Will Government Policies Ever Promote Economic And Political Liberty?

 

Updated July 4, 2010

Seemingly lost in the celebration of this nation’s Independence Day is a salient cause for concern. Debt is a huge threat. We are not honoring the wisdom and courage of our nation’s founders. The Declaration of Independence 234 years ago was designed to protect American citizens.

But unproductive policies, a culture of entitlement and unnecessary spending at all levels have created massive budget gaps and threaten Americans. Ironically, on Independence Day 2010, the culture of entitlement and lavish spending are closely tied with the deteriorating individual economic and political liberties.

Consider the federal budget quagmire: The national debt is now more than $13 trillion and is forecast to exceed $21 trillion by 2020.

As I’ve written on other occasions, policies leading to the heavy spending are unproductive. Two recent controversial examples, cap-and-trade and healthcare reform, threaten economic liberties – by extension they threaten political liberties.

The same is true in state governments – they are guilty of dangerous spending and onerous taxes. State legislators everywhere are unwilling to make tough decisions.

Their policies favoring public sector unions help keep them in office. Powerful public-employee unions rank among the heaviest spenders in political advertising during elections.

California, for example, a state facing another horrific budget – $19 billion – has few options. Gov. Arnold Schwarzenegger has been forced to follow through on a threat to pay state workers a minimum wage until lawmakers meaningfully balance the state budget. He also initiated a furlough policy so state employees would keep receiving their paychecks.

The state about which I’m most familiar is Washington. The state has a continuing $3 billion deficit to solve, but state legislators were more willing to hike taxes this year by $800 million without considering all opportunities to shave spending. Even state officials admit to a forecast of red ink for the next five years.

Upon receiving a forecast – confirmation of the continuing red ink – Gov. Gregoire appointed a panel of 32 business, labor, political and think-tank leaders to discuss the issues. There will be public hearings and conclusions will be given to the Legislature. And a reported return to priorities of government spending is welcome news. But why did it take so long? What’s needed is a structural change with state-government reform.

$65 million in waste

Washington Policy Center (WPC – www.washingtonpolicy.org), a respected think tank, points out a questionable benefit for public workers – state employees are permitted to carry forward and cash out their unused sick leave.

 “According to the state’s budget transparency website, Washington paid out $65.3 million in unused sick leave during the 2007-09 biennium,” said Jason Mercier, director of the association’s Center for Government Reform.

He points out the perk is allowed in sections 12.6 to 12.8 of the collective bargaining agreement.

“The state’s sick leave policy should be changed to a set number of days per year that can’t be cashed out or carried forward, added Mr. Mercier. “This is the benefit policy for employees at the Washington Policy Center as well as many other private employers.”

Another conclusion in the state’s 2009 comprehensive annual financial report (CAFR): Expenses outgrew revenue.

Another eye-opener in the report: “Governmental activities resulted in a decrease in the state of Washington’s net assets of $2.2 billion.”

Here’s a big reason for the liabilities:

Schedule 17 of the CAFR shows that the largest employer in the state is government coming in at 17.6 percent of total employment,” Mr. Mercier pointed out. “The next largest is retail trade coming in at 10.8 percent of total employment.” 

State and local governments are dysfunctional, too, in public employee health benefits. Retiree health benefits for employees in the public sector – state and local governments – are unfunded to the tune of $530 billion, according to the U.S. Government Accountability Office (GAO) in a report on state and local government retirement health benefits (OPEB – Other Post Employment Benefits).

The gap in Washington state was $7.9 billion in 2008 according to the state.

OPEB benefits are separate from pensions in the public sector, which are much higher than private employers are able to provide.

The GAO offered three OPEB solutions: “…changing the type of retiree health benefit plan, changing the level of the government’s contribution toward retirees’ health insurance premiums, and changing the eligibility requirements employees need to meet to qualify for retiree health benefits.”

Property Rights

Another hindrance to economic and political liberty in Washington: The state permits local governments to seize private property in the name of economic development. Not to be gauche, many public servants are behaving like public serpents.

A WPC study showed local governments in Washington have used the law as a land grab to threaten or actually confiscate the property owned by 71,000 state citizens. This is under the guise of economic development to create revenue – a literal taxing source. Many victims are poor. Their rights have been denied by elitists – the powerful legal tyranny of local governments.

Washington’s Attorney General Rob McKenna attempted action this year. He promoted two bills to halt exploitations of Washington’s Community Renewal Law that create new sources of tax revenue. Ironically, the law contradicts the state’s Constitution.

Meantime, elitist behavior continues to imprison taxpayers in other ways.

Washington state government is behaving as though 70 percent of the budget is off limits when considering spending cuts. That includes debt service, education, pensions, and federal funds from the American Recovery and Reinvestment Act for higher education and Medicaid.

Efforts to reform Washington government to become good government have so far fallen on deaf ears.

Washington State Auditor Brian Sonntag has conducted a performance review of the state government. The report, Opportunities for Washington, makes recommendations for the government to save money, become more efficient and target revenue sources.

Traditionally, however, many state agencies have virtually ignored such recommendations.

Some conclusions

Poor economic policies and extravagant spending impinge on rights – economic and political liberties.

Public servants claim they want to create jobs, but why is there so much unemployment? By sapping the wealth of Americans, the unemployed can’t find jobs. It takes wealth to create jobs, but burdensome taxation, revoking of rights, and transferring wealth to hire public workers with lavish benefits do not create wealth.

As a result, businesses are hesitant to hire workers so this means government is destroying jobs to create costly public-sector jobs. Their actions do not indicate they want a healthy economic climate with strong economic and political liberty for all. Only the state workers, unions and politicians who engage in unproductive behavior are the beneficiaries – to keep their jobs.

Unfortunately, politicians demonstrate an elitist behavior instead leadership in economic patriotism. They poorly manage the economy and mandate ineffective policies. That makes us all slaves – without economic and political liberty on Independence Day 2010.

From the Coach’s Corner, if you agree with the conclusions in this column, here are contact lists of your federal public servants:

House of Representatives

Senate

The White House

New Threats to Economic Liberty: Cap-and-Trade, Spending Bills

 

Updated Dec. 14, 2009

Businesses face new threats to their economic liberty and their ability to create jobs.

This is the result of two developments: The U.S. Senate passed a $1.1 trillion spending bill last Sunday; and it is now considering yet another cap-and-trade measure.

The massive spending bill, in funding federal agencies, exceeds the rate of inflation by more than 700 percent. Critics also contend it has $3.9 billion in pork spending. I’ll have more on that later.

The cap-and-trade measure was introduced by Sen. Maria Cantwell (D-WA).

Reasonable people agree going green is healthy for all stakeholders. Indeed, Sen. Cantwell’s cap-and-trade bill seems better for consumers than the current legislation being debated in Congress, but it still threatens businesses and their ability to create jobs.

In essence, her bill would fund rebates to consumers via emission credits by requiring manufacturers and other companies to buy credits in conjunction with government auctions. She contends an average household of four would receive $1,100 a year for 18 years from 2012 to 2030 – a total of $21,000.

The government auctions would keep the Wall Street investment banks out of the process.

Cap-and-trade is a controversial, complex subject and I’ve already voiced my opposition to the current House-passed bill (http://bit.ly/8E7Hs2). So I turned to a highly respected business spokesperson, Don Brunell, who is the president of AWB, the Association of Washington Business. AWB and he are known for moderate views on behalf of business. I managed to reach him while vacationing out-of-state with his family. He says he has not seen Sen. Cantwell’s bill, but he graciously responds.

“Generally, cap and trade proposals have created winners and losers which public policy and politicians should not do,” says Mr. Brunell. “That has been the experience in Europe, Australia and California where the government has passed and implemented cap and trade.”

He argues for a positive approach, incentives, to reducing greenhouse gases.

“For example, we brought a little home in Vancouver, WA, 1700 sq. ft., and replaced out water heater with a tankless heater which has dramatically cut our consumption of natural gas because we are only there on weekends. To offset the higher costs for the tankless system, we got a $1,500 federal tax credit,” he explains.

Mr. Brunell points out the progress already made by companies:

“Because of energy costs, many businesses and industries have dramatically cut consumption and thereby greenhouse gases.”

How serious is the problem of greenhouse gases in Washington state?

“Washington state produces less than .01 of 1 percent of the greenhouse gases but Gov. Gregoire wants us to sign on to the Western Climate Initiative along with California that would put us at a competitive disadvantage with Idaho which is not a cosigner of the Western Climate Initiative,” explains Mr. Brunell. “Apply that to a national level where the U.S. may be put at a competitive disadvantage with China, India and other countries which will ignore the Copenhagen agreements on climate change and greenhouse gas restrictions unilaterally by a government – such as the U.S. under either the Waxman-Markey bill passed last August by the House and proposals we’ve seen in the Senate.”

Spending Bill

The U.S. Senate’s massive $1 trillion-plus measure is a compilation of several spending bills and contains more than 1,000-plus pages. It dotes big money on such agencies as the Education Department, the State Department, the Department of Health and Human Services.

With a 10-percent increase, it spends far above the rate of inflation. Inflation was only 1.4 percent in August, according to Bloomberg on Dec. 8 (http://bit.ly/4ZzpNU).

Taxpayers for Common Cause, a watchdog organization, complained the bill has 5,224 pet-lawmaker projects costing $3.9 billion.

A published report indicates the pork includes a farmer’s market in Kentucky and rehabilitation of a theater in New York.

“You are spending money like a drunken sailor, and the bar is still open,” Sen. John McCain (R-AZ) was quoted to say in response to his colleagues regarding their earmarks.

Just so the U.S. Treasury can continue to borrow, also planned is raising the federal debt limit by $1.8 trillion to $14 trillion.

Ouch.

So, yes, in conclusion, my sense is that the cap-and-trade concept and heavy spending, which increases the national debt, constitute silent but ominous threats to the nation and business. They must have economic liberty if they are to succeed and create jobs.

From the Coach’s Corner, for Washington businesses, here’s the link to AWB:  www.awb.org.

It contains a wealth of information. If you’re not a member, you might wish to consider joining. The folks at AWB know what they’re doing.

(Disclosure: I’ve worked with AWB on projects in the past.)

Seattle business consultant Terry Corbell provides high-performance management services and strategies.