Tag: market

Federal Pay: Response to the Critics

My post yesterday on federal worker pay generated a large and aggressive response from federal workers, both in my inbox and on websites such as Fedsmith.com. (See also Federal Times and Govexec). Here are four points raised in criticism:

First, people accuse me of producing distorted data somehow. Actually, it’s essentially just raw Bureau of Economic Analysis data, but the data is usually overlooked by the media because I don’t think the BEA puts out a press release on it. Anyway, the average wage data is from BEA Table 6.6D. The average compensation data is simply total compensation (Table 6.2D) divided by the number of workers (Table 6.5D).

Second, people argue that reporting overall averages for wages and compensation is somehow illegitimate. People email me comments like “my federal salary is only $50,000, yet you claim that federal workers make $79,000.” All I can say to folks like this is that there must be a federal worker out there making $108,000 who balances you off.

Third, people argue that a better analysis would be to compare similar jobs in the private and public sectors, rather than looking at overall averages. I agree that that would be very useful. Unfortunately, the BEA data is not broken down that way. At the same time, the BEA data provides the most comprehensive accounting for the value of employee benefits of any data source. Benefits are a very important part of federal compensation, and so that’s why I look to the BEA data.

Fourth, many people argue that the federal government has an elite workforce with many highly educated people. Certainly, that’s an important factor to consider. However, that is the reason why I focused on the pay trend over the last eight years. The federal worker compensation advantage rose from 66 percent in 2000 to 100 percent in 2008. Has the composition of the federal workforce really changed that much in just eight years to justify such a big relative gain? I doubt it.

A final consideration is to look at a “market test” of the adequacy of compensation in the public sector–the quit rate. The voluntary quit rate in the federal government is just one-third or less the quit rate in the private sector (Table 16 near the bottom here).

That is strongly suggestive of ”golden handcuffs” in federal employment. While many federal workers probably grumble about their jobs (as many private sector workers do), they know that the overall package of wages, benefits, and extreme job security (Table 18 here) is very hard to match in the competitive private market, and so they stay put.

Sweet, and Yet Very, Very Sour

sugarMy colleagues have blogged before about the recent sugar “market” woes. There was some hope that the USDA, which manages sugar imports very carefully to maintain U.S. prices up to three times higher than world prices, would relax the sugar quotas this year and give sugar users some well-deserved and long overdue relief.

Alas, it was not to be. According to Congress Daily, the USDA announced today [$] that there would be no increase in the import quota for the time being, and that their models saw no cause for alarm because of predicted increases in domestic production and Mexican imports (allowed special import status through NAFTA). And who cares about sugar users’ concerns when you have models?

The American Sugar Alliance says (sigh) that the announcement “makes perfect sense. Supplies are adequate and will soon be building. If any tightness were to emerge, it would not be until next summer. USDA will have adequate time next spring to boost supplies.”

Do you hear that, sugar consumers of America? The USDA is on the case. Now, I’ve got nothing personally against the folks at USDA. I know many of them personally and they are fine people, and smart economists, who are just following congressional orders. But, really, are we still, in 2009, in an at least nominally market-oriented economy, seriously attempting to micro-manage supply and demand of commodities?

One last point from the Congress Daily story (which requires a subscription to read this far):

Last August, the Bush administration adjusted the tariff rate quota to allow an additional 300,000 short tons of sugar to enter the country…[American Sugar Alliance Economist Jack Roney] said the additional sugar … caused raw cane sugar prices to plummet from 23 cents per pound to 19 cents per pound. (emphasis added)

In November 2008, when U.S. raw sugar prices were 19.83 cents per pound, world prices were 12.87 cents per pound. Even allowing for the fact that domestic prices indeed fell quite a lot, on what planet does Mr Roney consider a domestic price over 50 percent above an (unusually elevated) world price to be a “plummet”? Is whether we are paying a lot more – rather than a lot, lot more – really the standard we are aiming for here?

To be sure, world sugar prices are high right now, at least by historical standards. (The average world raw sugar price last fiscal year was 13.67 cents per pound. Last quarter the average world raw sugar price was 16.09 cents per pound. See here for all my price data) But even if they fall back to to historically average levels, Big Sugar wants to keep domestic prices high, and to prevent Americans from having access to cheaper sugar, forevermore.

It really leaves a bitter taste in one’s mouth.

The Post and Times Push for Cap and Trade

Since the June House vote on the Waxman-Markey “cap-and-trade” bill, lawmakers from both chambers have backed significantly away from the legislation. The first raucous “town hall” meetings occurred during the July 4 recess, before health care. Voters in swing districts were mad as heck then, and they’re even more angry now. Had the energy bill not all but disappeared from the Democrats’ fall agenda, imagine the decibel level if members were called to defend it and Obamacare.

But none of this has dissuaded the editorial boards of the The New York Times and Washington Post. Both newspapers featured uncharacteristically shrill editorials today demanding climate change legislation at any cost.

The Post, at least, notes the political realities facing cap-and-trade and resignedly confesses its favored approach to the warming menace: “Yes, we’re talking about a carbon tax.” The paper—motto: “If you don’t get it, you don’t get it”—argues that in contrast to the Boolean ball of twine that is cap-and-trade, a straight carbon tax will be less complicated to enforce, and that the cost to individuals and businesses “could be rebated…in a number of ways.”

Get it? While ostensibly tackling the all-encompassing peril of global warming, bureaucrats could rig the tax code in other ways to achieve a zero net loss in economic productivity or jobs. Right. Anyone who makes more than 50K, or any family at 100K who thinks they will get all their money back, please raise you hands.

The prescription offered by the Times, meanwhile, is chilling in its cynicism and extremity. It embraces the fringe—and heavily discredited—idea of “warning that global warming poses a serious threat to national security.” It bullies lawmakers with the threat that warming could induce resource shortages that would “unleash regional conflicts and draw in America’s armed forces.”

(Note to the Gray Lady: This is why we have markets. Not everyone produces everything, especially agriculturally. For example, it’s too cold in Canada to produce corn, so they buy it from us. They export their wheat to other places with different climates. Prices, supply, and demand change with weather, and will change with climate, too. Markets are always more efficient than Marines, and will doubtless work with or without climate change.)

Appallingly, the piece admits that “[t]his line of argument could also be pretty good politics — especially on Capitol Hill, where many politicians will do anything for the Pentagon. … One can only hope that these arguments turn the tide in the Senate.” In other words: the set of circumstances posited by the national-security strategy are not an object reality, but merely a winning political gambit.

There’s no way that people who see through cap-and-trade are going to buy the military card, but one must admire the Times’ stratagem for durability. Militarization of domestic issues is often the last refuge of the desperate. How many lives has this cost throughout history?

Nevertheless, one must wonder at the sudden and inexplicable urgency that underpins the positions of both these esteemed newspapers. Global surface temperatures haven’t budged significantly for 12 years, and it’s becoming obvious that the vaunted gloom-and-doom climate models are simply predicting too much warming.

Still, one must admire the Post and Times for their altruism. The economic distress caused by a carbon tax, militarization, or any other radical climatic policy certainly won’t be good for their already shaky finances, unless, of course, the price of their support is a bailout by the Obama Administration.

Now that’s cynical.

Nader Supports Health Savings Accounts?

In a recent article Ralph Nader attacks several critics of Obama’s health care reform proposal, including Cato:

Now enters the well-insured libertarian Cato Institute with full-page ads in the Washington Post and The New York Times charging Obama with pursuing government-run health care. A picture of Uncle Sam pointing under the headline “Your New Doctor.” Nonsense. The well-insured people at Cato should know better than to declare that this “government takeover” would “reduce health care quality.”

I agree that Cato employees are “well-insured” – a description so appropriate that Nader used it twice in a single paragraph. At Cato we have Health Savings Accounts, which are probably the closest thing to free market health insurance allowed by law.

It’s nice to see Nader, a proponent of socialized medicine, praise HSAs. But it’s unfortunate that his preferred options for health care would abolish HSAs entirely.

Our Tax Dollars Are Being Used to Lobby for More Government Handouts

The First Amendment guarantees our freedom to petition the government, which is one of the reasons why the statists who wants to restrict or even ban lobbying hopefully will not succeed. But that does not mean all lobbying is created equal. If a bunch of small business owners get together to lobby against higher taxes, that is a noble endeavor. If the same group of people get together and lobby for special handouts, by contrast, they are being despicable. And if they get a bailout from the government and use that money to mooch for more handouts, they deserve a reserved seat in a very hot place.

This is not just a hypothetical exercise. The Hill reports on the combined $20 million lobbying budget of some of the companies that stuck their snouts in the public trough:

Auto companies and eight of the country’s biggest banks that received tens of billions of dollars in federal bailout money spent more than $20 million on lobbying Washington lawmakers in the first half of this year. General Motors, Chrysler and GMAC, the finance arm of GM, cut back significantly on lobbying expenses in the period, spending about one-third less in total than they had in the first half of 2008. But the eight banks, the earliest recipients of billions of dollars from the federal government, continued to rely heavily on their Washington lobbying arms, spending more than $12.4 million in the first half of 2009. That is slightly more than they spent during the same period a year ago, according to a review of congressional records.

…big banks traditionally are among the most active Washington lobbying interests in the financial industry, and the recession has done little to dent their spending. …Since last fall, companies receiving government funds have argued that none of the taxpayer money they were receiving was being spent on lobbying.

…American International Group, the insurance firm crippled by trades in financial derivatives that received roughly $180 billion in bailout commitments, closed its Washington lobbying shop earlier this year. AIG continues to spend money on counsel to answer requests for information from the federal government, but the firm said it does not lobby on federal legislation.

The most absurd part of the story was the companies claiming that they did not use tax dollar for lobbying. I guess the corporate bureaucrats skipped the classes where their teachers explained that money is fungible.

The best part of the story was learning that AIG closed its lobbying operation, though that does not mean much since AIG basically now exists as a subsidiary of the federal government. The most important message (which is absent from the story, of course) is that the real problem is that government is too big and that it intervenes in private markets. Companies would not need to lobby if government left them alone and/or did not offer them special favors. Indeed, that was the key point of my video entitled, “Want Less Corruption: Shrink the Size of Government.”

Cato Institute to Launch Ad Campaign Against Government-Run Health Care

The Cato Institute will launch an ad campaign Thursday highlighting under-reported poll data showing Americans’ concerns that current health care reform plans will raise costs, limit choice and reduce the quality of their health care.

The campaign will feature full-page ads in major national newspapers, in addition to radio spots focusing on why government-run health care cannot address the problems of growing costs and lack of coverage for many individuals and families. The campaign will expand in the weeks ahead.

“Our goal is to help the American public navigate terms like ‘a public plan’ and ‘individual or employer mandates’ to understand what is really happening here,” said Ed Crane, founder and president of the Cato Institute. “The bottom line is, most of the plans coming from the White House and congressional leadership will result in a government-run health care system that is really not the best option for most Americans.”

A poll by the Washington Post and ABC News conducted June 18-21 showed that 84 percent of respondents were “very” or “somewhat” concerned that “current efforts to reform the health care system” would increase their health care costs. The survey also showed that 79 percent of respondents were concerned that current efforts would limit their choices of doctors or medical treatments.

As part of the campaign, Cato is running radio ads in major cities across the country. You can listen to them below, and embed them on your own blog using the code on the official campaign site.

Who Pays?

Download the MP3

Who Decides?

Download the MP3

Cato has also created a new website, Healthcare.cato.org, to promote more free market-oriented health care reform proposals.

The Difference between the Health Care Systems in Canada and the U.S.

Sally C. Pipes understands Canadian health care. As the former assistant director of the free-market Fraser Institute, she lived under Canada’s national health care system and has researched it extensively.

The Canadian experience with national health care has produced waiting lines, rationed care and has not produced the preventive and patient-focused care that it has promised, says Pipes, who is now president of the Pacific Research Institute and author of the new book, The Top Ten Myths of American Health Care.

She spoke at the Cato Institute July 15, 2009.

For market-based solutions to health care reform, visit Healthcare.Cato.org.