Thursday, October 3, 2013

Bearing the Brunt: Federal Employees

Bearing the Brunt: Federal Employees

The shutdown of the federal government has prompted the media to send reporters to the national parks to interview disappointed tourists.  The financial press has been running stories about the increasing concerns on Wall Street over the shutdown and looming deadline to increase the debt ceiling.   Indeed, stocks prices are beginning to gyrate more and more every day.   However, the S&P 500 is merely 3% beneath its all-time high achieved in mid-September of last month.   Both the tourist and financial perspectives miss where the true pain and misfortune are hitting home.

Needless to say, the poor are being hurt.  Of course, they’ve already faced an onslaught, as the federal and many state governments have waged a war on the poor instead of a war on poverty.  In today’s post I want to focus on federal employees.  These folks are taking a beating.  For starters, federal employees haven’t received a cost of living increase in several years.  Then sequester hit earlier this year, requiring many workers to lose two weeks of pay through furlough.  And now most of them have been sent home.
Shutdown (1999)
I’d provide you with a bunch of statistics, but most government websites have been mothballed.  From what I’ve been able to glean, the median federal employee earned $74,700 in 2012,  is about 47 years old, and tends to live in a major metropolitan area.  In today’s world nearly $75,000 is a pretty good wage, but the folks making this money have significantly more education and experience than their private sector counterparts.  Of course, many federal employees make a lot less than the median and live in places where everything from rent to food is expensive.

I suppose it is easy to create a caricature of federal employees as mindless bureaucrats and thereby justify the shabby treatment being directed their way.  However, these people are no different than you and me.  The particulars of their jobs are just like those found in the private sector.  Of course, armies of public employees process paperwork.  What do you think goes on in the private sector?  Have you ever looked at the back offices of Wall Street, an insurance company, or a call center?  Ironically, the federal government almost always runs these operations with lower administrative costs than the private sector.

Moreover, there are thousands of civil servants trying to maintain the safety of the water you drink, the prescription drugs you rely on, and the airplanes you board.  When something goes wrong in the United States, we expect public servants to solve the problem, be it a hazardous waste site, a natural disaster, or a financial crisis.   Yet we’ve systematically cut their operating budgets, demeaned them as people, and threatened their incomes.

Some of you are probably thinking that federal workers are only now facing up to the restructuring and downsizing prevalent for so long in the private sector.  I bet you don’t know that federal employees hired after 1984 don’t receive a full defined benefit plan, or the degree to which outsourcing has upended government employment while saving you nothing. 

Perhaps you believe that the periodic reports of no-show employees or expensive IRS conferences justify this systemic clamp down on federal employees.  After all, as government critics say, “it’s taxpayer money.” In my thirty plus years in finance, I’ve seen excess and waste at all levels in banks, investment firms, and corporations in general.   The abuses across the private sector, and in finance in particular, make the anecdotes emanating from government look pretty small. 

You might want to remind yourselves that you are the ones paying for these private sector excesses through some combination of higher prices, lower stock prices, and higher taxes.  Don’t forget that the private sector “no-show” job or extravagant off-site is a tax-deductible expense: the corporation pays less and you pay more.  Most significantly, you paid for the Wall Street bailout by extending the government’s AAA credit rating to protect financial institutions and by injecting your tax dollars into financial institutions.  And you are still paying, because financial institutions are using the tax code to deduct losses generated by their mismanagement and fines imposed on their misconduct.

While a small group of Republican legislators appear to be at fault in forcing the government to shutdown, mainstream Republicans and Democrats are to blame in the lead up to this impasse.  Both parties have been hollowing out government for the better part of twenty years, thus ensuring that it cannot function reasonably well.  We’ve come to a point where the best the Democrats have to offer is a short-term continuing resolution to fund government at its present levels.

Most of us can go about our lives with a government that operates in fits and starts until something goes wrong.  Then we’ll demand a lot more.  For the needy and our country’s public servants, something has already gone terribly wrong.

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