Monday, November 29, 2010

Citing deficit, Obama freezing federal worker pay

Story this AM from Yahoo! Here comes a small dose of austerity for the US now.

Last fiscal year, total 'Federal Salaries' were $176B, so a small +2% pay adjustment here would have resulted in about a $3.5B additional transfer to the non-govt sector. It looks like this will now not happen.

Even though 'every little bit of fiscal helps', this small foregone fiscal adjustment may not warrant any growth forecasts for next year to be adjusted downward significantly.

18 comments:

welfarewarfare state said...

Of course growth forecasts won't have to be adjusted downward. It's not a "transfer" to the private sector, either. It's also telling that you reference everything in relationship to government, i.e. the non-governmental sector. Can I refer to the government as the non-private sector?

It's just bizarre that you think govt. workers not getting a pay increase is somehow a transfer to the people who pay their salaries. If I took 20% of your money every time I saw you until one day I decided to "only" take 18%, did I somehow transfer the remaining 2% to you simply because I didn't confiscate it? Of course not. The only transfer that takes place is when I take your money. Just as the only transfer that takes place with government workers is to them and away from the taxpayer.

You said that every litle bit of fiscal helps. What you should have said was that every little bit of fiscal discipline helps. Consumption spending is not the fountainhead of wealth creation; savings and capital investment are. All government spending is current consumption spending. We are just digging the hole a little deeper. The ephemeral "growth" that we have is just a consequence of money printing and borrowing. It isn't anymore real than the last two Fed-created bubbles in housing or dotcom stock.

Matt Franko said...

"Can I refer to the government as the non-private sector? "
Why not, that could be another way to look at it...the important thing is to realize the demarcation between the govt and us (citizens)
in this matter.

"govt. workers not getting a pay increase is somehow a transfer to the people who pay their salaries. "

Youre mis-interpreting, the govt workers getting paid by the govt are part of the non-govt sector for national accounting purposes.

"Consumption spending is not the fountainhead of wealth creation"

Welfare, Youre obsessed with so-called "wealth creation" .... I'm focused on all of our people being able to work and consume things for their means of subsistence and associated quality of life... youre obsessing on economic stock measures of "wealth", suggest change over to rather focus on economic flows.... we all can make more money and have a higher quality of life if everybody who was able and wanted to was working and consuming.

welfarewarfare state said...

Matt,

My point is that Norman and others of his ideological persuasion always view everything through the prism of government.

You claim that I am "obsessed" with wealth creation, but you guys are obsessed with consumption spending and aggregation. One can only consume if he or others have first produced. I keep harping on this because there is a misunderstaning on the part of government planners and many in the economics profession about how wealth creation works. The only way for people to consume a lot is for people to have productive jobs. You can only borrow for so long as we are about to find out. Jobs for the sake of jobs should not be the goal. Unproductive make-work jobs or govt. jobs are non-productive jobs. They are in fact a burden.

If you are really concerened about your fellow man's standard of living, you should give up on central planning. The purpose of economics should not be to hand power over to an anointed elite who seek to micromanage the individual's economic life--for his own good of course. The real purpose of economics should be to explain how the market order functions.

We are just coming from two very different prespectives. You think that economics is a science where pretend experts can ever have enough information to "manage" an economy. Economics is a human science that can never be reduced to mathematical formula. Central planning reduces decision-making to very few people with a very limited knowledge set who must try to cope with constantly changing local conditions that the planners are frequently unaware of. Individuals acting with localized knowledge that is specific results in far more wealth creation and efficiency.

I share Hayek's view that, " the purpose of economics is to demonstrate to men how little they really know about what they imagine they can design."

Marty Steinberg said...

we all can make more money and have a higher quality of life if everybody who was able and wanted to was working and consuming.

Government at all levels is about 44% of the U.S economy. Precisely for that reason people want to work can't find work.

welfarewarfare state said...

Marty,

Thank you for hepling me make my point. Matt's post would have been far more accurate if it had read, "We can all have more spending power if everyone who wanted to was doing PRODUCTIVE work and PRODUCING." He and the others are simply fixated on jobs with no concern as to whether the jobs are productive jobs. They are also obsessed with consumption spending which is just a prodcut of wealth creation and not its source.

I think if some of these guys happened upon a demolition site where a wrecking ball stood beside a flattened building, these guys would conclude that the building fell down so the wrecking ball showed up. They always seem to get cause and effect confused.

Matt Franko said...

Welfare & Marty,
" 44% of the U.S economy. Precisely for that reason people want to work can't find work."

And

" They are in fact a burden."

These are both due to the fact that taxes are TOO HIGH ie the DEFICIT IS NOT BIG ENOUGH....

That at it's core is all we try to point out here!

welfarewarfare state said...

Matt,

Government CONSUMES 44 percent of the GDP when all levels of govt. are calculated. That is not the same thing as saying that government creates any wealth. As a thought experiment, let's create a new government job solely at Matt Franko's expense. Have any new goods and services been created as a result of this added government job? Nope! Matt Franko simply has been saddled with the burden of a a non-productive government worker. Spending power is now split between Matt Franko and the government leech. No new production has taken place.

BTW, did any of you guys notice that when the media showed images meant to convey the strength of the American economy over the last weekend they showed Americans consuming in the malls and dept. stores. As a point of reference, when pictures are shown to convey the productive power and economic strength of the Asian economies, they show people engaged in productive work in factories producing real things. As the saying goes, a picture is worth a thousand words.

TomatoBasil said...

Speaking of another way of looking at things: The roads, financial system, utility, judicial, transport, trade, political, health and educational system produced by government employees enables a "private" business to succeed and be productive. Society allows Business' because they generate goods for consumption. That cause is no more or less noble than the function of government. The government doesn't whine when business consumes infrastructure and services. When government spends to improve these services, it is wasteful? A business isn't a waste. The employees and customers that benefit from these government products aren't a waste. The only wasteful occurance is when individuals aren't able to produce and consume because there aren't enough individuals producing and consuming. It isn't a matter of lax moral standards of government and frivolous consumers. The problem is a cyclical demand contraction that can be easily fixed using government consumption and monetary policy. Debasing everyone as warfare welfare derelicts leaching off your lone productive business... Please. Everyone wants less government in their life and lower taxes. No argument there from anyone.

Marty Steinberg said...

Speaking of another way of looking at things: The roads, financial system, utility, judicial, transport, trade, political, health and educational system produced by government employees enables a "private" business to succeed and be productive

Most of these things that you say are provided by government can be produced better in the private sector. Of course, it makes a lot more sense to leave some of these things to the local government - like local roads than the private sector. In fact, the inefficiency of these "government provided" services actually impose huge costs on business.

Society allows Business' because they generate goods for consumption.

Why should society care about what I do with my life so long as I don't inflict physical pain or death to someone else? What is society anyway? Who gets to be inside of it? Who decides?

When government spends to improve these services, it is wasteful?

Yes, almost always.

A business isn't a waste.

That depends on what or which business. However, businesses left to themselves operate a whole lot more efficiently than government. That only means as a system, private sector is MORE efficient than government.

The problem is a cyclical demand contraction

Nope.

that can be easily fixed using government consumption and monetary policy.

Nope. You should know from experience how easy it is.

Yes, government employees, many of them, are parasites.

Matt Franko said...

W,
Lets say we look at Boeing Aircraft, I'm sure you would think this aircraft manufacturer is "productive". Now say there is a guy there in Seattle up on the airframe working away, an he has to go to the bathroom...so he gets down and walks over to the head and does his business and flushes the urinal, goes back to work...are you saying that the sewer & water service doesnt count? The guy has to hold it all day until he gets home? That those sewer services and the associated bill from the govt sewer authority that Boeing builds into the price of its aircraft 'doesnt count'...how did that worker get to work that day? Does he sleep on the wing overnight or does he drive in from home on a govt road? Where will the airplane land at when it leaves the Boeing plant? Only at "private" airports? (There arent any!) etc...

Govt needs to do all it is currently doing and more and we in the non-govt (ie private) sector need much lower taxes...we need both things right now.

googleheim said...

OK

With great hesitancy I pull our the Lauffer curve - the upside down bell curve depicting tax revenues optimized versus the tax level.

Republians and Libertarians always always always always say we are on the right side - that taxes are too high ( X axis ) and if we could just lower taxes then the revenues ( Y axis ) would increase
and the world would be happy.

HOWEVER, I think we are too far on the LEFT side of the curve that taxes are TOO low for corporations and the top 2% and that's a reason for low receipts.

How's them apples ?

googleheim said...

WsWs :

Social contracts are born out of the failure of total reptilian individualism in favor of a social fabric,culture, and ... market.

Failure of social contracts leds to ball games and markets to play so long as the rules are fair.

If the fairness goes out, then the markets lead back to social contracts.

There is no egg and no chicken, and there is no sound of one hand clapping. It's all imagination -
Fed vs Real Economy etc

hiljaa said...

http://www.youtube.com/watch?v=lAuO8aK38W0

Naughty Baboon Michael Pento Calls Peter Schiff's Decoupling Theory 'Dodo Bird's Philosophy'

hiljaa said...

http://www.youtube.com/watch?v=wJNdj2ePaDs

Peter Schiff, Andrew Schiff and Jim Rogers' Ignorant Views About Capital Formation

An "Axis of Ignorance".

Even Nicole Foss, an old lady, is able to get it right - in today's banking system, savings are irrelevant to creating credit required for investment. Basically, banks make the loans first and then manufacture the reserves and rarely are they underpinned by savings.

Explains why the banks treat retail customers as ATMs only now.

Now what do these 3 ignorant "financial commentators" have for an excuse for not even understanding the basics of banking? Jim Rogers can probably claim hes senile; I can't say much for the other two except that ignorance runs in their family.

The sad part is that the US media promotes ignorant idiots like Peter Schiff and Jim Rogers as financial commentators and experts, further proliferating their erroneous and archaic views of the financial system to an unsuspecting public.

hiljaa said...

http://www.youtube.com/watch?v=dp5LNEx6JLU

Peter Schiff and The Judge - Two Clueless Looneys Who Don't Know The QE Cartoon Is Totally Wrong

This is how idiotic these two simpletons are - even though this cartoon has been debunked by experts who point out that the contents are completely incorrect - they think its a great explanation of the "evils" of the Fed and Quantitative Easing. Talk about stupidity - two grown men and they can't even understand a cartoon (and when its wrong) between them. These are the sort of morons the US media puts on TV as "commentators" when all they do is poison the public with their ignorance.

For smart viewers (and I'm sure there won't be many of them), I have included the CORRECT version of the cartoon - which someone kindly made after figuring out that the original one is complete BS.

Mike Norman said...

Marty, Welfare:

Just curious. What do you guys do for a living?

hiljaa said...

http://www.youtube.com/watch?v=wJNdj2ePaDs

Peter Schiff, Andrew Schiff and Jim Rogers' Ignorant Views About Capital Formation

An "Axis of Ignorance".

Even Nicole Foss, an old lady, is able to get it right - in today's banking system, savings are irrelevant to creating credit required for investment. Basically, banks make the loans first and then manufacture the reserves and rarely are they underpinned by savings.

Explains why the banks treat retail customers as ATMs only now.

Now what do these 3 ignorant "financial commentators" have for an excuse for not even understanding the basics of banking? Jim Rogers can probably claim hes senile; I can't say much for the other two except that ignorance runs in their family.

The sad part is that the US media promotes ignorant idiots like Peter Schiff and Jim Rogers as financial commentators and experts, further proliferating their erroneous and archaic views of the financial system to an unsuspecting public.

Marty Steinberg said...

Just curious. What do you guys do for a living?

Mike,

I'm a software architect with an interest in economics & finance.