September 6, 2010

HAPPY LABOR DAY: “This weekend we celebrate Labor Day in a country divided between two kinds of workers. The first is the private-sector worker, the vulnerable one who rides the business cycle without shock absorbers. The second worker, who works for the government, lives a cushioned existence in which terminations take years, pension amounts are often guaranteed, and recessions are only thunder in the distance. Yet worse than this division is the knowledge that the private-sector worker will pay for public-sector comfort with ever higher taxes.”

UPDATE: A reader emails:

I’ve been reading your blog for years and I appreciate your nuanced brand of conservatism. But lately, your attack on public pensions has me concerned. Look at it from my perspective:

When I graduated from law school and applied for a job at a Federal agency almost 30 years ago, the deal was simple: “We won’t pay you as much as you might make in the private sector, but you’ll get reasonable pay, great benefits including a generous retirement system, and a reasonable work life.” I took the deal. I started at a salary of around $20,000, or around one quarter of what new associates at big to mid-sized firms were making then. My first office was a cubicle with a WWII era metal desk. I worked hard, though rarely on weekends after my kids were born. I’ve had jobs writing administrative decisions, counseling auditors, as committee counsel on Capitol Hill, and most recently as a relatively low-level administrative law judge. My salary is now around $150,000. It makes for a good living for my family, but is not comparable to the salaries that most of my law school classmates, with comparable academic standing, now make. It is not even in the same ballpark as the salaries the big-firm lawyers who routinely appear before me make. One of them lives up the street from me in a much nicer house. But, I’m happy with the deal I made 30 years ago. I’ve had a good career and in a few years, I’ll be eligible for a comfortable retirement (although I still won’t be able to afford the house of the guy up the street).

Apparently though, some people, in and out of government, are no longer happy with the deal. Complaints and warnings about government pensions and pensioners abound. Typically, the narrative is something along the lines of: “Greedy Retired Bureaucrats Still Feeding at the Public Trough as Taxpayers Suffer!”

Well, if you’re concerned about unfunded government liabilities, I agree with you. If you think that government employee pensions are too generous, I’ll listen to what you have to say. But if you just don’t like the deal the government made 30 years ago and want out, I’ll see you in court.

Well, my pension certainly isn’t gold-plated, alas. It’s a defined-contribution plan, which is probably why Tennessee isn’t broke. But look at those overgenerous, and underfunded public pension plans in the places I’ve been writing about, like California, Illinois, and New Jersey, and you see a very different story. The federal retirement system — I had a post on this a while back, but I can’t seem to find it — works more like Tennessee’s, which is one thing to be thankful for as we ponder the Federal government’s general approach to insolvency. And public employees, overall, are no longer paid less.

But the Amity Shlaes passage above is factually true: Where people in the private sector have been economically hammered — and simultaneously vilified by the President — there hasn’t been any recession for the public sector. Perhaps pointing that out makes me a class traitor, but so be it. There hasn’t been much of that “shared sacrifice” in the public sector. And here’s a pre-election post on shared sacrifice from 2008.

ANOTHER UPDATE: Reader Kevin Murphy emails:

Maybe 30 years ago the “deal” was security in exchange for low pay, but today that is not the case at all. According to the US Government’s own figures, compensation (pay plus benefits) for the average federal employee is twice that of the average private sector worker. And, yes, that includes the military. Note that a good deal of the run up happened under Bush’s watch.

I’ve compiled the relevant data here.

I expect we’ll hear more of this as the budget crisis develops. I’ll just note that Chrysler bondholders thought they had a deal, too . . . .

MORE: “Dear Public Pensioners.”

See… businesses, people, and yes even governments too, that spend way, way, way more money than they make do this thing called “going broke.” When that happens the creditors of the “broke” entity take what is called “a bath.” . . . Those decisions will be made as follows. The least politically powerful people will be screwed first and hardest. The most politically powerful people will be screwed last and least.

All that means that grandma and grandpa, and the physically disabled as well, had better not be too reliant upon their government checks for food. Next will come, I am sorry to say, public employees. After them, the fat cats and wheeler dealers ( that’s right, public employees, the people that organized your unions) will take their bath. But you can bet it won’t be as hot or as thorough as the bath you’re going to take. Last and least will come the elected officials who will, amazingly, emerge from the whole mess completely unscathed. That’s how it’s going to work. I don’t tell you this because I dislike you. I tell you because I figure maybe you can use the warning to plan ahead, and buy lots of canned goods and a wood stove.

Ouch. Read the whole thing.

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