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The Shutdown Shakedown (and the Lowdown on It, Too)

April 7th, 2011 . by economistmom

This morning’s Washington Post could be called the special “Ponder the Shutdown” edition–perhaps the first in a week- or month-long series.  For federal workers, most of whom live here in the DC area, these are no doubt scary times, when one is not sure if one will be deemed “essential” and continue to get paid.  (Here’s a good FAQ section from today’s Post.)  I feel badly for my government-worker friends but continue to believe the adverse effects of a shutdown would be largely contained within the Beltway and that a shutdown would not cripple the economic recovery over the longer run or even immediately, simply because I doubt it would last very long or affect the neediest of households.  (Safety-net benefits will still get paid, and although government workers really aren’t paid as highly as their private-sector counterparts, I think they still do well enough to survive any potential blip in their income stream.)

The threat of the shutdown is hardly about the federal dollars it would save from the shutdown, or even about the continued funding for the current fiscal year (through September) that the disagreement is supposed to be about.  The threat of a shutdown amounts to a “shakedown” that each side is using to try to claim intellectual dominance or moral superiority over the other side on the federal budget more generally.  And the amounts of attention currently given to the particular unresolved budget issues–about this week, this year, next year, and beyond–seem inversely proportional to the sizes of the problems.

Incidentally, speaking of both “intellectual dominance” and “moral superiority,” it appears that Paul Ryan made a serious blunder asking the Heritage Foundation to do the macroeconomic analysis of his budget plan.  (And I would believe that even if Paul Krugman wasn’t the one, among many, to point it out.)

12 Responses to “The Shutdown Shakedown (and the Lowdown on It, Too)”

  1. comment number 1 by: Gipper

    Interesting quote “although government workers really aren’t paid as highly as their private-sector counterparts…”

    If that were true, then it could mean the following:

    1. Government workers accept lower wages now in exchange for training that will help to get higher paying jobs later. E.g. Justice Dept. prosecutors, officers in military, foreign service staff, Congressional and White House staff, etc. This is a rational investment in human capital, not some public service sacrifice.

    2. Government workers aren’t as capable as their private sector counterparts so they’ve settled for the job they could get. If they were as capable and were getting paid less, then it would mean they weren’t very smart, which kind of refutes the premise.

    3. Government workers prefer a work environment where it’s nearly impossible to be fired for doing your job poorly.

    4. The job doesn’t have a private sector counterpart. E.g. Marine infantryman risking IEDs and snipers in Afghanistan.

  2. comment number 2 by: Gipper

    Ryan’s voucher plan, while admirable, isn’t going to fly economically or politically. As long as the citizenry believes that someone else should foot the bill for their medical misfortunes, then there’s only one surefire way to control medical costs.

    The government must adopt policies to ensure that people lead healthier lives, get fewer illnesses, and use fewer medical resources.

    Yes, we should eliminate tax deductions for employer-provided medical insurance. We should do everything possible to ensure that we minimize the occasions when an insurance company is interposed between a patient and the doctor. These policies will help a lot. But not enough.

    We must do the following:
    1. Raise Medicare tax rates a lot higher.
    2. Offer Medicare tax rate discounts to taxpayers who can demonstrate that they are leading a healthy lifestyle that statistically predicts will lead to fewer demands upon the healthcare system.

    Comparing the percentage of GDP spent on healthcare of the US to other nations ignores the vastly inferior nutritional and exercise habits of Americans versus other developed nations.

    It’s real simple. Healthy people don’t spend money on healthcare. Only sick people do. Neither the Democrats or Republicans are proposing incentives required to encourage people improve their health. Rather both parties are just assuming that the level of sickness is an exogenous variable so all they can fight about are ideological shibboleths.

  3. comment number 3 by: Gipper

    Visit a doctor’s office in a poor neighborhood serving a lot of Medicaid patients. Very quickly you’ll notice a lot of obese patients with obese children.

    The government should immediately begin its Michelle Obama healthy living jihad on the Medicaid population. Condition any future Medicaid assistance on patients demonstrating empirical evidence that they are hitting targets for lowering their body fat percentage, cholestorol, blood pressure, and cease smoking.

    Better yet, have a program that encourages Medicaid recipients to exchange their television sets for $1,000 grocery vouchers (or food stamps, if you prefer) that are limited to healthy food items (e.g. no potatoe chips and Cola). The boob tube encourages more indolence and unhealthy living than even the automobile.

  4. comment number 4 by: BillSmith

    “government workers really aren’t paid as highly as their private-sector counterparts”

    Ha!

    I guess the key is in the word “conterparts”.

  5. comment number 5 by: Jim Glass

    government workers really aren’t paid as highly as their private-sector counterparts

    The town I grew up in, in a suburb north of NYC, has a public school district with 4,300 students. Its superintendent is paid $343,000. The superintendent of the NYC public school system is paid $250,000 to manage schools with 1.1 million students (and a $22 billion budget.

    So our local superintentent is paid, oh, 351 times as much per student as the head of the NYC school system.

    But don’t fee sorry for her that she is overworked — she has 26 assistants paid an average of $165,000 each. That’s one $165k assistant adminstrator for every 173 students.

    So she has some help. And this is the routine situation. The NY Times recently reported that a dozen local town/village school districts in the county pay their superintendents over $300k annually, and the others aren’t far under. (While the entire population of the county is less than the number of students in the NYC school system.)

    Gipper’s comment: I guess the key is in the word “conterparts” seems spot on. Who are “the private sector counterparts” of these people?

    Of course, almost nobody in the town knows these money numbers — nobody I’ve asked does — as one has to dig deep through a state web site to get them.

    I only did it because the family home I grew up in is where my aging mother still lives, I’ve started managing her property tax payments and all — and after what the recession has done to my business, and three kids in private school have done to my savings, the value of that house is now my “retirement plan”. So I started looking into these things.

    For the record, the district has revenue of $96,108,000 — $22,350 per student — of which a good 55.7% is spent on “expenditures on instruction”. But that’s not enough, it’s now trying to push thru a $96 million bond issue, the debt service on which will be most of another $1,000 per student in annual cost.

    Also for the record, the private schools I’ve sent my kids to, which have wiped out the life savings I used to have, are first-class ones in expensive Manhattan, with much better educational results than these mediocre town public schools — yet they have cost in annual tuition only about from 20% to about 60% as much as the tax cost of these public schools, per student.

    So, no, it seems private schools educators are not the “counterparts” of public school ones.

    Did I mention that I’m joining the Tea Party?

  6. comment number 6 by: B Davis

    Incidentally, speaking of both “intellectual dominance” and “moral superiority,” it appears that Paul Ryan made a serious blunder asking the Heritage Foundation to do the macroeconomic analysis of his budget plan. (And I would believe that even if Paul Krugman wasn’t the one, among many, to point it out.)

    I’m not that surprised to hear about the problems with analysis done by the Heritage Foundation. One of the most blatant examples of cherry-picking that I’ve run across is Chart 11 referenced in their paper titled The Historical Lessons of Lower Tax Rates. Following is an analysis of that chart which I wrote several years ago:

    Chart 11 is titled “Lower Tax Rates Work: Revenues Grew Faster Under Kennedy and Reagan” and shows the average annual increase in real income tax revenues for five time spans. I believe that the time span 1962-1969 was meant to be 1962-1968 as that most closely matches the budget numbers. The table below shows the numbers from the chart and my own calculations from the 1997 U.S. Budget:

    First year…………… 1953 1962 1969 1977 1981 1990
    Last year……………. 1961 1968 1976 1980 1989 1995
    Number of years in span.. 9 7 8 4 9 6
    Revenue Growth (chart 11) 0.01 4.79 1.53 —- 2.2 1.34
    Revenue Growth (budget).. 0.11 4.67 1.55 7.48 2.19 1.56

    The first glaring question is what in the world happened to the time span 1977-1980 in Chart 11!? Is it missing because it had a 7.48% growth rate, very much confusing the issue? In addition, why are the time spans of varying lengths? Looking at the reference to Chart 11 in the article, there is no mention of the missing and unequal time spans, much less an explanation.

    Of course, some of their analysis may be much better. But the fact that they continue to leave posted examples of analyses such as this one makes it difficult for me to take them seriously. At the very least, I would fact-check anything they put out very carefully.

  7. comment number 7 by: Arne

    “$22,350 per student ”

    That is certainly way above average. Do you have a link?

  8. comment number 8 by: Gipper

    Arne,

    Read Adam Schaeffer’s “They Spend What? The Real Cost of Public Schools” Cato 3-10-2010, to learn how the official education expenditure statistics omit capital expenditures and other expenses from the overall figures.

    Public schools expenditures per pupil are much higher than the average parochial school that account for the vast majority of private schools. The St. Augustine’s, Andovers and Exeters are a tiny fraction that get all the press.

  9. comment number 9 by: Jim Glass

    “$22,350 per student” That is certainly way above average. Do you have a link?

    Sure. In addition to the $343k superintendent and her 26 $165k assistants, teachers’ average compensation is $62,108 salary + $21,551 benefits, $83,659 (plus summers off and tenure job protection, of course). Plus “other staff” exceed full-time teaching staff by more than 30%.

    But “certainly way above average”?? No, remember, the Times reported that a dozen superintendents of these small school districts are paid more than $300k.

    Looking at the numbers for some neighboring communities, these are the first ones I pulled up…

    Mamaroneck
    expenditures: $122,167,894
    students: 5,074
    per student: $24,077

    White Plains
    expenditures: $173,371,000
    students: 7,049
    per student: $24,595

    Elmsford
    expenditures: $23,646,000
    students: 1,005
    per student: $23,528

    Etc., etc.

    As Friedman said, “Governments spend all the revenue they can collect, and then as much more as they can”.

    That’s why my local school district, while collecting revenue of $22,350 per student, is running a $780,000 deficit and politicking hard for a $96 million bond issue of deficit spending.

  10. comment number 10 by: Arne

    Jim Glass: “But “certainly way above average”?? No”

    Yes, your $22K+ is over twice the national average.
    http://nces.ed.gov/fastfacts/display.asp?id=66
    Perhaps you need to run for school board.

    Gipper: “learn how the official education expenditure statistics omit capital expenditures and other expenses from the overall figures”

    I read the report.
    1) By using budgeted numbers rather than actual numbers, they are including funds allocated for emergencies, but never actually spent - a 2 to 10 percent error.
    2) Certainly the NCES numbers do not include all capital expenditures, but including all debt service would imply that buildings are worthless after the debt has been paid - a very arguable point.
    3) They complain about the NCES numbers are incomplate, but then they turn around and use the NCES numbers as their basis for costs at private institutions. The buildings at all the private schools near me are not covered by tuition and the ones not connected to churches have large endowments besides. The authors may have a point, but their comparison methods are mere hand waving.

    If the above sources are setting your impressions of schools nationwide, I can see why your attitude is so much different from mine.

  11. comment number 11 by: Jim Glass

    Jim Glass: “But “certainly way above average”?? No”

    Yes, your $22K+ is over twice the national average.

    If I had made or implied any statement about the nation, that might be relevant.

    But I was very clearly talking about the area where I am. However, thank you for pointing out that compared to the national average this regional spending is exorbidant.

    And that’s why we have rapidly growing numbers in this long-time blue state joining the Tea Party.

    I’m waiting for the mail to bring me my membership card and secret message decoder ring any day now.

  12. comment number 12 by: SteveinCH

    Here’s a little data for your Arne.

    http://www.usgovernmentspending.com/downchart_gs.php?year=1970_2010&view=1&expand=&units=d&fy=fy12&chart=20-total&bar=1&stack=1&size=m&title=&state=US&color=c&local=s

    Enjoy ; )