THE FIRST ELEPHANT IN THE ROOM--AVOIDING THE REAL PROBLEMS IN THE BUDGET--THE FOUR BIG ACCOUNTS
Why doesn't somebody in Congress stand up and say what is obvious ot anyone who's ever managed a budget problem before? There is no way to fix the budget deficit without taking money our of the "big four" items: Defense, Social Security, Medicare and Medicaid, which, when taken together make up 60% of spending. Of course we all know why they won't; voters will not like having their entitlements cut or the costs of them increased. BUT THERE IS NO OTHER SOLUTION!
The shortcomings of both parties include their silence in addressing these pivotal budget issues — (not small, non-discretionary items that only have a political face and minor real impact) — the excessive defense and security budgets, Medicare, Medicaid, social security, and increasing taxes from the middle class on up. These are the issues that need addressed, not cutting a million dollars from planned parenthood or NPR.
THE OTHER ELEPHANT IN THE ROOM
The second elephant in the room is the employment/jobs problem. For this one, I'll borrow the words someone wrote to me during the past week. They are informative and insightful. Consider these words carefully
"John, ...as I'm sure you are most aware, post-1980 innovation does not create the magnitude of jobs that innovation created pre-1980 (look at how you are manufacturing your new book). The real pre-1980 innovation was in an industrial world were breakthrough's required a substantial workforce of less skilled individuals to bring the innovation to the population. That is not to say there is no innovation in what I call hard products like cars, appliances, etc, but that innovation is mostly improvements to the central products which requires maybe a realignment of the workforce but does not grow the workforce as when the products were introduced.
In post-1980 innovation, that same need to employee a large number of individuals to implement the innovation does not exist and the jobs that are created require a high degree of skill level. The new innovation has a huge impact on everyone and their lives (biotech, IT, internet business, etc) including the political impacts around the world, but does not greatly expand jobs. To address future profits and growth of pre-1980 innovation, companies need to turn to efficiency gains which naturally leads to labor costs - not employing a greater and greater number of people or labor at a less and less cost.
To expand Ford to address a future million more customers requires a greatly expanding workforce. To expand Facebook to address several million more customers might require a few hundred people. This is the type of real issue that needs to be addressed by our leaders over this next decade or we will be facing total unemployment by our young population much like we see today in the middle east and the developing world with very similar outcomes."
I asked him if I could use what he wrote to me, and he assured me I could. Albert Einstein once said, "We cannot solve today's problems by thinking the way we thought when we created them." I would add, that to apply old solutions to new problems is arguably the worst thing we can do. And yet, we are all creatures of habit, relying on what we learned on our way through life and our political leaders are no different.
In my recent Forbes Blog, http://blogs.forbes.com/prospernow/2011/02/26/what-will-america-make-what-does-make-mean/, I wrote about the mismatch of jobs going unfilled and people needing jobs. It is frightening--especially to those in its grip. Many of those unfilled jobs are in the Information Technology or Medical fields. Those who lost their jobs were experienced in the old industrial jobs. Many of them neither knew how to operate a computer nor cared to learn. And yet, learn they must, because manufacturing in the 21st century is done with computers controlling machine tools, tracking inventory, doing layout and design and essentially managing every aspect of every kind of business.
Not only do these unemployed workers not know how what they need to know, they are also geographically displaced from where many of the new jobs are going unfilled. Illegal immigration has become such a cause celebre' that it has driven America to limit H1B visas to immigrants who might bring many of the needed skills--for fear they would take jobs from Americans. In fact, they might just as likely create jobs for Americans by allowing American manufacturing companies to expand and grow, thus hiring many of the more traditional (albeit lower paying than in the past) jobs such as material handling jobs.
When you close one door, another one opens--or so the saying goes. But not if that other door is locked by someone else. That someone else, in America is increasingly trade unions. Unions were created during the last century to protect workers from being treated unfairly and/or abused. Now Unions have become exactly what they were created to thwart--money and power hungry institutions that live off the sweat of their members' work. Recently, against the admonition of some of America's legendary leaders like FDR, labor unions have also taken over the public sector workers. They require the governments of America to collect dues from members who are required to belong (unless they are in a Right to Work state) and funnel it directly back to the politicians who provide them their power base.
In a single sentence, Unions are not bad per se, but what they have become, in too many cases is bad for employers (private or public sector) and much worse for employees (their members). Using Seniority as the sole determinant of rank and promotion creates stark inequities where the best and brightest do not get paid or promoted based on their performance; rather they might even be among those laid off first, if their seniority is not great enough. Nowhere is this problem more serious than in education. Rather than go on myself, consider a couple of other opinions.
FORM YOUR OWN OPINIONS--SEE THE TWO PIECES POSTED BELOW
The turmoil that is roiling our state capitals, with busloads of imported demonstrators furnished by President Obama's old campaign organization, is both dangerous and misleading. The working people of these states couldn't afford to be out there demonstrating. They have jobs that they must be present to perform. When students don't come to school, they are called "truants," and punished or penalized. When soldiers run out on they jobs, they are AWOL and are subject to criminal action in Military Court Martials. When workers don't show up they are absent and if they are absent enough of the time, they can be terminated.
What do you call it when school teachers don't show up, so they can demonstrate? Worse yet, what do you do with legislators who literally FLEE to nearby states to avoid doing the job they were elected to do? Criminals can be "extradited" when they run and hide in faraway places. How about recalcitrant lawmakers--elected officials. How should we regard them? Should they be suspended" Replaced? Stripped of their position? Certainly NOT admired.
THE PRESIDENT IS VIRTUALLY SILENT (EXCEPT FOR PLATITUDES) ON THIS SUBJECT--HE DOESN'T WANT TO TAKE A POSITION!
What do you think? What can you do?
Remember the call to change things in 2010 elections? 2012 elections are coming. It will be time to act again.
Think carefully about the outcomes, and the people you choose to support. America's future and that of you and everyone you care about, depends on it.
Best, JOHN
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How Public Unions Force Taxpayers To Fund Dems
By MICHAEL BARONE in IBD
Everyone has priorities. During the past week, Barack Obama has found no time to condemn the attacks that Libyan dictator Moammar Gadhafi has launched on the Libyan people.
But he did find time to be interviewed by a Wisconsin TV station and weigh in on the dispute between Republican Gov. Scott Walker and the state's public employee unions. Walker was staging "an assault on unions," he said, and added that "public employee unions make enormous contributions to our states and our citizens."
Enormous contributions, yes — to the Democratic Party and the Obama campaign. Unions, most of whose members are public employees, gave Democrats some $400 million in the 2008 election cycle. The American Federation of State, County and Municipal Employees, the biggest public employee union, gave Democrats $90 million in the 2010 cycle.
Follow the money, Washington reporters like to say. The money in this case comes from taxpayers, present and future, who are the source of every penny of dues paid to public employee unions, who in turn spend much of that money on politics, almost all of it for Democrats.
In effect, public employee unions are a mechanism by which every taxpayer is forced to fund the Democratic Party. So, just as the president complained in his 2010 State of the Union address about a Supreme Court decision that he feared would increase the flow of money to Republicans, he also found time to complain about a proposed state law that could reduce the flow of money to Democrats.
And, according to the Washington Post, to get the Democratic National Committee to organize protests against the proposed Wisconsin law. Protests that showed contempt for the law, with teachers abandoning classrooms, doctors writing phony medical excuses, Democratic legislators fleeing the state and holing up in a motel. The lawmakers played hooky without losing any salary, which is protected by the state constitution.
It's true that Walker's proposals would strike hard at the power of the public employee unions. They would no longer have the right to bargain for fringe benefits, which are threatening to bankrupt the state government, and they would no longer be able to count on government withholding dues money and passing it along to them.
But what are the contributions that public employee unions make to our states and our citizens? Their incentives are to increase the cost of government and reduce down toward zero the accountability of public employees — both contrary to the interests of taxpaying citizens.
An argument can be made that higher pay, generous benefits and lavish pensions will attract better people to public employment. But where are the studies that show that citizens of states with strong public employee unions get better services than citizens in states without?
What citizens of states with strong public employee unions do get are higher taxes and enormous pension burdens that threaten to squeeze out funds for ongoing services, as even Democratic governors such as Andrew Cuomo of New York and Jerry Brown of California have figured out.
That's why one of the great 20th-century presidents was against unions for public employees who have civil service protections. No, not Ronald Reagan. It was Franklin Roosevelt who said, "Action looking toward the paralysis of government by those who have sworn to support it is unthinkable and intolerable."
So while the Wisconsin unions are defying the law, Scott Walker is in effect following FDR's lead — and if he's successful, others may follow. That would be an enormous blow to the money power of the public employee union bosses. Public opinion seems to be with the Republicans. Pollster Scott Rasmussen reports that 48% of voters support Walker, while only 38% support the unions.
This seems to be a sharp reversal of opinion over the last five years. Back in 2005, California Gov. Arnold Schwarzenegger sponsored a series of ballot propositions that would have reduced the power of the state's public employee unions. The unions spent something like $100 million — all of it derived from taxpayers — on TV ads, and all the propositions were defeated.
Now hard economic times have left voters wondering why public employees pay practically zero toward their health insurance and pensions when they have to pay plenty themselves. Wisconsin, which led the nation on civil service a century ago and on welfare reform in the 1990s, may be showing the nation the way ahead once again.
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An Open Letter to the Workers and Families of Wisconsin
February 15, 2010
Fellow Wisconsinites:
I’m not happy that we’ve found ourselves here today. None of us are. But we’ve got a huge problem on our hands.
Our state is fundamentally broken, and punting the problem on to our kids is simply not an option. Frankly, this is what happens when the government spends like a drunken sailor and never worries about the bill coming due. But the bill has come due. Ignoring that fact doesn’t change a thing.
I’m writing this letter to give it to you straight from the source: without the filter of a union boss, or a special interest, or the press, or the rumor mill.
First of all, our state is in rough shape.
In Washington, they can keep spending your tax money even if keeps sending the National Debt skyrocketing. Here in Wisconsin, it’s actually written into our constitution that we can’t run a deficit. Again, even if we could, I am not open to kicking the can down the road and sticking our kids with problems that could have been solved today.
This problem is NOW. If we twiddle our thumbs and do nothing, our state will, plain and simple, run out of money in the Medical Assistance program, the Public Defender’s office, and the Corrections Department. The state owes $200 million to the Injured Patients and Compensation Fund, and almost $60 million to Minnesota in reciprocity payments. Even if you don’t count that $200 million debt, and you ignore the $65 million positive balance the state is legally required to carry, we’re still more than $136 million short this year alone.
Does it get easier with the next budget? Exactly the opposite. Starting on July 1 of this year,
Wisconsin faces more than a $3 billion (with a “b”) deficit between the state’s revenue and its spending obligations, and unemployment payments have run up a $1.5 billion debt to the federal government on top of that.
Our state’s bill is coming due, and the federal bill isn’t far behind. I have a feeling the same conversations we’re having today are going to play out in Washington in the next few years.
How did we get here?
Wisconsin lost nearly 150,000 jobs1 in the recession. But rather than deal with the problem directly and make tough decisions during tough times, the government decided that its spending projects would take a higher priority than everyday folks being able to make ends meet. The government, it seems, knows no recession. In 2009, the Democrats in control of Wisconsin’s government passed a budget that hiked taxes on private-sector workers, small businesses, property owners and Wisconsin families by billions of dollars (again, with a “b”).
But even those billions in tax hikes weren’t enough: the Democrats relied on $2.4 billion in onetime government stimulus money to balance that budget – a “bailout” for the state. That money is gone – spent not on one-time job stimulus projects, but ongoing expenditures with no longterm solution. But the straw that broke the budget’s back, on top of the one-time stimulus money, the job-killing tax hikes, and the unsustainable borrowing, were programs Wisconsin couldn’t afford even in better times. The state currently pays for health care for childless adults making up to 200 percent of the federal poverty level, and even provides taxpayer-funded benefits for illegal aliens.
The recession was a crushing burden on people from every walk of life, and the government doubled down. Nearly two years later, we’re still feeling the effects, and we’re just as broke now as we were then. Wisconsin was rated by the Pew Center on the States as one of the ten states “in fiscal peril2
Frankly, these problems shouldn’t be a surprise. Since 2000, Wisconsin’s GDP (gross domestic product) has grown by about 38 percent3. Since 2000, the U.S. CPI (consumer price index) has grown about 27 percent4. How much has our state government grown? Nearly 60 percent! This year, the state government is asking for nearly 60 percent more spending than it was in 2000 (58.89 percent – more than $67 billion).
What’s the alternative?
Many of you, through rhetoric or the media or word of mouth, have heard parts of what’s in this budget repair bill. But what you probably haven’t heard, is what’s *not* in it.
• No tax hikes. Runaway government isn’t the solution to the problem – it is the problem.
1 WI Department of Workforce Development, seasonally adjusted
2 Pew Center on the States: http://www.pewcenteronthestates.org/report_detail.aspx?id=56044
3 Bureau of Economic Analysis: http://www.bea.gov/regional/gsp/action.cfm
4 Bureau of Labor Services: ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
• No furloughs. The previous budget required 16 furlough days, the equivalent of a 3 percent pay cut. This bill contains *zero* furloughs, to the disappointment of the critics.
• No job cuts. Without this bill, the state could have to lay off as many as 1,500 publicsector workers to make ends meet, and as many as 5,000 jobs in the next budget. Texas, Georgia, and New York are proposing massive job cuts to solve their budget gaps, between 9,300 and 14,000 positions, and California is proposing a 10 percent pay cut for state employees. Wisconsin has none of these.
• No service cuts. The looming M.A. deficit alone could mean eliminating services for 194,000 children, 92,000 adults or 16,000 elderly, blind or disabled persons. This bill keeps the promises that were made and shields the most vulnerable from cuts.
• No changes to Civil Service, vacation or sick leave policy.
• No “easy fix.” Anybody who promises you that there’s an “easier way” to close this gap is trying to sell you something.
Straight Talk.
I’d like the opportunity to address union workers directly, without the filter of their union bosses.
The first misconception I want to clear up is that the government is on a witch hunt for union cards, as some would lead you to believe. The vast majority of state employees and teachers are dedicated, hard-working public servants who go about their job the right way. These measures are not punitive in any way.
I think most reasonable people also realize that there’s no way we can come to a solution without some shared sacrifice. More than one-third of the state budget is spent on state operations, and half of that is on salary and benefits for employees. That percentage is much greater at the local level. We can’t possibly solve this problem without involving public employees in some way.
Governor Walker has made it clear that union leadership has no interest in good-faith negotiation. Over the last ten years, even with a Democratic governor, every single state employee contract has been signed late. On average, they’ve been 15 months late, even though every single contract contained a net compensation increase, in good times and bad.
Moreover, the union leadership has made it clear that they have no interest in negotiating with
Governor Walker: whether it’s calling his proposals “an assault on the middle class” or a “war,” or AFSCME’s leader calling both Scott Walker (R) and Russ Decker (D) a “whore,” or the veiled threats I and at least one of my colleagues have already received personally, which the authorities are investigating. I think we can all agree that this hyperbole and tone have no place in a reasonable discussion.
The right direction forward.
Nobody likes telling their kids they can’t afford that new toy. Nobody likes doing the math and realizing they can’t afford that vacation this year. Before the bubble burst, nobody wanted to admit they couldn’t afford that new subprime mortgage. But Wisconsin simply can’t afford the status quo.
It’s not a coincidence that this is the sixth time since Gov. Doyle was elected that some kind of budget fix has been necessary. The only real way to help is to improve the economy, create jobs and fix the budget to put our state in a position to grow. The only thing that's been growing lately has been the budget.
I appreciate your willingness to listen to both sides of this debate, and I look forward to this frank conversation about the direction of our state. Maybe none of us can afford to split this bill, but we can’t steal money from someone else’s pocket, and we can’t ditch out when the waiter isn’t looking. The bill is due, and this is how we’re going to pay it.
Sincerely,
Scott Fitzgerald
Senate Majority Leader, State of Wisconsin
__________________________________
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