The Wisconsin Battalion Fired the Loudest Shots in the Battle of the Bulging Government

Our country will soon be jolted by successive economic shockwaves that will ratchet down consumer confidence as our states and local governments are constitutionally forced to remedy historic revenue short falls.  With public opposition rapidly mounting against tax increases, most governments will be faced with the monumental task of slashing budgets.  The state of Wisconsin fired one of the first nationally heard shots across the bow of this newest American crisis.

In the state of Wisconsin, senators are attempting to bring to the floor a bill to give maximum flexibility for crafting a workable budget.  One line item of the bill caused half the senate to walk out, and sparked a teacher rally that filled the senate floor.  Public primary education teachers in Wisconsin make approximately $100,000 compensation, including salary and benefits. They can retire after 25 years service and receive a one time payment of $950,000, plus approximately $100,000 each year for life after that.

The Wisconsin state senate has 19 Republican senators who have vowed to reduce this budget line item.   However senate rules require 20 out of 33 senators to be physically present for a quorum to vote. All Democrat state senators staged a walk out and left the state for Illinois to avoid wounding the state teachers union. However, they must physically step onto the Senate floor to collect their checks. If even one Democrat defects, a vote will occur. Makes interesting politics.

In Sarasota, Florida where I live, the county’s tax revenue will not cover public employee retirement benefits this year. How did Sarasota, Wisconsin, and the rest of the country reach this seemingly overnight crisis?  During the economic bubble decades from 1980 until recently, government spending grossly outpaced our population and grew to spend revenues that had been inflated by economic bubbles and consumer borrowing. 

When the Great Recession hit, state revenues from most sources shrank, including federal transfer, sales, and income taxes.  All these sources had been artificially buoyed by successive bubbles, and now popped simultaneously along with our latest and greatest housing bubble.  With shrinking housing prices, plunging ad valorem revenues just added to the fray.  When tax revenues shrank to fit our sustainable private industry job base, decades of excessive government spending left an overwhelming shortfall that exposed both our governments’ lack of understanding of bubble risks, and their willingness over thirty years to spend increasing tax windfalls rather than reduce tax rates.

As an example, our local and state governments escalated public employee ranks and pay scales to match escalating revenues; increases that well outpaced our population increase.  During the last three decades, the U.S. population increased 37 percent, but our local government employment increased 56 percent, and state government employment increased 68 percent. 

State and local budget line items increased well beyond our population growth as well.  As an example, while an increasingly older and poorer population could partially explain a 100 percent increase in health/welfare spending in real dollars, the vast majority was spent to increas staffing, compensation, and programs.  Also, educational spending increased 50 percent in real terms when the school age population only increased 11 percent. In the last five years of the great housing bubble, total state spending increased 30 percent in an attempt to keep pace with accelerating home prices. 

Because of 30 years of escalating state and local government spending during the boom years, we now face yet more waves of economic crises, the first of which will be successive slashing of state and local budgets that will cause economic backlash and social unrest as a poorer public is forced to adjust to fewer government services.  Governments will have little choice but to reduce public employee ranks by 20 percent to right size government to our population size.  To balance budgets, remaining public employees will be forced to take 20 percent compensation cuts to match resulting sustainable GDP.  When the suds clear from this latest bubble burst, 4 million public servants will lose their jobs and an additional multiplier of parasitic jobs will be lost as well, exposing America’s latest of its coming destructive waves.

1 Comment

Filed under American Governance

One response to “The Wisconsin Battalion Fired the Loudest Shots in the Battle of the Bulging Government

  1. I should have worked in Wisconsin. My highest salary was $40,ooo after working 28 years fosr retirement credit and substituting, tutoring, and half day work for another 15 years. During that time, my substitute pay was $12.oo in 1964. Stsarting a private school kinjdergarten in Texas, my salary was $185 every 2 weeks for 9 months of the year. I manage my expenses well in retirement. My take home pay is $1729 per month. I consider this adequate if I live within my means. If I don’t, my dear children will have to support my whims or “as needed necesssities.” I am quite old and unable to demonstsrate. However, the Wisconsin dudes can pick on somseone else besides teachers who have spent a lifetime improving education and lifestyles sfor the masses in The United States. Find some padded expenses and take the samea health benefits as we , less fortunate have. Quit government padded expenses. Travel on the bus or railroads and athat will improve the economy. I would rather fight than quit. Take away 20% of my income, where do I cut. Charity giving that helps feed, and clothe the homeless, $4oo discretionaary spending? The state of Ohio has tried for years sto rtake over the State Tecachers Retirement System. So far we have remained solvent with the federal arms away from us. I will not receive social security at the death of my husband nor do I rreceive any now. As AI said, i am careful to live within my means even if it gets pretty mean at times. I am thankful for my faith in God and the guidance and comfort of The Holy Spirit. Are the legislators in Wisconsin in tune wit5h that? I hope so for the people of Wisconsin. Had they not overspent in the past years and closed their eyes to budget shortfalls , they would not be in their present situation. Quite frankly, I only seee retirees having the means and the sense to endue these times.

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