Tag: dennis cauchon

Federal Salaries Explode

That’s the subject of a USA Today analysis, which reveals an outrageous increase in salaries at the top levels of the federal workforce. I’ve been complaining about excessive federal pay for some time based on one set of data, and now Dennis Cauchon provides strong support for my thesis using a different set of data.

Cauchon finds that since the economy fell into recession, the number of federal workers earning more than $150,000 has more than doubled. The federal government has become extremely bloated and top heavy, even as families and businesses across the nation have had to tighten their belts. With 383,000 workers earning six-figure salaries, the government has become an elite island of overcompensated administrators immune from the competitive job realities of average families.

There are a remarkable 22,000 federal civilians earning salaries of over $170,000, illustrating that Big Government works for the benefit of well-off insiders, not average Americans. And Cauchon only looks at salaries and wages. Average annual federal benefits are more than $41,000, which pushes total federal compensation even further ahead of the private sector average.

The Bush administration let federal pay and benefits grow completely out of control, as it did with other areas of federal spending. President Obama has an opportunity to fix these problems. He should call for a multi-year freeze on federal pay, work to overhaul a system that moves workers up the pay scales too rapidly, and begin purging the upper ranks of federal management.

Here are some of my recent analyses of federal pay:

Debt Aggravates Spending Disease

USA Today’s Dennis Cauchon reports that ”state governments are rushing to borrow money to take advantage of cheap and plentiful credit at a time when tax collections are tumbling.” That will allow them to “avoid some painful spending cuts,” Cauchon notes, but it will sadly impose more pain on taxpayers down the road.

When politicians have the chance to act irresponsibly, they will act irresponsibly. Give them low interest rates and they go on a borrowing binge. The result is that they are in over their heads with massive piles of bond debt on top of the huge unfunded obligations they have built up for state pension and health care plans.

The chart shows that total state and local government debt soared 93 percent this decade. It jumped from $1.2 trillion in 2000 to $2.3 trillion by the second quarter of 2009, according to Federal Reserve data (Table D.3).

Government debt has soared during good times and bad. During recessions, politicians say that they need to borrow to avoid spending cuts. But during boomtimes, such as from 2003 to 2008, they say that borrowing makes sense because an expanding economy can handle a higher debt load. I’ve argued that there is little reason for allowing state and local government politicians to issue bond debt at all.

Unfortunately, the political urge to spend has resulted in the states shoving a massive pile of debt onto future taxpayers at the same time that they have built up huge unfunded obligations for worker retirement plans.

We’ve seen how uncontrolled debt issuance has encouraged spending sprees at the federal level. Sadly, it appears that the same debt-fueled spending disease has spread to the states and the cities.

Government Employment Up or Down?

The New York Times editorialized today about the supposed “brutalizing” effects of state and local government spending cuts. They claim that “most states also have cut their public workforces.”

Yet USA Today reporter Dennis Cauchon takes a look at the actual data, and he finds that state and local governments added 12,000 workers in the latest quarter, while the private sector cut 1.3 million jobs.

Thus, it appears that “brutal” restructuring is going on in the private sector, but not in the government sector. Indeed, Cauchon finds that “a huge influx of federal stimulus money to state and local governments more than offset a sharp drop in tax collections” this quarter. The article shows that state and local government spending rose quickly in the first three quarters of 2008, then dropped for two quarters, but is now rising again quite quickly. That doesn’t sound very brutal to me.

Too often editorial boards and columnists seem to write economics articles based on their preconceived notions about what they think is going on, without looking at any solid data. Cauchon’s columns at USA Today are a refreshing alternative to the sort of impressionist writing on economics we see in the NYT editorial today.