Although President Obama is clearly regretting his “private sector is doing fine” gaffe, it still doesn’t even approach the stupidest thing he said during Friday’s speech. There was a singular theme consistent throughout that spoke so loudly of his absolute ignorance of even the most basic economic theory, that it was simply breathtaking. When speaking about the current state of the U.S. economy, our president actually makes clear that he thinks we need to give federal dollars to state and local governments that they may hire more teachers, firefighters and police officers. He goes on to say that this would help reduce unemployment in the private sector.
Completely ignoring the kind of convoluted “Keynesian” logic would lead to that conclusion, I couldn’t help but think about the basic mathematics of the whole thing. With estimates indicating that average public employees earn between twenty and thirty percent more than their private sector counterparts, I was struck by an enormous numerical anomaly. Assuming that private employees are paying taxes at a twenty percent rate, IT TAKES THE TAX DOLLARS OF SEVEN PRIVATE SECTOR WORKERS TO PAY FOR ONE PUBLIC EMPLOYEE! This is not the kind of solution proposed by someone with any kind of economic sense. How are we to pay back borrowed money utilizing this kind of thinking? Is the strategy to breed our way out of it? It may be the only way.
Eventually, the United States is going to have to stop borrowing money. When that time comes, we will need to be able to work within the constraints of a reasonable budget. If we are borrowing money to hire more public workers (to whom we provide generous pensions), we are creating more long term economic liabilities. If we are borrowing money to support current liabilities and borrowing even more to create greater long term liabilities, we will never be able to get our fiscal house in order. When making reference to the tepid pace of our economic recovery, President Obama routinely uses the term “headwinds”. Although recent global events and a tough housing market will continue to contribute to a slow recovery, I think rather than blaming “headwinds” we should look at a Harvard educated anchor as the real culprit!