Taxpayer Unapproved State and Local Government Debt: $7.3 Trillion

Steven Malanga, senior fellow at the Manhattan Institute, says that state and local governments have $7.3 trillion of hidden debt.  These debts were not approved by taxpayers, despite the fact that most state constitutions and many city charters limit borrowing and require voter approvals.

• Illinois is rolling pension debt and state officials are being sued because they failed to disclose the debt and misrepresented it.
• Chicago city employees retiree health care annual expenses will increase by a factor of 5 in ten years.
• Each and every resident of Sacremento, CA is obligated with $4200 of debt they did not approve and the debt is 5.5 times the annual city budget.
• New Jersey legislators wanted $8.6 billion for school refurbishing projects and knew voters would not approve it.  So, they set up an independent borrowing commission for the purpose.  After spending $7 billion, the commission disbanded and left the taxpayers the debt.
• 95% of New York's $63 billion debt was never given voter authorization.

Malanga recommends that governments are forced to stop providing defined benefit pension plans.  Independent borrowing authorities must be denied and debts should only be allowed with voter approval.

The total state and local debt is mentioned twice in the article.  The first time it is mistakenly given as $7.3 billion.

California's Coming Massive Wealth Transfer to State Retirees

Among the many states which have promised state employees more in retirement benefits than they can reasonably deliver is the very Democrat state of California.  My last post discussed this problem broadly, but it did not examine the huge scale of the problem for California specifically.  That state is piling up future obligations which will come crashing down on the heads of California taxpayers more and more forcefully over the next decade.  It will act to force many more California businesses to relocate to less burdened states, such as Texas, which has created more than half of the new jobs in the country since the Socialist Recession began.

What California government admitted as of 2008 conditions was:

• The California State Teacher's Retirement System is short $40.5 billion.
• The California Public Employee Retirement System is short $35 billion.

Stuart Buck, a Distinguished Doctoral Fellow at the University of Arkansas has found that losses in the pension funds investments since 2008 has left them an additional $44 billion in the hole.  Worse yet, the state has been assuming that their investments for the pension funds will earn 7.75% to 8% per year return.  Given that we have had a decade of virtually no return on the stock market and given the huge problems which continue to plague the economy such as:

• the continuing home foreclosure crisis
• the further cost of bailing out Fanny Mae and Freddy Mac of about $300 billion
• the many states with hugely underfunded state pension funds totaling about $700 billion
• the many union multiemployer defined benefit pension funds with unfunded liabilities of about $700 billion which will destroy many unionized companies
• the much increased costs of ObamaCare which will increase everyone's premiums, increase medical taxes, greatly increase business costs, and put a huge strain on state budgets
• the increased costs of financial transactions due to the Dodd-Franks financial "reform" bill
• the increased costs of energy use planned by the EPA under its declaration that CO2 is a pollutant
• the increased costs of energy use due to ethanol, wind power, and solar power mandates, which California eagerly pushes forward
• government moves to force more unionization onto companies
• the ever increasing costs of more and more government regulations on businesses and those who pay the higher costs for their products and services
• our corporations will have the world's highest corporate tax rates beginning in 2011 and they are going up to help fund ObamaCare

the 7.75 to 8% rates of return imagined by the California accountants is totally unreasonable.  Unless the state of California is going to invest all of its pension funds in China, their wishful rate is much too high!  So, Buck says that using the more realistic rates of return used by private pension funds, the California pension funds will be $282.2 billion short.  This should be corrected for the current market values, so the real shortage is about $326.6 billion.  It turns out that the retiree health benefits program is also underfunded, by $51.8 billion.  The total shortfall for retirees health and retirement is then $378.8 billion.   This is about half the scale of the shortfalls on liabilities that caused the Socialist Recession that has brought down the entire U.S.!  This would be a disaster if the California Gross State Product were half of the GDP of the U.S.A.  It is a large fraction for a single state, indeed the largest state fraction, but it was only 12.7% in 2008.  This would imply that California will suffer for its state pension fund shortfall about 4 times more than it is suffering from the pain of the current Socialist Recession spread over the entire U.S.

When this entire burden falls on the Democrat-dominated state of California, the People of that state will know the Grim Reaper is among them.  Actions and choices have their consequences despite a peoples' refusal to foresee those consequences.  The California perpetual Christmas for retired state employees will have the characteristic of mass destruction for the people and companies of California.  Currently, the state is spending about $180 billion in 2010.  The unfunded pension liability is the equivalent of 2.1 times the annual state budget now.  If the state of California were to try to rectify the shortfall in these pensions it has a legal obligation to pay, it would require a large increase in tax revenues, which it will be hard to come by due to growth since people and companies are fleeing the already over-taxed state now.  Further tax increases will only accelerate the rate of abandonment.  The Democrats have put the people and the companies of the state of California into a very unforgiving vise, thanks to their many vices.

Government Employees Union is Lord of Campaign Spenders and Master Thief

The ultra special interest group in elections would be that which has the most to gain from Big Government.  The Lord of all the independent election campaign spenders is the government employees union, the American Federation of State, County and Municipal Employees, or AFSCME, union.  This union now has 1.6 million members and that membership has grown by 25% in the last decade, making it a very powerful union.

In comparison, the total number of non-farm workers in the U.S. grew by 5.0% from September 2000 to September 2010 and that number includes the large increase in government workers.  The U.S. population grew by about 6.5% in the last decade.  The AFSCME union grew by leaps and bounds because state and local government spending from 2000 to 2008 soared upward by 55% and federal government spending skyrocketed by 66.7%!  AFSCME grew rich on this huge transfer of wealth from the private sector to the government sector.  This bloodsucking of the private sector resulted in a decade of little job growth and little increase in the standard of living for other Americans.

The 22 October 2010 Wall Street Journal reported that AFSCME has spent or is spending $87.5 million on the Democrats to continue the transfer of wealth from the private sector to the government sector.  In comparison, the U.S. Chamber of Commerce, the 2nd biggest spender, is spending $75 million and the American Crossroads and Crossroads GOP is spending $65 million.  The Service Employees International Union, SEIU, which spend so heavily to get Obama elected and whose members pension fund is critically underfunded, is spending $44 million.  The next biggest campaign spender is another government sector employees union, the National Education Association, which is spending $40 million to keep the government spending spigots fully open.  It is clear that the unions are expecting to be paid back for their efforts with bundles and bundles of taxpayer money.  Meanwhile, the U.S. Chamber of Commerce and American Crossroads are simply trying to reduce the damage to the American People caused by the huge confiscation of private wealth by the governments and politicians who lust for power.

In the private sector, unions have come to represent a smaller and smaller fraction of those employed, with union members being more than 30% of workers in 1965, but only about 8% now.  In comparison, about 40% of state and local government workers are union members now.  That percentage has been fairly constant since the early 1980s, though there has been a recent Socialist Recession increase.  Those government employees in unions, when compared to state or local governments with no unions, are receiving 31% more pay and 68% more in benefits.  The states with the greatest incidence of unionized government workers are states with higher pay generally, so one has to correct for that.  The result is that they are paid 10% more with that correction, but such a correction to the huge benefit packages still leaves a large windfall to the unionized government worker.  The recent increase in union workers has been most noticeable on the West Coast, where 16.7% of workers in California are now union.  This is part of the reason why the local and state governments of California are in such financial straits.  It is also contributing to the anti-business climate of California and causing many businesses to leave the state or build new facilities outside the state.

Governments controlled by the Democrats are kind and generous to the unions.  But, the Tea Party movement has the Republicans much less inclined to be so generous.  On principle, they are in favor of smaller, limited governments.  They have become very aware that the growth of government has resulted in a loss of their freedoms and deprived them of personal choices.  The Tea Party is putting the screws to those long-tenured Republican politicians who have favored the growth of government.  The Tea Party people are aware that the transfer of wealth from the private sector to the government sector is hurting the economy and putting our children and grandchildren into unbelievable debt.  AFSCME is the opposition and is spending a hefty fraction of its members $390 per year dues to counter the Tea Party and the Constitution itself, which calls for a very limited federal government.

The Socialist Recession we are still staggering in for the third year, has caused a large reduction in state and local government income.  Many of these governments increased taxes on the People who were themselves staggering due to the Socialist Recession.  At least $160 billion of the $787 billion Stimulus Package was given to state and local governments so that AFSCME workers would not suffer from the recession as those of us in the private sector have.  The increased taxes and the federal Stimulus largesse allowed the states to have only a small reduction of employees, while local governments actually had a net increase in workers during the recession.  The Republicans must counter this privileged government worker nonsense as they gain strength in this election in Congress and in the states.  Republican Gov. Chris Christie has proposed that public employee unions in New Jersey be limited in the use of member dues for political purposes.  The National Right to Work Legal Defense Foundation wants to make government employee unions voluntary organizations, which is a viewpoint with which I agree and to which I have contributed.

The AFSCME union has a great desire to grow, which means it is invested in the growth of governments at the local, state, and federal levels.  It has another pressing reason to control the politicians: the defined benefits retirement plans for many state and local government employees in the union are unsound.  Illinois, Louisiana, New Jersey, Connecticut, Indiana, Oklahoma, and Hawaii have defined benefit legal contracts which they will not be able to meet by the end of the decade according to Prof. Joshua Rauh of the Kellogg School of Management at Northwestern University and Prof. Robert Novy-Marx of the University of Chicago Booth School of Business.  Illinois is in the worst shape, perhaps due to the legacy of the Chicago politicians such as Obama.  Assuming that the Illinois pension fund has an surprising 8% rate of return and the state makes the contributions planned, the pension fund runs out of money in 2018.  After that, the state must raise taxes by $14 billion a year.  The other states in the list will not last through 2020.  By 2030, 31 states may be unable to meet their defined benefit pensions requirements.  They will be going to the federal government with hat in hand to come up with the money to meet these requirements.  The resulting bailouts will match or exceed the bailouts of this Socialist Recession.

I recently discussed the defined benefit multiemployer pension failures of the private sector labor unions in a post called Union Pension Fund Swindles, Their Democrat Henchmen, and the Beknighted Taxpayer.
These private sector unions with very underfunded pension plans have been hoping to get the federal government and the Democrats to bail them out also.  Again the scale of the bailout is comparable to that of the bailouts in this Socialist Recession.

The legacy of the Democrat, and of some long-tenured Republican, politicians has been unfunded liabilities that are likely to total many times the staggering sums we recently paid in this Socialist Recession.  It is now clear that we still have huge payouts to make for Fanny Mae and Freddy Mac as well.  The payouts for their unmet obligations may be $300 billion.  The management of American government has been horribly mishandled and we will be paying the consequences with a lowered standard of living for a very long time.  It would have been so much wiser if we had lived by the principle that governments should be limited in power and that the People were capable of choosing their own individual values and managing their own lives.  The Nanny State has proven to be a thief operating on a scale to beggar us all.

Union Pension Fund Swindles, Their Democrat Henchmen, and the Beknighted Taxpayer

The unions prefer defined benefit pension plans to defined contribution pension plans.  They claim they want the risk in the plans to be with the employer, not the union member.  Defined benefit plans are either single employer plans or multiemployer plans.  The unions tend to prefer the latter, especially in heavily unionized industries such as construction, transportation, hotels, food, and entertainment.  The multiemployer plans were created by the Taft-Hartley Act of 1947 and allow workers to leave one company in the same industry for another while remaining in the same union or the same multiemployer agreement.  About 20% of workers in defined benefit pension plans are in multiemployer plans, or about 10 million active and retired workers.

There are about 1,500 multiemployer-union pension plans in the United States.  A pension plan that is less than 80% funded to meet its liabilities is defined by the Pension Protection Act of 2006 as endangered.  If it has less than 65% of the assets needed to meet obligations, it is defined as critical.  According to studies by Diana Furchtgott-Roth of the Hudson Institute and by economist Andrew Brown, in 2006 before the recession arrived, only 17% of these union plans were fully funded, though 35% of non-union defined benefit plans were fully funded.  Only 59% of union multiemployer pension funds were above endangered status, though 86% of non-union plans were.  13% of union plans were in critical status, while only 1% of non-union plans were.

It seems that unions are systematically eager to "win" higher retirement benefit payouts to their members so they can win re-election and members will stay with the union.  But, they are not diligent in seeking to keep the pension plans secure and safe.  In fact, in 2006, of the 438 union pension plans in critical condition, only 5% were even contributing enough money to pay for the current costs.  In comparison, there were 54 non-union defined benefit plans in critical condition, but 39% were at least meeting current annual costs with contributions.

The Government Accountability Office studied multiemployer plans over the time period of 1980 to 2006 and found that in 1998 the number of contributing active workers was equal to the number of retirees on the plans.  Presently, the Teamsters union Central States pension fund has four times as many retired workers as active workers paying into the plan.  There are many union members who expect retirement payouts of $60,000 a year who are likely to receive only the Pension Benefit Guarantee Corporation maximum of $12,870 per year for a union worker with 30 years of work!  The unions hide this possibility from their members.

Since the recession hit, the situation with underfunded pension plans is worse for most defined benefit plans, but most especially for the union multiemployer plans.  The 230 critical condition pension plans of 2008 were up to 640 in 2009, despite the reporting requirement actually lagging the present condition of these plans.  In hard times, more companies fail.  In these multiemployer pension plans, the remaining companies in the plan have to pick up the costs of the pensions for the employees in the plan who may never have worked for them. The burden of covering the orphaned workers can become huge.  Since unions in the private sector are very skilled at killing their employer, this is a common problem.

Many plans which have experienced failing companies, are very dependent upon bringing new workers into the plan.  This is a very strong incentive for the unions to force new companies to unionize to keep the Ponzi scheme going.  The card check, or the words-have-no-meaning Employee Free Choice Act bill which was so strongly desired by the unions, was to serve this purpose.  That plan, having failed to pass Congress, has now been supplanted by Senator Casey's (D, PA) bill, the Create Jobs and Save Benefits Act of 2010, which he hopes to get passed in the Lame Duck session of Congress after the Democrat's election Armageddon.  Representatives Earl Pomeroy (D, ND) [who appears to be losing re-election] and Patrick Tiberi (R, OH) have a union pension bailout plan called the Preserve Benefits and Jobs Act of 2009, which they introduced a year ago.  In July 2009, I posted Is a Government Take-Over of Pension Plans Coming?  If the Democrats have their way, it apparently is.

How big a liability are these Congressional hacks selling out the American People on?  We do not know.  But, last September Moody's Investor Services examined the Labor Department's Form 5500 reports of 126 multiemployer pension plans in 2007.  Remember this is only 126 plans out of about 1500!  In 2007, they said these plans were only 77% funded, with a total funding shortfall of $87 billion.  Moody's estimated that the 2008 data for these funds would show that they were only 56% funded and the shortfall would be about $165 billion.  Brett McMahon, vice president of Miller & Long Construction Co., an expert in the union pension fund issues, believes the total unfunded liability for the 1500 plans may be about $700 billion!

This building crisis is about to collapse the dam.  The Financial Accounting Standards Board (FASB) is likely to implement a new rule to take effect on 15 December requiring that companies more accurately report their liabilities for their multiemployer pension plans.  When the Kroger grocery store chain reported its multiemployer pension plan liabilities had more than doubled in a year to $1.2 billion, it mortified stock analysts and credit agencies.  YRC Worldwide, a trucking company, owed about $2 billion to various multiemployer pension plans in 2009 and about half of that will be paid to retirees who have never worked for a YRC Worldwide company.  The UPS paid $6.1 billion to leave the Teamsters Central States pension fund in 2008, before it declared it was in critical status in 2009.

These huge liabilities now greatly concern Moody's and Standard and Poor's.  They concern Wall Street and bankers and creditors, at least those on their toes.  After the new reporting requirements take hold on 15 December, many more of these banks and creditors will become aware of the problem.  This will be cause for considerable new economic woe.  The resulting situation will be very bad for many unionized companies and terrible for the private sector unions.  The Republicans will control the House of Representatives.  Redistricting according to the 2010 Census will probably help the Republicans to keep future control.  With unionized companies collapsing more rapidly because no banks will loan to them if they are liable for multiemployer pension funds, the funds will collapse catastrophically as company after company collapses.  The unions will be smothered with class action lawsuits by their members for being negligent in protecting their retirements.  And, the unions days of buying elections for the Democrats will be over, except for the public sector unions.

The SEIU, which is so close to Obama and the Democrats, already has announced that its multiemployer pension fund is in a critical status.  That happen in early 2009.  Many more union pension funds will follow.  Can you imagine the sense of betrayal many of the today's union members will feel?  Especially since Furchtgott-Roth and Brown found that union staff have much better funded pension funds than do union members.  Even worse, union officials have much better funded pension plans than do the union staff!  It seems the union officials were always well-aware of the shaft they were giving to their members!  They protected their elitist selves, while committing a serious fraud upon their members.

Howard Rich: Kicking the Can Right Off the Cliff

Howard Rich wrote an editorial at the Investor's Business Daily which rather long-windedly bemoans the spendthrift ways of politicians.  Most of us can appreciate his reasons for being upset, but we are fully capable of doing our own moaning and trashing about in pain.  But buried deep into his piece was this nice summary of some very foreboding financial figures:

According to a January 2009 paper from the National Center for Policy Analysis, the average European Union nation needs to place more than four times its current gross domestic product in the bank (earning interest) just to fund current obligations. In fact, the NCPA report found that by 2020, the average EU nation will have to raise its tax rate from 40% to 55% of the national income just to cover existing benefits.

In Japan — which has the world's highest percentage of debt to GDP — fiscal policy is "out of control," according to Harvard economist Kenneth Rogoff, who predicted the 2008 U.S. bank failures. According to the latest estimates from the International Monetary Fund, total Japanese borrowings will soar to 204.3% of the nation's economic output in 2011.

Meanwhile in America, total public debt will exceed GDP for the first time since the World War II era, part of a massive borrowing spree that has seen the nation more than double its debt over the last six years. "The U.S. is in a state of paralysis in its fiscal policy," Rogoff said last month. "When they start tightening monetary policy even a little bit, it's going to send shock waves through the system."

In addition to this brewing global and national crisis, U.S. states and municipalities are facing similar ticking time bombs. A March 2010 Northwestern University report discovered that the total unfunded liability of state government pension funds was $3.2 trillion — or more than $2.2 trillion higher than government officials estimated.

Note that last paragraph:  Government officials are claiming that state government pension fund liabilities are only 31% of what they really are.  To be that wrong, they have to be lying to the taxpayers.  That cannot be a mistake.  Of course, by now, one has to be really, really obtuse not to have come to understand that most of our politicians and bureaucrats have made it a standard practice to lie to us all of the time.  Clinton seemed to raise the commitment  to the lie to a new standard, but Obama has readily surpassed him in his commitment to lying.  Given the pitiful state of the planned economies and socialist states of Europe that Obama so much wants to transform the United States of America into, well .... you really must lie.  There is no truthful way to make those European Big Brother states palatable.

Some Objectivists tend to think that discussing mere matters of the amount of debt is not very important because it is not a matter rich in ethical content.  I disagree.  The Preamble of the Constitution noted our responsibility to our Posterity which was to be recognized by the very limited government of the Constitution. George Washington also reminded Americans that they had no right to saddle their posterity with debt.  He was very right and very wise.  Passing the debts of our governments today on to our children and our grandchildren is a heinous thing to do.  We have essentially been doing just this since the Social Security Act was passed in 1935.   The Medicare program has raised this practice to new heights.  Then came Medicaid, ObamaCare, and bailouts in TARP and now forever into the future with the Financial Industry Bailout and Consumer Spying Act which is said to likely be passed by Congress later today, and incredible subsidies to alternative energy firms who environmentalists will never allow to build any power plants.  There is no fun in spending money you actually have to earn, so the national governments prefer usually to just run the printing presses as long as need be.  Of course this drives down the value of everything the private sector does as productive work, but hardly anyone ever noticed as long as they were bribed with some goodies.  But, the number of necessary goodies kept escalating and now there is not more room for further escalating them.  The ever more meager productive private sector is now just too small in Europe, Japan, and the U.S. to support the Leviathan governments with all their redistributed goodies.

Speaking of which, Glenn Beck's 26 May 2010 show dwelt on the same Big Brother watching over the peasants bank accounts, credit card transactions, and ATM transactions that I discussed in the early morning hours of the 26th.

Is a Government Take-Over of Pension Plans Coming?

Single-employer defined benefit company pension plans are covered in many cases by the Pension Protection Act (PPA). The Pension Benefit Guaranty Corporation (PBGC) is tasked with the responsibility to take-over the covered pension plans if they fall into default. This is a government corporation with some similarities to Fanny Mae and Freddy Mac. 80% of the pension plans covered by the PPA in 2008 were considered to be reasonably well-funded. But, financial investment losses in late 2008 and early 2009, have left only 20% of these single-employee pension plans well-funded.

Meanwhile, outside of the PPA are some multi-employer pension plans. Among these is the Teamsters Central States Fund. This fund has three retirees for every active worker! There are now calls for the government to have the PBGC take over failing multi-employer pension funds, including the very troubled Teamsters Central States Fund. This will require an infusion of taxpayer bailout money.

The Teamsters claim the problem with their Central States Fund is that deregulation of the trucking industry decades ago caused a significant loss in trucking jobs when companies went out of business. Gee, have you seen a great decrease in the number of trucks on the road? No? Well neither have I. Teamsters leadership is heavily committed to the Democrat Party, so they are not well-inclined toward the truth.

Let us check up on the facts a bit here. In 1970 there were 18,000,000 trucks on the road. The Motor Carrier Act of 1980 brought about a partial deregulation of the industry. There was a dramatic increase in the number of trucking companies as a result. There were other consequences:

• Driver wages dropped.
• Consumer costs went down as trucking costs went down.
• There was a great increase in the number of truck drivers.
• There was drastic de-unionization!
• In 2006, there were 26,000,000 trucks on the road, none of which are driven by robots.
  

So, contrary to the implication that de-regulation brought about a loss of companies and truckers, it only brought about a loss of those companies who could not compete in a less regulated environment. A very disproportionate number of the companies unable to compete were unionized. Is this a surprise to anyone?

Democrats are always complaining about de-regulation. They are always unhappy with the idea of competition. They are always eager to be lazy. They are always eager to have the world owe them a living. How disgusting. How absolutely and utterly disgusting!!!!! Yet, we are all supposed to provide pensions to union workers whose unions kept their trucking companies from being able to compete. Does this sound familiar? Can anyone remember Government Motors and Chrysler? Is providing pensions for non-competing labor unions among our next bailouts?

Employee Free Choice Act Revisited

The union benefactors of Obama and the socialist Democrat Party want nothing more than passage of the Employee Free Choice Act, also known as Card Check. Opposition to this tauntingly misnamed legislation has been strong enough that it appears unlikely to pass without some compromised revision. As written, not only is secret ballot voting by employees no longer required or even likely to occur in most cases, but there is an important requirement that any failures of the union and company management to come to an agreement on a union labor contract will be settled by a federal arbitrator within 120 days of the union winning an election to represent the company employees.

There is now fear that this arbitration power will be used to force newly unionized workers to take on pension plan coverage with already existing union multi-employer pension plans. An editorial in the Washington Examiner discusses this. It gives some very interesting information on how badly funded these pension plans are. It notes that:

Pensions for nearly half of the nation's 20 largest unions are classified as either "endangered" or in "critical" condition due to underfunding, according to federal actuarial reports. Pensions with less than 80 percent of the assets needed to cover present and projected liabilities are considered "endangered," while those below 65 percent are classified as "critical" under the Pension Protection Act of 2006. The average union pension has resources to cover only 62 percent of what is owed to participants, according to the government-backed Pension Benefit Guarantee Corp. (PBGC). Less than one in 160 workers is presently covered by a properly funded union pension plan. Failed pension plans are bailed out by the PBGC.

It appears that getting more union members into these underfunded pension plans is to be used to improve the likelihood that these critically underfunded pension plans will either be paid up by additional companies forced into them or by the taxpayers through the Pension Benefit Guarantee Corp.

Maryland State Employee Benefits

According to the Maryland Public Policy Institute, the average state employee salary is $47,313, while the average private sector salary in Maryland is $46,031. While this is probably an unjustified salary level, the real benefit of being a Maryland state employee is the 55% greater benefit package. The state employee receives $13,387 worth of benefits, while the private sector Marylander receives benefits with an average worth of $8,604 per year. Only West Virginia offers its employees better benefits in the region. Maryland benefits rank only 24th in the nation, however, so the situation in many other states is comparable.

In 2006, the state pension liability was $7.6 billion. In January of 2008, the unfunded pension liabilities had increased to $11 billion. Other post-employment benefits, such as health care, have a liability of $14.5 billion. Someday, the state will be under considerable tax strain to pay out these obligations. These benefits should be reduced now!

The American Dream is Slip, Slipping Away - Not

Before every election in which a Republican President holds the reins of the Executive Branch of the Federal Government, the Democrats claim that the American Dream is dying. Both Senators Biden and Obama made the claim that it was "slipping" away. Biden said it directly, while Obama said that many Americans felt that it was slipping away.

I have posted on aspects of such Democrat claims in these prior posts:

• 47 million uninsured Americans
• 2nd Quarter GDP Growth 3.3% Annual Rate
• American and Chinese Exports
• Democrats Create Unemployment Before Election
• Hilary's 47 Million Uninsured Americans Demagoguer...
• 47 Million Uninsured Americans Revisited
• Benefits versus Wages
• Lambro: Recession fixation

Of these, the "Benefits versus Wages" post is must reading. I have recently come across another very essential commentary on the subject of American worker well-being. James Sherk, Bradley Fellow of Labor Policy at the Heritage Foundation wrote an article called "The American dream lives," which was published on 7 September 2008 in the Washington Times.

Sherk says we are "enduring trying economic times." Gas is expensive, some homeowners have lost considerable home equity, growth has slowed, and there are some job losses. But the American Dream cannot be said to be lost every time the American economy enters a downward business cycle. We should remember how slight today's problems are compared to say the stagflation of the 1970s, which was not enough to end the American Dream.

He says good jobs are easier to find in recent times than they were in the past. Repetitive, brawny work has been replaced with creative, brainy work. "The share of Americans working in what the Census Bureau calls 'professional specialty' jobs (such as nurses or engineers), as well as executive or managerial, and technical or sales positions, has expanded 10 percent since 1980." "Between 1993 and 2006, the median annual earnings of American born workers rose by one-sixth."

By contrast, the Democrats, as in Obama's acceptance speech, like to point out that workers have lost earnings in the last 8 years. This ignores the fact that Americans take a much larger fraction of their compensation as benefits to avoid taxes. It also ignores the affect of many immigrants and many illegal workers, who are commonly paid less than native Americans.

Sherk points out that 401(K)-style defined contribution pensions have freed many workers to make more frequent job changes, which gives them more opportunities to seek jobs at higher pay and that they enjoy. Employees are more than one-third more likely to voluntarily change jobs now than they were in the 1970s. Contrary to the anecdotal claims, employers are much less likely to fire or lay off employees than in the past.

One of the problems often noted today is the rising cost of health care costs. This puts some downward pressure on take-home income as employers pay more for health insurance plans. Despite this pressure, the fraction of the work force receiving company provided health care insurance is the same as in the mid-1990s, provided a correction is made for illegal immigrants.

When the present slow growth moment ends, Americans will have many opportunities to get ahead. It is a sad business to underestimate the long-term strength of the American economy and the productivity of its workers.