Does Obama Know Why the Public Sector Isn’t ’Doing Fine’? - Bloomberg
: "On Friday President Barack Obama spoke about why the economic recovery has been so slow. People are focusing on his gaffe -- saying “the private sector is doing fine”
-- and Ezra Klein admonishes us to focus on the president's substantive point, which is that job losses in the public sector have undermined the recovery overall. Unfortunately, Obama didn’t mention a major barrier to job growth in the public sector -- and neither did Ezra: unsustainable compensation structures.
This problem existed before the recession, but it’s gotten worse during the recession, because public pension systems
are designed to have very rapid rises in current-year cost in the years following a recession. . . . the main reason is that costs for a full-time equivalent employee are astronomical and skyrocketing.
San Jose spends $142,000 per FTE on wages and benefits, up 85 percent from 10 years ago. As a result, the city shed 28 percent of its workforce over that period, even as its population was rising.
A lot of that increase is due to rising required pension payments, as the assets in the city’s pension funds have lost value. But much also had to do with what Mayor Chuck Reed, a Democrat, describes as “irresponsible policy actions” over the last 15 years. Here’s his list:
1. Giving out raises faster than revenues were growing.
2. Giving out raises and increasing benefits when revenues were falling.
3. Giving out raises and benefits retroactively.
4. Allowing employees to cash out unlimited amounts of sick leave when they retire.
5. Providing lifetime health care for retirees. . . "
Need one say more? Hogs at the Trough.