Saturday, February 19, 2011

The United States of Redistribution

I sometimes wonder how our country ever survived its first 150 years or so. You would think it was humanly impossible to survive without a massive federal bureaucracy, public sector unions, transfer payments, government grants and refundable tax credits.  Somehow we became the greatest country in the world over those 150 years without all that stuff.  However, all we hear now are cries that we have no hope as a nation if we make even the most modest reforms in trimming government spending and public sector union power.

A good example is this opinion column in today's Cincinnati Enquirer by John T. McNay who is the President of the University of Cincinnati Chapter of the American Association of University Professors Union (AAUP).  If there was ever an aggrieved, abused group who needed the protection of a union it has to be college professors, right??  McNay is unhappy that Ohio is considering a bill (he calls it radical) that is similar to Wisconsin's effort to limit public sector union benefits and collective bargaining rights.

Mr. McNay writes...
Without the safeguards of contracts, firemen, policemen, nurses and teachers will lose the ability to do their jobs safely and efficiently.
How did any of this noble work get done before?  The University of Cincinnati did not have collective bargaining for its professors until 1975.  I graduated from another state university in Ohio right up the road from UC prior to 1975.  I don't seem to recall that my non-union professors were imperiled or were inefficient.  I dare say that professors in those days taught more hours per week than is done today.  Therefore, they actually were more efficient and productive before collective bargaining.  For example, look at this chart comparing college tuition and fees vs. overall inflation just since 1985.   This is efficient?

McNay goes on with some other interesting statements such as...

The AAUP champions shared governance in which faculty and administrators share in the decision-making process to ensure quality education and good financial stewardship. It is our experience that decisions made solely by business managers or accountants end in failure. (my emphasis)
What is ironic is that Mr. McNay is a Professor of History.  The University of Cincinnati was founded in 1819.   How did it ever grow and prosper before the AAUP arrived on the scene?  How did people like Edison, Carnegie, Ford, Firestone, Hearst, Procter, Walton, Jobs, Dell and Gates ever succeed?

Another example is shown in the chart below which shows the dramatic change in the role of the federal government since World War II.   Up to that point, the federal government's role was principally to defend the nation.  It did not spend a lot of time and resources in picking winners and losers and transferring money around.  For example, in 1945, direct payments to individuals only amounted to 2.4% of total federal spending.  There was very little redistribution of wealth.  Today that number is 66.2%.

Let that sink in for a minute.  2/3 of the total activity of the federal government today is to take money from one person and give it to someone else.  That has become the principal role of the federal government.  This chart is from the White House's 2012 Budget as reported by John Merline at via HotAir's Ed Morrissey.

What are the biggest transfer payments?  Social Security, Medicare and Medicaid.  They are also the fastest growing.  Therefore, the amount of redistribution will grow even more in future years without even considering Obamacare's tax increases or future tax increases on the "rich".

Merline points out that at the same time the transfer payments are growing the federal government has come to rely on fewer and fewer taxpayers to cover its costs.  The top half of all taxpayers pay 97.3% of all income taxes today.  The bottom 50% pay only 2.7%.  In 1980, the bottom 50% paid around 8% of the total.

In fact, according to the IRS, which collects such data, the share of income taxes paid by the richest 1 percent almost equals the share of income taxes paid by the bottom 95 percent. 

How much more redistribution can the system take without imploding?   And I am not just talking about from those that have more to those that have less.  I am also talking about the private sector to the public sector.  The young to the old.  The savers to the debtors.  The irresponsible to the responsible.  These are serious questions and they need serious discussion.   We need our best minds on this.   Perhaps a college professor or two that is more concerned about their country than their union could help?

1 comment:

  1. The paragraph re: the change in the role of the federal government and its involvement in direct payment is startling. Good post.