More government hiring is not the answer – By George J. Marlin
The following appears in the June 29 – July 4, 2012 issue of the Long Island Business News:
President Barack Obama’s recent statement, “The private sector is doing fine” will rank in the annals of presidential quotes next to President Nixon’s “I’m not a crook” and President Ford’s, “There is no Soviet domination of Eastern Europe and will never be under a Ford administration.”
The fact is that 35 months after the Great Recession ended, the United States is experiencing the most anemic private sector recovery in the past half-century. Between 1960 and 1999, average annual economic growth was 3.5 percent; between 2000 and 2009, 1.7 percent; and since then, economic growth has averaged 0.6 percent.
Many Americans still believe the economy is a mess because unemployment has been over 8 percent for 40 straight months, 23.2 million people are in need of work and the net worth of the middle class has been hemorrhaging. The Federal Reserve Survey of Consumer Finances, released in June, revealed that the overall net worth of the average household in 2007 was $126,000 and in 2010 it was $77,000 – down 40 percent in three years.
With the media spotlight on Obama’s private recovery statement, what was largely overlooked, however, was his follow-up comment: “Where we’re seeing weakness in our economy has to do with state and local government.”
Actually, the public sector is doing well versus the private sector. State and local government employment has been up 4 percent since the recovery has commenced. Between 2007 and 2010, thanks to gratuitous public employee union contracts, annual wages grew 40 percent faster than wages in the private sector.
Also, public sector workers have benefits far superior to their neighbors who work for private companies. According to the U.S. Bureau of Labor Statistics, 90 percent of state and local government workers have access to pensions versus 65 percent in the private sector. Access to health insurance: 87 percent public, 69 percent private. Workers’ average cost of benefits: $14.51 per hour for public workers, $8.55 for private employees.
Obama and his big-government friends do not understand that their prescription – more federal stimulus dollars to state governments to maintain or increase public employee jobs – does not produce economic growth.
In New York, for instance, the billions of Obama stimulus dollars that arrived in 2009-2010 were used not to spur the economy but to expand state expenditures at pre-recession levels – about three times the inflation rate. And when the stimulus money dried up, not only did Albany have to deal with a $10 billion structural deficit, the state’s economic recovery lagged behind most other states.
New York’s unemployment rate in May stood at 8.6 percent versus 8.1 percent a year ago. The state added only 6,100 private sector jobs in May, significantly behind lower tax and regulation-friendly Ohio’s 19,600 new jobs.
For New York to prosper, it must be acknowledged that public employee salaries and benefits are destroying local economies, not improving them. Long Island’s residential and commercial real estate values continue to decline because there is little hope that local government spending will be curtailed due to the size of unfunded pension and health care liabilities. Right now, Nassau and Suffolk municipalities and school districts, on average, dedicate 8 percent of their operating funds to pension contributions. Because of increasing pension payouts and lackluster investment returns on pension fund assets, local contributions are expected to grow to 20 percent of operating budget expenditures within the next five years.
Contrary to President Obama’s claims, expanded government has been hindering local economies and destroying municipal tax bases. And if political leaders refuse to say “enough already,” expect ballot-box revolts, similar to San Diego and San Jose, Calif., where voters approved measures June 6 to cut pension and health care benefits to municipal employees and retirees, to spread like wildfire across the nation.