There are myriad retirement plans, both government and private industry that cover millions of workers who toil during their working years to create a cash flow of benefits in later years. Currently, there are 126,256,764 full time workers in our country of which 23,510,459 work for a county, city, state or federal government installation or agency. As any reasonable mathematician can easily calculate, it takes almost five workers in private enterprise to pay one person in the employ of government.
What these workers have in common is that they all pay income and other taxes. The difference in their employers is that government employees are paid from the tax revenues of their counterparts in private industry and the tax extractions of their private industry employers. According to a report by Jim Clifton, Pres. and CEO of Gallup the number of business enterprises has dropped from more than 20 million in 2008 to six million in 2015 and 70,000 more businesses are dying each year than are being born.
In most cases government employees work for tax-exempt agencies and organizations and thus virtually all government costs are replenished with taxes while private industry pays taxes generated by the profits of the sale and exchange of products and services. Result: government costs and expenses are ‘liabilities’ while private enterprise generates capital investment in the form of profit (assets). That’s why we need fewer government workers.
Following our last workday when we have received a glowing proclamation, a glass of punch, a cupcake and an $18 watch preceded by a three minute speech encapsulating our 27 years of stellar performance, the rocking chair on the porch beckons. Government uses many formulas for career, appointed and elected officials and workers at all levels related to generous healthcare and retirement financial benefits. Among those graduating from work in the private sector may have the benefit of a company retirement plan or other plans from insurance companies, annuities and other investment schemes.
In most cases, retirement unfolds pleasantly and the future ‘defined benefits’ roll in right on schedule. But as in many plans, glitches develop. Many citizens have never heard of the ‘Pension Benefit Guaranty Corporation’ (PBGC) that is a government unit reporting to the U.S. Congress and has a board of directors that include the Secretary of Labor (chair), the Secretary of Commerce and the Secretary of the Treasury. This organization is funded by insurance premiums set by Congress and contributed by member companies.
The PBGC protects the defined benefits of 24,000 private-sector plans and their 40 million worker participants. In 2016, PBGC made pension payments to 840,000 people that represented 4,700 defined benefit plans. The PBGC pays benefits based on two basic plans: one is single employer that is currently operating on the basis of long term viability; the other plan is multiemployer based and is estimated to be in debt $80 billion in 2025 and become insolvent.
Retirement benefits for public employees looks bleak. Politicians with cerebral myopia collected and analyzed the projections of actuaries and economists and made benefit promises that were impossible to keep. Public unions found easy targets of government workers and waltzed them into benefits and employer restrictions that brought them 20% to 45% greater pay compensation than their private-sector counterparts. Retirement and healthcare benefits raise the disparity in favor of government employees even further.
An extreme example is Illinois where Republican Governor Rauner is trying to bring fiscal stability to a Democratic Legislature led by long-term House Speaker Michael Madigan. The state has a $130 billion unfunded pension liability, a $15 billion backlog of delinquent bills and a $6 billion budget shortfall.
The Hoover Foundation at Stanford University released its 2017 report in May that estimated national pension debt at $3.85 trillion with $1.38 recognized by government accounting, the difference of $2.47 billion being ‘hidden’ debt. More than 65 million people receive benefits from Social Security that will become insolvent in 2033 (16 years). National debt is $20 trillion. Taxes and ancillary collections are government’s only source of revenue. The multiemployer segment of PBGC is headed for oblivion in 2025.
And our elected Congress of 535 members and 6,500 staff are rendered helpless…….by each other.