Saturday, October 20, 2012

Public Sector Unions and How They Have Destroyed the West

In his outstanding book, Boomerang, Michael Lewis was spot on in his analysis of Greece:
As it turns out, what the Greeks wanted to do, once the lights went out and they were alone in the dark with a pile of borrowed money, was turn their government into a piƱata stuffed with fantastic sums and give as many citizens as possible a whack at it. In just the past twelve years the wage bill of the Greek public sector has doubled, in real terms – and that number doesn’t take into account the bribes collected by public officials. The average government job pays almost three times the average private-sector job. The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses. The average state railroad employee earns 65,000 euros a years. Twenty years ago a successful businessman turned minister of finance….pointed out that it would be cheaper to put all Greece’s rail passengers into taxicabs: it’s still true. “We have a railroad company which is bankrupt beyond comprehension…..and there isn’t a single private company in Greece with that kind of average pay.”
For more on Greece:

Greece: Yes, Life Does Go On When the SHTF

Suffocating Athena: Public Sector Unions Kill Greek Salvation — Again 
Greece’s finances are spinning out of control. If nothing is done, public debt could reach 179.3 percent of GDP by next year. But this does not concern unions. They are fighting the austerity measures that could give Greece its first budget surplus in 10 years.
Hardly a day goes by when we aren't greeted with youtubes and photos of civil unrest in Greece, Spain and other European nations reeling from the big punch of economic misery. These folks are protesting austerity measures that includes proposed cuts in compensation, pensions and benefits. In Europe, public sector unions are an incredibly powerful force because they literally control nearly all vital infrastructure like power plants, transportation and much more. Over the decades, these union have managed to vote themselves huge salaries and benefits that far exceed private sector pay for comparable skills.

Spain is another country facing severe financial and economic problems. Spain has mountains of debt and a hugely bloated socialist public sector.  Spain, like other European nations with busted economies, has proposed a solution that will only magnify the problem:  higher taxes.

Time to Burst Spain's Public-Sector Bubble
Among this week's measures—which Spain's cabinet will officially approve today—is a hike in the rate of VAT to 21% from 18%. Civil servants' wages are being slashed by 7%, unemployment benefits beyond the sixth month will be reduced by 15%, and some bureaucratic expenditures and subsidies will be cut by a third.....

Until now, the Rajoy government had tried to maintain the oversized public sector by raising taxes on families and enterprises.....

The sad part of this story is that the bloat in the Spanish public sector is actually quite recent. Government spending swelled thanks to the extraordinary revenue growth provided by the housing bubble. Between 2001 and 2007, total revenues grew by 67% while expenditures increased by 57%. Spain ran modest budget surpluses for a few of those years, but those vanished as bubble revenues ran out while spending continued to grow. A 1.9% surplus in 2007 turned into an 11.2% deficit in just two years.

By the end of 2011, public expenditures were 75% higher (33% higher after adjusting for inflation) than a decade before.
The Economist chirped in on the severity of the situation which is far more complicated than a mere localized capital vs. labor dispute. Even the statist and socialist leaning Economist observed that public sector unions have been literally feasting at the expense of the much lower paid private economy that, incidentally, works to pay the taxes to feed the bloated public sector.

The battle ahead
LOOK around the world and the forces are massing. On one side are Californian prison guards, British policemen, French railworkers, Greek civil servants, and teachers just about everywhere. On the other stand the cash-strapped governments of the rich world. Even the mere mention of cuts has brought public-sector workers onto the streets across Europe. When those plans are put into action, expect much worse.....

People in the private sector are only just beginning to understand how much of a banquet public-sector unions have been having at everybody else's expense...

While union membership has collapsed in the private sector over the past 30 years (from 44% of the workforce to 15% in Britain and from 33% to 15% in America), it has remained buoyant in the public sector. In Britain over half the workers are unionised. In America the figure is now 36% (compared with just 11% in 1960). In much of continental Europe most civil servants belong to unions, albeit ones that straddle the private sector as well. And in public services union power is magnified not just by strikers' ability to shut down monopolies that everyone needs without seeing their employer go bust, but also by their political clout over those employers.
Many Western centre-left parties are union-backed. Britain's Labour Party gets 80% of its funding from public-sector unions (which also, in effect, chose its new leader). Spain's sluggish state reform may be partly explained by its prime minister's union membership. In America teachers alone accounted for a tenth of the delegates to the Democratic convention in 2008.....
Public sector unions claim they enshrine middle class values and that they they indeed represent the working class man.  In fact, the opposite is true.  Public sectors really don't care about a damn thing except their license to steal at the expense of the common man. In bankrupt California, it's a crisis of public sector tyranny.

Who Runs California? Follow Public-Sector Union Money
California: A century ago, a railroad dominated the Golden State. Now government workers are in charge. A look at funding marshaled against a reform initiative tells the story.

Public employees want us to think they're members in good standing of the struggling middle class, but they sure manage to pony up the cash when elections come around. Maybe it's strength in numbers. Maybe it's union strong-arming. Whatever the reason, California's teachers, firefighters, police, prison guards and other government workers are, as a group, the richest and most powerful in state politics.
The public sector unions have become a noose around the necks of government and taxpayers. Socialist governments everywhere bred them, fed them and now are faced with the abject horror that nobody can afford them.

So as we witness the protests on an almost daily basis, the protesters are all pampered public sector union employees just raising hell at the prospect that their gravy train is in jeopardy.

For public sector unions, it's austerity for everybody except for them. Compounding the situation is the fact that European nations borrowed heavily to fund their un-affordable cradle to the grave entitlement states. However, there are indeed severe problems beside the public sector unions which include that fact that taxpayers are being forced to bailout the failed banks that are swimming in bad loans. The dual edged sword of socialism for public sector unions and banksters will continue to impede economic recovery while intensifying the misery of stagnation.  In fact, together they definitely have the power to guarantee the death of Western Civilization.

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