There Are Two Americas

It seems John Edwards had a point about there being "two Americas", he just got the players wrong. How you have fared during the great recession largely depends on whether you work in the public or private sectors.

Here's a theory that explains the "two Americas" concept better than Edwards. In his new book "The Battle", Arthur Brooks posits that our country is split into 70-30 coalitions and that we are facing a new culture war with our country's future in the balance:

This is not the culture war of the 1990's. This is not a fight over guns, abortions, religion and gays. Nor is it about Republicans versus Democrats. Rather, it is a struggle between two competing visions of America's future. In one, America will continue to be a unique and exceptional nation organized around the principles of free enterprise. In the other, America will move toward European-style statism grounded in expanding bureaucracies, increasing income redistribution, and government controlled corporations. These competing visions are not reconcilable: We must choose.

The $862 billion stimulus amounted to little more than a government union member full employment plan. Now that most states have blown through their first bailout, they have their hands out for more. President Obama pressed Congress to borrow another $50 billion to send to profligate state and local governments to ensure they don't have to cut back on spending. Since Congress hasn't authorized the second round of bailouts, some politicians are starting to panic and mention the word "layoff"; which considering how much money government employee unions spend to elect(and keep) Democrats you can imagine the panic is genuine. After all, fewer government workers, means fewer union dues and ultimately less money to promote their common dream of ever expanding government.

The potential loss of more than $600 million in federal aid once deemed a sure thing has had Massachusetts Democrats scrambling to rebuild the state budget behind closed doors, warning publicly of layoffs and steep program cuts if the funds fall through.

From todays Boston Herald we have two stories of Mr. Brook's 30% coalition in action:

House and Senate dealmakers nixed a 24-hour hotline to report illegal aliens and refused to force the attorney general to agree in writing to enforce federal immigration law. And they would not put into law language barring state schools from offering in-state tuition rates to illegal aliens.

and

State probation department staffers banged in sick more than 11,000 days last year - the equivalent of 30 years - in a workplace epidemic that has private sector leaders shaking their heads in disbelief, a Herald review finds.

That’s obviously an absurd statistic,” said Robert Ahearn, chief executive of the Plymouth-based IGS Systems, a high-tech firm that was forced to lay off 27 people over the past three years.

“That would be an enormous impact on our business, and we couldn’t tolerate it,” he added.

On Capitol Hill Sen. Tom Harkin is threatening to use a "lame duck" session of Congress to aid his union allies.

One such law is the so-called “card-check” bill, which takes away employees’ right to vote secretly against unionizing and skews the balance in favor of labor unions during negotiations with newly unionized employers. Labor unions see the bill as essential in saving their many under-funded multi-employer pension plans. The bill’s binding arbitration provision could force many employers to enter the unions’ underfunded pension plans, taking away their employees’ opportunity to contribute to tax-deferred 401(k) retirement plans.

I encourage public employees who are unfamiliar with the term to google "layoff" because they are about to get a big, ugly dose of the real world.

Jeff Jacoby wrote this last September. Sadly it's just as true today as it was then. That's what happens when unions spend $400 million to make sure the politicians watch their backs at taxpayers' expense.

Americans increasingly fall into one of two camps. Those who work for the government - about 15 percent of the labor force - tend to enjoy sumptuous perks, virtually indestructible job security, and pensions that are guaranteed for life. The rest of us work in the private economy, where millions of jobs can be wiped out by a recession, defined-benefit pensions are disappearing, and competition and downsizing are facts of life.

What does this mean in dollars?

In 2008, total federal civilian compensation averaged $119,982 - more than twice the $59,908 in wages and benefits earned by the average private-sector employee. This gap has doubled since 2000.

It isn’t only at the federal level that the political class so handsomely takes care of its own. “State and local government workers get paid an average of $25.30 an hour, which is 33 percent higher that the private sector’s $19,’’ Forbes magazine reports. “Throw in pensions and other benefits and the gap widens to 42 percent.’’

Remember in November.

Our Jobs President At Work

President Obama travels to Ohio to promote the $862 billion failure otherwise known as the stimulus's 10,000th project, causing hundreds to lose a days pay. Way to go Mr. President.



Maybe these guys can receive their lost wages from the $100 million fund that BP set up to help out of work oil-rig workers. After all, the president's six month ban on drilling caused the need for the fund in the first place, just as his need for a photo op caused the construction workers to hit the bricks. When all else fails blame BP, but don't return their campaign donations. Sure they're evil incarnate, but there are elections to win and a country to re-make. Besides, BP supports cap and trade.

The Ground We Should Fight 2010 On

From the inestimable Michael Barone:

Public-sector unions bleed taxpayers
By: Michael Barone
Senior Political Analyst
February 7, 2010
(AP File)

Growing up in Michigan in the heyday of the United Auto Workers, I long assumed that labor unions were part of the natural order of things.

That's no longer clear. Last month the Labor Department reported that private-sector unions lost 834,000 members last year and now represent only 7.2 percent of private-sector employees. That's down from the all-time peak of 36 percent in 1953 and '54.

But union membership is still growing in the public sector. Last year 37.4 percent of public-sector employees were union members. That percentage was down near zero in the 1950s. For the first time in history, a majority of union members are government employees.

In my view, the outlook for both private- and public-sector unionism is problematic.

Private-sector unionism is adversarial. Economic studies show that such unions do extract premium wages and benefits from employers. But that puts employers at a competitive disadvantage. Back in the 1950s, the Big Three auto companies dominated the industry and were at the top of the Fortune 500. Last year General Motors and Chrysler went bankrupt and are now owned by the government and the UAW. Ford only barely escaped.

Adversarial unionism tends to produce rigid work rules that retard adaptation and innovation. We have had a three-decade experiment pitting UAW work rules against the flexible management of Japanese- and European-owned nonunion auto firms.

The results are in. Yes, clueless management at the Detroit firms for years ignored problems with product quality and made boneheaded investment mistakes. But adversarial unionism made it much, much harder for Detroit to produce high-quality vehicles than it was for nonunionized companies.

As economist Barry Hirsch points out, nonunion manufacturing employment rose from 12 million to 14 million between 1973 and 2006. In those years, union manufacturing employment dropped from 8 million to 2 million. "Unionism," Hirsch writes, "is a poor fit in a dynamic, competitive economy."

Moreover, federal laws passed since the 1950s now protect workers from racial and sex discrimination, safety hazards and pension failure. They don't need unions to do this anymore.

Public-sector unionism is a very different animal from private-sector unionism. It is not adversarial but collusive. Public-sector unions strive to elect their management, which in turn can extract money from taxpayers to increase wages and benefits -- and can promise pensions that future taxpayers will have to fund.

The results are plain to see. States such as New York, New Jersey and California, where public-sector unions are strong, now face enormous budget deficits and pension liabilities. In such states, the public sector has become a parasite sucking the life out of the private-sector economy. Not surprisingly, Americans have been steadily migrating out of such states and into states like Texas, where public-sector unions are weak and taxes are much lower.

Barack Obama is probably the most union-friendly president since Lyndon Johnson. He has obviously been unable to stop the decline of private-sector unionism. But he is doing his best to increase the power -- and dues income -- of public-sector unions.

One-third of last year's $787 billion stimulus package was aid to state and local governments -- an obvious attempt to bolster public-sector unions. And a successful one: While the private sector has lost 7 million jobs, the number of public-sector jobs has risen. The number of federal government jobs has been increasing by 10,000 a month, and the percentage of federal employees earning over $100,000 has jumped to 19 percent during the recession.

Obama and his party are acting in collusion with unions that contributed something like $400,000,000 to Democrats in the 2008 campaign cycle. Public-sector unionism tends to be a self-perpetuating machine that extracts money from taxpayers and then puts it on a conveyor belt to the Democratic party.

But it may not turn out to be a perpetual motion machine. Public-sector employees are still heavily outnumbered by those who depend on the private sector for their livelihoods. The next Congress may not be as willing as this one has been to bail out state governments dominated by public-sector unions. Voters may bridle at the higher taxes needed to pay for $100,000-plus pensions for public employees who retire in their 50s. Or they may move, as so many have already done, to states like Texas.

Obama's Democrats have used the financial crisis to expand the public sector and the public-sector unions. But voters seem to be saying, "Enough."

A quick primer:

President Obama used TARP money to bail out GM and Chrysler to benefit the UAW. These companies acknowledge that the taxpayer will likely never be repaid. Instead the president is proposing a fee on banks' to recoup these losses.

The stimulus, as admitted by the administration was designed to bail out spendthrift state governments and protect public employees from layoffs.

There is no reason why public workers should be allowed to unionize and then use memeber dues to advocate for ever bigger government.

Stimulus or lack thereof, by the numbers

This chart of job losses by state was put out by the republicans on the House ways and means committee. Congrats to North Dakota, the only state to add jobs since the stimulus billed passed. So what happened to those 3.5 million new jobs the Obama administration promised would materialize if we borrowed and spent 787 billion dollars? Veronique de Rugy explains on reason.com:
"Since then, Romer has told CNBC she couldn’t say for sure how many jobs would be created, since we can’t know what would have happened without the stimulus. But didn’t her report pro-ject what would happen if the stimulus wasn’t passed? Wasn’t the 3.5 million number supposed to be the difference between employment with the stimulus and employment without it?
The confusion flows from the faulty theory underlying the stimulus bill. In Keynesian thought, a decline in demand causes a decline in spending; since one person’s spending is someone else’s income, a fall in demand makes a nation poorer. As a poorer nation cuts back on spending, it sets off another wave of declining income. So any big shock to consumer spending or business confidence can set off waves of job losses and layoffs, as fewer goods are demanded and more workers become useless.
Under this logic, one possible remedy is for public spending to take the place of private spending. As government increases its spending, the money creates new employment. That, in turn, spurs those new workers to consume more and prompts businesses to buy more machines and equipment to meet the government-induced demand. Economists call this increase in aggregate income the “multiplier” effect. One dollar of government spending, the theory goes, ends up creating more than a dollar of new income. It’s a rare free lunch.
As appealing as the Keynesian story sounds, many economists have long doubted it. In 1991, looking across 100 countries, Robert Barro of Harvard presented historical evidence that high government spending actually hurts economies in the long run by crowding out private spending and shifting resources to the uses preferred by politicians rather than consumers. For a dollar of government spending, we end up seeing less than a dollar of growth. Can long-term poison be short-term medicine?".
If you don't want to take the republicans' numbers as proof of the stimulus bills failure to stimulate job creation. I offer the governments' website http://www.recovery.gov/. According to the Obama administration, stimulus spending in Massachusetts has created 584 jobs while spending $47,620,000. That's $81,541 per job.

To check out the job loss numbers on the above chart just click to enlarge.

signage as stimulus

Some States Forgo Signs on Stimulus
By MICHAEL COOPER
"The Great Depression had its red, white and blue “U.S.A. Work Program” signs and the ubiquitous “We Do Our Part” blue eagle emblems, which can still be seen in the credits of films of the era. This recession has green highway signs telling drivers when construction work was paid for by the stimulus program — but not in Georgia, which just became the latest of at least half a dozen states to forgo the signs as a waste of money.
The signs, which proclaim “Project Funded by the American Recovery and Reinvestment Act” over the red, white, blue and green logo of the stimulus, cost an average of $1,200 apiece in Georgia, said David Spear, the press secretary for the Georgia Department of Transportation. With the state putting up two signs at each project and 119 construction contracts awarded through September, the cost of the signs was adding up. The sign issue became a lightning rod for critics of the stimulus, and many of them complained to the department about their cost.
“The more we reflected on it, the more we realized they were absolutely right: it’s not the best use of the money,” said Mr. Spear, who added that the decision would save tens of thousands of dollars that could be spent on more construction work.
The use of signs for stimulus projects was strongly encouraged by the Federal Highway Administration but not required.
“We think the signs promote transparency and accountability — so taxpayers can know where their money is being spent and on what,” said Jill Zuckman, the Department of Transportation’s director for public affairs. “But the important thing is that the projects be sound, well run and job creating.”
The sign question has taken on partisan overtones. Some Republicans say the signs are essentially publicly financed advertisements for one of the Obama administration’s signature programs.
“These signs are simply for political self-interest, and it’s high time we stop using stimulus dollars to fund them, and instead use these dollars for their intended purpose of creating economic activity,” Senator Judd Gregg of New Hampshire, a Republican who voted against the stimulus package, said in a statement last month. He tried — and failed — to prohibit the use of the signs.
At the local level, though, the issue seems to be more about red ink than red states. Georgia, which made the decision this month to stop buying the signs, is led by Gov. Sonny Perdue, a Republican. Texas, another largely Republican state, also banned the signs. But Virginia, which decided from the beginning not to use any of its stimulus money on signs, is led by Gov. Tim Kaine, the chairman of the Democratic National Committee.
Florida, whose Republican governor, Charlie Crist, broke ranks with his party to support the stimulus, decided not to use the signs. And New York, a largely Democratic state, stopped requiring them this summer after it was embarrassed by reports that contractors were asking for more than $4,000 for the largest signs."

If only Governor Patrick would follow the example set by these governors. At 2 signs per construction project, that's at least $2,400 wasted on every road project. While that amount of money isn't even a rounding number for Congress, for the average American it's still a lot of money. Since it's our money we should expect that Congress, the president and Governor Patrick spend it wisely.

It really pays to be a bureaucrat

I always thought that government workers received such great benefits like health care, vacation time and pensions because the pay was lousy. Whoever sold that fable to the public deserves a promotion. The truth is they make much more than the taxpayers of this country that pay their salaries and they never have to be worried about being laid off. If this isn't a big enough kick in the teeth, President Obama plans on adding 600,000+ in the coming years to the federal government. With the national unemployment rate up to 9.7%, a 26 year high, it seems the only "company" hiring is the government. An economy that depends on an ever expanding government for growth is unsustainable. Vice President Biden remarked the other day that the stimulus is working better than expected. Do you believe him? Someday soon the debt being run up by this administration will come due. The only way to pay the bills will be to institute a value added tax.