Thursday, March 10, 2011
A Bridge to Nowhere, A Bridge Too Far, or The Bridge of Sighs?
The Spruce Goose of All Stimulus Plans Ever Concocted
If you recall the $787 billion(try $862 billion at last count) Obama deficit spending plan aka stimulus plan, you likely remember the claim that unemployment would not rise above 8% which in fact rose to 10%. Maybe you merely recall the enormity of the plan at $787 billion ($862 billion) plus future interest putting the grand total well beyond a trillion dollars. Maybe you remember the term “shovel ready”.
Remember the term “social engineering”? (1)
Bridge of Economic Security
One of the social engineering aspects of the stimulus plan was the awarding of large chunks of money to state governments to keep public sector employees on the payroll. The money was doled out over two years. In other words, an artificial bridge was produced with deficit spending (tax payer liability) to delay public sector layoffs.(2)
One thing to consider, historically speaking, when the US economy goes into recession the private sector begins layoffs immediately. However, the public sector begins its layoffs approximately twelve months after the beginning of the recession. Why? Governments plan their budget and fund those budgets one year in advance. Hence when the recession begins the public sector has budgeted and funded their budget with tax dollars well in advance of the recession. Moreover, once the recession is twelve months old and tax receipts have plunged, the public sector budget is adjusted downward to equal the new lower tax revenue volume at which point public sector layoffs begin.
Therefore the bridge of economic security for public sector workers was merely delaying or putting off into the future what would historically speaking occur in twelve months from the beginning of the recession. Why put off the inevitable? What if you think you can spend your way out of the inevitable? What if you think you can centrally plan a desired outcome at someone else’s expense?
A Bridge to Nowhere?
Politicos, through the mechanism of government, built a Keynesian deficit spending social engineering bridge and picked winners and losers regarding the bridge. One of the social engineering winners was public sector employees. Why? Public sector unions and associations lobbied their associated politicos for additional economic security. That is, organized public sector labor merely organized for their particular economic security against the disorganized mass of tax payers and to the detriment of the tax payer’s economic security. Hence the public sector and their associated politicos built a bridge of economic security for the public sector at tax payer expense.
Moreover, the bridge of economic security was produced to remove the threat of layoffs over two years for the public sector. The implicit and explicit assumption of the Obama deficit spending plan and consequential bridge of economic security for the public sector being that the economy would have recovered after twenty four months and tax revenues once again would be robust. That is, the economic assumption was that the $862 billion deficit spending plan would jump start the economy and after two years there would be no public sector layoffs as the economy would once again be robust.
However, the bridge of economic security became the bridge to nowhere as the economy did not recover in a robust manner as assumed by the stimulus plan’s Keynesian social engineering designers. Hence the bridge never reached the shores of robust economic recovery and robust tax revenue.
Its important to note that little attention would have been directed to the cumulative effects of public sector collective bargaining, its unsustainable path, had the Obama deficit spending social engineering plan succeeded. That is, some commentators in the past have pointed out the unsustainable path of cumulative total compensation produced by public section unions through collective bargaining. However, the issue would have remained in the background and continued to fester as politicos elected by and in association with public sector unions would have derailed any debate. Meaning that the hidden strategy of the social engineering deficit spending, spending specifically for an economic bridge of security for public sector unions, was in essence a strategy of pay me now and pay me later.
A Bridge Too Far?
The economic stimulus plan aka deficit spending plan was the grand design of central planning techniques. One likely remembers the grand charts and graphs of how the deficit spending would stimulate this sector and that sector. That future unemployment trends were shown graphically and how they would peak at 8% then begin a downward trend. Like any central planning scheme the central planners were so sure of themselves that they made bold prediction with their charts and graphs. And like all the central planners from the past, present, and future they were/are/will be frightfully wrong.
However, the assumptions used in the Spruce Goose of all stimulus plans ever concocted regarding the bridge of economic security for public sector employees were woefully short sighted. The single minded idea that in two years all would be well and public sectors workers could go on their merry way was ludicrous. What about state spending expanding at an extraordinary rate from the mid 1990’s until the demise of Lehman? What about two thirds of the states with continuing and constant financial problems? What about ballooning state debt? What about Medicaid eating up larger and large chunks of state tax revenue? What about woefully funded state unemployment insurance programs that immediately had to apply for loans from the federal government at the onset of recession? What about exploding public employee total compensation costs?
“The curious task of economics is to illustrate to men how little they really know about what they imagine they can design.” - F.A. Hayek
The Bridge of Sighs
The current problem for state legislators is that a bridge to nowhere or a bridge too far is of no interest to public sector unions. Regardless of the implosion of the bridge of economic security for public sector employees, regardless of the failure of the stimulus plan, regardless of the failure of the social engineering aspects, regardless of the failed predictions by the central planners - bridge or no bridge- there shall remain economic security for public sector employees or else.
Forget the billions of dollars thrown at the bridge of economic security for public employees, tax revenues be damned, budgets and accumulated debt be damned, the status quo for public sector employees will remain or else a tantrum to end all tantrums erupts. We won’t teach your children and we will not pick up your garbage. That is, the wonderful world of government monopolized services will come to a grinding halt. And to boot we will jam your capital buildings and sleep over if necessary.
You see, regardless of the billions upon billions upon billions of dollars already spent to ease the pain of public sector employees, well, that’s still not good enough. All past benefits will be retained. Period! Collective bargaining will be retained as public sector unions and associations know exactly how they obtained current benefits and how they will expand benefits in the future. Politicos will continue to be funded by these unions so the both-sides-of-the-table phenomena will continue and tax payer’s money will continue to be funnelled into greater and greater compensation levels for unionized/collective bargaining public employees.(3)
And who pays? You pay!
Government is the great fiction, through which everybody endeavours to live at the expense of everybody else. -- Frederic Bastiat
Current public sector union demands are made atop of the past bridge of economic security specially built for the exact same group. Public sector employees are earning approximately 25% more compensation than comparable private sector workers made possible through cumulative effects of collective bargaining against they tax payer's dollar. Gratefulness is not an option. More of the same is the only option. More and more, all at the tax payer’s expense. (4)