Thursday, May 24, 2012

Do You Want to Know a Secret

What is the point of Government Unions?

After watching the coverage of the fight for a recall election of Governor Scott Walker in Wisconsin and seeing various ballot issues raised trying to address rising government employee costs in Ohio, Indiana, and California among others, clearly the question of the scope of government unions has come to the forefront and has become a very polarizing issue.   Four things specifically bother me about government unions:

1)  A union's most significant function is to secure above market wages and benefits for their members.  I think this statement may offend people that are part of these unions, because it may feel like I am suggesting they are overpaid.  And while I would never make that statement about an individual, as a group, I am saying they are overpaid.  Think about it, how useful is a union of it does NOT negotiate wages and benefits higher than the market would bare?  If employees are able to get better compensation on their own, then the unions would be completely ineffective and thus cease to exist.  Further, anytime a service is priced above market, we create a surplus and thus have more teachers than positions inflating unemployment.

2) We have an enormous conflict of interests in government unions.  These unions are EXTREMELY ACTIVE in politics and elections, which means they are working very hard to pick the politicians with whom they will then turn around negotiate.  Wow, do you think if my boss knew I could get him fired, I would get a big fat raise every year?  Of course I would.  Which leads to...

3) Rigidity of union benefits.  Over the last 4 years, the United States has gone through an extremely tough downturn.  Private sector wages across the board have stagnated or gone down.  401Ks have been ravaged by the stock market.  In other words the market spoke and adjusted the economics of private citizens.  So, of course teachers salaries and pensions would have felt the same devastation, right?  No, of course not because for many their defined benefit plan are not subject to the market, even though all of the collected taxes (property, income, sales) were massively reduced by the downturn.  Share in the prosperity, but be insulated from decline.  Thats great for union members but the taxpayers feel the effects of burgeoning deficits and debt.     

4) Unions minimize the effect of incentives to improve quality through collectively bargaining for everyone. I am a firm believer in rewarding strong performance over time served.  We are decoupling pay from performance, which in turn lowers performance and effectiveness.

So, believing that government unions raise unemployment, increase state debt burden, and reduce the potential quality of services, what should we do about them?  I would love to hear your thoughts...

Friday, May 4, 2012

A Hard Day's Night

As we inch closer to election season, I listen to tons of chatter on the really important issues:

1) Free contraception for casual fornicators
2) Who has the guts to kill a man who was universally hated and is consequently already dead (bin Laden)
3) The ever important millionaires tax which has no chance of improving our debt
4) Who paid more than their secretary in income taxes

I am reminded that voters can easily get their priorities tangled up in these small issues that have little impact on the future of our country.  The funny thing is really we have ONE issue that should be a TOP concern for every single American in this country.  JOBS.  Why are jobs more important than anything else?  Because jobs fix or improve so many of the problems our country faces, it is THE silver bullet.

What happens when employment improves:

1) Increased Tax Revenues -> Reduced Deficits
2) Reduced Welfare Spending -> Reduced Deficits
3) Higher demand for Homes -> Increased Property Taxes -> Improve Education, Add Teachers
4) Increased Demand for Immigrants -> Allows for more legal immigration, less Illegal Immigration
5) Bigger Workforce -> Increased Health Care Coverage
6) Higher Youth Employment -> Reduced Student Loan Burden
7) Increase Payroll Taxes -> More funding for Medicare / Soc Security
8) Reduced Borrowing -> Improved trade position with China
9) Increased State/Local Tax Revenues -> Improved Infrastructure
10) More Job Competition -> Increased Wages 

WOW.  What other one thing can single-handedly improve so many issues all at once.  If your biggest fears are social issues like the environment, gay marriage, or abortion, I am not totally sure how increased jobs would directly help, but I am convinced that you will have a very hard time moving the needle on those issues when so many voters are worried about putting food on the table.  So, I think you would want to get the economy strong so that your issues can get some level of attention.

The only other big issues that jobs does not directly positively impact is energy and defense spending.  Obviously, more people working will raise the demand for energy and thus make it more expensive.  However, as I have talked about previously, I do believe we have some supply solutions worth the investment (Nat Gas) and we could use energy policy to create more jobs.  Defense is trickier because the world has a say for which we respond, but I think on the whole we should support policies that reduce the overall spending, waste and world policing.

So, how are we doing with addressing this golden ticket of job creation?  As you can see from one of my previous posts, I do NOT believe Obama has much interest in job creation despite his rhetoric.  Also, as you watch the unemployment numbers month over month, pay attention to this: 

Labor Force Participation Rate

 Source: Bureau of Labor Statistics (1992-April 2012)
As a country we are at a 30 year low in number of people in the workforce.  Since the stated unemployment number (still at a very high 8.1%) only counts people currently looking for jobs, it is artificially low.  We need the participation rate number to get back to a healthy level before we can reap the benefits of job creation touted above.

I think job creation is something that both sides of the isle can agree is a very top issue facing the U.S. today even if we disagree on how to get there.  I would urge you to put your priorities in order before casting your vote this fall, because no matter what your favorite issue, chances are reducing unemployment will help its cause.  Please do not be fooled by endless media and campaign coverage trying to persuade you that you should care about silly sidebar issues.

Determine who is going to foster a better job creating environment and I guarantee you will see a better America with a brighter future 4 years from now.  Jobs is a rising tide that lifts all boats, get on board.