Illinois Public Workers Seek “Fair Contract”, Already Highest Paid in Nation

The state of Illinois is in serious trouble. After not passing a budget for more than two years, the Democratic controlled state legislature recently pushed through a $5 billion-dollar state income tax increase, overriding the governor’s veto in the process. The increase makes Illinois’ state income tax among the highest in the nation, joining their already ridiculously high property tax rates. And all that just to pass a balanced budget, a requirement of the state constitution. This allowed the Comptroller to begin paying the over $15 billion in past due vendor payments. Interest on the past due bills alone total over $800 million.

In addition to their short-term budget crisis, the state has unfunded pension obligations of over $100 million, the highest in the nation, and recently narrowly avoided a “junk” credit rating.

It isn’t just the state’s governmental accounting woes that are a problem, either. The state’s economy is currently growing at a pace slower than even during the great depression.

In a measure sure to add insult to injury, Illinois Policy reports:

“Illinois’ biggest government-worker union, the American Federation of State, County and Municipal Employees, is engaged in contract negotiations with the state in an attempt to boost its salaries and benefits. As part of its negotiation tactics, AFSCME claims its “middle class” benefits are under attack. That’s why union officials are demanding up to $3 billion in salary and benefits for union members.”

Yes, you read that correctly. During the state’s worst economic growth since the great depression, less than a month after the legislature raised taxes $5 billion just to balance the budget, the largest public union in the state is demanding $3 billion in raises to salary and benefits.

Sound ridiculous? You haven’t even heard the best part yet. Public employees in the state of Illinois are already the highest paid public employees in the country. They receive Cadillac health care benefits, many of them receive free health insurance in retirement, and the average public worker gets $1.6 million out of their plan in retirement.

Moreover, Illinois Policy shows that while private sector earnings have remained flat over the past 12 years, public sector workers earnings have risen over 40%.

All this while marching and picketing with signs that read “Fair Contract.” Fair to who? Fair to the public employees or fair to the state of Illinois taxpayers?

To his credit, Illinois Governor Bruce Rauner has proposed a number of reforms that would bring public employee costs more in line with private sector costs. He is being fought at every turn by a public employee union that is content to continue fleecing Illinois taxpayers, pushing an already economically decimated state to the verge of bankruptcy.

Rick Perry Mangles Basic Economics

Last week, Department of Energy boss Rick Perry stuck his foot in his mouth when he said to a group of coal workers, “Here’s a little economics lesson: supply and demand. You put the supply out there and the demand will follow.” On its face, the statement seems to imply that supply creates its own demand. This is obviously not true. CNN and other cable news networks wasted no time pointing this out.

These errors are nothing new for Perry, who has a history of this kind of verbal faux pas. He sank his presidential campaign in 2012, when, during a primary debate, he famously forgot the names of the three federal departments he would eliminate. (The correct answer is all of them.)

What Perry got wrong is called Say’s Law, or the Law of Markets. J.B. Say was a French economist in the late 18th century who noted not that supply creates its own demand, but that production always precedes consumption.

Say wrote in his A Treatise on Political Economy wrote,

“A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value…As each of us can only purchase the productions of others with his own productions – as the value we can buy is equal to the value we can produce, the more men can produce, the more they will purchase”

 

Because of  the division of labor, you work, producing goods or services for your employer. Your labor is compensated with money, which you use to buy things that other people produce. The more money you make, the more you tend to purchase.  These are not controversial economic statements.

At the macro level, the Law of Markets says that aggregate supply will drive aggregate demand to a relatively equal level. This means that there can never be a general glut in the economy over the long term. When the market is allowed to operate freely, businesses that fail are liquidated into the capital the fuels new businesses ventures, some of which succeed. This is how economies grow.

Instantly, you can see why government doesn’t like the Law of Markets. If a free market produces a growing economy, it is much more difficult for them to steal the money to intervene in the economy  i.e. socialize the costs of failing pet interests, bail out industries en masse, and wage aggressive wars around the world.

John Maynard Keynes was the one who coined the phrase “supply creates its own demand” as a way to discredit the Law of Markets. Keynesian economics advocates for widespread government intervention into the economy. He thought government could end the business cycle by stimulating demand when necessary and contracting when necessary, providing a smooth, growing national economy. Given that we are still feeling the effects of the government driven economic meltdown of 2008, that is clearly a laughable proposition.

Secretary Perry’s mangling of the Law of Markets shows that he doesn’t understand the underlying economic principles. Not surprising, given the GOP’s dismal track record on economics.