Cut the government. The public sector is bloated. The sky is falling. Thanks Chicken Little, I mean Chris Christie, for the lovely words.
New Jersey Gov. Chris Christie has become a YouTube sensation for his attacks on public workers and unions (especially the teachers union). So, why are people so upset that teachers have a decent pension, health care benefits and basic livelihood? No one was complaining about how high the salaries of public workers were during the 1990s when the stock market was booming. This is a case of sour grapes and jealousy more than anything else and it needs to stop before we have a race to the bottom.
The public sector workforce still holds and represents what used to be offered from private sector jobs. Until the 1980s, the private sector offered benefits comparable to or better than those of the public sector workers. We should look to private industry to build up its own employees’ livelihoods instead of lashing out at public sector workers.
I think there are also some risks that come with cutting the public sector that are often overlooked. Someone who would make a great teacher might not want to become a teacher if it no longer offered retirement and every five years there was a risk of being fired.
Police might not stay honest if their pay is frozen or reduced. Federal workers in the intelligence field might be more inclined to share state secrets after their pay freeze goes into effect.
Will you attract great teachers to the field if it does not offer a living wage and benefits? Would someone want to collect garbage for a living if it did not come with health care, retirement or a decent wage?
But if we are not cutting the government, how do we balance the budget? The answer is carried interest.
Hedge fund managers and others working on Wall Street for the financial sector are paid with carried interest. Carried interest is taxed as capital gains, even though it is essentially their salary. Why does that matter? It matters because millions of dollars are being taxed at 15 percent instead of the normal income tax level.
As Allan Sloan of CNN Money says, “Public investors in Blackstone and other publicly traded partnerships would get stuck paying higher taxes, because some of their share of the partnerships’ income would be taxed as ordinary income rather than as capital gains.” Sloan continues by saying, “they’d also have somewhat higher gains (or lower losses) when they sell their partnership units. It’s probably not a big enough difference to really matter to public investors, who own 16 percent of Blackstone. Another 10 percent is owned by China’s sovereign wealth fund, which I’m sure can look after itself.”
If you taxed carried interest as income tax instead of capital gains, the government would be closer to balancing its budget and the people who caused the recession would finally be paying for it.