Amity Shlaes on Government Employment

From Bloomberg's Amity Shlaes (2/17/10):

From January 2000 to January 2010 -- first under President George W. Bush after Sept. 11, then under Barack Obama -- the number of non-postal employees in the federal government grew 15 percent, to 2.18 million from 1.89 million...[but] over the same period, private-sector employment decreased by 3 percent.

[When including local and state government employees] Federal data show that [over the last decade] the number of total government employees in the U.S. rose to 22.5 million from 20.6 million.

Jobs with Uncle Sam aren’t just more numerous than they used to be. They’re better. Wages and benefits for federal civilian workers were more than double the average total compensation in the private sector: $119,982 versus $59,909. In the treacherous period between December 2007 and mid-2009, the number of federal employees earning more than $100,000 doubled, rising to 66,500 or so.

See here for more. Personally, I'd love to be a federal government attorney. Right now, I regularly receive phone calls where the person calling has a good case based on the facts and the law, but his or her wage losses or damages are too low to file suit.

Many people don't realize that lawsuits are expensive. By the time you file a lawsuit, get the complaint served, file a few motions, and take a deposition, you're looking at about $2,000 in costs--none of which goes to the lawyer. Fast forward six months, and costs can increase to $6,000 easily. In one case I took to trial, the other side's costs exceeded $18,000.

If damages are low, I cannot ordinarily justify spending $5,000 of my own money for a potential $10,000 settlement--and so many hourly or part-time workers have cases where six months of severance would equal about $10,000. Sadly, it's not unreasonable to argue that poor people get run over twice--first, in their job environments, because poor people tend to take tougher or boring jobs, and second, in finding an attorney to negotiate a severance or to file suit.

In any case, if I worked for the federal government, I could, assuming the approval of my boss, assist anyone who had a good case. Why? The taxpayer would be footing the bill for my time, not the poor or middle class worker. Of course, I would hope the agency would keep costs as low as possible. One way to do that would be to reduce retiree benefits, such as pensions. If taxpayers are paying $80,000/yr to a retired cop or lawyer, that's $80,000 that's not being used to hire a new cop or lawyer. Plus, it's always been unclear to me why taxpayers should be paying money to someone who is not longer helping taxpayers.

These kinds of "golden parachutes" exist in the private sector, too. In fact, taxpayers could be liable for private pension obligations as well as government employees' pensions. As of 2008, the Pension Benefit Guaranty Corporation (PBGC) had a $10.8 billion deficit, estimated to rise to $26.3 billion in 2018; however, total underfunding of all private sector pension plans, on a termination basis, amounts to an astounding $225 billion. Clearly, we have a problem.

America's pension plans need reform. One simple reform would be to require that all new government workers have 401(k)s, not pensions. Such a move would immediately reform public sector pension plans and assist already stretched taxpayers, but it is highly unlikely. Public sector unions have so much clout, it seems they can force politicians to put government employees' interests ahead of taxpayers' interests. That's a shame, because Congress had no qualms about reforming private sector pension plans. According to CNN's Colin Barr, Congress has already enacted a law--the 2006 Pension Protection Act--to force corporations to fully fund their pensions by 2015. See here for more.

Despite the new law, cash-rich companies like Exxon Mobil Corporation (XOM) continue to have underfunded pensions. In Exxon's case, its pension is underfunded by about $6 billion. Shareholders should take notice--over the next five years, some companies may have to reduce their growth or take on more debt to fully fund their pensions.

More here, from Mark Scolforo. He points out that taxpayers are in the hole $1 trillion because of public sector retirement benefits, including pensions: "As of 2008, states had $2.4 trillion to meet $3.4 trillion in promised pension, health care and other post-retirement benefits."