What do you do, when you're broke

[sirs]

You stop spending more than you take in.  It's not rocket science

[sirs]

We've Become a Nation of Takers, Not Makers
More Americans work for the government than in manufacturing, farming, fishing, forestry, mining and utilities combined.
By STEPHEN MOORE

If you want to understand better why so many states?from New York to Wisconsin to California?are teetering on the brink of bankruptcy, consider this depressing statistic:
Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government.

It gets worse.
More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees. Is it any wonder that so many states and cities cannot pay their bills?

Every state in America today except for two?Indiana and Wisconsin?has more government workers on the payroll than people manufacturing industrial goods. Consider California, which has the highest budget deficit in the history of the states. The not-so Golden State now has an incredible 2.4 million government employees?twice as many as people at work in manufacturing. New Jersey has just under two-and-a-half as many government employees as manufacturers. Florida's ratio is more than 3 to 1. So is New York's.

Even Michigan, at one time the auto capital of the world, and Pennsylvania, once the steel capital, have more government bureaucrats than people making things. The leaders in government hiring are Wyoming and New Mexico, which have hired more than six government workers for every manufacturing worker.

Now it is certainly true that many states have not typically been home to traditional manufacturing operations. Iowa and Nebraska are farm states, for example. But in those states, there are at least five times more government workers than farmers. West Virginia is the mining capital of the world, yet it has at least three times more government workers than miners. New York is the financial capital of the world?at least for now. That sector employs roughly 670,000 New Yorkers. That's less than half of the state's 1.48 million government employees.

Don't expect a reversal of this trend anytime soon. Surveys of college graduates are finding that more and more of our top minds want to work for the government. Why? Because in recent years only government agencies have been hiring, and because the offer of near lifetime security is highly valued in these times of economic turbulence. When 23-year-olds aren't willing to take career risks, we have a real problem on our hands. Sadly, we could end up with a generation of Americans who want to work at the Department of Motor Vehicles.

The employment trends described here are explained in part by hugely beneficial productivity improvements in such traditional industries as farming, manufacturing, financial services and telecommunications. These produce far more output per worker than in the past. The typical farmer, for example, is today at least three times more productive than in 1950.

Where are the productivity gains in government? Consider a core function of state and local governments: schools. Over the period 1970-2005, school spending per pupil, adjusted for inflation, doubled, while standardized achievement test scores were flat. Over roughly that same time period, public-school employment doubled per student, according to a study by researchers at the University of Washington. That is what economists call negative productivity.

But education is an industry where we measure performance backwards: We gauge school performance not by outputs, but by inputs. If quality falls, we say we didn't pay teachers enough or we need smaller class sizes or newer schools. If education had undergone the same productivity revolution that manufacturing has, we would have half as many educators, smaller school budgets, and higher graduation rates and test scores.

The same is true of almost all other government services. Mass transit spends more and more every year and yet a much smaller share of Americans use trains and buses today than in past decades. One way that private companies spur productivity is by firing underperforming employees and rewarding excellence. In government employment, tenure for teachers and near lifetime employment for other civil servants shields workers from this basic system of reward and punishment. It is a system that breeds mediocrity, which is what we've gotten.

Most reasonable steps to restrain public-sector employment costs are smothered by the unions. Study after study has shown that states and cities could shave 20% to 40% off the cost of many services?fire fighting, public transportation, garbage collection, administrative functions, even prison operations?through competitive contracting to private providers. But unions have blocked many of those efforts. Public employees maintain that they are underpaid relative to equally qualified private-sector workers, yet they are deathly afraid of competitive bidding for government services.

President Obama says we have to retool our economy to "win the future." The only way to do that is to grow the economy that makes things, not the sector that takes things.

[sirs]

House Budget Chairman Congressman Paul Ryan (R-Wis.) said President Barack Obama?s budget strategy is to ?do nothing, punt, duck, kick the can down the road? while the debt remains on track to eventually hit 800 percent of GDP and the CBO is saying it "can't conceive of anyway" that the economy can continue past 2037 given its current trajectory.

Ryan also said that the House Republicans? FY2012 budget, which he unveiled yesterday, would save Medicare and help the United States avoid a debt crisis.

?It all comes down to this: Either you fix this problem now where we, you can guarantee people who?ve already organized their lives around these programs get what they have coming to them, or you pick the president?s path, which is do nothing, punt, duck, kick the can down the road, and then we have a debt crisis and then its pain for everybody,? said Ryan.

?Then, you do start cutting seniors,? he said in a speech at the American Enterprise Institute (AEI) in Washington, D.C. on Tuesday.  ?So, the question here is not if we reform Medicare. The question is when and how we reform Medicare and by reforming Medicare now, you save Medicare.? Ryan said during

He continued, ?So the question is, do we save these programs now by engaging in budget reform that preempts a debt crisis that gets this situation under control and gets this economy growing or do we worry about politics, do we worry about the next election and then by doing so, kick the can down the road, only to wake one day and see a real problem where you have to do indiscriminate cuts to everybody including senior citizens? We don?t want to have European austerity in this country, which is a debt-crisis-fueled cut to current seniors, tax increases on the current economy to slow us down.?

Ryan?s proposal, which cuts $5.8 trillion in government spending over the next decade, would provide Medicare beneficiaries with subsidies to purchase private insurance starting in 2022.  The proposal would also end taxpayer support of Fannie Mae and Freddie Mac and provide no funding for the implementation of the health care reform law passed by Congress last March.

?We?re on a debt crisis path. We are on a path where the government goes from 20 percent of GDP, to 40 percent then 60 percent of GDP. We?re on a path where our debt goes from about 68 percent of GDP to 800 percent of GDP over the three-generation window,? Ryan said.

?I asked CBO to run the model going out and they told me that their computer simulation crashes in 2037 because CBO can?t conceive of any way in which the economy can continue past the year 2037 because of debt burdens,? said Ryan.

?So, we have to go out and give the country a choice,? he said. ?We know the path the president?s put the country on. It?s a path that I fundamentally believe transforms this country into something it was never designed to be ? into a cradle-to-grave social welfare state and economic stagnation.?

?We are offering a country that is true to this country?s founding principles that is prosperous, that is pro-growth, that lives within its means, that is an opportunity society with a sound, resilable safety net,? said Ryan.

Indeed, a choice for the ages.

[hnumpah]

Basically you either bust your ass trying to find ways to pay your bills, or you roll over and die. I refuse to quit.

[kimba1]

the postal service is already downsizing, I expect the various other government agencies will follow.

no money still means no money.

[sirs]

Basically you either bust your ass trying to find ways to pay your bills, or you roll over and die. I refuse to quit.

LOL...nice quote at the bottom.  I especially like the out of context nature to it.     

[Xavier_Onassis]

I do not see this country rolling over and quitting.

[sirs]

The Mother of All Bankruptcies

The budget problem that the country faces isn?t merely big.

It isn?t even really, really big.

It?s much bigger, and more dangerous, in actual fact, than politicians are willing to acknowledge.

Think of the biggest number you can.

Yeah. It?s bigger than that.

The Congressional Budget Office says that if we continue at our current rate of spending, we?ll  ?chalk up nearly $7 trillion in red ink over the next 10 years,? according to Reuters.

Yawn. Think bigger than that.

Because that number?s not even close to the size of the real problem we have. $7 trillion is just a fraction of the liabilities of the government as it doesn?t take into account all the ?off-the-book? items.

You might remember ?off-the-book? accounting. It made a stunning debut in the Enron scandal.

Oh.

You thought politicians fixed that problem?  They did. The ?fix? doesn?t apply to government accounting; it just applies to the rest of us.   

While experts usually peg the unfunded portion of pension liabilities at around $1 trillion, that number is based on reports from public pension managers who are anxious to downplay the size of the gap in pension liabilities.

If real-world accounting methods are used to gauge the pension gap- you know, the methods that private pension managers have to use to stay out of prison- the states owe about $3 trillion to pension funds that they don?t have.

But, hey, what's $2 trillion more or less?

Because, still, our problem is much bigger than that.

The IMF yesterday called upon the U.S. government to ?make explicit its guarantees of the housing-finance market and bring them fully onto the government balance sheet.?

The IMF has this silly notion that the government should stand by loans it?s guaranteed and add the bill to the balance sheet. 

Forbes? Bill Bonner reckons  the ?total bailout bill?may exceed $20 trillion.?

The IMF stated the obvious by saying that government-guaranteed, easy credit helped drive prices up and create a real estate bubble in the first place.

So far that?s $7, plus $3, plus $20 trillion.

But wait. It gets worse.

Bill Gross, the manager of the world?s largest mutual fund, did calculations that includes all the liabilities of the government he could think of- Social Security, Medicaid, Medicare- and figured a deficit of around $75 trillion more or less.     

Gross ?has been selling Treasuries because they have little value within the context of a $75 trillion total debt burden,? he said, as reported in Bloomberg.

?This country appears to have an off- balance-sheet, unrecorded debt burden of close to 500 percent of GDP. We are out-Greeking the Greeks,? Gross concluded, referring to the debt crisis which has Greece teetering on bankruptcy.   

Fellow investor Warren Buffet agrees with Gross. He?s told investors to stay away from U.S. government securities.

"If you ask me if the U.S. Dollar is going to hold its purchasing power fully at the level of 2011, 5 years, 10 years or 20 years from now, I would tell you it will not," Buffet said to overseas investors in March.

It?s not clear if we?re supposed to add the $20 trillion in mortgage obligations that the IMF is counting on to Gross? estimate of $75 trillion.

$75 trillion is a number that would stagger even the late Carl Sagan. 

Written out it's $75,000,000,000,000.00 if you are keeping box-score at home.

So, what?s a measly $2 or $3 trillion more or less, in a figure like that?

Just the pension problem, that?s what.

Our real problem, unfortunately, is much bigger than that.

[sirs]

[Kramer]

I do not see this country rolling over and quitting.

Of course you don't but the people supporting your friends are sick & tired of it and won't be doing it much longer. call that quitting if you like! When your friends wake up to learn the free ride is over likely many of them will quit. I hope they don't jump off skyscrapers because they might kill productive people but I do hope they rid us of their presence.