The Real Fairness Issue

Barack Obama likes to talk about fairness.  He continually vilifies Republicans as being against fairness while at the same time supporting the public employee unions against any reform of their compensation and benefit packages that are better than the average non-government worker performing similar jobs.  An April 11, 2012 Wall Street Journal editorial reported that a Bureau of Labor Statistics study published in the Winter 2012 Journal of Economic Perspectives found that state and local government employees receive salaries 10% higher and current benefits 21% higher on average than private sector employees.  Similarly, a recent Congressional Budget Office report found that federal employees retirement packages of pensions plus health care benefits were 3.5 times more generous than those in the private sector.

How fair is that given that the private sector workers are the very people paying the salaries of those government employees?  Maybe it would be a good idea for Republicans to make that a fairness issue and campaign for reform of the overly generous government compensation deals.  I suppose it is possible that reducing the pay of government employees might cause minor disruptions in the provision of some government services.  Therefore the changes could be gradual but on a specific schedule in order to get the bloated ship of state turned around and heading in a more fair and rational direction.

Perhaps we need something like what the airlines have gone through, basically abandoning the old operating methods through attrition and starting over with a lower cost structure with new employees.  Freezing salaries for some period of time may be all that is needed regarding current payroll outlays.  But changes definitely need to be made in retirement and health care benefits.  Even though most private sector employers have changed to the more rational defined contribution pension plans, most government employees still enjoy unaffordable defined benefit retirement plans.  Defined benefit plans assuming 8% returns in a 3% world is unsustainable, and these funds will run out of money to maintain benefits much sooner than most expect unless we mandate that our children and grandchildren sacrifice their living standards to support us.  Are people today really that selfish as to not care about what legacy we leave our children?

Over the last two decades the salaries and benefits for public employees have grown much faster than they have for those in the private sector.  That disparity has to be addressed whether the public unions like it or not, or we will be in the same situation Europe finds itself in with bankrupt governments, high unemployment, no growth and civil unrest.  That is clearly the direction we are heading.  European countries must make across the board cuts in public sector salaries and benefits in order to reduce their government debt and reposition their economies for future growth.  That will take time and be very painful, but they really have no choice.  It would be much better for our country to undertake those actions now before we get into the same chaotic situation as Europe.  Why is that reality so hard for Congress and public employee union leaders to understand?