Gary Shilling: Government Salaries Are Out Of Control; Get Ready For A Tax Revolt (VIDEO)
Video: Gary Shilling on Tech Ticker -- Feb. 10, 2010
We've covered it several times. Public sector (government) employees now earn substantially more than private sector counterparts.
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Peter Gorenstein: 14.8 million Americans are currently out of work and looking for a job, according to a report released today by the Bureaus of Labor Statistics. Even if you do have a job, wages have not increased substantially over the last ten years, with one exception: government workers.
Thanks to generous health-care benefits and pensions, it pays - more than ever - to work in the public sector. Economist Gary Shilling fears dubious consequences if state and local workers continue to make more money and at the same time governments raise taxes and cut services.
- "In good times, nobody really cares that much but now we’re not in good times. The basic problem is pay differential, as I see it, and that I think is likely to lead to a taxpayer revolt."
Shilling's point about pay is illustrated well in this recent research by Dr. Mark J. Perry, professor of economics and finance in the School of Management at the Flint campus of the University of Michigan.
According to a December report from the BLS, state and local government employers spent an average of $39.83 per hour worked ($26.24 for wages and $13.60 for benefits) for total employee compensation in September 2009. Total employer compensation costs for private industry workers averaged $27.49 per hour ($19.45 for wages and $8.05 for benefits). In other words, government employees make 45% more on average than private sector employees.
According to another BLS report, compensation for private industry workers has increased by 6.9% between December 2006 and December 2009, compared to a 9.8% increase for government workers (state and local) over the same period.
If that's not enough, the trend will lead to a lowering of our standard of living, even for the highest paid workers on Wall Street, Shilling tells Henry in the accompanying clip. If reforms like the Volcker Rule take hold, Shilling's "not sure Wall Street (will be) permanently bidding up the prices of Manhattan real estate and vacation homes in the Hamptons."
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(Screenshot...video is above)
Feb 11, 2010 at 10:46 PM
Reader Comments (5)
Gary Shilling: Higher Government Pay Will "Likely Lead to a Tax Revolt"
Obama, on the other hand, talks tough, then worries about upsetting Wall Street. That’s insane.
Wall Street respects only one thing -- strength. If it smells weakness, the Street will try to leave the other guy with nothing but his socks and a smile.
Offer a Reminder
So don’t ask, tell. Remind the banks, none too subtly, that Obama can make their lives miserable.
http://www.bloomberg.com/apps/news?pid=20601039&sid=a4hIeftRVyvE
Yet the market rallied on this and other simular news!
""These are among the hardest decisions any governor could be called upon to make," said the Republican, according to a copy of his speech to legislators in a special session.
The deficit in the current budget, which ends on June 30, is $2.2 billion, while the gap in the following budget has spiked to $11 billion from a forecast of $8 billion in November, Christie said in his first major policy address to state lawmakers.
Next year's deficit is the largest per-capita budget shortfall of any U.S. state, said Christie who is scheduled to deliver his budget for the coming fiscal year on March 16.
Christie cut $2.203 billion from the current budget in a series of measures that include reducing aid to school districts and using unspent funds from some agencies.
In all, 375 budget lines are subject to cuts, efficiencies, and program eliminations. Cuts include $475 million in aid to school districts; $62 million in cuts to colleges, and $12 million in aid to hospitals. The cut in school-district funding will force them to use budget surpluses for the remainder of the fiscal year, Christie said."
http://www.reuters.com/article/idUSTRE61A49V20100211
Some people never learn to not bite the hand that feeds them...
Revolt!
lol!!