With Labor Day recently having passed, we got the usual round of stories decrying U.S. inequality, and blaming the decline of unions, the advance of technology, and/or the export of jobs to low wage countries for the fact that the average wage continues to lag behind inflation, as it has for decades. Meanwhile, the U.S. current account balance (the trade deficit plus investment and other flows) continues to be deep in deficit, as it has also been for decades, something President Trump blames on unfair international trade agreements and unfair trade by countries such as China, Mexico, and the European Union. As a result, the Trump Administration is launching trade wars with countries all over the globe. The only import he seems fine with is imported oil, which fuels terrorism and increases greenhouse gas emissions but also allows cheap gasoline.
But if U.S. workers are being paid less and less, to whom are businesses selling in order to make profits? Workers and consumers aren’t two different classes of people; they are the same people at different times of day. And if the U.S. has been importing more than it exports for decades, and has for decades had a financial deficit even when U.S. earnings on investments abroad are taken into account, then how have those imports been paid for? The answer to both those questions is the same. By having Americans, individually and collectively through the government, go deeper and deeper into debt and sell off more and more of our individual futures, and our collective future. Rising debts, public and private, are what allows businesses to pay workers less and yet sell them more, and imports to be paid for without exports. Neither could occur if debts were not rising, and if future retirements were adequately saved for.
It’s a financial house of cards disguising a global crisis of demand, one that would have collapsed in 2008 absent massive government intervention to bail out asset prices and the rich. None of the real problems have been solved since, only deferred at a cost of shifting some of the private debt to the government — just as the Baby Boomers have started to retire in large numbers.
I worked in capital budgeting for New York City Transit in the early 2000s, and was shocked to see the price of capital projects soar — despite a recession. The MTA’s construction costs have continue to soar ever since, contributing to the agency’s $41 billion in debt and deteriorating infrastructure, and this has become a political issue since the New York Times series on the decline of the subway late last year. Recently, MTA head Joe Lhota promised to implement reforms to reduce those costs.
“On some projects the MTA has shelled out seven times more money than European transit agencies have paid for similar initiatives. Lhota said the agency is working to reduce red tape and the high risk that causes contractors to inflate their bids on MTA projects or not bid at all. In theory, increased competition would drive down costs.”
Or at least admitted costs, since “reducing contractor risk” means reducing the MTA’s ability to get restitution when the contractors fail to perform.
What I didn’t know back in 2004, but have since learned, is that the MTA’s contractors have been jacking up their bids in large part not to pay for current workers doing current construction, but rather to pay for the underfunded construction union pension plans. This is something the MTA isn’t talking about, because both the construction unions and the real estate industry, two of the most politically powerful interests in New York, each benefit from the shift at that private debt to the public sector in general, and the MTA in particular.
“You have to believe in facts. Without facts there’s no basis for cooperation. If I say this is a podium and you say this is an elephant, it’s going to be hard for us to cooperate.” — Barack Obama
It is amazing the way effect of decades of public policies and economic and social trends, all to the benefit of some generations at the expense of others, stays out of the news. Even as, anything, everything else is blamed for the situation so many people find themselves in. For the most part what you get is silence, and an attempt to change the subject to anything, everything else. People and groups who on the surface are at war with each other, and unable to cooperate, somehow all agree to keep certain facts out of the public discussion.
If you look closely enough, however, some cracks are beginning to appear in the Omerta. The fact that Generation Greed is leaving those coming after so much worse off hasn’t gone viral, but it is beginning to bubble up under the surface. The rest of this post will quote from some examples I’ve come across.
Over the past 25 years some types of Americans have become richer and richer, at the expense of others who have become poorer and poorer – to the point where average life expectancy is starting to fall. One might have imagined that at some point those who have been taking more and more would conclude that enough is enough, feel obligated to do more in return, and become concerned about the circumstances of others who are less well off. But that doesn’t seem to happen. Not among the richest generations in U.S. history, those born from 1930 to 1957, who continue to be completely focused on increasing their own share of the take. Not among the richest people, the top executives who sit on each other’s boards and vote each other higher and higher pay. And who anointed themselves “the makers” and everyone else “the takers” within two years of having been bailed out by the federal government, even as “the takers” saw their standard of living plunge, and then demanded another round of tax cuts that mostly benefit themselves.
And not among New York’s unionized public employees, particularly those working in its public schools, who have become the most politically powerful – and selfish – of all self-interest groups at the state and local level here. Power and selfishness seem to go together in part because no one dares to offend the powerful, by pointing out how much they have taken relative to everyone else, and the connection between others having less and them taking more. So they can continue to feel aggrieved, entitled, resentful, unobligated – and somehow demand even more without embarrassment. There seems to be no end to it. This post uses Census Bureau data to show how far it had gone, as of three years ago.
There was no press release or PDF report, but if you click on 2016 tables at the top and then “Summary Tables,” you can find all the spreadsheets the Bureau previously released in PDF format. Including, crucially, Table 12 (tabs on the bottom), which ranks states according to their school revenues and expenditures per $1,000 of state residents’ personal income (which adjusts for the state average cost of living and average age and the ability of state taxpayers to pay). And Table 18, which provides per pupil revenues and expenditures for the 100 largest school districts, including the most expensive by a mile, New York City. As in the past, I’ve downloaded and compiled more detailed data for every school district in New York State and New Jersey, the U.S. average, the averages for selected other states, and selected school districts elsewhere. And tabulated revenues and expenditures per student by category for FY 2016 and FY 1996 — with an adjustment for the higher average wage in the high-cost of living Northeast Corridor.
I’ve been holding onto the data for a month, re-downloading and checking it against other sources, because New York City’s expenditures and staffing levels had become so extreme that I can hardly believe it. Especially since it would be much higher today, in FY 2019. And because Mayor Bill DeBlasio, candidate for Governor Cynthia Nixon, and a lawsuit from a group backed by the United Federation of Teachers claim that New York City school funding is inadequate, with the schools “cheated out of $billions.” How high was it? Take a look.
Not long ago, New York City passed its FY 2019 budget. It was, with the exception of a few additional spending items insisted on by the New York City Council, about the same as the budget proposal made by Mayor DeBlasio. As is usually the case.
Under DeBlasio the city’s Office of Management of and Budget has drastically cut back, though not yet eliminated, the tables that show total NYC spending by category and agency, including pension and other benefit costs, separating the funds the City of New York must come up with itself from those it receives from the federal and state governments. Former Mayor Bloomberg had provided such a table for the current fiscal year, the next fiscal year as proposed, and the change between them in the Budget Summary documents in January or February. Mayor DeBlasio provides a single table of his proposal – the Full Agency Costs table – in April, on page 81 of the Message of the Mayor document. Lots of other readily comparable data on state and local finance has been diminishing or disappearing, as the public sector becomes more and more of a ripoff for younger generations. Similarly, down in Washington the Republicans are trying to make legally required information on executive pay go away. But for now, I have still the one table that I can use to make an inflation-adjusted comparison between FY 2019 and the numbers I already had for FY 2007 and FY 2014, before DeBlasio took office. That comparison is the subject of this post.
When I first looked at the March 2016 employment and payroll data from the Governments Division of the U.S. Census Bureau I thought I had two rare stories – New York City’s local government data moving closer to the U.S. average rather than further away. After a couple of decades of being much lower, the city’s full time equivalent local government Parks, Recreation and Culture employment per 100,000 city residents was approaching the U.S. average. And after decades of being 60 to 90 percent higher, New York City’s payroll per full time equivalent employment in the Solid Waste Management function was above the U.S. average by a percentage closer to what the average private sector payroll per worker in Downstate New York is above the U.S. average. Upon further consideration, and pending anything I hear back from the Bureau, however, it appears only one of those things is true.