Katherine Kersten: Public sector: An anchor as we sink

Want an example of what union muscle and big deficits can do? Greece.

America is awash in deficit spending. President Obama and his allies in Congress are flooding the economy with funny money, but the average American isn't seeing a dime.

In fact, the average American can barely hold on to his job. In the midst of an outpouring of federal dollars intended to spark job creation, unemployment remains stubbornly stuck at almost 10 percent, with underemployment much higher.

So where is this river of federal money going? The Obama administration's $787 billion "stimulus" dollars seem, in good measure, to have disappeared into a black hole.

But in the midst of our jobless misery, one group of workers is truly getting "stimulated."

That's government employees. The federal government has added almost 9,000 jobs a month, and the federal payroll has spiked a whopping 10.5 percent, since the current recession began in December 2007, according to data from the Bureau of Labor Statistics.

And guess what? Federal employees are also earning higher wages and benefits than private sector workers do. The average federal worker now earns $71,206, compared with $40,331 in the private sector, according to an analysis by USA Today. "Federal employees making salaries of $100,000 or more jumped from 14 percent to 19 percent of civil servants during the recession's first 18 months," the paper reports -- and that's before overtime pay and bonuses are counted.

While the rest of the economy is reeling, government just keeps expanding. Why?

A major factor is the power of public-sector unions. New data from the Bureau of Labor Statistics show that, for the first time in history, a majority of American union members -- 52 percent -- now work for the government. James Sherk of the Heritage Foundation points out that "three times more union members now work in the Post Office than in the auto industry."

In the private sector, unions' power is constrained by market factors. Competitive pressures limit how many people a company can hire, and the wages and benefits it can offer. If unions make unrealistic demands, their employers simply won't survive.

But government, unlike business, isn't constrained by market pressures. As a monopoly, it can add workers, and boost wages, benefits and pensions, without the adverse consequences that profit and loss impose on private-sector firms.

Some might argue that a large, secure and prosperous government workforce is good for a nation and its people.

The folks in Greece certainly bought that line -- at least until the bill came due earlier this month. That's when the country's economic perils threw world financial markets into turmoil.

Greece's plight is due largely to the fact that one in three Greeks is employed by the government and is guaranteed lifetime employment. According to the New York Times, public wages and pension payments make up fully 51 percent of the country's budget -- a huge drag on the economy. Over the last decade, Greek public-sector workers' pay has doubled and their numbers have exploded, thanks to union muscle.

The result? Greece is heading off a financial cliff. The country's annual deficit is now almost 13 percent of GDP -- four times greater than the European Union's cap of 3 percent of GDP. This back-breaking debt has raised the specter of a Third World-style bailout from the European Union or IMF, or even the unthinkable: default.

Is America's vibrant economy immune to the kind of economic paralysis Greece is experiencing?

There are indications that, while we're not heading over the cliff just yet, we're going straight for it.

States with strong public unions -- including California, New Jersey and New York -- make the threat vividly clear. There, unsustainable budget deficits and public pension liabilities are killing economic vitality.

California's unemployment rate is 12.3 percent, and its deficit is $20 billion. In the last 10 years, pension costs for the state's public employees ballooned 2,000 percent, while revenues grew only 24 percent. Today, more than 15,000 state government retirees get pensions of more than $100,000 a year -- including some who can retire at age 50 with a pension that is 90 percent of their final year's pay.

California Treasurer Bill Lockyer, a liberal Democrat, has warned that public employee pensions will bankrupt the Golden State.

Today, U.S. total public debt is 53 percent of GDP and rising. By 2018, some forecasts project it will reach 85 percent of GDP, and by 2038, 200 percent of GDP. In the 10th year of Obama's budget, indications are that interest alone will total almost $1 trillion.

Our elected officials have made clear they won't put the brakes on this looming disaster. Only voters and taxpayers can do that.

Katherine Kersten is a Twin Cities writer and speaker. Reach her at kakersten@gmail.com.

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