposes.  And he would never ask public sectors to cut their budgets.  Democrats never attack the colleges for the high cost of tuition.  They attack people who don’t approve higher taxes for higher education.  But Obama attacks colleges.  Leaving college administrators dumbfounded (see College presidents pan Obama cost-control plan by the Associated Press posted 1/28/2012 on the New York Post).

Fuzzy math, Illinois State University’s president called it. “Political theater of the worst sort,” said the University of Washington’s head…

Illinois has lowered public support for higher education by about one-third over the past decade when adjusted for inflation. Illinois State, with 21,000 students, has raised tuition almost 47 percent since 2007, from $6,150 a year for an in-state undergraduate student to $9,030…

Bowman said the undergraduate experience can be made cheaper, but there are trade-offs.

“You could hire mostly part-time, adjunct faculty. You could teach in much larger lecture halls, but the things that would allow you achieve the greatest levels of efficiency would dilute the product and would make it something I wouldn’t be willing to be part of,” he said.

If you crunch the numbers that’s $189,630,000 ($9,030 X 21,000) Illinois State takes in each year from their undergraduate students.  That’s a lot of money.  But it excludes donations.  And federal and state aid.  Which when added all together pays for administrative workers, janitors, administrators and, of course, professors.  Which makes you wonder where all that money goes.  The $189 million.  The donations.  And the federal and state aid.

Of course, everyone knows where it all goes.  Where it always goes.  Pay and benefits.  In particular, salaries, health care and pensions.

People love to work at these colleges.  Because of all that money.  You can’t get this in the private sector.  Which is why pay and benefits in the public sector, including these colleges, are far better than in the private sector.  Because they always justify their ever increasing tuition costs on the imperative to educate students to compete in the high-tech world of tomorrow.  While those working in the high-tech world can’t make similar pleas so their customers will pay higher prices for their high-tech products.  No, they can’t do that.  For that would be greedy.  But colleges can.  While no one calls them greedy.

And if you argue against colleges you sound like you’re against winning the future.  Even though many of these students are getting degrees in art, music, sociology, anthropology, women studies, minority studies, etc.  Which really don’t help to win the future.  But they do provide a lot of jobs on campus.  And a lot of tuition revenue from students who don’t want to take the more difficult degree programs that require math.

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FT101: “Unlike government a business tries to fix bad policy before it bankrupts them.” -Old Pithy

Posted by PITHOCRATES - January 20th, 2012

Fundamental Truth

If Businesses give their Employees Overly Generous Pay and Benefits they will not be able to Stay in Business

A lot of people say businesses are greedy.  That they are always trying to go on the cheap when it comes to their employees.  The fatal flaw of capitalism some even say.  That need to make a profit.  And because of the profit-incentive businesses try to use as few employees as possible.  While paying them as little in pay and benefits as possible.  Which they, of course, do.  Because that’s the only way they can stay in business when their customers are doing the same.  When we go to the store looking for the maximum value at the lowest price.

You see, a business has to earn enough sales revenue to cover all their costs.  And their sales prices include these costs.  If these costs are too high people won’t buy from them.  So this is the reason why they pay their employees as little in pay and benefits as possible.  Because of us.  And our greed.  To keep as much of our money as possible when shopping.

So businesses can’t be overly generous to their employees.  For if they are they are then faced with two choices.  Raise prices to pay for this generosity.  Thus dissuading consumers from buying from them.  Which reduces their sales revenue.  Or they can choose not to raise their prices.  Which will increase their costs greater than their sales revenue.  Either way it’s bad for business.  For if they give their employees overly generous pay and benefits they will lose money.  And not be able to stay in business.

Businesses must make these Difficult Choices if they wish to Survive in the Real World

In free market capitalism businesses have real constraints.  They can’t be overly generous.  Because they won’t be able to earn enough revenue to cover their costs.  But neither can they be too miserly with their employees.  Because they have to be generous enough to entice them to work for them.  It’s this balancing act between generosity and being too cheap that causes a business problems.  Because in good economic times employees like to demand more.  And if they don’t get it where they currently work they will leave and work for someone else.  So employers are generous.  Sometimes too generous.  Which they usually learn when the good times end and they can no longer cover their costs at the new levels of revenue during those bad economic times.

A business cannot raise revenue by simply saying ‘raise revenue’.  For it is not up to them.  It’s up to the consumer.  And during bad economic times they’re just not buying like they once were.  Which leaves a business only one choice.  They must cut costs.  Either by cutting back on pay and benefits.  Or by really cutting back on pay and benefits.  By laying off employees.  It’s either that or they will bankrupt themselves out of business.

All businesses must make these difficult choices.  If they wish to survive.  Because they live in the real world.  Capitalism.  Where there are winners and losers.  And where businesses fail because they don’t make the difficult choices when they have to.  We’ve all seen a favorite store go out of business.  It may not always be because of the cost of their employees.  But it is always because they’re not earning enough revenue to cover their costs.

Difficult Choices are Rarely Politically Expedient and don’t bring in Many Votes

Health care costs and pensions have been the biggest costs businesses have struggled with.  That’s why defined benefit pension plans are a thing of the past.  Unless you’re in a union.  Or in government.  And employees are contributing more to the cost of their health care benefits.  Why?  Because of our aging population.  People are having fewer babies and are living longer.  And consuming more health care and pension benefits in their retirement than the actuaries ever dreamed possible when they created the health care benefit and defined benefit pension plans.

It’s no different in the public sector.  In fact, it’s worse.  Government grew.  And taxes grew to pay for that growing government.  It became more expensive to have babies.  So people had fewer.  Made possible by birth control and abortion.  Now there are fewer and fewer young people entering the work force to pay the taxes to pay for the ever growing number of seniors in their retirement.  Again, something the actuaries never calculated.  And there’s no way to fix it.  It’s a failed model.  But government won’t give up on this bad policy.  Unlike businesses have.  Because government doesn’t operate in the real world.  Like those businesses.

Government can do things businesses can’t.  They can tax.  They can run deficits.  Paid by massive borrowings.  And they can print money.  So they don’t have to make the difficult choices.  And chose not to.  Because those difficult choices are rarely politically expedient.  And don’t bring in many votes.

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Collective Bargaining in Wisconsin – Greed versus the Taxpayers

Posted by PITHOCRATES - February 25th, 2011

Democracy in Action and Whiny Democrats in Wisconsin

The Wisconsin Democrats need to take a refresher course in democracy.  Because democracy isn’t oligarchy.  The minority power can’t have its way.  No matter how unhappy they are.  Elections have consequences.  Like Obama said.  The Obama Administration governed without the consent or input of the minority power.  It may not have been nice or what he said he would do during the campaign.  But it was legal.  And democratic.  So Obama governed against his campaign platform.  And the American people.  The people didn’t like that.  And gave the House back to the Republicans in the 2010 mid-term elections.

You see, that’s how democracy works.  You don’t whine and cry when you can’t have your way.  You compete in the arena of ideas.  Win elections.  And govern accordingly.  And when you lose elections you don’t govern any more.  Unless you’re a bunch of whiny cry babies in Wisconsin (see Capitol Chaos: Assembly Passes Budget Repair Bill by Charles Benson, Jay Sorgi and the Associated Press posted 2/25.2011 on todaystmj4.com).

Shortly after 1:00 a.m., after more than 60 hours of debate on this, the Republicans quickly called for the vote, which ended all debate.

Some of the Democrats were so taken aback by what had happened, they didn’t get a chance to vote. 

The vote happened so fast, within seconds, that the bill pass with Republican voting for it, but while they were voting, Democrats kept yelling, “No!  No!  You can’t do this!”…

After it passed, Republicans started walking off the floor, and the Democrats started yelling “Shame!  Shame!  Shame!” as Republicans walked off, one by one, and left the Assembly floor.

Obamacare was hustled through a lot faster with a lot of bribes.  There was no debate.  Nancy Pelosi said we had to pass it to learn what was in it.  The Democrats had no problem with that vote.  The vote in Wisconsin, on the other hand, they do. 

The people of Wisconsin, unhappy with the Democrats, voted in a Republican controlled legislature.  And a Republican governor.  The Republicans had the majority.  The Democrats didn’t.  It’s called democracy.  Which they’re all for.  When they are in power.  But when they’re not in power democracy just isn’t fair.  And they whine.

Of Course they’re Over-Compensated

After the vote layoff notices went out.  The UPI reports teachers are so anxious that they were breaking out in tears.  And for good reason.  They have some pretty nice jobs.  All public sector workers do.  I mean, they wouldn’t be making such a big fuss if those jobs were as bad as they would have us believe.

We the taxpayers pay public sector workers well.  And we’ve been giving them the best of benefits.  Well, yes and no, say the critics.  They’re smart.  Well educated.  And underpaid for their brains.  The critics say people in the private sector with the same education are compensated more.  That’s a little hard to believe.  Because few give up those public sector jobs once they get them (see Everything You Need to Know about Whether State and Local Bureaucrats Are Over-Compensated, in One Chart by Daniel J. Mitchell on 2/25/2011 on CATO@Liberty).

The data on total compensation clearly show a big advantage for state and local bureaucrats, largely because of lavish benefits (which is the problem that Governor Walker in Wisconsin is trying to fix). But the government unions argue that any advantage they receive disappears after the data is adjusted for factors such as education.

This is a fair point, so we need to find some objective measure that neutralizes all the possible differences. Fortunately, the Bureau of Labor Statistics has a Job Openings and Labor Turnover Survey, and this “JOLTS” data includes a measure of how often workers voluntarily leave job, and we can examine this data for different parts of the workforce…

Not surprisingly, this data shows state and local bureaucrats are living on Easy Street. As the chart illustrates, private sector workers are more than three times as likely to quit their jobs.

The reason someone doesn’t quit a job is simple and straight forward.  They can’t find a better one.  Over in the private sector, they say the way to increase your compensation is to make a few moves to other companies.  Let private employers bid up your salary.  This isn’t how it works in the public sector.  Pay and benefits have nothing to do with ability.  You get in and you stay put.  And let the union shake down the taxpayers for ever more generous pay and benefits.

Greedy Teachers and the Poor Taxpayers they Shake Down

Wisconsin teachers are calling in sick to show up at these protests.  They are using fraudulent doctor’s notes handed out at the protests to excuse their ‘sick’ days.  That’s not very ethical.  And probably not very legal.  Or a good lesson for the children they teach (some of which have joined them in the protest as useful pawns for the children can’t possibly understand what’s really at stake here).  So why would they go to these lengths?  Will the governor force them to choose between food and medicine?  Will they have to eat cat food?  I doubt it.  For it looks like they’re currently enjoying champagne and caviar (see Oh, To Be a Teacher in Wisconsin by Robert Costrell posted 2/25/2011 on The Wall Street Journal).

The average Milwaukee public-school teacher salary is $56,500, but with benefits the total package is $100,005, according to the manager of financial planning for Milwaukee public schools.

Wow.  That’s like having one job and getting two paychecks.  And they only work 9 months out of the year.  And get a lot of time off when they do work.  That is some pretty sweet compensation.  I can see why they protest.  They are a privileged elite.  And like elites, they don’t like giving up their elitism.

So how do the benefits add up to $100,005 in total compensation for an average public-school teacher?  Well, thanks to collective bargaining, they get pensions and health care benefits like no one does in the private sector.

•Social Security and Medicare. The employer cost is 7.65% of wages, the same as in the private sector.

•State Pension. Teachers belong to the Wisconsin state pension plan. That plan requires a 6.8% employer contribution and 6.2% from the employee. However, according to the collective-bargaining agreement in place since 1996, the district pays the employees’ share as well, for a total of 13%.

•Teachers’ Supplemental Pension. In addition to the state pension, Milwaukee public-school teachers receive an additional pension under a 1982 collective-bargaining agreement. The district contributes an additional 4.2% of teacher salaries to cover this second pension. Teachers contribute nothing.

•Classified Pension. Most other school employees belong to the city’s pension system instead of the state plan. The city plan is less expensive but here, too, according to the collective-bargaining agreement, the district pays the employees’ 5.5% share.

•Health care for current employees. Under the current collective- bargaining agreements, the school district pays the entire premium for medical and vision benefits, and over half the cost of dental coverage. These plans are extremely expensive.

This is partly because of Wisconsin’s unique arrangement under which the teachers union is the sponsor of the group health-insurance plans. Not surprisingly, benefits are generous. The district’s contributions for health insurance of active employees total 38.8% of wages. For private-sector workers nationwide, the average is 10.7%.

•Health insurance for retirees. This benefit is rarely offered any more in private companies, and it can be quite costly. This is especially the case for teachers in many states, because the eligibility rules of their pension plans often induce them to retire in their 50s, and Medicare does not kick in until age 65. Milwaukee’s plan covers the entire premium in effect at retirement, and retirees cover only the growth in premiums after they retire.

No one in the private sector gets these benefits.  No one.  Unless they make very large contribution towards them.  Whereas the teachers get them totally free.  Is that fair?  People bitch about CEO compensation but at least it’s the shareholders who have last say on that.  In Wisconsin it is doubtful the taxpayers even know what their public-school teachers are making.  Courtesy of their tax dollars.

Overall, the school district’s contributions to health insurance for employees and retirees total about 50.9 cents on top of every dollar paid in wages. Together with pension and Social Security contributions, plus a few small items, one can see how the total cost of fringe benefits reaches 74.2%.

What these numbers ultimately prove is the excessive power of collective bargaining. The teachers’ main pension plan is set by the state legislature, but under the pressure of local bargaining, the employees’ contribution is often pushed onto the taxpayers. In addition, collective bargaining led the Milwaukee public school district to add a supplemental pension plan—again with no employee contribution. Finally, the employees’ contribution (or lack thereof) to the cost of health insurance is also collectively bargained.

As the costs of pensions and insurance escalate, the governor’s proposal to restrict collective bargaining to salaries—not benefits—seems entirely reasonable.

And there you have it.  Why the Left is panicking about what’s going on in Wisconsin.  And it ain’t about the children.  Health care benefits and pensions can’t get any less about the children.  Collective bargaining has given the public sector workers great pay and benefits at the taxpayer’s expense.  All without having the taxpayer to approve these generous compensation packages.  Unlike shareholders in private corporations. 

Collective bargaining for public sector workers enables the transfer of huge sums of money from the private sector (the taxpayers) to the public sector.  Union members pay dues.  And guess who unions support in elections.  Democrats.  If other states follow suit the Democrats stand to lose a lot of campaign cash and foot soldiers.  And this is what it’s really about in Wisconsin.  Greed.  The greed of public sector workers.  And the greed of Democrats.

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Big Government is Bankrupting and Oppressing Us

Posted by PITHOCRATES - November 21st, 2010

Rich Democrats Profit from Big Government

Do you know what the problem with the idle rich is?  They sometimes use their idle time to think (see Millionaires to Obama: Tax us by Rachel Rose Hartman posted 11/19/2010 on Yahoo! News blog The Ticket).

More than 40 of the nation’s millionaires have joined Patriotic Millionaires for Fiscal Strength to ask President Obama to discontinue the tax breaks established for them during the Bush administration, as Salon reports.

And who are these millionaires?

The group includes many big-time Democratic donors such as Gail Furman, trial lawyer Guy Saperstein and Ben Cohen of Ben & Jerry’s ice cream (pictured). The list remains open to millionaires who want to sign on.

One thing we’ve learned from government.  The rich never pay their fair share of taxes.  Neither will these Democrat supporters.  I mean, if you’re so patriotic and loyal then just give your money to the government without the tax law forcing you.  Like J.P. Morgan did during the Panic of 1907.  (He used his own wealth to help shore up the banking system during a liquidity crisis).  But they don’t.  Why?  (That’s not a rhetorical ‘why’.  I would really love to hear them answer that question.)

But the key here is that they’re Democrat supporters.  Supporters of Big Government.  Who either profit from government (by preventing any tort reform so lawyers can continue to enrich themselves with frivolous lawsuits brought against corporate America (News Flash:  McDonald’s hot coffee is hot)).  Or are a bunch of rich coots that get off on telling other people how to live.

A Bankrupt City Pleads for Churches, Schools and a Hospital to Help Pay their Union Costs

And speaking of charitable contributions to the government, here’s a city government asking for just that (see Debt Rising, a City Seeks Donations in Michigan by Nick Bunkley posted 11/19/2010 on The New York Times). 

A Michigan city is pleading with churches, schools and a hospital for donations to help cover its staggering budget deficit.

Gail Furman, Guy Saperstein and Ben Cohen ought to throw some of their wealth over to Mount Clemens.  They could feel patriotic and loyal.  And the city could really use their help.  For they’ve done everything they can already.

[The Mount Clemens mayor] said the city has already drastically cut its expenses, having disbanded the police department six years ago, but still faces a $960,000 deficit that is projected to reach $1.5 million next year.

It’s always the police and fire departments that get chopped first.  Not the real things bankrupting the city.  Which, interestingly, they note (probably unintentionally) in the last paragraph.

The city asked its retirees to increase their health insurance deductibles, [the mayor] said, and 8 or 10 did so or switched to their spouse’s plan, saving $192,000.

It’s the same thing that’s bankrupting cities in all of ‘blue’ America.  Fat union payrolls and fat union benefits for city employees.  But they get rid of cops and fire fighters first because it’s a good scare tactic that usually works at the polls when trying to renew or increase a millage.

High Union Pay and Benefits do not Make NYC’s Trains any Safer

But we have to provide those fat pay and fat benefits to attract quality people to these jobs.  Don’t we?  You decide.  Here’s yet another example of what we get for these high pay and benefits (see Subway Signal Inspections Found to Be Falsified by Michael M. Grynbaum posted 11/19/2010 on The New York Times).

Safety workers at New York City Transit falsified thousands of inspections of the track signals that direct trains in the subway system, deeming the signals safe even though those inspections had never taken place, according to an investigation by the inspector general of the Metropolitan Transportation Authority.

Train tracks are broken down into ‘blocks’.  These signals are green when a block is empty.  They’re red when a train is in that block.  These block signals are what keep trains from crashing into each other.  So they’re kind of important.  For safety.

Real railroad personnel would never do this.  They take their work too seriously and have far too much pride to endanger people on their tracks.  But unionized city workers are another story.  It’s not about the love of railroading.  But living better than other people. 

Is this only an isolated incident?

It is not the first time that safety workers in the subway have been found to have falsified such inspections. A nearly identical situation was revealed by the inspector general in 2000.

Apparently not.

The TSA:  Submit to Our Awesome Powers or We Will Destroy You

So government employees are bankrupting our nation with their fat pay and fat benefits.  And they’re endangering our lives with their poor work ethic.  Can it get worse?  Yes.  If we give them unfettered power over us (see $11,000 fine, arrest possible for some who refuse airport scans and pat downs by John Lantigua, Palm Beach Post, posted 11/20/2010 on the Sun Sentinel). 

The Transportation Security Administration (TSA) is warning that any would-be commercial airline passenger who enters an airport checkpoint and then refuses to undergo the method of inspection designated by TSA will not be allowed to fly and also will not be permitted to simply leave the airport.

Welcome to airport security.  By entering our line you forfeit all Fourth Amendment rights.  Please remove your shoes, your belts and lift up your dresses and drop your panties.  It’s all in the name of national security.  Yeah, it’s good to be an ineffective bloated government bureaucracy.  Power to the state, baby.  The state rules!

No wonder the Nazis went from state socialism to maniacal oppressive dictatorship.  It’s a rush for the corrupt in power.  No doubt that if some TSA gropers are brought up on criminal charges for ‘crossing the line’ they will follow suit.  I can hear them now.  “I was just following orders.”

Absolute Power Corrupts Absolutely.  And Brings Down Superpowers

Those rich Democrat millionaires got it wrong.  We shouldn’t be giving government more money.  Or more power.  That wasn’t the formula we used to become a superpower.  But it is the formula that has brought down every superpower to date.

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LESSONS LEARNED #26: “If we need Big Government to protect us from ourselves, then our public schools can’t be the best place to learn.” -Old Pithy

Posted by PITHOCRATES - August 12th, 2010

WE ARE WHAT they teach us.  And here is a little of what our teachers taught us.  And a little of what we learned by observation.

WHEN I WAS in grade school, our teachers went on strike.  It was great.  Another week or so of summer vacation.  But I saw a curious thing.  Some of my classmates were carrying picket signs.  And there they were, walking with the teachers.  I could not understand why anyone would want to help to end an extended summer vacation.  That’s all I knew about a teacher’s strike.  I had no idea why they didn’t want to go back to work.  I just knew it meant I didn’t have to go back to school yet.

The signs my fellow students carried said something about making our schools better.  As kids typically don’t like being in school, I couldn’t imagine they thought much about improving the educational system.  Other than greatly shortening the school day.  And school year.  But giving a pay raise to our teachers?  Giving them more benefits?  How, exactly, was that going to make school better?  I mean, if they got more pay and benefits, our education would get worse, not better.  They would just transfer money from the classroom to the teachers.  Unless the city raised property taxes to replace the classroom money that was given to the teachers.  And that would only increase the household costs of these kids’ parents.  Meaning less presents at Christmas.  Couldn’t these kids see the folly of their ways?

Of course they couldn’t.  They were just useful pawns.  They hadn’t the foggiest idea why teachers go on strike.  The teachers told them what to say.  What to think.  And they lied to these kids.  They weren’t striking because they wanted more money and better benefits.  Which they were.  No.  They told these innocent children that they were striking so they could have a better art department.  A better music department.  Better field trips.  That’s why these teachers were on the picket lines.  For the children.  And that every time there were cuts in the classroom, it was because of the greed of their parents who didn’t approve a millage.  Or who bitched about rising property taxes.  It was never their OWN greed.  Never that.

WE HAD A mock election when I was in 7th grade.  It was an ‘exercise in democracy’.  I remember voting for the Democrat candidate.  I don’t know why.  I knew nothing about politics.  I had only recently quit playing with my toy cars.  I was still reading The Hardy Boys mystery novels.  And thinking about the pretty girls in class.  What I don’t remember was spending much time thinking about the presidential election.  But there I was, voting for the Democrat candidate.  Who won in our little mock election.  But how did I, as well as my fellow students, know enough about politics to vote for the Democrat candidate?

Obviously, they taught us what to think.  That the Democrat candidate was the better candidate.  Because he was for the working man.  And cared about the little people.  That the Democrats cared about education.  Not profits.  All these touchy feely things.  Which was about all a kid could understand.  A kid can’t understand monetary or fiscal policy.  The intricacies of foreign policy.  They don’t have a clue about those things.  But kids do know that they should play nice.  And that’s what the Democrats are all about.  Playing nice.  And providing political muscle for the teachers’ unions in exchange for votes.  And obedient little minds of mush that will one day become voters.

I HAD A speech/debate class in high school.  Our teacher used the latest in progressive teaching methods.  A lot of touchy feely stuff.  Feel more than think.  We often did these exercises where the class as a whole debated the pros and cons of a particular position.  One day we went through a list of five or so.  I found the last one interesting.  It was about a ‘death ray’.

I had recently watched a program about nuclear weapons.  I learned that the size of their warheads was a function of the accuracy of the weapons.  They needed a big radius of destruction to guarantee the destruction of the target.  This is true for all weapon systems, conventional or nuclear.  The less accurate they are, the bigger the destructive force required.  (Whereas smart weapons today can have smaller warheads because they can be steered onto target.)  The more accurate the weapon, the less destructive it can be.  The less collateral damage there would be.  Less civilian dead.  The lesson described the ‘death ray’ as a weapon of pinpoint accuracy.  Based on what I just recently learned, I thought that it would be very interesting to discuss the pros of such a weapon.

When we finished discussing the position before the ‘death ray’, he said something like it was obvious that no one would argue for such a weapon system.  So there was no point in discussing it.  And then, as an afterthought, he said “unless someone does” with a condescending smirk.  I raised my hand.  I began to make some positive points.  He cut me off.  There was to be no discussion in favor of any weapon system in his class.  Turns out he was anti-war.  Free speech was one thing but not when you disagree with the program.

TWO BOOKS THAT that stand out from high school that were required reading are The Grapes of Wrath and Johnny Got His Gun.  You couldn’t find a couple of more depressing books if you tried.  The Grapes of Wrath was about the plight of a family who lost the farm during the dust bowl of the Great Depression.  In it you learned that bankers were evil.  Rich people were evil.  That Big Business was evil and exploited the poor.  Whereas poor people were virtuous.  And only poor people helped other poor people.  That Big Government was good and helped the poor people.  That FDR’s New Deal was good and helped the poor people.  That unions are good and protect those who Big Business exploits.  You get the picture?  Democrats good.  Republicans bad.  Because the Democrats take care of the little guy.  And evil bankers and fat cats are all Republicans.  Or so we were taught.

Johnny Got His Gun is an anti-war book.  It’s about a U.S. veteran of World War I.  Joe Bonham.  He lost about every part of the human body you could.  And yet they kept him alive.  I read it in the 10th grade.  Young and impressionable, I saw the folly of war.  War hurt good, young men like poor Joe Bonham.  (Incidentally, the name ‘Bonham’?  It’s from the French ‘bon homme’, good man.)  A pity only the anti-war crowd read it.  Apparently no one read it in Germany or Italy or the Soviet Union.  Maybe if their citizens did read it World War II would not have broken out.  Thankfully for the free world, though, men did serve in the armed forces despite what happened to poor Joe Bonham.  And they saved liberty.  And the burning of books did not spread further.  And books like this, because of men who did pick up a gun, remain in the public school curriculum.

Of course, you know why they (the public school teachers) are anti-war, don’t you?  It’s simple.  Any money spent on the military is money not spent on them.

I HAD AN electronics teacher in high school who was really cool.  He let us drink coffee in class (or, should I say, cream and sugar with some coffee).  He’d send a student across the street to buy donuts to eat with our coffee.  And he taught us how to build little black boxes that could unscramble scrambled television.  He was also a pretty good teacher.  A PNP transistor symbol?  The arrow was P-N (peein’) on the base.  (An NPN transistor symbol pointed away from the base.)  The resistor color code?  Bad boys rape our young girls but Violet gives willingly.  The whore.  (Hey, this stuff was funny when you’re only 16 years old.)  He even set up an interview for me at an electronic repair shop.  He liked being a teacher.  But he enjoyed doing concrete flatwork, too.  One of those things he did to pay the bills while in college.  And kept doing after college.  And that’s what he did during the summer, the peak of the construction season.  And made good money doing it.

MY MOM WORKED as a volunteer at my grade school.  She got to know the teachers pretty well.  She even went to their homes.  One lived not too far away from us.  I went with her once or twice.  Talk about surreal.  Seeing your teacher outside the school.  Acting so un-teacher-like.  Wearing something she doesn’t wear to school.  Having fun.  Laughing and joking.  And seeing her being a mom to her own kids.  That was weird.  We treated her politely and with respect in school.  Her kids whined “maaaa” at home just like I did when I was at home.  My teacher was just a normal person.  Human, almost.

But what really struck me then was that though they lived in the same general area as we did, they had more.  Bigger house.  With nicer stuff.  A newer car in the driveway.  More presents under their Christmas tree.  And in bigger boxes.  It was a ‘blue-collar’ neighborhood.  Her husband was a ‘blue-collar’ worker.  Just like my dad.  But my mom volunteered.  My teacher was, well, a teacher.  The ultimate second income in a two income family.  Good pay and benefits.  And no child care to worry about.  Teachers are off when their kids are off.  Holidays.  Breaks.  Snow days.  And, of course, summer vacation.  It just didn’t get better for a working mom.

IT IS INTERESTING that people become more conservative with age.  They may start out Democrat.  But after working awhile or raising a family, they often become Republican.  Not all of them.  But a lot.  The net number of people changing from Democrat to Republican far exceeds those changing from Republican to Democrat.  If there are any.  Other than for political reasons (in a desperate attempt to get reelected by switching parties).  That’s why the Democrats depend on the youth vote.  Because the youth vote is an uninformed voted.  They haven’t been deprogrammed yet.  They still toe the party line.  Because they don’t know any better.  Yet.

As we work and live in the real world, though, away from the insulated life of home or the college campus, things change.  We get older.  And wiser.  Less naive.  Less idealistic.  Less ignorant.  That’s why there is a net change from Democrat to Republican.  We grow up.  And start thinking for ourselves.  And try as they might during our public school indoctrination, we stop being sheep.  Eventually.  We strop bleating their mantra.  ‘Big Government good.  Private sector bad’.  Why?  Because we see that public school teachers and government workers live a lot better than we do.  This privileged few, this ruling elite, continue to take from us and respond with condescending arrogance when we complain.  Angry that we don’t mind our place in the lower strata of society.  Where we belong.

And they are nervous.  They can only maintain their elite status as long as we pay for it.  The more we learn, though, the less we are willing to support this aristocracy.  And they know it.  So they try to keep us dumbed down.  For an educated constituency is the greatest threat to Big Government.  And the public school system.  This self-proclaimed aristocracy.

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FUNDAMENTAL TRUTH #20: “It is never a consumer that complains about ‘predatory’ pricing.” -Old Pithy

Posted by PITHOCRATES - June 29th, 2010

LOW PRICES.  GOD help me, I do hate them so.  I hate them with every fiber of my body.

Who says this?  Do you?  I don’t.  Of all the times I’ve spent shopping, I have never heard anyone bitch about low prices.  I’ve heard people bitch about high prices.  But never about low prices.  When gas approached $3/gallon, people bitched about that being too high and drove 10 miles to find ‘cheap’ gas to save a few pennies per gallon.  Let it approach $4/gallon and they’ll want Congress to take action.  To attack Big Oil.  To seize their oil and their profits and give us cheap gasoline in return.  But when gas was cheap, no one ever bitched about it being ‘too’ cheap.  It just doesn’t happen that way.  People bitch about high prices.  Not low prices.

So who bitches about low prices?  Competitors.  There’s a saying that competition makes everything better.  And it does.  It lowers prices.  And raises quality.  And who is looking for lower prices and higher quality?  Consumers.  Who isn’t?  Competitors.  Especially competitors with political connections.

WHEN THE BIG 3 were putting out crap in the 1970s, they did so because they could.  I mean, who else were you going to buy a car from?  So what if your car breaks down and the fenders and quarter panels rust away?  That just means you gotta buy another car sooner rather than later.  A pretty sweet deal.  Especially when there are only three places to go to buy a car.  And each of the Big 3 is selling the same crap.

Then the Japanese had to go and ruin a good thing.  They started selling cars in America.  These cars were smaller than your typical American car.  But there were other differences.  They didn’t rust like the American cars.  They didn’t break down as much.  And the imports were cheaper than the American cars.  Lower price and higher quality.  More bang for the buck.  Exactly what consumers were demanding.

So what was the response of the Big 3?  Did they rise to the level of their new competitors and deliver what the consumer wanted?  No.  They ran to government for help.  For protection.  And they got it.  Voluntary Export Restraints (VER).  The government negotiated with the Japanese to ‘voluntarily’ limit the number of cars they exported to the United States.  Or else.  So they did.  To avoid worse protectionist policies.  Problem solved.  Competition was limited.  And the Big 3 were very profitable in the short run.  Everyone lived happily ever after.  Until the Japanese refused to play nice.

The problem was what the Big 3 did with those profits.  Or, rather, what they didn’t do with them.  They didn’t reinvest them to raise themselves up to the level of the Japanese.  Protected, they saw no incentive to change.  Not when you have Big Government on your side.  And how did that work for them?  Not good. 

So look, the Japanese said, the Americans like our cars.  If the American manufacturers won’t give them what they want, we will.  While honoring the VER.  We won’t export more cars.  We’ll just build bigger and better cars to export.  And they did.  The Big 3 were no longer up against inexpensive, higher quality subcompacts on the fringe of their market share.  Now their mid-size and large-size cars had competition.  And this wasn’t on the fringe of their market share.  This was their bread and butter.  What to do?  Build better cars and give Americans more bang for their buck?  Or run to government again?  What do you think?

The Big 3 assaulted the Japanese under the guise of ‘fair trade’.  The cry went out that unless the Japanese opened up their markets to American imports (in particular auto parts), we should restrict Japanese imports.  To protect American jobs.  To protect the American worker.  To protect the children.  This was code for please make the Japanese cars more unattractive to purchasers so they will settle for the more costly and lower quality cars we’re making.  (Let’s not forget the reason Americans were buying the Japanese cars in the first place).

The Japanese response?  They took it up a notch.  They entered the luxury markets.  They launched Acura, Lexus and Infiniti.  They competed against Cadillac and Lincoln.  And well.  The quality was so good they even affected the European luxury imports.  More attacks followed.  Americans were losing their jobs.  Soon there would be no more American manufacturing left in the country.  So the Japanese built plants in America.  And Americans were now building the Japanese cars.  The Japanese actually created American jobs.

SON OF A BITCH!  So much for the loss of American jobs.  The Japanese threw a wrench in that argument.  So now the argument became about the loss of ‘high paying’ American jobs.  For the Japanese plants were non-union.  Didn’t matter that their workers were making better pay and benefits than many in their region.  No.  What mattered was that they were building a better product.  And they didn’t want THESE jobs in America.  But if they couldn’t get rid of these new workers, they should at least unionize them so their cars cost more.  To make them a little less appealing to the American consumer.  So far they have been unsuccessful in this endeavor.  The workers are happy as they are.

Well, these cars just weren’t going away.  So the Americans surrendered car manufacturing to the Japanese.  They couldn’t beat them.  (Of course, it’s hard to do that when you don’t even try).  They, instead, focused on the higher profit truck and SUV markets.  Then the Japanese entered those markets.  And at every level they competed with the Americans, the Japanese gave more bang for the buck.  And the consumers responded.  With their hard-earned wages.  It just wasn’t fair.  The Japanese kept giving the American consumer a better product.  No matter what political action the Big 3 took or demanded.

And there’s the problem.  They sought their answers from government.  Instead of making a better car.  They wanted to stop the Japanese from giving the American consumer what they wanted so they could force Americans to pay more for less.  All the while the economy was forcing the majority of consumers to get by on less (the majority of consumers do not have the wage and benefit package the ‘select’ few had in the Big 3). 

Fast forward to 2008 and we see the ultimate consequence of their actions.  Bankruptcy.  GM and Chrysler had to grovel for a federal bailout and in the process become Washington’s bitch.  Ford survived on her own.  As did the Japanese.  You can bitch all you want about costs, but if you have the revenue you can pay your costs.  And the Americans just couldn’t sell enough cars to maintain the revenue they needed for their cost structure.  By refusing to address the core problem (they weren’t making cars Americans wanted to buy), they only made their competition stronger and more entrenched in the U.S. market.

IT’S ALL POLITICS.  Political cronyism.  And crony capitalism.  It all comes down to political spoils and patronage.  That’s what happens when politics enter capitalism.  Big Business partners with Big Government and they enter into relationships.  You scratch my back and I’ll scratch your back.  But when government protects a business for political expediency, the industry suffers in the long run.  As the U.S. automobile industry has.  Ditto for the U.S. textile industry.  And the U.S. steel industry.

So what goes wrong?  When you protect an industry you insulate it from market forces.  You can build crap.  The problem is, consumers don’t buy crap.  So, for awhile, politics intervene and makes the crap more favorable.  Whether it’s predatory pricing, monopolistic pricing or collusion, business can’t win.  Big Government is there.  If your prices are too low, government will intervene.  If prices are too high, government will intervene.  If prices are too similar, government will intervene.  To make things ‘fair’.  And by fair they mean to reward those who play the game and to punish those who don’t.  And the spoils go to those large voting blocs they need.  And in return for their votes, they can count on patronage.  Government jobs.  Political positions.  Favorable legislation and regulation.  If you got the vote out, you were rewarded quite nicely. 

And consumers be damned. .

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