The New Economy—Government Employees as Winning Losers

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   Do not think about, write about or deal with  human behavior without determining the effects of incentives. It’s not their money, of course they’ll waste it.

     Wherein we see, once again, the welfare state providing a nice living for the shiftless and government employees.

John Robson
National Post

The welfare state is bust
And so are Americans

FROM SOCIAL SECURITY AND COLLEGE LOANS TO FOOD STAMPS, AMERICANS ARE NOT PROVIDENT BECAUSE THEY DON’T HAVE TO BE. — JOHN ROBSON

How can Americans, living in one of the richest societies in human history, appear to have no money?
U. S. hourly wages have been stagnant and median net worth has been falling.

I’m not referring to the persistence of poverty. I’m talking about a Federal Reserve Board survey finding that 47 per cent of Americans couldn’t meet an unexpected $ 400 expense without borrowing or selling something. In a moving, and alarming, essay in The Atlantic, Neal Gabler asks “Who knew?” and responds with courageous frankness, “I knew because I am in that 47 per cent.”

He’s not some kid just starting out. He’s an established writer with a middleclass income and, in some respects, lifestyle, including sending one daughter to Stanford, then Harvard Medical School, and another to Emory, then University of Texas Austin for an MA in social work. Yet he and his wife later had to borrow from the kids to buy heating oil. What is going on? Gabler brings up two very relevant points. First, Americans seem clueless about personal finances, including the perils of increasingly easy credit; he dubs himself, “a financial illiterate, or worse — an ignoramus.” Second, real hourly wages have been stagnant since Richard Nixon’s first term and median net worth has been falling for a generation, and sharply since 2008.

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  The hypothesis I hold is that the increase in government interference and cost is responsible for this stagnation.

Not, of course, for those in government. Their salaries and benefits continue to gallop ahead, as in Canada where, for i nstance, nearly 80 per cent of Toronto cops now make more than $ 100,000 a year unlike nearly 90 per cent of everyone else. And Gabler rightly notes that things like TVs and computers and even clothing have been getting cheaper so “stagnant” real wages are not quite as bad as they seem.

Declining real wages for less skilled work is in significant measure the result of the same technical progress that has lowered the price of many goods. And technical progress cannot be stopped. But the clever people in the top quintile could be a bit less smug about driverless cars and smart appliances, and a little more sympathetic to those being squeezed out of decent, dignified manual labour as it continues.

Gabler also blames “that great, glowing, irresistible American promise that has been drummed i nto our heads since birth: just work hard and you can have it all.” Declining faith in the American Dream, he says, is souring the national mood. And I think the resulting anger is fuelling the insurgent campaigns of Donald Trump and Bernie Sanders. But there’s an elephant in the room Gabler does not deal with. It’s government. Not just the expense, as people in the public sector keep cutting themselves a bigger slice of the pie while everyone else tightens their belts. It’s what government spends, and how.

Why are Americans squandering incomes their grandparents could not have imagined, and experiencing financial crisis surrounded by cars and clothes and devices that transport and warm them and deliver all the highfidelity music in the world at astoundingly low prices by historical standards? What is making them so careless of the future financially? Why have so many dropped out of the School of Hard Knocks that once reliably taught frugality even to people to whom the formal math of compound interest was as impenetrable as quantum theory?

It’s the welfare state. Not just for the poor. For everyone. From social security and college loans to food stamps, Americans are not provident because they don’t have to be. If you mess up, the state is there for you. Thanks to the 1930s New Deal and especially Lyndon Johnson’s mid1960s “Great Society,” there are programs for everybody who failed to cope, paid for by those who coped.

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     Stripped of all its rhetoric, the welfare state is just the support of losers, including government employees, by the winners.

As Gabler notes, without drawing this connection, “The personal savings rate peaked at 13.3 per cent in 1971 before falling to 2.6 per cent in 2005. As of last year, the figure stood at 5.1 per cent.” It is not coincidence that savings rates peaked once people noticed savers were chumps.

Americans’ tendency to vote themselves the contents of the public treasury is partly a symptom of fecklessness. But over time it increasingly becomes the cause.

All is not lost. And it better not be, because some day the music will stop and there will be far too few chairs. When Mitt Romney was outed saying 47 per cent of Americans would never vote for him because they were dependent on the state, he should have seized the opportunity to start a real national conversation. Chickening out instead did him no political good. And sooner or later Americans will have to have that conversation, possibly while looking into a cracked mirror.

Government is sucking the life out of the economy with excessive taxes to fuel spending that sucks the life out of society. It runs trillion-dollar deficits to fund trillion-dollar social programs. And with all this free money flying around, nobody has any.

The welfare state model is busted. And so are Americans.

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      The parallels with Czarist Russia are striking with government employees as the new nobility.

Government Job or Respect–Which’ll It Be?
Cheerio and ttfn,
Grant Coulson, Ph.D.
Author, “Power Teaching: How to Find Someone to Teach Your Child when the Education System has Failed.
Cui Bono–Cherchez les Contingencies

 

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