The Democratic Party War

While attention focuses on the battle in Wisconsin between a Republican Governor and public employee unions who overwhelmingly support Democrats, it is in California where the future role of public sector unions in politics is being most severely tested. Because in California, Democrats exercise nearly absolute control over the state’s political agenda, and as a result, Democrats are forced to confront the unsustainable and counterproductive public sector union agenda all by themselves.

An interesting article in the March 2011 issue of Reason Magazine by Tim Cavanaugh, entitled “Farewell, My Lovely – How public pensions killed progressive California,” opens with a statement that clearly expresses the political reality in California today, “In November, bucking the national trend, Democrats in California won not just the governorship but 51 Assembly seats to Republicans’ 29, 24 state Senate seats to Republicans’ 14, and every statewide office. With the passage of a referendum lowering the number of legislative votes required to approve a state budget (from a two-thirds majority to a simple majority), California is that rarest of land masses for the 2011 Democratic Party: conquered territory.”

Cavanaugh goes on to describe the slow realization by California’s Democratic lawmakers that their visions for California’s future “are being derailed by a labor movement nobody can harness.” Referring to California’s unsustainable pension benefits package granted unionized state and local government employees, Cavanaugh observes “…the most aggressive lobbying for pension reform is coming not from [...] Read More

Unions and America’s Ills

On February 9th, 2011, the Detroit News, as part of its “Labor Voices” series, published a guest editorial by the President of the International Brotherhood of Teamsters, James Hoffa, entitled “American ills not caused by unions.” In this editorial Hoffa made many statements that require a rebuttal, starting with this: “Across the country, new governors and new legislatures are demanding cuts to jobs, pensions and concessions from public employee unions. Their demands are nothing more than payback for the billions of dollars that the ultra-rich have poured into political campaigns.”

What Hoffa ignores is the political fundraising reality in America, which is that corporations are split relatively evenly between those who will back union reformers – usually Republicans, and union protectors – usually Democrats. Corporations hedge their bets. Very few large corporations openly challenge the union agenda, or even have reason to, since unionization drives off emerging competitors.

Similarly, wealthy individuals are split relatively evenly in their political affiliations in America. For every billionaire who backs Republicans, there is a billionaire who backs Democrats – for every Koch, there is a Soros.

At the grassroots, however, something very different occurs. Because labor unions, which still command over 16 million members in the United States (ref. U.S. Census, Bureau of Labor Statistics), nearly always give money to union-friendly Democratic candidates and issues. If you estimate the average annual dues of a union member at [...] Read More

California’s State AND Local Government Personnel Costs

Last week CIV FI posted an analysis, “How Much of California’s Budget is Personnel Costs?” that estimated about two-thirds of California’s state budget covers state employee compensation expenses. This was in response to a widely quoted estimate that the number was only about 12%. Due to the huge disparity in these claims, and the implications having the correct number may have on the debate over public employee compensation, I decided to dig a little deeper.

For expert information, I talked with two individuals at the California Office of Legislative Analyst, Jason Sisney, the Director of State Finance, and Nick Schroeder, Public Employment and Fiscal Oversight. Both of them confirmed that state government employees compensation consumes about 12% of the state general fund budget. But the devil is in the details.

Probably the best source for information on state expenditures in California is available at “California Budget Information,” produced by the state Dept. of Finance. Using this data, and corroborating this data with other sources, this post will produce another, more in-depth estimate of what percentage of the state budget is consumed by personnel expense, as well as what percentage of state and local budgets combined are consumed by personnel expenses. Both Sisney and Schroeder, who ought to know, stated that arriving at a meaningful figure is “nearly impossible,” but they agreed with the rough percentages that will [...] Read More

How Much of California’s Budget is Personnel Costs?

An influential blogger in Orange County, California, made the following claim on January 25, 2011 in a post “Busting The Myths About Public Employee Pension Costs,” “For California’s budget, salaries represent 7.5 percent of the total state budget. The costs for healthcare and pension benefits are another 3.7 percent.” If only this were true.

Because this claim is being repeated as if it were fact, such as by guest columnist Nick Berardino in the Orange County Register, who on February 4th, 2011 in a “Reader Rebuttal” accused that newspaper of having “continued its misleading and irresponsible assault on public employees,” it is important to take a closer look. Using core data, as well as some studies funded by union-friendly think-tanks (hopefully to avoid accusations of bias), here are some numbers:

As a baseline, the California Governor’s Budget Summary for fiscal 2011 shows projected revenues and expenditures balanced at $89.6 billion. Using straightforward multiplication, if salaries and benefits only consume slightly more than 10% of California’s state budget, this means salaries, healthcare and pensions should cost (.075 + .037) x $89.6 = $10.4 billion. So how much does California’s state government actually spend on total employee compensation?

According to California’s own state government payroll records, in March of 2008 there were 393,989 full-time workers employed by the state of California, and their payroll for that month was $2,235,947,296 (ref. Read More

Can Developing Nations Avoid Catastrophe?

Advocates for free markets and free enterprise will assert that if political preconditions can be established to nurture these freedoms, prosperity and liberty will increase, and population growth rates will voluntarily decrease in favor of education and career aspirations. The so-called developed nations nearly all have embraced the fundamental principals of free markets and free enterprise and now confront new challenges – how to provide for aging populations, what environmental goals to prioritize, what investments to make in emerging technologies, and how to manage their floating currencies, freewheeling commodities markets, and burgeoning debt. It is important for members of the developed world to understand what a luxury it is to have such challenges.

Using Egypt as an example, this post will present data on their population trends and agricultural production, comparing that to how much of their household income is spent on food, global food prices, and their balance of trade. These hard numbers will underscore how daunting the task may be for many developing nations to emerge economically.

While everywhere in the world the rate of population increase is slowing, in nations like Egypt the projected slowdown in population growth lags well behind the rest of the world. Projections that place the global population maximum occurring sometime between 2030 and 2050, at a total of somewhere between 8.0 and 10.0 billion people, generally view large developing nations such as Egypt, Pakistan, India, Indonesia and Nigeria as the wild cards. How quickly they develop economically is considered the key to [...] Read More

When is Debt Unsustainable?

Two economists who are inspirations to me are Steve Keen, who publishes Debtwatch, and Mike Shedlock, who publishes Global Economic Analysis. I found them while trying to make sense of the credit bubble, and finding little or nothing forthcoming from the mainstream economic community. But Keen and Shedlock provided insights when most experts were silent, and they still do. I remember the summer of 2005, driving up Highway 99 in California’s Central Valley, and seeing a billboard advertising “ranchettes” that were “starting in the low $600,000′s” – in the middle of nowhere – in a state with a median household income of $60,000! People were buying homes that cost ten times their annual earnings.

A scathing recent post from Keen, “How I Learnt to Stop Worrying and Love the Bank,” and Shedlock’s “World Economic Forum Embraces Fraud,” followed by Keen’s response to Shedlock on the same topic, “Mish Mashes the WEF,” all reinforce this sad suspicion: Mainstream economists who think we can avoid deleveraging are still strangely clueless, or worse, they are in collusion and have a hidden agenda.

In Shedlock’s post, he calls attention to the report recently released by the WEF entitled “More Credit with Fewer Crises – Responsibly [...] Read More

Political Centrists & The Litmus Problem

A provocative column last week by Richard Cohen of the Washington Post, entitled “The GOP’s Litmus Problem,” makes the point that “GOP dogma” will “shrink the biggest of men.” As Cohen puts it, “they [successful Republicans] have to swear allegiance to a balanced budget, dangerously low taxes, cutting (trivial) waste, fraud and abuse from the budget, the sacredness of even microscopic life, the innocence of mankind in the cooking of the planet, the inviolability of the 18th century Constitution, meeting the challenges of globalism with even more localism, and a furious rejection of the lessons of Keynes – even when those lessons are successfully applied.”

Cohen goes on to say “it is simply impossible for a centrist to capture the Republican presidential nomination – maybe even to be a Republican. I challenge any of the above to wholeheartedly endorse evolution or global warming.” Cohen believes the Republican party “continues on a course that has already driven out the political moderates and pro-choicers that once comprised its intellectual and financial core…to call this a brain drain understates the calamity. It’s a political lobotomy.”

Notwithstanding some inconvenient facts; that John McCain was a centrist who captured the Republican Presidential nomination, or that Republicans, supposedly a dwindling party of ideological lemmings, recently took over the U.S. House of Representatives, captured 29 Governor’s mansions, and control both legislative houses in 26 states; how exactly does Cohen [...] Read More