Tuesday, September 18, 2012

My Take on Public Sector Unions


I have no problem with unions per se.  Unions may have killed American manufacturing, but they really only hurt themselves, not consumers, since, in this country, consumers can still choose non-union made goods.  As long as there exists non-unionized competition, whether foreign or domestic, that will always be the case.  It's when unions have no competition, when they are actually the monopolists, that I have a problem, a big problem.  Nowhere in our country does that happen except in the public sector, where we hand over our most vital services--police, fire, education, sanitation--to unions.  Somehow the notion of public service has been turned inside out to instead become public blackmail: "pay us whatever we want or we will let fires burn, let thieves roam, let your children suffer, let garbage pile up on your streets."  Any city or state that is foolish enough to try and cross a public employees' union finds itself terrorized.

Witness the ongoing Chicago teachers' strike, where teachers have rejected raises averaging 16% over the next four years--teachers, who on average, have done a miserable job, Chicago having one of the lowest performing school systems in the country.  This, at a time when millions are unemployed, many with little chance of ever finding a job that even matches their previous salary.  The only reason for this travesty is that the Chicago teachers' union has a monopoly on the provision of public education in the city of Chicago. In a time where just about everyone is struggling, the underperforming Chicago teachers' union has the audacity to demand even more than the generous amount its been offered.  If the rest of us did our jobs as poorly as the teachers, we would be on the street.  And they want more. 

What is the most vital public service of all?  In my mind there is no doubt that it's the military, without which none of the other services would even be possible.  Now imagine a unionized military.  Do you think that would work?  We would never let that happen, yet really, is there any difference conceptually between a unionized military and a unionized police?  Unionized firefighters?  Unionized teachers?  Unionized sanitation workers?  All are vital.  All are handled by the public sector.  Picture the country's safety held hostage to union leaders demanding higher wages--which is what every city, state and town of the country already faces at the hands of its public sector unions.  And that needs to change.

Unions in the private sector eventually have to be reasonable.  Otherwise they kill their golden goose. Public service sector unions have no such limitations. Left unchecked they will and do kill their golden geese.  The financial situation of our our cities, towns and states attests that the process is well under way.  And that is why public sector employees' unions should never have been and should most definitely no longer be permitted. 

Sunday, September 16, 2012

Tax Cuts Are Not The Issue


Yesterday's (September 15, 2012) New York Times contained an article titled "Do Tax Cuts Lead to Economic Growth?" that goes through the monotonous exercise of examining the various tax cuts and increases enacted by Presidential administrations since G.H.W. Bush and how, in the author's opinion, tax cuts have actually depressed growth, increases having had the opposite affect.  While it could be argued that tax increases and reductions have a lagged effect on the economy and maybe the author is just missing that point, in my opinion the whole tax increase/decrease debate is just a giant red herring. And that's because what really matters is the level of government spending. 

In a nutshell, this is how it works:  if government spending increases, the money is taken from the private economy either through taxes or borrowing, both of which reduce the money available to be spent or invested by individuals or corporations. Reducing taxes wIthout reducing spending just means that more has to be borrowed--any increase in private activity will just be offset by the increased cost to service the debt.  Increasing taxes will have the opposite effect. 

So, getting back to the NYT article, has the author considered how much G.W. Bush increased government spending and how, maybe, that has had something to do with lack of growth in the private sector?  As discussed in a previous post (Spending is THE Problem), Ronald Reagan, the patron saint of tax-cutters, believed that, by limiting its sustenance, tax cuts would actually reduce the amount of government spending.  What Reagan failed to understand was that Congress's penchant to live beyond its means could not be controlled so simply.  Today's tax-cutters don't even pretend that cutting the size of government is their goal, being instead content to redistribute the pie based on their own personal beliefs.

Is it any wonder that Republican tax cut proposals are met with so much skepticism?  Without corresponding spending cuts, they will most definitely increase the deficit. It's just math.  Any benefit that goes to one group will be equally offset by the increased liability of the rest. The sum of the two will always be zero.  And that goes for Democratic tax increases as well.  Both actions--without spending cuts--are zero sum games.  What both parties have embraced is simply class warfare.

Which, finally, leads us to the most important question, the one that really lies at the heart of the matter:  Why should we care whether the government promotes the private economy by reducing its own spending or whether it completely manages the economy?  Two words--Soviet Union, where the government planned everything and no one produced anything.

Saturday, September 8, 2012

Healthcare Dreams


I have to admit, for years I've been quite the quixotic dreamer, thinking that if we could only get government out of the way the glorious market would intervene and cure all ills.  Unfortunately, while I do believe this could have been the case, the reality is that its never going to happen.  As long as human beings are able to combine in self-interested mobs to assert themselves over other human beings, they will. And that really is the definition of government, isn't it?   

As originally formed, our government was supposed to be different--it was specifically designed to limit the natural inclination of governments to overreach.  Unfortunately, by finely parsing the words, not the intent of the Constitution, the Supreme Court unshackled the mob that is Congress and the result is what we have now--self-interested factions continuously banding together band to force their beliefs or economic interests on others.  Think of unions or corporate special interest groups.  That being the case, what's a dreamer to do?  Besides drink, I mean. 

This year's Presidential election clearly illustrates the problem. On one side you have a sitting President who wants to expand government into just about every facet of our lives.  On the other you have a candidate that wants to do the same thing--only from a different perspective. We are left to choose between two sides of the same coin.  Why, after decades, is Roe v. Wade even an issue?  Why do Democrats insist that those whose religious beliefs oppose contraception and abortion must fund them with their tax dollars?  Why does the Republicans' right-wing insist that everyone must follow its religious beliefs? Wasnt freedom from religious persecution the primary reason the Pilgrims came here in the first place?  Both parties act like abortion is the most vital issue facing the country when, in reality, those of us in the middle think its just a huge distraction.  

With our aging baby boomers, healthcare should be front and center to the debate.  And yet the best the Democrats and Republicans can come up with is shifting the deck chairs on the insurance Titanic. I'll let you in on something--when everyone is insured its not really insurance anymore.  The underlying premise of insurance--risk of something occurring--is pretty much eliminated when coverage is universal because the larger the pool the easier it is to predict occurrences.  This should mean lower costs to customers, but it just results in higher profits for insurance companies under both parties' current proposals--for insurors, Obamacare and the Republican alternatives are simply "heads I win, tails you lose".  [Hedge funds seem to agree, having poured billions of dollars into the stocks of insurers following the Supreme Courts decision on Obamacare.]

We don't have insurance that covers police, fire or education, the three rails of public service. If healthcare is truly the fourth rail--and its healthcare, not insurance that's the issue--then we need to suck it up and nationalize the whole system. And if that means death panels and delays so be it.  At least everyone would have access to a basic level of care and if they chose to spend more on better treatment and less on something else that would be their choice (and if they didn't or couldn't that would just be too bad, which is how it works in every other country that already has national healthcare).  As it is, we've become slaves to our insurance companies (and to our employers who usually pay the bill), who are more than happy to take our premiums but come up with every excuse to deny or reduce benefits when we submit a claim. Handing these criminals more of our money in the name of universal health insurance is a travesty. And yet that's the best both parties can propose?

If our government is going to be involved in healthcare, and it clearly will be, then the answer to America's healthcare situation is painfully simple--if we want everyone to have access to healthcare then it needs to be a public good, i.e., healthcare should be nationalized. The public has been misled by the insurance industry into believing that government control would lower its level of care.  That may be true in some instances, but what we get right now isn't exactly wonderful.  Has your insurance company ever disallowed a claim you were previously told would be permitted, sticking you with the bill?  Have you ever gone to a doctor who won't even take your insurance?  Get hurt in Canada and--even if you're an American--the cost for emergency care will be a fraction of what it is here, in large part because there is no insurance bureaucracy to navigate.

For once, this is a political issue that defies religious boundaries.  Is there a religion that wouldn't want everyone to have access to some basic level of care--at least for its members)?  That being the case, maybe government control is actually warranted in the case of healthcare.  Clearly, there has to be limits, especially with an aging population.  But creating an incomprehensible (I've got degrees in finance, accounting and law and I have no clue how Obamacare or the Republican alternatives are supposed to work) system that has the primary result of putting more money in the pockets of insurance companies, whose main priority has never been to provide the best healthcare, strikes me as the wrong way to go. I guess I'm still a dreamer.