Monday, May 24, 2010

The cure for Greece is the one for US too

America faces a big, fat Greek-style bankruptcy
[...] Greece's problem is Europe's problem ... and following closely behind, America's problem, too. We're all Greeks now. Quite simply, Greece's problem starts and ends with government employee unions. There are too many government employees (one of every three Greek citizens works for government); their salaries are way too high; their bonuses can be described only as insane (2 months for each public employee); their pensions are ridiculous (retirement far too young and free health care for life); and their government jobs are guaranteed for life.

Sounds crazy, right? Sounds like in Greece the inmates must be running the asylum. Except America has the exact same problem. California, New York, New Jersey and Illinois are our very own homegrown versions of Greece. These states are bankrupt, insolvent and desperately need a bailout. Why? For the same reasons as Greece. Far too many government employees; bloated salaries for civil servants; bonuses and raises are contractually obligated even during an economic crisis; sky high pensions; and jobs guaranteed for life. The only difference is that we are a nation of 300 million, so the debt is far bigger than Greece. It turns out that we are Greece squared.

The solution to save America from economic Armageddon? Simple. Use the same "austerity measures" imposed upon Greece, in return for this $145 billion loan, to dramatically cut spending on government employees:

-- Freeze government hiring for the next three years.

-- Eliminate bonuses and raises for the foreseeable future.

-- Institute layoffs and across the board wage cuts. Why should government employees enjoy "privileged status" that no employee in the private sector enjoys?

-- Change pensions from "defined benefit" to "defined contribution" pension plans, meaning retirees receive only what has been built up in their 401K type retirement accounts.

-- Raise the retirement age. In Greece it is going from age 53 to 67. Gold-plated pension plans are the single biggest factor that bankrupted Greece. The same problem bankrupted U.S. automakers GM and Chrysler.

-- Require government employees to pay more of their health care (through co-pays and deductibles).

-- Change the way pensions are calculated by eliminating overtime and raises in the last years of employment to "game the system."

The real global threat to our existence isn't global warming -- it's catastrophic government spending and, more specifically, spending on government employees. Our government's unfunded liabilities are now estimated at $60 trillion to $75 trillion over the coming decades. To give you some perspective, the New York Post recently reported that one New York firefighter is retiring on a pension of $240,000 per year. If he lives 40 years beyond retirement, that will cost the taxpayers almost $10 million. That's for one single government employee.

There are millions of them on the federal, state and local level. It can only be described as a ticking time bomb that threatens to destroy our children's and grandchildren's future.

Nevada's economic future is clouded by this same crisis.

Government employees should be cheering the solutions I have laid out above. [...]

Yes, they should, and the author goes on to explain why. The way things are, government employees are risking losing it all. But the unions are doing every thing they can to block any changes to make pensions sustainable. Excessive Union greed can kill the host, the goose that lays the golden eggs, the prosperity engine that pays the bills, leaving us all poorer.

I know that unions are not going to disappear, but there must be balance. Their relationship to their employer needs to be symbiotic, not parasitic. In the private sector that concept is sometimes understood, by unions that understand enlightened self-interest; they know that their employer needs to thrive, so that the union can also thrive and survive. But in the government sector, that concept doesn't even exist. It's a parasitic relationship that's completely out of control. And the taxpayers are the host that's being attacked. We need the cure, for ALL our sakes!

I wanted to print this entire article, it explains the causes perfectly and has the answers too. It's worth reading the whole thing.

No comments: