EnduringSense

At the onset of this recession, public anger focused on Wall Street bankers and corporate exclusives that accumulated great wealth as economic bubbles grew.  The government sensing the public’s mood, responded with legislation designed to limit this group’s power and compensation.  The resulting legislation is doomed to failure since it is merely a political response created by people who have that little understanding as to how the markets work.

An example of the failure of governmental intervention is the Sarbanes-Oxley act inflicted on the people after the Enron debacle.  It did little to protect shareholders and only made the accounting industry wealthy.  Sarbanes-Oxley did nothing to stop the banking meltdown that occurred in the same decade.  In fact it may have played a role in letting investors’ guards down due to the mistaken belief that the Act would protect shareholders in the banking industry.

More recently, the government has inflicted FinReg on America, broad-based financial regulations that purport to address problems in financial industry.  It too will fail for the same reasons Sarbanes-Oxley did.  This legislation was incredibly championed by Senator Chris Dodd and Congressman Barney Frank, two who played key roles in creating the housing bubble through their earlier interventions into the charters of Fannie Mae and Freddie Mac.

More recently, America’s focus on inequities has fallen on unionized employees, especially those in the public sector and those in industries that receive public support.  The washingtonexaminer.com recently ran two stories highlighting abuses by these union members.

One of the Examiner’s stories focused on union salaries in the performing arts area.  Here are some of the examples:

• Avery Fisher Hall and Alice Tully Hall in Lincoln Center –  average stagehand salary with benefits is $290,000 per year.  These are the workers that move musicians’ chairs into place and hang lights.

• Metropolitan Opera – props master received $334,000 in 2010.

• Carnegie Hall – top paid stagehand paid $422,599 in  annual salary.

How can such exorbitant pay exist?  The reason is the power of the International Alliance of Theatrical Stage Employees union. Two years ago they exerted their power closing most Broadway theaters during a 19 day strike.  This willingness to such down an industry or governmental function is how salaries get out of hand.  An industry’s or government’s unwillingness to say “no” over extended periods guarantees the inequities will be created and paid for by future generations.

As outrageous as the stagehand salaries are, public anger over wages is focused on what public sector employees are being paid by taxpayers.  Where in earlier times public sector employees received lower wages in return for relatively safe jobs and serving the public, they now often make significantly more than their private sector counterparts.  The Examiner supplied the following examples of governmental workers in Maryland and Virginia.

• The top administrator for Montgomery County, Maryland,  makes more than Vice President Biden.  The same for Fairfax County, Virginia.

• The District’s police chief for Fairfax makes more than the Chief Justice of the U.S. Supreme Court and Speaker of the House.

• The Montgomery County Chief Administrative Officer earns $266,000 annually.

• The Fairfax County Executive earns $240,000 per year.

• The Washington D.C. City Administrator, an appointed position, earns $225,000.

• The Montgomery County Schools Superintendent earned about $500,000 in 2010.

• Not including overtime, Fairfax has nearly 800 employees making more than $100,000 per year.

• At least 50 Maryland county managers and directors are paid more than its governor’s $150,000 base salary.

• Nearly 1,200 Maryland employees make more than $100,000 per year when overtime is included.

When a bureaucrat is questioned about these outrageous governmental salaries, they inevitably respond by claiming that the high salaries are required to attract higher talent.  That dog no longer hunts given the current high unemployment rate and availability of talent for any job.  In addition, governments at all levels have poorly managed the peoples’ finances and continually supply unacceptable services.

States throughout America are on the brink of insolvency.  The same for many municipalities.  A major cause is the high salaries paid to state and municipal workers and the astronomic amounts due to their employee pension obligations.

How did we get to this sad state?  The seeds were sown when public employees were allowed to unionize.  Unlike in the private sector where companies that overpay and supply poor products are punished in the marketplace and ultimately may be shut down, public “industries” are often protected monopolies.  However, unlike naturally existing parasites that do not take enough resources from its host to kill it, the public employee unions have gone too far and have made many of their hosts terminal.  With states and municipalities unable to pay their bills, we are approaching an end to the public employee greed-fest.  Economic realities will not only require governments to say “no” to the unisons, but public outrage will demand more equitable compensation for taxpayer employees.

The decision to allow public employees to unionize was a dereliction of duty by politicians.  Those responsible are long gone.  Like most governmental decisions, this one was based on politics, not sound economics.  This is another example as to why the federal government must have its power limited by a strict interpretation of the Constitution, a document designed to limit the federal government’s power.  The Founders understood that without such limits, the government would create the kind of mess that the United States now finds itself.