Federal Government Pay Exceeds Most Industries

New data show that worker compensation is rising faster in the federal government than in the private sector. After rapid growth in federal pay during the George W. Bush years, growth slowed from 2011 to 2013 after policymakers enacted a partial freeze on federal wages.

That era of restraint is now over. The latest data from the Bureau of Economic Analysis (BEA) show that wages rose 2.9 percent in the federal government in 2014, on average, compared to 1.7 percent in the private sector. When benefits such as pensions and health care are included, federal compensation increased 2.8 percent, on average, compared to 1.3 percent in the private sector.

Federal civilian workers had an average wage of $84,153 in 2014, compared to an average in the private sector of $56,350. The federal advantage in overall compensation (wages plus benefits) is even greater. Federal compensation averaged $119,934 in 2014, which was 78 percent higher than the private-sector average of $67,246. This essay discusses trends in federal and private pay.

The BEA provides compensation data by industry. The figure shows average compensation in 17 major private industry groups, as well as compensation for federal civilian workers, the military, state and local governments, and federal government enterprises (mainly the postal service).

The federal government has the fourth highest paid workers in the United States, after utilities, mining, and the management of companies. Federal compensation is higher, on average, than compensation in the information, finance and insurance, and professional and scientific industries. Federal compensation is more than twice as high as compensation in the education industry, and it is more than three times higher than compensation in the retail trade industry.

For more information, see here.

Economic Growth Slashed Global Poverty to Historically Unprecedented Level

According to the World Bank, for the first time in human history, “less than 10 percent of the world’s population will be living in extreme poverty by the end of 2015.” The bank has “used a new income figure of $1.90 per day to define extreme poverty, up from $1.25. It forecasts that the proportion of the world’s population in this category will fall from 12.8 percent in 2012 to 9.6 percent.”

As scholars have noted, historically speaking, grinding poverty was the norm for most ordinary people. Even in the most economically advanced parts of the world, life used to be miserable. To give one example, at the end of the 18th century, ten million of France’s twenty-three million people relied on some sort of public or private charity to survive and three million were full-time beggars.

Thanks to industrial revolution and trade, economic growth in the West accelerated to historically unprecedented levels. Over the course of the 19th and 20th centuries, real incomes in the West increased fifteen-fold. But the chasm that opened up as a result of the Western take-off is now closing.  

The rise of the non-Western world is, unambiguously, a result of economic growth spurred by the abandonment of central-planning and integration of many non-Western countries into the global economy. After economic liberalization in China in 1978, to give one example, real incomes rose thirteen-fold.

As Princeton University Professor Angus Deaton notes in his book The Great Escape, “[T]he rapid growth of average incomes, particularly in China and India, and particularly after 1975, did much to reduce extreme poverty in the world. In China most of all, but also in India, the escape of hundreds of millions from traditional and long established poverty qualifies as the greatest escape of all.”

Russia Follows U.S. Script to Intervene in Syria and Embarrass Washington

Vladimir Putin opened a new game of high stakes geopolitical poker, backing Syria’s President Bashir Assad. But Washington has no complaint. America has been meddling in Syria’s tragic civil war from the start.

Russia’s dramatic backing for Syria’s beleaguered Assad government formally buries any illusion that “what Washington says goes,” even in the Middle East. Moscow has begun bombing regime opponents. Sounding almost like the George W. Bush administration, the Putin government insisted that it was fighting terrorism and there really wasn’t a “moderate opposition.”

In contrast, Russia’s intervention has resulted in much wailing and gnashing of teeth in allied capitals. In a joint statement America, France, Germany, Qatar, Saudi Arabia, and United Kingdom claimed that Moscow’s intervention would “only fuel more extremism and radicalization.” The Gulf States separately warned of more “violent extremism” and “terrorists” and increased refugee flows.

Alas, promiscuous American military intervention in the Middle East long has promoted the worst forms of violence and terrorism. Further, for years Qatar and Saudi Arabia have been important sources of finance for “extremism and radicalization.”

Nevertheless, President Barack Obama declared that Moscow risked a “quagmire.” Probably true. Of course, the U.S. understands quagmires, having spent 13 years unsuccessfully attempting to bring democracy to Afghanistan and being drawn back toward a combat role in Iraq.

Secretary of State John Kerry intoned that “Russia has made a catastrophic mistake because they will be siding … against the entire rest of the community in that part of the world,” which mostly means the dictatorial Gulf monarchies, highlighted by totalitarian Saudi Arabia. He also complained about the potential ill consequences—after Washington’s extraordinary record in destabilizing the region, destroying nations, spreading conflicts, creating refugees, and harming noncombatants.

“Any military support to the Assad regime for any purpose, whether it’s in the form of military personnel, aircraft, supplies weapons, or funding, is both destabilizing and counterproductive,” asserted White House spokesman Josh Earnest. Actually, U.S. support for Assad’s overthrow is both destabilizing and counterproductive. Just like invading Iraq and intervening in Libya.

There’s little the U.S. actually can do, at least at reasonable cost, to stop Russia. Washington could push for more sanctions, but the Europeans aren’t going to destroy what remains of their relationship with Moscow over Syria. Even the most war-happy neoconservative hasn’t called for blasting the Russian planes out of the sky.

Certainly U.S. officials have no credibility in claiming that their policy will yield a better result. Washington has intervened repeatedly in the Middle East with disastrous consequences.

America’s participation in the 1953 coup in Iran set that nation on a path toward violent Islamic revolution. Fear of the new Islamic republic caused Washington to back Saddam Hussein’s Iraq against Tehran, which encouraged Hussein to assume he could attack Kuwait with impunity, which in turn triggered America’s first war with Iraq.

To “drain the swamp” Washington invaded Iraq in 2003, wrecking that society, triggering violent sectarian conflict, generating millions of casualties and refugees, expanding Iranian influence, and empowering a new sectarian Shia government. The Sunni insurgency morphed into the Islamic State which, with the aid of former Baathist soldiers, grabbed control over much of Iraq and Syria.

As I point out on Forbes online: “The U.S. and its European allies also helped destroy Libya, resulting in more chaos and another fertile ground for the Islamic State. In Yemen Washington is backing Saudi aggression which has turned a long-term civil war into another horrid sectarian conflict. Weapons given to supposedly moderate Syrian insurgents have ended up with ISIL forces.”

Yet Washington is filled with voices demanding that America intervene more.

The Assad regime is blood drenched and Moscow’s efforts in Syria are likely to have ill effects. But Washington bears most of the blame for wrecking and destabilizing the Middle East.

Russia’s intervention is merely the latest unintended consequence of foolish, irresponsible U.S. behavior. Maybe Vladimir Putin can make Washington policymakers finally learn from their many mistakes.

Still the Slowest Recovery

Friday’s disappointing jobs report reminds us that we are still in a very slow recovery from the 2007 recession. Not only were far fewer jobs created in September than economists predicted, the estimates for July and August were revised downward. And the size of the total workforce slipped to 62.4 percent of the population, the lowest level since 1977.

The Minneapolis Federal Reserve Bank has a handy tool for monitoring the depressing news, allowing you to compare this recovery to past recoveries since World War II. Output (GDP) is recovering more slowly than in past recoveries, along with employment:

Economic Recoveries

Why is the recovery so slow? John Cochrane of the Hoover Institution examined that question in the Wall Street Journal a year ago. Here’s part of his answer:

Where, instead, are the problems? John Taylor, Stanford’s Nick Bloom and Chicago Booth’s Steve Davis see the uncertainty induced by seat-of-the-pants policy at fault. Who wants to hire, lend or invest when the next stroke of the presidential pen or Justice Department witch hunt can undo all the hard work? Ed Prescott emphasizes large distorting taxes and intrusive regulations. The University of Chicago’s Casey Mulligan deconstructs the unintended disincentives of social programs. And so forth. These problems did not cause the recession. But they are worse now, and they can impede recovery and retard growth.

If you put obstacles in the way of investment and employment, you’ll likely get less investment and employment.

A new e-book edited by Brink Lindsey, Reviving Economic Growth, presents ideas from 51 economists of widely varying perspectives on this crucial question.

Taking on the Conventional Wisdom about NATO at the Council on Foreign Relations

It should surprise no one that Cato tends to be an outsider in Washington. At least on the domestic policy side we usually have some allies hiding somewhere along the ideological spectrum. Conservatives are more likely to support free markets; liberals are more likely to back civil liberties.

But on foreign policy Cato often stands pretty much alone. Almost everyone in the foreign policy field can be counted on to endorse every existing alliance and insist that it be “strengthened.” No matter that the Cold War is over, Soviet Union and Warsaw Pact are gone, Maoist China has disappeared, and most of America’s friends and allies have “grown up,” becoming democratic and prosperous. Whatever has been must always be is the seeming motto for liberals and conservatives alike on foreign policy.

Unfortunately, most of the debate in Washington occurs between opposing establishment advocates of the status quo. Everyone knows we should intervene. The only questions are how much more bombing is appropriate, what new tactics might prove to be more effective in imposing Washington’s will, and, most important, how to get a different result doing a lot more of the same?

But I recently had an opportunity to crash an establishment event. Actually, perhaps more surprising, I was invited to participate. The Council on Foreign Relations staged a discussion on NATO’s future in which I joined James Goldgeier, dean of the School of International Service at the American University. Thom Shanker of the New York Times served as moderator.

It was an eminently civil affair, as Council events almost inevitably are. Goldgeier enjoys disagreeing without being disagreeable; in fact, he has participated in Cato events at our invitation. Shanker, a long-time reporter before ascending to editor, has strong interest in the issues and knowledge of the facts. The audience joined in, asking good, serious questions.

Perhaps most striking was the fact that everyone appeared to acknowledge that the alliance was seriously dysfunctional, with European countries unwilling to spend much on their own behalf while expecting America to make up any gaps. Where Goldgeier and I disagreed was whether the organization was too important for Washington to abandon. He thought so, while I contended that the end of the Cold War and rise of Europe allows America to finally turn over defense duties to those being defended.

The audience also seemed greatly frustrated with the behavior of our “allies.” While I can’t say the majority were ready to join my “out of NATO” parade, they did not seem shocked by my criticism of Washington’s most important pact. Even on foreign policy Cato’s ideas increasingly have a place in serious policy discussions. That’s all to the good, given how dramatically status quo ideas have failed. Especially in the international arena.

We still have a long way to go to change policy. But events continue to affirm the warnings that Cato scholars have made since the Institute’s founding about the dangers of promiscuous intervention. I look forward to more events, like that held by the Council, to make the case for a foreign policy that more effectively protects America—its people, territory, market economy, constitutional order, and dedication to individual liberty.

America Should Charge the World for Defending It

Today the U.S. underwrites the defense of wealthy nations across the globe. Washington should stop using the Pentagon as a global welfare agency.

Uncle Sam at least should charge for his defense services, as Donald Trump has suggested. America shouldn’t be defending its rich friends for free.

Most Republican Party presidential candidates insist that Washington do more on behalf of its already subsidized, protected, coddled, and reassured allies. Why do U.S. politicians put the interests of other nations before those of America?

The Pentagon devotes much of its resources to defend other nations, mostly wealthy industrialized states. In most of these cases America has no important, let alone vital, interests at stake. Instead, Washington should allow allies and friends to protect themselves.

China: Historic Empire Transformed, Fragile Leader In The Making?

SHANGHAI, CHINA—Shanghai, China’s financial capital, enjoys a double skyline. The city proper, or “old city,” sports a fascinating mix of colonial buildings and modern architecture. The “New Area” of Pudong hosts Shanghai’s four tallest structures, on the east bank of the Huangpu River.

In contrast, when I first visited Shanghai a couple decades ago there were few buildings, commercial or residential, racing skyward. Pudong was mostly empty, with more brush and trash blowing down the streets than buildings with people working in them.

But there is another China. More distant towns offer a vision into the past—more traditional, less advanced, more isolated. Shift to the nearby countryside and incomes drop substantially, averaging less than $2000 per capita. My traveling group stopped by the remains of an ancient fortress and the Great Wall, which required walking along dirt roads lined by homes constructed with bricks taken from the ruins. The primitive toilet had holes in the wooden floor, through which the ground was visible.