The Federal Debt and Public Sector Grow, American Exceptionalism Declines

Posted by PITHOCRATES - April 4th, 2011

Obama sets Spending Record, Maxes out Uncle Sam’s Credit Card

As Congress battles over a budget, Timothy Geithner goes back to Congress and warns them that the world as we know it will end unless they increase the debt ceiling.  I’m paraphrasing, of course (see U.S. will hit debt ceiling by May 16, Geithner warns Congress by Jim Puzzanghera posted 4/4/2011 on the Los Angeles Times).

The Treasury Department had estimated that the nation would reach its $14.29-trillion debt limit between April 5 and May 31…

The Obama administration is pushing Congress to increase the debt limit, as it has done 75 times since 1962. The nation has never failed to increase the limit, Geithner said.

But the nation has never spent money it doesn’t have like the Obama administration has.  After some 2 years in office Obama has added about $4.3 trillion to the national debt.  That’s pretty impressive for just two scant years.  And how does that compare with his predecessors?  George W. Bush‘s added $4.2 trillion in eight years.  Bill Clinton added $1.4 trillion in his eight years.  Ronald Reagan added $1.6 trillion in his eight years.  And Reagan is always attacked with the ‘sure he saved the economy and increased GDP but at what cost’ line implying he did it with reckless and irresponsible spending by mortgaging our future.  But Reagan’s debt was chump change compared to the Obama $4.3 trillion added in only 2 years.  Yet the Reagan debt was bad.  While the Obama debt is nothing to worry about.  Funny how that works. 

One thing for sure, Obama sure likes to spend other people’s money. 

Renewable Energy Subsidies are a Slush Fund for Democrats

So what are we spending so much money on?  Oh, lots and lots of things.  Some big (Obamacare).  Some small.  So small that when you look at it as a line item you say, sure, that’s a lot of money, but in the grand scheme of things, it’s chump change.  Like the debt Reagan added rebuilding the American economy and winning the Cold War.  Or solar energy subsidies (see Get A Tax Break For Going Green In 2011 by Ashlea Ebeling posted 4/1/2011 on Forbes).

When [a retired couple], N.J., both 73, file their 2010 tax return this spring, they’ll be getting a $15,000 federal tax credit for going solar. They were expecting to get an additional $11,000 state rebate too, but newly-elected Republican Gov. Chris Christie raided the N.J. Clean Energy Fund last year to help balance the state budget, so the pot of rebate money ran dry. Yet even without the promised state rebate, [they] calculate that their $50,000 investment will be paid off in five years thanks to the federal tax credit and other incentives.

He’s already watching his meter send electricity he generates back to the power company; he figures he’ll save $1,600 a year in electricity bills. And he stands to get up to $6,500 a year for 15 years in state-legislated solar renewable energy certificates…

Okay, so we have a retired couple who could afford to spend $50,000 on solar panels that will never pay for themselves in energy savings unless they live another 32 years in retirement.  You know, that is an awful return on investment.  Which explains why no one is making this investment.  Unless the government gives them about $100,000 in the next 15 years on top of the $15,000 federal tax credit.  And the $11,000 state benefits.  All to save $1,600 a year.  What a scam.

This may stimulate the economy locally for a short time, but it just adds to the debt.  And the long term problems will be far greater than the short term benefits.  Then again, 73 year old people won’t be around to face those problems.  But you can bet that they will be voting for the party that just dropped a boatload of money into their laps to spend in their retirement years.  Let’s not forget that the senior population is growing greater than the younger population.  And they vote more.  So you can see that although the return on investment on solar energy is awful, it pays huge political dividends.  And that’s what it’s all about.  Not the environment.

Obamacare is a Slush Fund for Democrats

And speaking of really enjoying those retirement years, here’s a little pork buried in Obamacare just coming to light (see Uncovered: New $2 billion bailout in Obamacare by Byron York posted 3/31/2011 on The Examiner).

Investigators for the House Energy and Commerce Committee have discovered that a little-known provision in the national health care law has allowed the federal government to pay nearly $2 billion to unions, state public employee systems, and big corporations to subsidize health coverage costs for early retirees.

The legislation called for the program to spend a total of $5 billion, beginning in June 2010 — shortly after Obamacare was passed — and ending on January 1, 2014, as the system of national health care exchanges was scheduled to go into effect.

In other words, if you support Obamacare, we’ll take care of you.  As we always do.  And that’s why they fight for the public sector workers like they do.  They get a lot of union dues and foot soldiers.  In return the government throws them a bone.  Like an additional $5 billion in health care subsidies.

Where is the money going?  According to the new report, the biggest single recipient of an early-retiree bailout is the United Auto Workers, which has so far received $206,798,086.  Other big recipients include AT&T, which received $140,022,949, and Verizon, which received $91,702,538.  General Electric, in the news recently for not paying any U.S. taxes last year, received $36,607,818.  General Motors, recipient of a massive government bailout, received $19,002,669.

The program also paid large sums of money to state governments.  The Public Employees Retirement System of Ohio received $70,557,764; the Teacher Retirement System of Texas received $68,074,118; the California Public Employees Retirement System, or CalPERS, received $57,834,267; the Georgia Department of Community Health received $57,936,127; and the state of New York received $47,869,044.  Other states received lesser but still substantial sums.

But payments to individual states were dwarfed by the payout to the auto workers union, which received more than the states of New York, California, and Texas combined.  Other unions also received government funds, including the United Food and Commercial Workers, the United Mine Workers, and the Teamsters.

Remember the GM bailout?  Obama screwed the GM bond holders.  He called them greedy.  Humiliated them for trying to keep their contract rights.  The Obama administration sent these ‘first in line’ in bankruptcy to the end of the line.  Even behind the UAW who had no investment in GM.  Obama gave the UAW free shares of stock just for being who they were; contributors to the Democrat Party.  When the company went public again, the UAW was able to reap a fortune on that stock gift and fund their poorly funded pension fund.  And now this.  More tax dollars gifted to them for being good Democrat Party contributors.  This time to pay for health care costs of early retirees.  Lovely. 

Privileged life is good.  Obama takes care of the privileged.  And all you have to do is vote for him.  And give him a piece of your union dues.

The Public Sector Grows, the Private Sector Shrinks

But this government generosity is getting out of control.  People see the gravy train.  And they’re getting on it (see We’ve Become a Nation of Takers, Not Makers by Stephen Moore posted 4/1/2011 on The Wall Street Journal).

If you want to understand better why so many states—from New York to Wisconsin to California—are teetering on the brink of bankruptcy, consider this depressing statistic: Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government.

It gets worse. More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees. Is it any wonder that so many states and cities cannot pay their bills?

The problem with this trend is that the government doesn’t pay for these government workers.  The taxpayers do.  The people with private sector jobs.  And as the public sector (i.e., government) grows, the smaller the private sector gets.  Which has to fund an even greater public sector by ever greater taxes.  But the more taxes we pay the more sacrifices we have to make.  Our lives grow more austere.  While the public sector lives a far more comfortable life than ours.  The government will be the first to condemn this income disparity when they can attack some corporation.  But it’s a different story when the well-to-do are their own people.  So they try to hide this wealth transfer.  Well, they try to hide it from the makers.  Not the takers.

Don’t expect a reversal of this trend anytime soon. Surveys of college graduates are finding that more and more of our top minds want to work for the government. Why? Because in recent years only government agencies have been hiring, and because the offer of near lifetime security is highly valued in these times of economic turbulence. When 23-year-olds aren’t willing to take career risks, we have a real problem on our hands. Sadly, we could end up with a generation of Americans who want to work at the Department of Motor Vehicles.

Public sector workers will bitch and moan about their jobs.  How they can earn more in the private sector.  Of course, they never leave the public sector.  Because the pay and benefits in the private sector suck compared to what they get in the public sector.  And no one ever fires them or lays them off.  That’s why they don’t ever give up those jobs.  Even college graduates have learned this.  And to guarantee those sweet jobs you know they will become lifetime Democrat voters.

Over the period 1970-2005, school spending per pupil, adjusted for inflation, doubled, while standardized achievement test scores were flat. Over roughly that same time period, public-school employment doubled per student, according to a study by researchers at the University of Washington. That is what economists call negative productivity.

Why, then, is the answer to our educational woes always more spending?  Because there are a lot of teachers.  Who pay a lot of dues.  That go straight to the Democrat Party.  In exchange for more government spending on education.  Always for the children.  Yet the money never seems to make it to the classroom.  Based on the test scores.  But the money keeps flowing.  So the Democrat Party can always count on the teachers’ vote.

Most reasonable steps to restrain public-sector employment costs are smothered by the unions. Study after study has shown that states and cities could shave 20% to 40% off the cost of many services—fire fighting, public transportation, garbage collection, administrative functions, even prison operations—through competitive contracting to private providers. But unions have blocked many of those efforts. Public employees maintain that they are underpaid relative to equally qualified private-sector workers, yet they are deathly afraid of competitive bidding for government services.

So you could say these public sector workers are 20% to 40% overpaid, couldn’t you?  I mean, in the private sector, it’s the rare person who can demand 20% to 40% more than the going market salary or wage.  People just don’t choose to pay more.  Do you?  Do you hire a plumber whose rates are 20% to 40% higher than the going rate?  No, I doubt you do. I’ve even known union construction workers who hire nonunion workers to work at their house.  Because they, too, don’t want to pay more than they have to.  But public sector workers think they deserve this higher pay and benefits.  As does the federal government.  Who steps in to fight a governor (Scott Walker) who is trying to balance his state’s budget.  Why?  Because public sector workers are loyal Democrat voters.  And donors.  Via their automatically deducted union dues.

The Shining City upon a Hill to become Ordinary?

The national debt is growing out of control for a good reason.  Spending.  Now we’ve had spending in the past that was necessary.  But much of the spending in the last 2 years has had a higher purpose.  To fund the growing public sector.  And to buy loyal Democrat voters.  With the growth in entitlements consuming an ever larger part of the budget, that leaves little for the business of politics.  So they must borrow.  And borrow they do.  More than ever before.  They’ve added more in 2 years than George W. Bush, Bill Clinton and Ronald Reagan did in their 8-year terms.  And they’re begging Congress to raise the debt ceiling so they can keep on spending.

The future isn’t looking so bright.  Perhaps this marks the beginning of the end of American Exceptionalism.  The point on the historical timeline when we stopped being that shining city upon a hill.  When we became ordinary.  With our best days long behind us.  I hope not.  But it’s been done before.  Great civilizations have come and gone.  Done in by an ever growing public sector that bankrupts nations.  Even empires.  No one is immune.  Not even that shining city upon the hill.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,