Lawyers make a lot of Money without Contributing anything Tangible to Society
An attorney was sitting in his office late one night when Satan appeared before him. Satan said, “I have a proposition for you. You can win every case you try for the rest of your life. Your clients will adore you, your colleagues will stand in awe of you and you will make embarrassing sums of money. All I want in exchange is your soul, your wife’s soul, your children’s souls, the souls of your parents, grandparents, parents-in-law, the souls of all your friends and law partners.” The lawyer thought about this for a moment then asked, “So, what’s the catch?”
That’s funny, isn’t it? Lawyers. Ambulance chasers. The butt of so many jokes. Why? Well, some will say they deserve it. Because they do chase ambulances. And will pass out their business cards if they’re on a sinking ship. Because sinking ships are good for lawsuits. And lawyers love to sue. For they can make a lot of money without contributing anything tangible to society. All they do is get between two parties when large sums of money change hands. And put a portion of that money into their pockets. That’s how they earn their living. Taking money away from others. They’re parasites. Just to get rich. And the big tort lawyers (those who sue people and businesses) get really rich. Allowing them to live very privileged lives.
Take a class action lawsuit. Where they bring a lot of wronged people together to sue a large corporation. The old David and Goliath thing. A little person can never take on a big corporation. But a whole class of them can. When represented by a tort lawyer. Who liken themselves as heroes of the little guy. Taking the big corporation on to make them pay for all the horrible things they’ve done to their clients. But who do they really help? Let’s say they win a judgment from a big corporation of $250,000,000. That’s a lot of money. From that sum they take their cut. Let’s say 50%. Leaving $125 million for the people the corporation wronged. That’s a lot of money. So the people won, too, right? Not really. For there are a lot of people represented in these class actions. Let’s say 5 million in our example. So if you divide the $125 million by 5 million that comes to $25 per person. So, again, who did the lawyers really help? The lawyers. Which is why there are so many lawyer jokes.
In the Private Sector if you want to spend Half of your Life Retired you have to Pay for It
Lawyers vote Democrat. Because they like being privileged people. They don’t want the laws changing that allow them to get so rich when money exchanges hands. Which is why they donate heavily to the Democrat Party. And don’t donate to the Republicans. Who complain about the high costs of frivolous lawsuits to businesses in an overly litigious society. It’s so bad that a footnote in the financial statements of a corporation about a lawsuit is not that big of a deal. Why? Because so many corporations are sued that investors are more surprised to see one that isn’t being sued. This is why Republicans want tort reform. And pass ‘loser-pays’ into law. Like many other countries have. Where the loser in court pays for the attorney fees for the side that wins. Which would greatly cut down on frivolous lawsuits. And cut the costs businesses incur from these frivolous lawsuits that they pass on to their customers. So the lawyers donate to Democrats. To prevent any tort reform that would change the easy way lawyers have of getting rich.
It’s the world’s oldest profession. Screwing people for money. But lawyers aren’t the only ones seeking privilege. There are a lot of others, too. Interestingly, they, too, support the Democrat Party. Such as the United Autoworkers. They donate heavily to the Democrat Party to keep labor laws favorable to unions. To make it more difficult for their nonunion competition. And to use the power of government to force people to pay may for a union-made car. Allowing their union members to live better lives than those outside of the UAW. And when even that doesn’t allow General Motors to pay its bills when selling a record number of cars the UAW goes to government for a bailout of their woefully underfunded pension fund. So their union members can continue to have a more generous retirement at an earlier age than those outside of the UAW.
Teacher unions seek privilege, too. You hear a lot about how the teachers don’t earn that much. But then again, they don’t work that much. Getting 3 months off in the summer. So you can’t compare their wages to people who don’t get the 3 summer months off. But for teachers it’s not so much about the paycheck. It’s the benefits. Very generous health insurance coverage. And pensions. Which have gone the way of the dodo in the private sector. Because people are just living too long into retirement. When they first set up these pensions people were dying in their sixties. The actuaries never saw people living into their eighties as common. So in the private sector if you want to spend half of your life retired you have to pay for it. And you work as long as necessary to fund the retirement you want. The union pensions just can’t work these days as they once did. Which is why teacher unions like the United Autoworkers and lawyers support the Democrat Party. They want to keep their privileged lives.
The Wealth Transfers of the Welfare State give Democrats Money and Privilege
Of course privilege is nothing new to the Democrat Party. They have long stood for privilege. Even now. As the Democrats provide themselves all kinds of exceptions from the Affordable Care Act. For more expensive and lower quality health insurance is good for the masses. But not for the privileged elite. Or their special friends who support them so generously with campaign donations. Congress has had a history of exempting themselves from the laws they pass for us. It took the Republican winning of the House in the 1994 midterm elections to change that. The first Republican-controlled House since 1952 required Congress to be held to the same laws as the rest of us. A bitter pill for Democrats to swallow. For their feelings of privilege go way back.
The Democrat Party can trace its pedigree back to Thomas Jefferson’s Democratic-Republican Party. The party of the slave-owning planter elite. Who from day one fought for their privilege starting with the Three-Fifths Compromise. To give them a greater say in the new national government than their voting population allowed. The planter elite’s South turned into an Old World aristocracy. With great manors for the landed aristocracy. And vast lands worked by slaves. Very similar to feudalism in the Old World. And something they fought hard to keep. Their privilege. The Southern Democrats used the power of the national government (such as the Fugitive Slave Act) to interfere with state laws in the North. To protect their feudalism by keeping slavery legal as long as they could while the north was industrializing and modernizing. With paid laborers. When they lost control of the House due to the growing population in the North they turned to war. Saying that the national government was interfering with state laws in the South. And getting poor southern farmers who owned no slaves to fight and die so the southern aristocracy could live on.
When the Southern Democrats lost the American Civil War they scrambled to maintain their privilege. They unleashed a terror on the freed slaves and Republicans with the KKK. The Democrats then wrote Jim Crowe Laws. Separate but equal. Government-enforced racial segregation. During debate of the Civil Rights Act of 1964 Democrat and former Exalted Cyclops of the KKK Robert Byrd filibustered for 14 hours. To keep the South segregated. With power and privilege in a new aristocracy. Centered not on land but political power and cronyism. Even becoming the party for blacks as ironic as that is. Trading government programs for votes. And destroying the black family in the process. Aid to Families with Dependent Children (AFDC) replaced black fathers with government. And moved single mothers and their children into housing projects that became infested with drugs and crime. But this large (and failed) welfare state transferred a lot of wealth to the Democrats. Giving them money and privilege. That they can use to maintain their power. By taking care of those who take care of them. Lawyers, the UAW, teacher unions and other privilege seekers. For nothing has changed on the left. They have been and always will be an aristocratic-thinking, privilege-seeking people who want to live better than the rest of us. While we pay for their privileged lives.
Ford brought the Price of Cars down and Paid his Workers more without Tariff Protection
Andrew Carnegie grew a steel empire in the late 19th century. With technological innovation. He made the steel industry better. Making steel better. Less costly. And more plentiful. Carnegie’s steel built America’s skylines. Allowing our buildings to reach the sky. And Carnegie brought the price of steel down without tariff protection.
John D. Rockefeller saved the whales. By making kerosene cheap and plentiful. Replacing whale oil pretty much forever. Then found a use for another refined petroleum product. Something they once threw away. Gasoline. Which turned out to be a great automotive fuel. It’s so great that we use it still today. Rockefeller made gasoline so cheap and plentiful that he put the competition out of business. He was making gasoline so cheap that his competition went to the government to break up Standard Oil. So his competition didn’t have to sell at his low prices. And Rockefeller made gasoline so inexpensive and so plentiful without tariff protection.
Henry Ford built cars on the first moving assembly line. Greatly bringing the cost of the car down. Auto factories have fixed costs that they recover in the price of the car. The more cars a factory can make in a day allows them to distribute those fixed costs over more cars. Bringing the cost of the car down. Allowing Henry Ford to do the unprecedented and pay his workers $5 a day. Allowing his workers to buy the cars they assembled. And Ford brought the price of cars down and paid his workers more without tariff protection.
George Westinghouse decreased the Cost of Electric Power without Tariff Protection
George Westinghouse gave us AC power. Thanks to his brilliant engineer. Nikola Tesla. Who battled his former employer, Thomas Edison, in the Current Wars. Edison wanted to wire the country with his DC power. Putting his DC generators throughout American cities. While Westinghouse and Tesla wanted to build fewer plants and send their AC power over greater distances. Greatly decreasing the cost of electric power. Westinghouse won the Current Wars. And Westinghouse did that without tariff protection.
After losing out on a military contract for a large military transport jet Boeing regrouped and took their failed design and converted it into a jet airliner. The Boeing 747. Which dominated long-haul routes. Having the range to go almost anywhere without refueling. And being able to pack so many people into a single airplane that the cost per person to fly was affordable to almost anyone that wanted to fly. And Boeing did this without tariff protection.
Bill Gates became a billionaire thanks to his software. Beginning with DOS. Then Windows. He dominated the PC operating system market. And saw the potential of the Internet. Bundling his browser program, Internet Explorer, with his operating system. Giving it away for free. Consumers loved it. But his competition didn’t. As they saw a fall in sales for their Internet browser programs. With some of their past customers preferring to use the free Internet Explorer instead of buying another program. Making IE the most popular Internet browser on the market. And Gates did this without tariff protection.
Tariff Protection cost American Industries Years of Innovation and Cost Cutting Efficiencies
Carnegie Steel became U.S. Steel. Which grew to be the nation’s largest steel company. Carnegie had opposed unions to keep the cost of his steel down. U.S. Steel had a contentious relationship with labor. During the Great Depression U.S. Steel unionized. But there was little love between labor and management. There were a lot of strikes. And a lot of costly union contracts. Which raised the price of U.S. manufactured steel. Opening the door for less costly foreign imports. Which poured into the country. Taking a lot of business away from domestic steel makers. Making it more difficult to honor those costly union contracts. Which led the U.S. steel producers to ask the government for tariff protection. To raise the price of the imported steel so steel consumers would not have a less costly alternative.
During World War II FDR was printing so much money to pay for both the New Deal and the war the FDR administration was worried about inflation. So they put ceilings on what employers could pay their employees. With jobs paying the same it was difficult to attract the best employees. Because you couldn’t offer more pay. So General Motors started offering benefits. Health care. And pensions. Agreeing to very generous union contracts. Raising the price of cars. Which wasn’t a problem until the imports hit our shores. Then those union contracts became difficult to honor. Which led the U.S. auto makers to ask the government for tariff protection. To raise the price of those imported cars so Americans would not have a less costly alternative.
These two industries received their tariffs. And other government protections. Allowing them to continue with business as usual. Even though business as usual no longer worked. So while the foreign steel producers and auto makers advanced their industries to further increase quality and lower their costs the protected U.S. companies did not. Because they didn’t have to. For thanks to the government they didn’t have to please their customers. As the government simply forced people to be their customers. For awhile, at least. The foreign products became better and better such that the tariff protection couldn’t make the higher quality imports costly enough to keep them less attractive than the inferior American goods. With a lot of people even paying more for the better quality imports. Losing years of innovation and cost cutting efficiencies due to their tariff protection these American industries that once dominated the world became shells of their former selves. With General Motors and Chrysler having to ask the government for a bailout because of the health care and pension costs bankrupting them. Something Carnegie, Rockefeller, Ford, Westinghouse, Boeing or Gates never had to ask.
You won’t find many Union Workers filling out TPS Reports
In the movie Office Space we see how frustrating it is to work in a big corporation. The office politics. The bureaucracy. The policies and procedures. The frustration of having to answer to 8 different bosses after making a mistake. Bumping heads with management at all levels. And the mind-numbing frustration of getting your paperwork right.
Anyone who has ever worked in an office no doubt had their own TPS report moments. And dealt with their own Bill Lumbergh. So we laugh at poor Peter. For we’ve been there. And know his frustration. For there is nothing worse than trying to work through a company’s bureaucracy. Or dealing with layers of management that often appeared to be working at cross purposes. And suffering under bad bosses.
Which is the whole purpose of labor unions. To protect their workers from a business’ management. And bad bosses. Because unions say if they don’t management will just abuse their workers. So unions shield workers from these unfeeling and inefficient bureaucracies. Who are always introducing new policies and procedures to improve business efficiencies. Things like TPS reports. Which unions say only makes things worse for the worker. So you won’t find many union workers filling out TPS reports. Just the non-union office workers.
Dealing with a Bureaucrat is like a Grizzled Sergeant with 20 Years Experience reporting to a Junior Officer
Junior officers get no respect. Comedian George Carlin served in the Air Force. And said a common joke was to say when someone broke wind, “Captain who?” They get no respect because they are bureaucrats. They come out of their officer training with only book-learning. While enlisted people have been gaining experience and learning how to do things on the job. Then these junior officers come in with their book-learning. And start telling these enlisted people how to do their jobs. Despite these junior officers having never done their jobs. Or understanding how to do their jobs. But they will tell these people how to do their jobs better.
This is less of a problem in combat. As junior officers typically have a short lifespan in combat. For all the book-learning cannot replace the experience gained in actual combat. Which is why lieutenants may command units but it is the grizzled sergeants with the combat experience that lead men into battle. And a smart junior officer will learn everything he can from his senior sergeants.
Small business owners feel the same way about government. For a lot of small business owners often go into business after working for someone else. They’re like those grizzled sergeants in the military. They’ve learned and done pretty much everything in a business. Then decided to quit and start their own business. And one of the first things they have to deal with is the mind-numbing bureaucracy of government at all levels. City, county, state and federal. A bunch of bureaucrats who never ran a business. Who have no experience in their field. And here they are. Telling them how to run their businesses. Like a junior officer out of the academy trying to tell a grizzled sergeant with 20 years experience how to do his job.
Under Obamacare Professional Bureaucrats will tell our Doctors how to administer our Health Care
In these complicated times if there is one thing everyone can agree on it’s this. Bad managers, bosses, and officers are insufferable. No one likes putting together ‘TPS reports’. Or being told by 8 different bosses that they did something wrong. And they sure don’t like people who don’t understand the first thing about their job or business telling them how they should do their job or run their business. They especially hate people that can cite rules and regulations by chapter and verse who mete out some penalty or fine because they can’t cite those same rules and regulations by chapter and verse.
This will be the world of Obamacare. And as much as EVERYONE hates these things at their workplace there are some who still want these same clueless bureaucrats and politicians to take over health care. As if somehow these people who don’t know the first thing about treating sick people can do a better job than the grizzled veterans working in the health care industry. Who spend more and more time filling out paperwork these days than actually seeing patients. And the last thing they want is an even more bureaucratic system where they will have to report to 8 different people and agencies to treat a patient. Where bureaucrats at the Department of Health and Human Services as well as the IRS will have their own coversheets for their ‘TPS reports’.
In the movie The Usual Suspects the character played by Kevin Spacey said, “The greatest trick the devil ever pulled was convincing the world he didn’t exist.” For if you don’t fear the devil you may live a life more in line with the devil’s wishes. Making it easier for the devil to get your soul. Government is a little like that. For it has a horrible track record of doing anything right. Even in the finest military in the world the bureaucrat side of the military pays $100 for a $15.00 toilet seat. And yet the government has tricked so many people into believing they want more government in their lives. Even though government is nothing but the managers and bosses people hate where they work. Bureaucrats who tell others how they should do their job by citing rules and regulations by chapter and verse. But who really don’t know what you do. Or how you do it. Now these professional bureaucrats will tell our doctors how to administer our health care. And God help you if you get sick and put the wrong coversheet on your Obamacare health care services requisition form. Or leave an important income tax field blank.
The Roosevelt Administration fought Inflation by Passing a Law to Cap Employee Wages
Most times when those in government try to fix things they end up making things worse. Giving us the unintended consequences of their best intentions. And the government had some good intentions during World War II. They were printing money to pay for a surge in government spending to pay for war production. As well as a host of New Deal programs. Which sparked off some inflation. Inflation is bad. Enter their best intentions.
One of the biggest drivers of inflation is wages. Higher wages increase a company’s costs. Which they must recover in their selling prices. So higher wages lead to higher prices. Higher prices increase the cost of living. Making it more difficult for workers to get by without a pay raise. Which puts pressure on employers to raise wages. If they do they pass on these higher costs to their customers via higher prices. It’s a vicious cycle. And one all governments want to avoid. Because higher costs reduce economic activity. And that’s how governments get their money. Taxing economic activity.
Enter wage and price controls. The Roosevelt administration thought the way to solve the problem of inflation was simply passing a law to cap employee wages. To halt the vicious cycle of escalating prices and wages. Something employers didn’t like. For that’s how they got the best people to work for them. By offering them higher wages. With that no longer an option what did these employers do to get the best people to work for them? They started offering fringe benefits. Which became a killer of business.
As People lived longer in Retirement Retiree Pension and Health Care Expenses Soared
Employers began offering health insurance and pensions as fringe benefits for the first time. To get around the wage and price controls of the Roosevelt administration. Which they had to pass on to their customers via higher prices. So the wage and price controls failed to do what they were supposed to do. Keep a company’s costs down. Worse, these benefits made promises many of these businesses just couldn’t keep.
Roosevelt also empowered unions. Who would negotiate ever more generous contracts. By demanding generous pay and benefits for current workers. And pensions and health care for retired workers. But it didn’t end there. The unions also expanded their membership as much as possible. So in those contracts they also got very costly workplace rules. If a lamp burnt out at a workstation the worker had to call an electrician to replace the lamp. They could not screw in a new lamp themselves. The unions defined every work activity in a workplace and created a job classification for it. And only a worker in that job classification could do that work. Which swelled the labor rolls at unionized plants. Who all were receiving generous pay and benefits. As were a growing number of retired workers. Greatly increasing labor costs.
For awhile businesses could absorb these costs. Business was growing. As was the population. There were more younger workers entering the factories than there were older workers retiring from them. But things started changing in the Sixties. The population growth rate flattened out thanks to birth control and abortion. So as the population grew slower the domestic demand for manufactured goods fell. While in the Seventies foreign competition increased. So you had falling demand and a rising supply. Making it harder to pass on those high labor costs anymore. Which proved to be a great problem as their market share fell. For as they laid off employees fewer and fewer workers were paying the pensions and health care costs for an ever growing number of retirees. Pensions were chronically underfunded. Worse, people began to live longer in retirement thanks to advances in medicine. Increasing retiree pension and health care expenses for these businesses. Bleeding some of them dry.
Bethlehem Steel filed Bankruptcy when they had 11,500 Active Workers and 120,000 Retirees and Dependents
Bethlehem Steel helped build America. And win World War II. It made the steel for the Golden Gate Bridge. And the bridges between New York and New Jersey. Many of the skyscrapers you see on Manhattan are made with Bethlehem steel. Little Steel. Second only to Big Steel. U.S. Steel. Big Steel and Little Steel dominated the US steel industry. Until, that is, foreign competition entered their market. And the steel minimills arrived on the scene. Neither of which had unionized workforces. Or those legacy costs (retiree pension and health care expenses). Which spelled the doom of the sprawling Bethlehem Steel. From 1954 to 2003 hot-rolled steel sheet prices rose 220%. While wages soared over 900%. And it got worse.
Employment peaked in 1957 at 167,000 workers. By the mid Eighties that fell to 35,000. With some 70,000 retirees and dependents. That is, Bethlehem’s retiree costs were about twice their active labor costs. As business continued to fall employment fell to 11,500. While their retirees and dependents rose to 120,000. Just over 10 retirees for each active worker. Unfunded pension obligations soared to $4.3 billion. Just impossible numbers to recover from. Which is why Bethlehem Steel is no longer with us today. The company was dissolved in 2001. With International Steel Group (ISG) buying some of their remaining assets. Then, in 2005, a foreign steel company, Mittal Steel, merged with ISG. Leaving no remnants of Bethlehem Steel in American hands.
ISG got the steelworkers union to reduce the number of job classifications in the Bethlehem plants they took over from 32 to 5. Greatly shrinking the labor rolls. And increasing efficiency. Helping these remaining assets to move forward. The pension fund was taken over. With retirees losing only about $700 million, giving retirees a pension of up to $44,386. But retirees lost their health care. Some $3.1 billion in spending obligations that the company couldn’t pay. And didn’t. A sad ending for an American great. A failure the Roosevelt administration was responsible for. As their good intentions resulted in unintended consequences. Setting businesses up to fail with costly fringe benefits. Adding yet another demand to the union’s list of demands. Spending obligations these businesses couldn’t pay once domestic demand fell while steel supplies rose. Leading to the inevitable. Bankruptcy of large unionized companies.
The Democrats champion unions. And the poor. Which creates a bit of a problem for Democrats. As unions actually help to keep the poor poor. Union employees raise selling prices higher than non-union employees. Which is why cars built in the union North are more expensive than cars built in the non-union South. And why the world’s largest retailer, Wal-Mart, can sell at such low prices. Because their stores use non-union labor. Which the Democrats hate. And work actively to prevent them from moving into new neighborhoods. Which may explain problems like this (see How access to fresh food divides Americans by Iris Mansour posted 8/15/2013 on CNNMoney).
Twenty-nine million Americans live in urban and rural food deserts, according the U.S. Department of Agriculture (USDA). By this definition, Americans in low-income rural areas have to travel at least 10 miles to get to their nearest supermarket. While city dwellers from low-income neighborhoods have to travel a mile or more.
In America, where the car is king, a 15-minute, one-mile drive doesn’t seem unreasonable. But if you live in a dense city like Washington D.C., that may mean having to take two hour-long bus rides in each direction to get to a supermarket, with shopping bags in tow…
But why the supermarket shortfall..?
Brian Lang, Director of the National Campaign for Healthy Food Access at The Food Trust says supermarkets stay away because urban settings force them to rethink the shape and size of their stores. Walgreens (WAG) can’t transplant its standard rectangular layouts from the sprawling suburbs into tightly packed neighborhoods. TRF’s Hinkle-Brown highlights another issue. A supermarket’s employees tend to live very nearby. “If they’re operating in low-income areas, they’re less work-ready. It takes six months longer to train them, and insurance costs are higher in urban areas,” he says.
Jeffrey Brown has experienced these problems firsthand. He operates six ShopRite supermarkets in former food deserts and five in suburban areas. He explains that suburban grocery stores, like his own, can expect to make a 1% net profit after tax, while his urban stores initially showed a 4% loss, resulting in a 5% gap between urban and suburban profits…
Hinkle-Brown explains that in 2004 he couldn’t get a meeting with a national grocery store. But today Target (TGT) and Wal-Mart (WMT) are opening smaller urban stores. “They realized that the big business frontier of revolutionary growth was behind them,” says Hinkle-Brown.
Walmart has a made a commitment to open 275 to 300 stores in food desert areas by 2016.
Wal-Mart can make life better for so many. And they want to. But because they’re non-union the Democrats are keeping them away from the people that would benefit most from them. It’s not the Republicans doing this to the poor. It’s the Democrats doing this to the poor. And they’re supposed to be the protector of the poor? Let’s hope the poor remember this the next time they vote. Of course, for that, the Democrats will drive them to the polls. Because that’s what they really care about. Their vote. Not how many hours they have to travel by bus to do their grocery shopping.
So who’s to blame for Detroit? The greedy. The greed of the public sector. Who stole as much as they thought possible from future generations. Laughing all the way to the bank. But never did they think that their greed would eclipse the paying-ability of those they were stealing from. Future taxpayers. Which is what happened in Detroit. And will probably happen elsewhere throughout the nation (see The Unsteady States of America posted 7/27/2013 on the Economist).
Nearly half of Detroit’s liabilities stem from promises of pensions and health care to its workers when they retire. American states and cities typically offer their employees defined-benefit pensions based on years of service and final salary. These are supposed to be covered by funds set aside for the purpose. By the states’ own estimates, their pension pots are only 73% funded. That is bad enough, but nearly all states apply an optimistic discount rate to their obligations, making the liabilities seem smaller than they are. If a more sober one is applied, the true ratio is a terrifying 48% (see article). And many states are much worse. The hole in Illinois’s pension pot is equivalent to 241% of its annual tax revenues: for Connecticut, the figure is 190%; for Kentucky, 141%; for New Jersey, 137%.
By one recent estimate, the total pension gap for the states is $2.7 trillion, or 17% of GDP. That understates the mess, because it omits both the unfunded pension figure for cities and the health-care promises made to retired government workers of all sorts. In Detroit’s case, the bill for their medical benefits ($5.7 billion) was even larger than its pension hole ($3.5 billion).
Some of this is the unfortunate side-effect of a happy trend: Americans are living longer, even in Detroit, so promises to pensioners are costlier to keep. But the problem is also political. Governors and mayors have long offered fat pensions to public servants, thus buying votes today and sending the bill to future taxpayers. They have also allowed some startling abuses. Some bureaucrats are promoted just before retirement or allowed to rack up lots of overtime, raising their final-salary pension for the rest of their lives. Or their unions win annual cost-of-living adjustments far above inflation. A watchdog in Rhode Island calculated that a retired local fire chief would be pulling in $800,000 a year if he lived to 100, for example. More than 20,000 retired public servants in California receive pensions of over $100,000.
This is an important point. People say that we must honor these lavish pension and retiree health care benefits because they made a deal. A contract with the city. Or the state. But did they? No. The public sector unions and the cities and states colluded together to steal money from future generations. Who were not a party to those agreements. This amounts to generational theft. And the generous size of those benefits just makes that theft worse. Transforming the public sector into an aristocracy. That cares little for the future taxpayers that they will be bled dry to pay for their long and comfortable retirements.
Detroit is just the first domino to fall. This generational theft is just unsustainable. Something has to be done. But what?
Public employees should retire later. States should accelerate the shift to defined-contribution pension schemes, where what you get out depends on what you put in. (These are the norm in the private sector.) Benefits already accrued should be honoured, but future accruals should be curtailed, where legally possible. The earlier you grapple with the problem, the easier it will be to fix. Nebraska, which stopped offering final-salary pensions to new hires in 1967, is sitting pretty.
In other words our public servants should not live a better life than their masters. Those people paying the bill. There should be no aristocracy in the United States. People in the public sector shouldn’t be able to retire young and live a long life in retirement while someone else is paying the bill. The taxpayer. People who have to work until they drop dead to save for their own retirement. That just isn’t right. If our servants in the public sector want that long and comfortable retirement then they must do what people in the private sector do. Save for it. Make sacrifices. And live more frugally. Because there shouldn’t be two Americas. Where one enslaves the other. While setting up a string of municipal and state bankruptcies because of their greed that threatens the financial wellbeing of the nation.
The Democrats hate Wal-Mart. As do unions. Because Wal-Mart stores do not have union labor. Unions hate that. And because Democrats and unions are joined at the hip, Democrats hate what unions hate. Which is why you won’t find Wal-Mart stores in big Democrat cities. Because the Democrats do everything they can to keep them out. Even writing laws specifically targeting Wal-Mart (see Trouble in store: Why Walmart has failed to woo Washington by Rupert Cornwell posted 7/21/2013 on The Independent).
Walmart has been wooing [Washington D.C.] for years, and in 2010 announced plans to open four stores there, a number subsequently raised to six. Everything was going swimmingly, with work already started on three of the sites, until earlier this month, when the council passed its Large Retailer Accountability Act, otherwise known as “Get Walmart”.
Under it, non-unionised stores with a commercial space of 75,000ft or more – ie Walmart – will henceforth have to pay employees at least $12.50 (£8.20) an hour, compared with the city’s existing minimum wage of $8.25, and the national one of just $7.25 an hour. The company retorted by threatening to scrap three of the planned stores at once, and perhaps abandon the three where construction has begun too, causing the loss of up to 1,800 new jobs…
The case for Walmart is strong – that its stores provide working-class Americans (and many wealthier ones too) with good service and a broad selection of goods “at the lowest prices possible”, to use the words of old Sam Walton, who opened his first store in Rogers, Arkansas, in 1962. And it provides jobs: 1.4 million of them in the US alone…
Nor is Washington DC alone in feeling that way. Five of the country’s other largest cities – San Francisco, Detroit, Seattle, Boston and, above all, New York – have also said no. “As long as Walmart’s behaviour remains the same, they’re not welcome in New York City,” says Christine Quinn, the New York City council speaker who may well be the next mayor. “New York isn’t changing. Walmart has to change.”
Not by coincidence all those cities, like DC, are Democratic strongholds where unions are strong. They are liberal, socially “progressive” and, by definition, urban, while Walmart’s genes are southern, conservative and suburban.
Detroit said ‘no’ to Wal-Mart? The city that just filed the largest municipal bankruptcy in history said they don’t need jobs or low prices on food, clothing, pharmacy and household goods? If you’re looking for the answer to why Detroit is in the mess it is in this is your answer. The Democrat stronghold in Detroit got so anti-business that it chased all the jobs out of the city. Once the jobs left the people soon followed. First the whites. Accelerating their ‘white-flight’ following the Detroit riots. While the blacks held on. But after 20 years (1974 – 1994) of Coleman A. Young they gave up, too. For they don’t come further left than Coleman A. Young. And when you’re that far left you’re no friend to business. So businesses stay away. As do their jobs.
The black middle class followed the whites out of Detroit. In pursuit of greener pastures. And jobs. Leaving Detroit with half the population it once had. Impoverished. And more anti-business than ever. Which is why they said ‘no’ to Wal-Mart. Because Wal-Mart isn’t union. And the two largest employers in the city, the City of Detroit and the Detroit Public Schools, are union strongholds. So they protected their high pay and benefit packages. By keeping nonunion jobs out of the city. While thinking nothing of the unemployed masses in the city. Helping to keep the unemployment rate in Detroit well above the national average. While the unemployed masses would have loved to see up to six new Wal-Mart stores (or more) opening in the city. The 1,800 new jobs (or more) that would have came with them. And shelves full of food, clothing, pharmacy and household goods at low prices that their Wal-Mart paycheck could easily afford. But no. Wal-Mart is not union. So the people of Detroit have to stay unemployed. And impoverished.
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.
If you want to Destroy an Industry and Kill Jobs all you have to do is Raise the Cost of Labor
What happened to American manufacturing? The Industrial Revolution swept through the United States and made America an industrial superpower. By the beginning of the 20th century the United States became the world’s number one economic power. Immigrants poured into this country for those manufacturing jobs. Even though some of these jobs may have come out of a Dickens novel. Because being able to eat had it all over starving to death. And in America, with a good factory job, you could put food on your family’s table.
Most of those manufacturing jobs are gone now. Why? What happened to the once booming textile industry? The once booming steel industry? The once booming automotive industry? Unions happened to them. That’s what. These jobs were so horrible and unfit for humans that unions stepped in and organized them. But the jobs never got better. Based on the ever more generous union contracts they kept demanding. Increasing the cost of labor more and more. Which chased the textile industry out of the country. And much of the steel and automotive industries as well.
Is there anything we can learn from this? Yes. If you want to destroy an industry, if you want to kill jobs, if you want to damage the economy, all you have to do is raise the cost of labor. The largest cost to most businesses. Which is why many businesses have been replacing people with machines. Advanced machines. Computer-controlled machines. Robots. Because they can work 24/7. They’re never late. Never hung over. Never out sick. They don’t take lunch. And they will work as fast as possible without ever complaining. This is why businesses like machines. For they let them lower their costs. Making them competitive. So they can sell at prices lower than their competitors. Allowing them to remain in business.
Uncompetitive American Manufacturers go to Emerging Economies where they can be Competitive
Labor is a big cost of business. Especially in an advanced economy. With a high standard of living. Where people own houses and cars. Where those houses have central heat, air conditioning, televisions, sound systems, kitchen appliances, washers and dryers, etc. These things cost money. Requiring paychecks that can afford these things. As well as pay for clothes, groceries, gasoline, utilities, etc. Common things in an advanced economies. But not all that common in an emerging economy. Where factory workers aren’t accustomed to those things yet. And don’t demand paychecks that can pay for those things. Yet.
Still, people in developing economies flock to the new factories. For even though they are paid far less than their counterparts in advanced economies these factory jobs are often the highest paying jobs in their countries. And those who have these jobs have a higher standard of living than those who don’t. Even when the occasional factory burns to the ground or collapses killing everyone inside. As sad as that is. But if you want to eat and provide for your family these factories often offer the best opportunity.
So this is where American manufacturing jobs go to. Where labor costs are lower. Allowing business to stay competitive. Because if they can’t be competitive no one will buy what they are selling. And without any revenue they won’t be able to pay their suppliers. Their employees. Or their energy costs. Another large cost of business. Especially for manufacturers.
Unions and Regulatory Costs haven’t made Emerging Economies Uncompetitive Yet
A lot of houses today come with a 200-amp electric service. Assuming a house uses about 100 amps on average that comes to 24,000 watts (100 amps X 240 volts). Now consider a large manufacturing plant. Like an automotive assembly plant. That can have anywhere around 8 double-ended unit substations. Which are pieces of electrical distribution equipment to feed all of the electrical loads inside the plant. Each substation has two 13,800 volt 3-phase primary electrical services. If you’re looking at one you will see the following from left to right. A 600-amp, 15,000 volt switch, a transformer to step down the 13,800 voltage to 480 voltage, a 480-volt main switch, a bunch of 480-volt switches to feed the electrical loads in the plant, a ‘tie’ switch, another bunch of 480-volt switches, another 480-volt main switch another transformer and another 600-amp switch.
The key to a double-ended unit substation are the two 480-volt main switches and the tie switch. Which normally distributes the connected electric load over the two primary services. With both 480-volt main switches closed. And the tie switch open. If one service fails because a car knocks down a cable pole these switches will sense the loss of that service. The 480-volt switch on the side of the failed service will open. And the tie switch will close. Feeding both sides of the unit substation on the one live primary service. So each primary service carries half of the connected load. Or one primary service carries the full connected load. Assuming each unit substation uses 600 amps on average (2 services at 300 amps or 1 service at X 600 amps) that comes to approximately 13,194,070 watts (600 amps X 13,800 volts X √3 X .92 PF). Where we multiply by the square-root of 3 because it is three phase. And assume a 0.92 power factor. If a plant has 8 unit substations that comes to 105,552,562 watts. Which equals approximately 4,398 houses with a 200 amp service. Now to further our crude mathematical approximations let’s take a typical electric bill for a house. Say $175 on average per month. If we multiply this by 4,398 that comes to a monthly electric bill for this manufacturer of about $769,654. Or $9,235,849 per year.
So here is another way to destroy an industry, kill jobs and damage the economy. By increasing the cost of electric power. Which is already a very large cost of business. And ‘going green’ will make it even more costly. As the Obama administration wants to do. With their war on coal. The cheapest source of electric power we have. By increasing regulations on coal-fired power plants. Even implementing some kind of a carbon tax. To punish these carbon emitters. And to subsidize far more costly green energies. Such as solar. And wind. Going from the least costly to the most costly electric power will greatly increase a business’ electric utility costs. Easily adding 15%. 30%. 40%. Or more. A 40% increase in our example would increase the electric utility cost by $3,694,340 each year. If a plant has 1,200 workers that’s like adding another $3,000 per worker. And we’ve seen what higher labor costs have done to companies like General Motors. Chrysler. And the textile industry. By the time you add up all of these new regulatory costs (Obamacare, green energy, etc.) businesses will be so uncompetitive that they will have to follow the textile industry. Out of the country. To a country that will let them be competitive. Such as an emerging economy. Where unions and regulatory costs haven’t made them uncompetitive. Yet.
The unions and President Obama were tight. Once upon a time. They helped the president win two elections. Dumped truckloads of campaign money into his coffers. And the thanks for all of this? Obamacare. Which they once enthusiastically supported. But now they are learning what the opponents have been saying about Obamacare all along. That it will make health insurance more expensive. And likely that people will lose coverage they like and want to keep. It’s getting so bad that unions are now coming out in opposition of Obamacare (see Some unions now angry about health care overhaul by SAM HANANEL, Associated Press, posted 5/24/2013 on Yahoo! News).
…some unions leaders have grown frustrated and angry about what they say are unexpected consequences of the new law — problems that they say could jeopardize the health benefits offered to millions of their members…
“It makes an untruth out of what the president said, that if you like your insurance, you could keep it,” said Joe Hansen, president of the United Food and Commercial Workers International Union. “That is not going to be true for millions of workers now.”
The problem lies in the unique multiemployer health plans that cover unionized workers in retail, construction, transportation and other industries with seasonal or temporary employment. Known as Taft-Hartley plans, they are jointly administered by unions and smaller employers that pool resources to offer more than 20 million workers and family members continuous coverage, even during times of unemployment.
The people who work in construction may work for many different construction companies throughout their working life. But they have consistent benefits because of the one constant during their union life. Their union membership. Which makes these jobs different than someone working in the same UAW assembly plant all of their life. Who also work for the same company all their working life.
A lot of people will stay in a job they don’t like because of their health insurance benefit. Construction workers don’t have to worry about being stuck in a job they don’t like. If they don’t like an employer they can quit. Go to the union hall. And pick up another job. All without any interruption in their benefits.
Construction companies collectively bargain contracts with these unions. For example, electrical contractors will negotiate a contract with the local chapter of the union representing electricians. And health care costs are a big part of those negotiations. For it is these electrical contractors that pay for the health insurance plans managed by the union. And it’s costly. Raising a contractor’s cost when bidding new work. Which is why union construction companies try to keep nonunion companies from bidding their work. Because nonunion companies don’t have this massive cost to pay for this generous union benefit. Which can provide uninterrupted health insurance for an unemployed worker sitting at the hall for months waiting for another job. As well as for his wife and his children. Something people don’t enjoy when they get laid off from most other private sector jobs.
The union plans were already more costly to run than traditional single-employer health plans. The Affordable Care Act has added to that cost — for the unions’ and other plans — by requiring health plans to cover dependents up to age 26, eliminate annual or lifetime coverage limits and extend coverage to people with pre-existing conditions.
As it has added to the cost for ALL insurance plans. There’s a reason why before Obamacare plans didn’t cover dependents up to age 26, had annual or lifetime coverage limits and excluded pre-existing conditions. Because they add great cost. Insurance companies aren’t greedy. They’re just trying to provide insurance. Having people pay a little bit for a policy to insure against a large financial loss.
For insurance to work you need a lot of responsible people paying a little bit for those policies. Forcing plans to cover pre-existing conditions, though, makes people NOT buy health insurance. For they think why should I pay years of health insurance premiums when I can just buy a policy when I’m sick? Which they will. So they will consume a lot of health care costs that have to be paid by people who are buying policies. While contributing nothing to the pot for others. Making those policies under Obamacare very expensive. Because with preexisting conditions covered a few people will now have to a pay a lot.
Workers seeking coverage in the state-based marketplaces, known as exchanges, can qualify for subsidies, determined by a sliding scale based on income. By contrast, the new law does not allow workers in the union plans to receive similar subsidies.
Bob Laszewski, a health care industry consultant, said the real fear among unions is that “a lot of these labor contracts are very expensive and now employers are going to have an alternative to very expensive labor health benefits.”
“If the workers can get benefits that are as good through Obamacare in the exchanges, then why do you need the union?” Laszewski said. “In my mind, what the unions are fearing is that workers for the first time can get very good health benefits for a subsidized cost someplace other than the employer.”
You see, the Obama administration cannot give a subsidy to the unions. Because they have to pay for subsidies they give to low-income people with a ‘tax’ on other insurance plans. That is, the people who can afford to pay for health insurance have to pay the subsidies for those who can’t.
The ultimate goal of Obamacare is to put the private health insurers out of business so the government can step in and get what they want. National health care. Of course, doing that has one big drawback for these unions. With national health care you don’t need to belong to a union any more for the kind of health care benefit that provides for you and your family even when you’re unemployed.
Labor unions have been among the president’s closest allies, spending millions of dollars to help him win re-election and help Democrats keep their majority in the Senate. The wrangling over health care comes as unions have continued to see steady declines in membership and attacks on public employee unions in state legislatures around the country. The Obama administration walks a fine line between defending the president’s signature legislative achievement and not angering a powerful constituency as it looks ahead to the 2014 elections.
The cost of unions has pushed most of U.S. manufacturing offshore. Public sector unions are bankrupting city and state governments. And even the state of Michigan, home of the automotive industry, has voted to become a right-to-work state. The heyday of the unions is over. And they’re struggling to hold onto what little they have. Especially in the private sector. Where their ranks have done nothing but fall since the Sixties.
The unions poured money into the reelection of President Obama because Democrats are supposed to make things better for unions. Not worse. At this rate unions may start voting Republican. For though they may not have as generous union contracts they may at least still have union contracts. Because with the business-friendly environment of the Republicans there may at least be a building boom. And more union construction jobs.
As the 2014 midterm elections draw close you may see a louder voice for the repeal of Obamacare. This time coming from one-time vocal supporters. Perhaps giving Democrats a difficult time at winning their elections. Unless they come out for the repealing of Obamacare, too. For unions may have at one time thought about how nice it would be to get rid of that costly benefit from their benefit package. Which will happen if Obamacare evolves into national health care. But now they’re seeing that this outcome may make unions irrelevant. And are likely thinking, “My God, what have we done?”
It just goes to show you have to be careful what you wish for. Because sometimes those wishes come true.