Economy Analysis Emits
Only Static
Government interference is causing the economy to emit nothing but static these
days.
Remember at the midway point in the recession when the blame was put on the 1%? The 1% were those who ran
companies. Their pay was considered evil. So the 1% conceded their direct pay in favor of obtaining stock options
under pressure from the lawmakers. This was approved by the government as a fit plan--the idea being as
companies' stock rose so would worker compensation.
It isn't quite working out that way. As with most government programs, the results are far different than what the
bureaucrats and elected-elites had envisioned.
The stock market is soaring since this policy was agreed to but both the volume and participation rate have dropped
precipitously since 2007. In fact, doing even a cursory inspection of the market finds most transactions involve
companies buying back their own stock. This boosts the price and thus maintained the 1%'s wealth by compensating
them for their real income cut. (Part of the push to raise tax on capital gains came from this result.)
The buyback program has come at a high cost however. The companies are seeing their equity capital vanish,
meaning they have much tighter constraints on their growth options and the budget's highest cost item--employees-are on the outside looking in for additional compensation.
Hold the protests here. I know you've read published survey results and heard politicians announce better results for
workers but look beyond the public announcements and there is a much different story.
Gallup released a poll last week that didn't get much play in regular news outlets except for the overall fact wages
are rising. In reality the poll found federal workers--not all government employees, mind you, but federal workers
alone--are prospering more than their private counterparts. To quote a Newsmax report, "Specifically, 44% of
federal workers are thriving financially compared with 34% of other U.S. workers."
As with all government analysis, you have to parse the meaning of the verbiage. What exactly is the meaning of
'thriving financially"? Until you can draw the lines in concrete, you will have a shifting base at best and no base at
worst.
According to the survey, "Financial well-being does not consist of salary, benefits or overall compensation alone.
Therefore it is possible for someone to have a higher salary but still rate low in financial well-being." Uh, yeah,
maybe, um...that qualifying statement is as clear as mud.
How about a dollar for dollar comparison, dutifully adjusted for the unannounced inflation rate from the Fed's
printing press run? In the last Rant it was explained how the Fed has nearly tripled the amount of cash available.
That means every dollar earned--measured in overall compensation--in 2007 has to have grown by 281% to have
stayed even with the Fed's unprecedented printing press run in the intervening years.
It is not a coincidence that the poll did not put things into this perspective. Nobody but a precious few would be
better off if it had.
But it is also no coincidence that even on the indirect basis of financial well-being, federal employees thought they
were better off. They are the ones who received almost all of the raises over the past six years. In that regard, private
employer workers are definitely lagging.
Dollar for dollar, federal workers are still not better off than they were in 2007. But compared to the rest of America
they are rolling in the lap of luxury.
What was a particularly telling statistic was on educational reward. In the federal government, 35% of the workers
without college feel they are thriving. In the private sector only 27% of those in the same education level think they
are thriving.
The most important factor the survey revealed was the mental stress area. Federal workers, by almost an 8:1
majority, felt their jobs were secure. Private sector employees were actually below the breakeven point. By a
47:53 vote, the security rate simply wasn't there. This stress probably contributes to the dismal 34% of private sector
respondents who felt they were thriving.
When 1% can manipulate the stock market to their benefit from a government program specifically aimed at helping
their employees, there is a flaw in the program.
That's the main problem with government regulation. Those who impose it feel no law is too flawed to be enacted,
they feel the intent is more than enough to outweigh the obstacles. Those of us on the other side of the law, feel the
flaws all too keenly.
"I have sworn on the altar of God eternal hostility to every form of tyranny over the mind of man."--Thomas
Jefferson