Public Sector Unions Threaten Our Fiscal FuturePublic sector leaders will oppose any efforts at fiscal sanity.
Lewis M. Andrews
Mar 31, 2023
The recent collapse of Silicon Valley Bank and Signature Bank is just the latest warning that Washington has long passed the point of prudent debt accumulation. Whatever President Biden hoped to achieve with his American Rescue Plan and deceptively named Inflation Reduction Act, the inflation produced by these budget-busting bills and subsequently required interest rates hikes have forced banks to adjust their lending to the devalued long-term bonds that capitalize them. And while most seem likely to avoid the fate of Silicon Valley and Signature, the banking system’s abruptly shrunken capacity to lend almost guarantees a recession later this year.
With prominent Democratic economists like Larry Summers and Jason Furman predicting further financial damage from continued government overspending, even progressives know they must be far more specific about how they would fund their agenda and stop relying on future deficits as a backstop. Already we are hearing far less from the left about Modern Monetary Theory—the belief that a country can comfortably live beyond its means in the long run—and a lot more about various income and wealth redistribution plans: raising the cap on capital gains taxes, imposing an annual wealth tax on high-net-worth individuals, hiking corporate taxes, taxing a company’s buyback of its own stock, eliminating the stepped-up basis on inherited assets, and treating unrealized capital gains as income.
What those on the left have yet to accept is that none of these schemes can produce anything close to the revenue they hope for. As twelve European countries learned when they hiked a variety of levies and fees on their highest earners in 1990, the targeted taxpayers either move away or reduce their investment activity to the point where overall government collections decline. These nations lost so much money, in fact, that by 2017 almost every one of the original wealth taxes had to be repealed.
Trying to impose higher taxes on corporations would prove no more fruitful, as U.S. firms can always move their respective headquarters to more lenient jurisdictions such as Ireland, as Eaton, Johnson Controls, and many others have already done. Last October, a number of governments tried to close that particular escape hatch, agreeing amongst themselves to a 15 percent minimum tax on corporate income, but found that too many other nations were unwilling to go along.
Sooner or later, those on the political left will have to adjust to the reality that the only way to fund new social programs without either increasing the national debt or imposing counterproductive taxes is by making existing programs operate more efficiently. Take public education, for example, where today’s budgets typically have no relationship to student performance. Compared to the rest of the world, the U.S. spends the fifth-highest amount per pupil ($612.7 billion annually), yet its students consistently rank average to below-average on international tests of math, science, and reading.
Government-funded healthcare is another area where public money is massively squandered. According to former Louisiana Governor Bobby Jindal, who now serves on the board of LifeMD, at least $150 billion is wasted each year on excessive or unnecessary medical procedures. And the global management firm McKinsey and Company says Medicare and Medicaid could easily raise another $150 billion with simple data management techniques that better identify fraud.
* * *
There is unfortunately one faction on the left that will not take well to what historian Simon Heffer has called the coming “Great Government Jobs Audit,” and that is government workers themselves, especially the leaders of their unions. And not just because less competent public employees would likely be reassigned, paid less, demoted, or dismissed, this last leaving the proceeds from union member dues considerably reduced.
Many public sector leaders have become greatly attached to the political power that has resulted from decades of lax oversight. Their power is typically disguised by jargon-laden rules and procedures, but strong enough that American Federation of Teachers president Randi Weingarten could keep U.S. schools locked down during the pandemic and Anthony Fauci could subsidize illegal genetic research at China’s Wuhan lab, then cover his tracks with a phony scientific study.
* * *
Source:
https://www.theamericanconservative.com/public-sector-unions-threaten-our-fiscal-future/
