Wednesday, February 2, 2011

The Consequences of Our Tax Cowardice

Friends,

 

This is a very good article, but it misses the elephant hanging out in the corner of the room.  The military budget, which is larger than the combined expenditures of all countries, is destroying us.  In any legitimate discussion about a budget crisis, we must point out the absurdity of spending more then 50% of the federal budget on warmongering.

 

Kagiso,

 

Max

 

The Consequences of Our Tax Cowardice

 

If we permit public- sector workers to be scapegoated for

state and city budget crises, we all stand to lose

 

By Richard Wolff and Max Fraad Wolff

The Guardian/UK

January 28, 2011

 

http://www.guardian.co.uk/commentisfree/cifamerica/2011/jan/28/usdomesticpolicy-public-finance

 

A national campaign is now fully launched to make local

public-sector employees pick up a major share of the costs of

economic crisis. Years of rising spending and falling revenue

have carved a path of destruction through federal, state and

local budgets. Deficits and debts have mounted eroding

taxpayer support for government spending in general, and for

public employees particularly. In response to deep economic

pains in middle-class communities, major efforts are under

way, from California to Maine, to balance budgets through

major cuts in services, wages, benefits and employment.

 

Federal, state and local governments are staggering from

reduced tax revenues because of unemployment, reduced

production, lower investment and the housing collapse.

Washington borrowed huge sums from foreign investors,

domestic big business and the rich. These funds went to

bailout select businesses and to help (partially and

temporarily) broken state and local government budgets.

Because Democrats and Republicans agreed last December not to

increase income, estate and capital gains taxes, broken state

and local budgets face declining federal support. This is

driving governors, mayors and state legislatures to raise

taxes and/or to slash payrolls and programmes.

 

Of course, some cutting and tax increases are required. The

real social decisions involve what to cut, how much, for

whom, and whose taxes to increase.

 

The pressure is on to shift the heavy costs of economic

crisis onto the middle- and low-income communities already

stung by unemployment, foreclosures, reduced job benefits and

rising job insecurity. The campaign to make the middle- and

lower-income Americans now focuses on public employees -

especially their numbers, incomes and benefits. Battles loom

over which state and local job holders get fired, whose

pensions/benefits will be reduced, and which public services

will stop being available.

 

Politicians will keep silent on the key alternative to deep

cuts - precisely because it would otherwise be on most

citizens' agendas. That alternative would be to raise the tax

share paid by leading firms and the wealthiest 5-10% of

citizens. In most cases, this means returning to the levels

of taxation in the 1980s. Whatever may be needed in the way

of reasonable rationalisations and savings in government

budget outlays, we will not exit the continuing economic

crisis by massive reductions in public service provision and

employment. Those only further depress the economic

conditions and wellbeing of middle- and lower-income

communities. This would be a more and more cruel version of

the track we have been on for decades. Sadly, this approach

is neither new nor likely to work.

 

The facts don't support the attacks on public employees. Last

year, total state and local public employment declined by

407,000 jobs. There are about 20m state and local workers in

America today: 14.3m local and 5.2m state employees (for full

details, see the figures here ). Until the last decade, the

numbers of public employees grew steadily as did the US

population. Unemployment levels in our communities would have

been much higher had those workers not found public jobs.

State and local government would have spent and provided far

fewer and/or poorer public services had state and local

employment not grown. Of course, there are stories of waste

and corruption. Nonetheless, we all need and benefit from

many state and local services.

 

Over the last decade, state and local employment did not grow

very rapidly. As the US economy moved towards crisis, state

and local governments did not notably expand their payrolls.

Their economics did not spin out of control - as did our

financial industry and other parts of the private sector.

Some states and localities even trimmed their tax rates.

Assumptions were made about a lasting housing and equity

market boom. These proved false. In many cases, the pain

emerges slowly as properties are reappraised, sales tax

revenues fail to rise amid record unemployment, and huge

numbers of citizens do without healthcare coverage.

 

Some now paint public employees as "fat cats". In 2009 (the

latest available data), the average state employee earned

$23.67 per hour or $49,240 per year . The average local

government employee earned $21.68 per hour or $45,090 per

year . These are averages. There are considerable differences

among individual public employee earnings depending on

her/his location, age and job type. There are huge ranges in

pay by locality and union membership, as well.

 

By comparison, the national average earnings per hour for all

employed Americans in December of 2009 was $22.38 or $44,760

for a 2000-hour year. In other words, state and local

government employees earned about the national average in

2009 and 2010. Figure 3 below lists the most common jobs and

salaries for state and local employees, according to the BLS

Career Guide to Industries, 2010-2011 Edition . State and

local government employees' earnings were close to the

national averages in most occupations. Labelling all public

employees "fat cats" is an attempt to make mostly middle-

class earners and all social service consumers pay for what

the economic crisis did to state and local budgets.

 

Another part of the campaign against state and local workers

is aimed at their unions. But here, too, the facts offer a

more honest picture. State and local government employees are

more unionised than private-sector workers. Approximately

12.3% (or 14.7 million people) of the total US labour force

is represented by unions. That includes a 612,000 member

decline across 2010. About 36% of public sector workers were

unionised in 2010, as compared to 6.9% of private-sector

workers (local public employees - teachers, police and fire

personnel, and others closest to the communities they serve -

were the most unionised). The majority of state and local

public employees are, in fact, not unionised - just like the

vast majority of private-sector workers. Portraying public

employees or their unions as the primary problem is not

supported by the facts.

 

In conclusion, consider exactly who public employees are.

Equal Opportunity Employment Committee data from 2007 suggest

that 18% of full-time state employees are African American ,

while that number for local employees is 19%. Public

employment has reduced African American unemployment, reaping

social benefits for everyone. Because African Americans have

a higher than average union membership, attacking state and

local union jobs targets them especially. Veterans are also

significantly over-represented in public-sector employment at

both the state and local level. In 2009, nearly 13% of all

employed veterans worked for state and local government .

Third, public-sector employees tend to stay at jobs longer

and tend to be older than private-sector workers. Our at-risk

state and local workers are disproportionately likely to be

people of colour, in unions, older and veterans. Most

importantly, state and local employees provide vital services

to all. Our education, transport, protection, courts and

civic participation, rely on public sector workers. Over 85%

of Americans are educated in public institutions, from first

grade through university. Our police, fire, courts, social

workers and clerks keep all of us and our property secure.

Our roads, bridges, tunnels, ports, trains, buses and

security are public-sector work. Our diversity and our

veterans are well represented among our public-sector

workers. Cutting the public sector will worsen the economic

crisis, while deepening many social problems. No discussion

about real and serious budget adjustments should proceed from

ignorance about what public-sector workers do, who they are

and what they are paid.

 

No society moves wisely without acknowledging and factoring

the real lives at stake and the real effects of budget decisions.

 

(c) 2011 Guardian News and Media

 

Richard D Wolff is professor of economics emeritus at the

University of Massachusetts, Amherst, where he taught

economics from 1973 to 2008. He is currently a visiting

professor in the graduate programme in international affairs

of the New School University, New York City. Richard also

teaches classes regularly at theBrecht Forum in Manhattan.

His most recent book is Capitalism Hits the Fan: The Global

Economic Meltdown and What to Do About It (2009)

 

Max Fraad Wolff teaches economics in the New School

University graduate programme in international affairs. Max's

work can be seen at the BBC, NPR, al-Jazeera English,

Bloomberg TV and the Wall Street Journal, among others

 

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