Austerity isn't fun.

[sags]

How does the US get it's balance sheet in order, when the people won't accept any austerity measures and take to the streets in boisterous protest.

It started in Wisconsin and is spreading to other states.

[dogcom]

We did it in Canada in the 90's and it wasn't fun but we have seen the benefits of this for years now. The same kind of voter swell has to take place in the US and do the dirty deed. They will all need to be on the same page and that means every state must pull the same rope to succeed. This means accepting tax increases and spending cuts every year for awhile and every state must participate.

Also they will need to be very strict on their financial institutions and not allow cowboy bankers to screw up all their hard work like what happened in Ireland. I don't think this will happen though until the Fed either creates runaway inflation or the bond market collapses.

[olivaw]

It's an interesting story that seems to have as much to do with politics as it does to do with money:

Republicans wants state workers to increase contributions to pensions to 5.8 percent of salary, and double contributions to health insurance premiums to 12.6 percent.

They also want to limit collective bargaining to the issue of wages, and cap increases to the rate of inflation, with a voter referendum needed for bigger increases. Walker's proposal also ends government collection of union dues, allows workers to opt out of unions, and requires unions to hold recertification votes every year.

Walker said the alternative is to layoff more than 10,000 workers.


Republicans have majorities in both the state Senate and the Assembly. In a bid to scuttle the proposal, Senate Democrats fled the state on Thursday and Friday to deprive the Senate of the needed quorum for a vote.

The lawmakers apparently left the state because they were concerned that they would be compelled to return to the Capitol by police if they stayed in Wisconsin.


The Milwaukee Public School system, which serves 85,000 students in the state's largest city, canceled all classes on Friday after nearly 630 unionized teachers called in sick.http://www.reuters.com/article/2011/02/19/us-wisconsin-protests-idUSTRE71H3UZ20110219?pageNumber=1

[brad]

Reducing employee benefits may make sense at the state level, but at the U.S. federal level it's worth keeping in mind that payroll (all those "useless bureaucrats") accounts for a whopping 5% of federal spending. It's an easy target, everyone thinks government is bloated and in the public's mind this is a huge area for savings when in fact it's a drop in the bucket.

Interesting perspective (on the federal budget debate) here: http://www.nytimes.com/2011/02/14/opinion/14krugman.html?ref=paulkrugman

[I'm Howard]

The HST allows our Politicians to escape dealing with an overpaid bloated Silly Service, and increasing property Taxes compensate a totally inefficient lack of Education system and overly paid Governmnet workers.

Why do we pay a Bonus to someone who speaks French but not to someone who speaks Mndarin or Spanish.?

Why are Public Sector jobs the best paying with the best benefits??

Canada has the same problems as the U.S, we just hide them with excessive taxes.

Florida, 24 Beer, $18.00, 1.75 litres of Scotch, $21.00.

No HST, we buy all our needs while we are here, and with a $1.02 , bonus.

[olivaw]

I'm_Howard, the term "silly servants" seems unfair. I spent a few years working for the government about 25 years ago. There were lazy workers and hard workers. The compensation was barely competitive.

I think we have to be careful about making scapegoats of civil servants. As Brad said, the payroll is not necessarily the bulk of the budget. (Difficult to get real numbers because figures are easily manipulated to support political agendas). If we want lower taxes and balanced budgets then we'll have to put up with reduced government services, a weaker social safety net and health care cutbacks. The pain has to be shared by all of us.

(Sorry, don't want to start a political debate but I do think that taxes and government budgets are relevant. A broke government means no OAS, GIS, public health care, free RX drugs etc. Be careful what you wish for).

[brad]

I'm_Howard, the term "silly servants" seems unfair. I spent a few years working for the government about 25 years ago. There were lazy workers and hard workers. The compensation was barely competitive.

I can't speak for Canadian civil servants, but I've been working as a contractor for US federal agencies since 1996 and I have to say most of my clients are working 50-70 hours a week just like me; I get emails from them late in the night and on weekends. And when you see the working conditions many of them have to put up with (dingy cubicle farms, bad lighting, lack of supplies) it's amazing what they are able to accomplish. Entire programs are being run out of one or two cubicles on shoestring budgets. I am constantly awed by their dedication.

[HaroldCrump]

I'm_Howard, the term "silly servants" seems unfair. I spent a few years working for the government about 25 years ago. There were lazy workers and hard workers. The compensation was barely competitive.

I think we have to be careful about making scapegoats of civil servants.Olivaw, "I'm Howard" has valid points.
In my experience/observation as well, the Canadian public sector (or most portions of it) is over staffed and over paid vis-a-vis the private sector.
I agree with Howard's point that Why are Public Sector jobs the best paying with the best benefits??
This aspect cannot be denied.
For the same nature of work, our colleague in the public sector is paid and compensated much better.
This disparity is more evident in benefits than in basic salary.
The sharpest contrast is in the area of guaranteed pensions.

I'm not denying that public sector workers do not work hard or do not contribute value to society - it is just that they are compensated much better than their private sector counterparts.
It is a case of Everyone is equal - but some are more equal than others.

Even in times of such austerity, when many private sector enterprises have reduced hiring, frozen pay raises, eliminated bonuses, etc. the public sector (particularly unionized workers) have guaranteed pay increases each and every year.
The reason is because their employer - the government - has ultimate power to fund itself.
All they need to do is think up some new tax, some new surcharge, some new tax rates to keep the gravy train flowing.


If we want lower taxes and balanced budgets then we'll have to put up with reduced government services, a weaker social safety net and health care cutbacks. The pain has to be shared by all of us.Not at all.
If we want lower taxes and balanced budgets, we need to equalize the benefits in the public sector to be similar to private sector, for similar jobs.
That is not all, of course, but a substantial portion of the issue.

Think about what's happened in the socialized economies of Europe, like Greece, Spain, UK, etc.
The public sector is out of control there.
Over generous vacation benefits, training benefits, paid sabbaticals, unemployment benefits, etc. essentially bankrupted the govt.

It is not fair to compare the Canadian public sector to the US one.
Theirs is no where near as generous as the Canadian one.
The Canadian one is closer to the European model.

[osc]

In US there is a money grab by the richest 1%. They want people working longer so they have larger unemployment which leads to lower wages. They want lower taxes for the rich and higher taxes and lower benefits for the silent/stupid majority.
Canada has the same level of debt (as % of GDP) as US:
http://www.visualeconomics.com/gdp-vs-national-debt-by-country/, but people here think we are doing better than them, which we are not.

[OptsyEagle]

Debt and democracy go together like pie and ice cream. You pretty much can't have one without getting the other. It's very unfortuneate, since it was all working out so well for so long. It will be interesting to see how it all ends.

[olivaw]

If we want lower taxes and balanced budgets, we need to equalize the benefits in the public sector to be similar to private sector, for similar jobs.
That is not all, of course, but a substantial portion of the issue.

Think about what's happened in the socialized economies of Europe, like Greece, Spain, UK, etc.
The public sector is out of control there.
Over generous vacation benefits, training benefits, paid sabbaticals, unemployment benefits, etc. essentially bankrupted the govt.

It is not fair to compare the Canadian public sector to the US one.
Theirs is no where near as generous as the Canadian one.
The Canadian one is closer to the European model.

Harold, I don't disagree that Canada's public debt is worrisome and we do have to look for public efficiencies. What I question is the assertion that we can solve our problems on the backs of public service workers.

My (admittedly anecdotal) experience is that public sector work was hardly as fantastic as public perception suggests. I left the public sector long ago. Here are some of the reasons.
- Pay scales that could easily be match in the private sector.
- No stock options, profit sharing or bonuses.
- A pension plan that nominally returned 4%. At that time you could easily beat that with GICs, bonds and stocks. (Now it doesn't seem so bad, but back then it was almost insulting).
- No basic perks like paid social functions and retreats. We even had to pay for our own coffee.
- Dingy windowless work areas with poor ergonomics and old furniture.
- A public that perceived us as overpaid, under-worked leeches.

There was waste and political manipulation, of course. Those happen in the private sector too. However, for me, the private sector has been far more lucrative than the public sector. I therefore question the assertion that cuts to public worker salaries, benefits and head counts will substantively solve our budget woes. I think we have to be prepared for the fact that we'll all need to chip in to solve Canada's fiscal woes. That may mean higher taxes or giving up entitlements.

[To argue against myself for a moment, I do admit to feeling occasional resentment towards public teacher's unions but that may reflect my own lack of understanding of what teacher's lives are really like.]

In some respects, I think the US may be in better shape than Canada or Europe because America will probably have a better ratio of workers to retirees. Programs such as OAS, GIS, universal health care and prescription drug benefits may become as unsustainable in Canada as they did in Europe. http://globaleconomicanalysis.blogspot.com/2008/05/us-and-canada-demographic-time-bomb.html

[OptsyEagle]

A pension plan that nominally returned 4%. At that time you could easily beat that with GICs, bonds and stocks. (Now it doesn't seem so bad, but back then it was almost insulting).


If you think that you could take your personal pension contributions and invest them at 4% and replace a federal government pension, you really need to get a new calculator.

Everything else you had to say was fine, but that one needed addressing.

[Larry6417]

Debt and democracy go together like pie and ice cream. You pretty much can't have one without getting the other. It's very unfortuneate, since it was all working out so well for so long. It will be interesting to see how it all ends.

At least one democracy, Norway, has a massive surplus when its sovereign wealth fund is included. Also, many authoritarian regimes have large (for their economies) debt levels. I suspect many dictatorships have relatively lower debt levels because no one wants to lend to them.

[Larry6417]

The Harper gov't has already made plans to lower the employer (i.e. taxpayer) contribution to federal employees' pensions. However, Harper is a "fiscal conservative" the way Bush jr. was a grammar guru. He's increased spending consistently since being in office. The Conservatives made much of "gov't waste", but haven't succeeded in finding much to cut since being in power.

The harsh truth is that entire programs and entitlements have to be eliminated (or much reduced) to have a real effect on the budget.

[the-royal-mail]

The problem is that no one wants to accept any pain and everyone says "cut somewhere else" and makes themselves out to be some sort of victim somehow exempted from spending cuts.

[olivaw]

If you think that you could take your personal pension contributions and invest them at 4% and replace a federal government pension, you really need to get a new calculator.
OptsyEagle, I was probably unclear. I didn't mean to suggest that the plan is a bad one. Rather that it didn't seem so great 20 or 30 years ago. Nowadays we look on that pension plan with envious eyes. In the 80s. GICs returned over 10%, mortgages were over 12.5% and we'd come to expect 15 to 20% market returns. You'd only receive the maximum benefit from the pension plan if you were prepared to stay with the government for 35 years. A plan that we now refer to as gold plated seemed to be covered in rust back then. (I wonder if that is how private employers dispensed with defined benefit pension plans so easily - most workers really didn't think we needed them. Guess we got what we wished for.:eek:)

I agree with everyone who says that programs and entitlements will have to change. We'll all have to be prepared to give up something.

[HaroldCrump]

My (admittedly anecdotal) experience is that public sector work was hardly as fantastic as public perception suggests. I left the public sector long ago. Here are some of the reasons.
- Pay scales that could easily be match in the private sector.
- No stock options, profit sharing or bonuses.
- A pension plan that nominally returned 4%. At that time you could easily beat that with GICs, bonds and stocks. (Now it doesn't seem so bad, but back then it was almost insulting).
- No basic perks like paid social functions and retreats. We even had to pay for our own coffee.
- Dingy windowless work areas with poor ergonomics and old furniture.
- A public that perceived us as overpaid, under-worked leeches.LOL.
I don't know what period your experience belongs to, but I can assure you this is not the scenario these days - and hasn't been so at least in the last 10 years since I have entered the workforce.

If the above had been the scenario then at some point, the govt. may have said that they are not attracting smart talent and underwent substantial compensation restructuring.
These days, the salary and benefits of public sector (both federal and provincial - at least Ontario) can easily top the best the private sector has to offer.

The stock options, social events and big fat bonuses that you refer to in the private sector don't really exists except in large multi-billion dollar corporations like the banks, financial institutions or large corps. like IBM, etc.
Most private sector employers in the small and medium scale ranges do not offer any of these benefits.
Esp. these days, companies have clawed back benefits to a large extent.
In fact, the public sector employees (maybe managerial level and above) continue to experience luxurious and decadent treatment at tax payers' expense.
We hear of those parties, ski trips, etc. of OPG employees, for example.

Most private sector employees work in "Dingy windowless work areas with poor ergonomics and old furniture" in fact because the companies don't have and don't want to spend any money.

Regarding the rate of return on pensions, the main benefit of public sector pensions in the guarantee and the longevity & inflation protection, which are very hard to replicate on your own.
If you can throw a Mil $ at an indexed lifetime annuity, maybe, but most folks can't.
Isn't it true that the federal pension benefits provide a 70% salary replacement after maximum tenure (35 years)?
This comes with longevity and inflation protection and a solid guarantee backed by the govt. unlike private sector pension plans.
I wouldn't call that a bad RoR.

Of course, I'm not suggesting that cutting out all benefits will solve all our budget problems, but there is a huge disparity here.
I don't see why a subset of the working population, who are not substantially smarter than the rest of the working folks, should continue to enjoy such disproportionate benefits on the backs of the rest of the folks.

[loggedout]

"austerity" measures hurt the non-rich, meanwhile the rich get richer. therefore there will be revolution unless the non-rich can be appeased and there is a fairer distribution of wealth.

[osc]

The problem with government waste is real and needs to be addressed. The source of all these problems was the application of socialist/communist measures to solve poverty issues in the first half of last century. All these wasteful government run programs (compulsory employment insurance, compulsory pension plans, government-run health care, government redistribution of money from the working taxpayers to the older retirees) are socialist and subject to abuse by special interest groups.
The real solution to the problem is not to make these programs even less useful than they are, but to get rid of all of them. To address the poverty problem we should have a real progressive tax system (including negative taxes for people making less than a certain amount). This would drastically reduce the government waste, would ensure fair minimum wages for people who will have to work, and would be future proof (when most human labor will be replaced by cheap machine AI labor).

[m3s]

The grass is always greener on the other side..

Everyone in the private sector always thinks the Gov is pocketing all their taxes. Maybe you should look at what your CEOs are pocketing?

Human labour could easily be replaced by computers, the Gov could stop wasting, and we could kick out all the illegal immigrants.. the economy would promptly crash. How is negative taxes not a waste? We have enough people scamming EI and welfare as is

If you want to talk about spreading wealth, you can't take it from the public sector without repercussions.. why don't we pay the police min wage eh? Something like 70% of wealth is in the hands of 1% and it's not the public sector. How is that for equality?

[Berubeland]

How about their big fat expensive war? How come no one's even mentioned all the money they spend on that? Enough to pay their deficit back I'll bet.

America was all proud when USSR broke up under the weight of their unsustainable defense spending. It's your turn now America. But, they'd rather shut down schools then stop meddling in other countries.

Funnily enough the Middle East seems to be able to get rid of their tyrants on their own when they want to. Without even being bombed back into the stone age or American "help". Of course when they become democracies they may well elect Hamas or the equivalent again.

[sags]

May be time for a return of the Grey Panthers.............or is it "gray", I forget.