By Robert Reich
Wisconsin is in a showdown. Washington is headed for a government shutdown.
Wisconsin Governor Scott Walker won’t budge. He insists on delivering a knockout blow to public unions in his state (except for those, like the police, who supported his election).
In DC, House Republicans won’t budge on the $61 billion cut they pushed through last week, saying they’ll okay a temporary resolution to keep things running in Washington beyond March 4 only if it includes many of their steep cuts – among which are several that the middle class and poor depend on.
Republicans say “we’ve” been spending too much, and they’re determined to end the spending with a scorched-earth policies in the states (Republican governors in Ohio, Indiana, and New Jersey are reading similar plans to decimate public unions) and shutdowns in Washington.
There’s no doubt that government budgets are in trouble. The big lie is that the reason is excessive spending.
Public budgets are in trouble because revenues plummeted over the last two years of the Great Recession.
They’re also in trouble because of tax giveaways to the rich.
Before Wisconsin’s budget went bust, Governor Walker signed $117 million in corporate tax breaks. Wisconsin’s immediate budge shortfall is $137 million. That’s his pretext for socking it to Wisconsin’s public unions.
Nationally, you remember, Republicans demanded and received an extension of the Bush tax cuts for the rich. They’ve made it clear they’re intent on extending them for the next ten years, at a cost of $900 billion. They’ve also led the way on cutting the estate tax, and on protecting Wall Street private equity and hedge-fund managers whose earnings are taxed at the capital gains rate of 15 percent. And the last thing they’d tolerate is an increase in the top marginal tax rate on the super-rich.
Meanwhile, of course, more and more of the nation’s income and wealth has been concentrating at the top. In the late 1970s, the top 1 percent got 9 percent of total income. Now it gets more than 20 percent.
So the problem isn’t that “we’ve” been spending too much. It’s that most Americans have been getting a steadily smaller share of the nation’s total income.
At the same time, the super-rich have been contributing a steadily-declining share of their own incomes in taxes to support what the nation needs – both at the federal and at the state levels.
The coming showdowns and shutdowns must not mask what’s going on. Democrats should make sure the public understands what’s really at stake.
Yes, of course, wasteful and unnecessary spending should be cut. That means much of the defense budget, along with agricultural subsidies and other forms of corporate welfare.
But America is the richest nation in the world, and “we’ve” never been richer. There’s no reason for us to turn on our teachers, our unionized workers, our poor and needy, and our elderly. The notion that “we” can no longer afford it is claptrap.
Robert Reich is Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written twelve books, including “The Work of Nations,” “Locked in the Cabinet,” “Supercapitalism” and his latest book, “AFTERSHOCK: The Next Economy and America’s Future.” His ‘Marketplace’ commentaries can be found on publicradio.com and iTunes.
Thanks for posting Reich. I read him daily and believe he’s spot on on most things, but maybe that’s just my Bay Area radical roots showing.
By Forbes magazines Rick Ungar:
Gov. Scott Walker says he wants state workers covered by collective bargaining agreements to “contribute more” to their pension and health insurance plans. Accepting Gov. Walker’ s assertions as fact, and failing to check, creates the impression that somehow the workers are getting something extra, a gift from taxpayers. They are not. Out of every dollar that funds Wisconsin’ s pension and health insurance plans for state workers, 100 cents comes from the state workers.
Via tax.com
How can this be possible?
Simple. The pension plan is the direct result of deferred compensation- money that employees would have been paid as cash salary but choose, instead, to have placed in the state operated pension fund where the money can be professionally invested (at a lower cost of management) for the future.
Check out section 13 of the Wisconsin Association of State Prosecutors collective bargaining agreement – “For the duration of this Agreement, the Employer will contribute on behalf of the employee five percent (5%) of the employee’s earnings paid by the State. ”
Johnston goes on to point out that Governor Walker has gotten away with this false narrative because journalists have failed to look closely at how employee pension plans work and have simply accepted the Governor’s word for it. Because of this, those who wish the unions ill have been able to seize on that narrative to score points by running ads and spreading the word that state employees pay next to nothing for their pensions and that it is all a big taxpayer give-away.
If it is true that pension and benefit money is money that already belongs to state workers, you might ask why state employees would not just take the cash as direct compensation and do their own investing for their retirement through their own individual retirement plans.
Again, simple.
Mr. Johnston continues-
Expecting individuals to be experts at investing their retirement money in defined contribution plans — instead of pooling the money so professional investors can manage the money as is done in defined benefit plans — is not sound economics. The concept, at its most basic, is buying wholesale instead of retail. Wholesale is cheaper for the buyers. That is, it saves taxpayers money. The Wisconsin State Investment Board manages about $74.5 billion for an all-in cost of $224 million. That is a cost of about 30-cents per $100, which is good but not great. However it is far less than many defined contribution plans, where costs are often $1 or more per $100.”
If the Wisconsin governor and state legislature were to be honest, they would correctly frame this issue. They are not, in fact, asking state employees to make a larger contribution to their pension and benefits programs as that would not be possible- the employees are already paying 100% of the contributions.
What they are actually asking is that the employees take a pay cut.
That may or may not be an appropriate request depending on your point of view – but the argument that the taxpayers are providing state workers with some gift is as false as the argument that state workers are paid better than employees with comparable education and skills in private industry.
Maybe state workers need to take pay cut along with so many of their fellow Americans. But let’s, at the least, recognize this sacrifice for what it is rather than pretending they’ve been getting away with some sweet deal that now must be brought to an end.
Read the rest here:
http://blogs.forbes.com/rickungar/2011/02/25/the-wisconsin-lie-exposed-taxpayers-actually-contribute-nothing-to-public-employee-pensions/
Thanks, Brian. Great points. We’d feel better about pay cuts if it wasn’t always the middle class where it’s taking place. We’ve lived through the most transfer of wealth in history and somehow, the middle class is still fooled into believing these Walker-type policies benefit them.