http://www.youtube.com/watch?v=A1MASsKbWQs

The problem that faces our country today, the last 30 years we have lived off the future, and the bill is coming due.

I think you’ll see a 15 to 18 percent unemployment rate. I think you will see an 8 to 9 percent decline in GDP. I think you’ll see the middle class just destroyed if we don’t do this. And the people that it will harm the most will be the poorest of the poor, because we’ll print money to try to debase our currency and get out of it and what you will see is hyperinflation.

If we didn’t take some pain now, we’re going to experience apocalyptic pain, and it’s going to be out of our control. The idea should be that we control it.

We have 267 job training programs across 39 different agencies. Why do we have 267 of them? We have 105 programs to encourage people to go into science and technology, engineering and math. That’s 105 sets of bureaucrats. None of them have metrics on it.

The Pentagon can’t even audit its own books. It doesn’t even know where its money is going. And we refuse to have the tough forces go on the Pentagon so that at least they are efficient with the money they’re spending.

The very fact that we have $1.1 trillion in tax expenditures every year that directs capital in a way that the government says it should be directed rather than the way it should be directed based on markets, tells us that we have a terrible tax system.

I don’t care if you’re rich or poor, liberal or conservative. If we don’t fix the problems in front of us, everybody is going to pay a significant price.

The history of republics is they average 200 years of life. And they all fail in the history over fiscal matters. They rot from within before they collapse or are attacked.

–Tom Coburn, Fox News Interview

http://www.youtube.com/watch?v=8ylAjZOHLZU

[H.T. ZeroHedge]

This is pretty scary stuff.

Part 1:

Part 2:

At a time when workers’ pay and benefits have stagnated, federal employees’ average compensation has grown to more than double what private sector workers earn, a USA TODAY analysis finds.

Federal workers have been awarded bigger average pay and benefit increases than private employees for nine years in a row. The compensation gap between federal and private workers has doubled in the past decade.

Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation, according to the Bureau of Economic Analysis. The data are the latest available.

The federal compensation advantage has grown from $30,415 in 2000 to $61,998 last year.

…

What the data show:

• Benefits. Federal workers received average benefits worth $41,791 in 2009. Most of this was the government’s contribution to pensions. Employees contributed an additional $10,569.

• Pay. The average federal salary has grown 33% faster than inflation since 2000. USA TODAY reported in March that the federal government pays an average of 20% more than private firms for comparable occupations. The analysis did not consider differences in experience and education.

• Total compensation. Federal compensation has grown 36.9% since 2000 after adjusting for inflation, compared with 8.8% for private workers.

–Dennis Cauchon, USA Today

While it’s understandable that stats like this will make your blood boil, it’s more important to understand what’s going on with these numbers. Specifically, why is this “wrong.” It’s not enough to just get mad that somebody is making more money than you are. And, while legitimate, it’s also not enough to get mad that so many public workers appear to be such lazy freeloaders. You have to give reasoned arguments as to why it isn’t right for government employees compensation to be that high. And, that argument happens to be an economic one.

Why is it not ok for a mid-level beauracrat to make $100k, but it’s ok for a mid-level V.P. at Microsoft to make $100k? The principle reason is that Microsoft is actually giving you something that you have determined is valuable to you in exchange for your money. Remember rule number one in market economics: value is subjective. When you make a transaction with a private institution, it’s because you think that the good or service you’re getting in exchange benefits you more than the potential goods and services you are foregoing by giving them your money. Another way of saying it is that, at a particular moment in time, you’d decided that the particular good or service you are purchasing is more valuable than the exchange potential of the money in your pocket.

Because of this, a privately employed individual’s salary is based on how well he satisfies the consumers of his goods and services. That means that, all things being equal (i.e. in a truly free market), private employment wages are linked directly to consumer satisfaction. Obviously, this isn’t the case with public employees. Government wages aren’t reliant upon satisfying the consumer. Instead, government entities increase their budgets, and thus their salaries, through lobbying and political entrepreneurship – drawing their funds from taxation and inflation(i.e. theft). There is no connection to consumer satisfaction whatsoever. Indeed, many times when a government office or department does a horrible job, the call goes out to increase that department’s budget. They will say it’s the lack of funds that’s causing them to do a poor job.

I think all of this is probably pretty obvious, but it helps to keep a proper perspective. The problem with government salaries in general is not how much they are(obviously the lower the better), but the fundamental lack of connection to how they produce anything of value.

A perfect example of all of this is my wife’s recent license plate payment. We bought a van a couple of weeks ago for about $6000. It’s an older van with a lot of miles, but it meets our needs. Essentially, we decided that, at this time, having a van was more valuable to us than any other potential purchases we could make with $6000 dollars. Now, fast forward to two weeks later. My wife takes the van down to the DMV. They inform her that she must pay them $400. That’s $58 for the license plate, $240 for sales tax, and some other fee crap. Could she have told them, “You know, $400 seems a bit steep when there are potholes all over the road on the way over here. I think I’ll just go down the street to your competitor and see if they can give me a better deal?” Of course she couldn’t say that, because the DMV is a monopoly. There is no competition by fiat. If we didn’t pay them the $400 I would eventually wind up in jail.

In this way, government wages are completely devoid of any job performance evaluation, because there’s nothing to evaluate. You’re job consists of showing up, demanding people give you their money and then going home. Government wages aren’t just bad because they are high. They’re bad because they exist at all.

Cap and trade is a system dreamed up by tree huggers to help the environment by reducing green house gasses. Specifically, good ol’ carbon dioxide(CO2), to the chagrin of plants everywhere. The way it works is like so:

Now, leaving behind the question of how it’s possible for a naturally ocurring gas like carbon dioxide to be a pollutant, why is this a idea bad? Doesn’t it help the environment to pollute less? Well, sure. But the devil is always in the details. Firstly, how do we know that we need less pollutants. It’s pretty apparent at this point that there is no consensus on the whole global warming issue. Japan recently made headlines by saying that they are re-thinking the whole “man made” part of global warming. There are definitely enough dissenting scientific voices to hold off on something so radical as this. From my view, it’s becoming more and more obvious that the whole global warming movement is a big money scam on the part of an elite group of environmentalists. That makes anything targeted at global warming reduction suspect. Cap and trade itself was born by the Environmental Defense Fund.

And that leads me to the next point. The money factor. The real heart of cap and trade has nothing to do with environmentalism. It’s got everything to do with tax dollars. It’s a total money grab by politicians. Think about it. If there is some pre-set cap that you will have to pay penalties on if you exceed; do you think for one minuite that the “cap” will be sensible? Think again. It will be absurdly low. And anytime budgets get a little tight in Washington, they will just lower the cap and have an instant tax increase, without changing a single IRS rule. And, as I said, the cap will be so low that every company will have to buy credits. Every one. And where will this extra money to buy credits come from? You guessed it. YOU! Remember the first rule of taxation. Companies don’t pay taxes. Individuals do. We pay all of them in the end, as they trickle down.

What’s worse about all this, is that higher energy prices directly hurt the poor first. As these companies have to spend millions more each year to buy credits, they will pass those costs on to the consumer. The ones who will hurt most will be the ones least able to afford it. This is not all just some conservative cynicism. We’ve seen the massive problems with cap and trade in Europe as a result of Kyoto protocols:

And this is the heart of the argument from an economist perspective. The end game here is to force a reduction in output. And the only way to reduce output in any substantial way is to make less product. This means less energy supply and thus higher prices. Every time government gets involved in a certain sector of the market, that market ends up reducing output. And it’s done in the name of helping the consumer. What a crock. The only sector they seem to be increasing output in these days is banking. Credit is in more than adequate supply. And they’re gladly handing out more every day.