America is heading toward a financial reckoning because of exploding government spending and debt.
There are too many government employees doing too little work, and getting paid salaries and benefits far beyond what private sector employees make. A new Washington Post poll demonstrates that American voters have figured out that the pay and benefits received by government employees are far out of line with their own careers: according to the poll released today, more than half of Americans think federal employees are overpaid, and three-quarters of Americans believe government employees get paid more and have better benefits compared with those outside government.
I should know how good federal employees have it. For five years, I was one.
The concept of “public service” is dead. Federal employees now make higher salaries than their private sector counterparts. For example, lawyers at the United States Justice Department, where I worked, regularly make between $130,000 and $155,000 per year. This is significantly higher than the average lawyer salary — particularly private sector lawyers outside large cities. While U.S. Justice Department lawyers enjoy these salaries, their state government attorney counterparts often make less than half this amount, even with the same experience.
This isn’t a knock against federal government employees as people. Most of them are fine individuals, and scamming the taxpayer is not part of their plan. This is a knock against the system that employs them. Government pay and benefits have been allowed to swell to an unsustainable bloat. Until recently, the financial solvency of the nation was not at risk, but now sovereign debt threatens the economic life of not only the United States, but also the entire world.
During my last week at the Justice Department, I received notice that I received an automatic “step increase” to a higher salary. To workers in the real world who must ask their employers for a raise, a step increase is an alien concept. In the federal government, you don’t ask for a raise, you don’t apply for a raise. If you breathe and wait, you get one.
Realizing it was absurd for me to receive a significant raise for an inactive final month, I asked for it to be revoked. I didn’t want the raise. But I learned that salaries only go up when you work for the feds, never down. I was told by the human resource professionals it would not be possible to reduce my pay. I must accept the raise.
It is no mystery why the Washington Post poll found what it found.
High and automatically increasing salaries aren’t the only great part of a federal government job. A vast buffet of benefits makes federal employment extremely lucrative. Life insurance, child care help, dental, health care subsidies, and transportation subsidies only add to the take. Best of all, while the real world is jettisoning costly defined benefit plans or pensions and moving toward defined contribution retirement plans, the federal government offers its employees … both!
When I tell people in the wealth-producing world about the federal defined benefit plan, they are shocked and intrigued. It is like discovering a steel toy truck in an attic, or finding faded color photos of grandpa’s chrome-trimmed DeSoto gracing a driveway. The federal defined benefit plan is an economic relic from another age. The federal pension plan is so preposterous, many federal employees don’t know it exists because they never imagined it could exist.
The federal government also attracts lawyers who stay their entire careers, further burdening the rest of us. Every year of federal service entitles a retiree to that same percentage of their three-highest salary years, every year, for the rest of their life. So a twenty-six year government attorney who retires making $155,000 per year gets $40,000 per year starting as early as age 55 for as long as the retiree lives. That same attorney in the coveted Senior Executive Service can look forward to about $50,000 per year in retirement.
No need to worry about rising costs of living — Uncle Sam adjusts the payout for inflation. Even lower-paid federal employees enjoy a defined benefit plan that has no equal, except maybe among General Motors retirees.
This retirement largess doesn’t even include the defined contribution plan — remember, federal employees get both. Through the twenty-six year career of that federal employee, contributions to a separate retirement fund were matched up to about $5,000 per year tax-free.
And of course, an array of other benefits continues for the federal retiree, such as health care and other insurance.
Who gets to pay for this luxurious living for retired bureaucrats? You do! How many small- and even medium-sized businesses paying the taxes to support these federal benefits can provide a similar plan?
Probably none. The marketplace has no tolerance for fantasy.
Some states, particularly those with public sector unions such as ASFME, might be worse. States are facing insolvency because of state government benefits packages. In just the last decade, state pension obligations have soared 2000 percent. California is among the worst, with a pension liability of $500,000,000,000. Only two states have adapted to the realities of the wealth producing sector and adopted defined contribution plans similar to 401(k) plans. The remainder of states maintain the antiquated and unsustainable defined benefit pension system, just like Uncle Sam does.
Thankfully, many states have refused to recognize public sector unions, and they find themselves further from the cliff than states like Massachusetts, New Jersey, Illinois, and California. Citizens of states without public teachers unions (yes Trenton, such places really do exist) and without state government employee unions aren’t facing financial catastrophe. Citizens from the sane states should take pride that their court systems run without unions, the highway patrol still patrols, criminals still go to prison, the schools still open, and they even enjoy paved streets. In fact, these states provide more services because there is more money to go around. Paving a road in Charlotte costs less than in Boston. Cheaper libraries mean more libraries.
It’s become trendy to demonize the benefits packages of executives in the wealth-producing sector. Putting aside the fact that private sector revenue only comes from willing customers, the greater scandal seems to be the millions of federal bureaucrats enjoying a retirement plan on the backs of taxpayers. If the details of these federal benefits were fully and broadly known, a wild public backlash might follow.
The pain endured by private sector workers doesn’t end simply by paying for the retirement of millions of federal employees. Over the last year, 153,000 new federal government civilian jobs were created. During the same period, private sector jobs have been lost. The diverging trends are not unrelated. While public sector pay has increased, private sector pay has fallen.
Because government creates no wealth, the result is a shrinking pool of private sector jobs supporting a growing cast of federal bureaucrats.
Don’t be fooled about how essential and important the 1,350,000 federal employees are. When the Washington, D.C., area received a few feet of snow in February 2010, all “non-essential” federal employees were told to stay home for over a week — and nobody noticed.
But if there was any doubt, who across America even noticed the government was closed for over a week? Cows still got milked, software was written, and trucks got driven, regardless. The country buzzed along. If anything, the nation enjoyed a well-deserved week of comparative freedom with Washington, D.C., bureaucrats like me home shoveling snow or drinking hot cocoa by the fire. It was good to be a federal bureaucrat last February. While our private sector neighbors scrambled to find child care for children stuck at home, we watched movies, went sledding, and spent quality time with the kids.
Sure, some things the government does are vitally important. Some truly essential federal workers worked despite the blizzard. So let’s get the list of who was deemed “essential” during the blizzard and keep it handy. We’ll need it when those loans from the Chinese dry up and printing money to pay for the federal debt triggers Carter-era inflation.
My first job was working for the secretary of State in South Carolina. He gave me sage advice upon being hired: “Government jobs ought to be temporary. Do some service, and go back to the real world.” He’s right. So now I’m back practicing law and helping my former colleagues enjoy a world-class retirement.
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