Public Employees' Benefits

This is personal.

This week I read about a survey in which a majority of Californians believe that public employees in California should give up some of their retirement benefits to help balance the state budget.

I don't know about California. I don't know how their public employee benefits are structured or how generous (or not so) the retirement plan(s) for public employees is in California.

But, I know about Travis County, Texas.

I have been an employee of the Travis County Attorney's Office for over 29 years. For many years, I have been the Executive Assistant Travis County Attorney, one of the two lawyers who report directly to the County Attorney. I supervise the civil (as opposed to the criminal prosecution) side of our office. It is the equivalent of being a senior partner in a law firm of 75 or so lawyers.

During my career working for the Travis County Attorney, I have been well- and fairly-paid. I have no complaints about the salary I've received. But, it has been a small fraction of the salary I would have received in an equivalent position in private practice, even though, over the years, the lawyers we have faced, both in transactional negotiations and in litigation, have been the senior partners of major law firms, and we've done pretty well.

This fractional salary fact is and has been true for most, if not all Travis County employees. Virtually all of us make less than our private-industry counterparts and always have, even though we do the same work that they do.

Over those years, I have heard, over and over, from elected officials and from members of the public, that it was fair to pay us, the county employees, less than our private-industry counterparts because (1) we had more job security and (2) we got such generous benefit packages, including our retirement plan.

And there is some truth to that, though not as much as I suspect people think. Our benefit packages are not all that much more generous than many in private industry, and not as generous as some in private industry. Nonetheless, there is some truth to it.

In particular, this has been said during times of an expanding economy when private-industry salaries were rising fast and far out-pacing our salaries as county employees. "You don't get paid as much because you get such good benefits."

So, for many years, the public servants of Travis County have received less for our work than our private counterparts with the promise that it would even out when we retired.

Now you want to reduce our retirement?

I'm sorry. I worked for that retirement. It's been part of what I've been promised - by my fellow citizens - if I would continue to work on their behalf in public service. I've sacrificed countless nights and weekends for that retirement. I've watched my private-practice counterparts live in huge houses and drive expensive cars and take fancy vacations to ski resorts in Colorado and trips to Europe, none of which I could afford. And the reason given to me for why I should feel okay that I wasn't able to afford what they had - even though I was facing them in the courtroom and beating them - was always that I had better benefits than they did.

Now you want to reduce our retirement?

Shame on you! Keep your promises! We've kept ours! Pay us what you agreed to pay us when we were doing your work for you!

I told you this was personal.

The Coporate Tax Rate

In a previous article, I discussed the fact that an "expert" averred in an article published in the Austin American-Statesman that the United States had the second highest corporate tax rate in the world and that, in fact, this was not true. There were, in fact, at least six other countries with higher corporate tax rates than the United States.

At the time, I refused to discuss whether the U.S. corporate tax rate was too high. I wanted to stay on the point that this "expert" had said something which wasn't true, and which he almost surely knew wasn't true, and that the American-Statesman had published his article without the most rudimentary checking of his "facts," thereby putting and perhaps perpetuating a falsehood into the public discourse about U.S. corporate tax rates.

Now I want to talk about whether U.S. corporate tax rates are "too high."

The U.S. corporate tax rate is actually a range, depending on the income level of the corporation paying the taxes. That range is from 15% to 39%. Is that too high?

I don't know that I'm qualified to answer that question, but I have an opinion. That opinion is informed, at least in part, by this fact: According to NPR, the actual rate of tax paid by corporations in the United States on average is between 12 and 13%.

I need to say that again: the average rate of tax actually paid by corporations in the United States is between 12 and 13%.

That doesn't seem too high to me. Especially when corporations are making record profits and that's lower than the rate of taxes I pay. A lot lower.

So, in addition to making a false statement about U.S. corporate tax rates compared to other nations corporate tax rates, the "expert's" statement was really misleading. Regardless of what the stated corporate tax rate is, the actual rate of taxes paid by corporations in the United States falls below the lowest rate in the stated range of corporate taxes.

Why? I am not suggesting that U.S. corporations are cheating on their taxes, though a number of them have plead guilty to that crime over the years. Maybe they're cheating, maybe they're not. I tend to think most of them aren't.

They pay an average rate lower than the lowest rate of the stated range because of all the deductions, exemptions, and credits of which they may legally avail themselves in the U.S. tax code. So, it is actually our tax law that allows them to pay such a low rate.

My suggestion is that, when we are evaluating whether corporations pay too much in taxes in the United States, that we look at what they actually pay under our tax law, not what they might pay if their accountants were stupid and they paid more than the law requires them to pay.

Twelve to 13% doesn't seem too high to me.

CORRECTION!

In these articles, one of my recurring themes has been the need to speak the truth to each other.

Unfortunately, I violated that principle in my previous article on the Federal Debt Ceiling.

I said that the United States had had a federal debt ever since Secretary of the Treasury Alexamder Hamilton. That statement, it turns out, is not true.

In 1835, under President Andrew Jackson, the United States fully paid its national debt. The very next year, the national economy went into recession, the federal government borrowed money again, and we have had a national debt ever since.

So, the truth is that since President George Washington authorized his Secretary of the Treasury, Alexander Hamilton, to incur debt in the name of the United States, we have had a national debt ever since, except in the year 1835, when, for less than one year, we were national-debt free.

The Federal Debt Ceiling

In the middle of May, the federal government will reach its Congressionally authorized debt ceiling. Unless the Congress increases the debt ceiling, the federal government will be unable to pay its debts. The United States will default on its financial obligations.

Some members of Congress are saying that they will not vote to increase the federal debt ceiling. The problem is, there may be enough members of Congress making this threat to actually prevent the federal debt ceiling from being raised.

This is so irresponsible it approaches madness. If those who are threatening to keep the federal debt ceiling at its current level, thereby assuring that the United States will default on its financial obligations, are not insane, then they are diabolical. I don't use that word lightly, nor do I use it without understanding its literal meaning.

The issue of whether the United States government would have debt was fought out over 200 years ago, between Alexander Hamilton, our first Secretary of the Treasury, and Thomas Jefferson, our first Secretary of State and the founder of the original Republican party. The dispute was referreed by none other than George Washington, our first President.

Secretary Hamilton won, and the United States has had a federal debt ever since.

But, we've never defaulted on the payments due on that debt. Never. Hence the saying, "sound as a dollar." That saying did not become common by accident. It became common because when someone owned a financial obligation of the United States of America, whether that be a treasury bond or a dollar bill, they could be certain that financial obligation would be honored.

Our national financial system is based on this concept: the United States will never default on its financial obligations. That's why a treasury bond is considered the standard by which every other financial investment is measured. A treasury bond has been an investment in which there has never been any risk. Therefore, if an alternative investment couldn't net an investor at least as much as a treasury bond, it was clearly unsound.

But, more than that, the world's financial system is based on the concept that the United States will never default on its financial obligations. Everyone in the world trusts the United States to pay its debts, and investment decisions in every corner of the globe have been made on that assumption. A previously safe assumption.

However, now it is no longer safe.

And just the fact that it is not a safe assumption - entirely aside from whether we actually default on our debt - is already causing damage in the financial world, which will eventually spill over and affect every man, woman, and child in the world negatively. Some will be hurt much worse than others.

Just making people think we might not pay our debts, just letting people think we might not pay our debts, has terrible consequences. Already, major banks are developing contingency plans for how they stay in business - not how they continue to make a profit, how they stay in business - if the debt ceiling is not raised. That costs money. Real money. Out of the real pockets of real people.

If a member of Congress wants to control or reduce the federal debt, the way to do that is by controlling the federal budget. Not by threatening to default on our financial obligations. Unless, of course, your real objective is to destroy the federal government or, even more diabolical, the United States of America.

I have already heard it said in defense of the threats to vote against raising the federal debt ceiling that "Senator Obama did it."

I have two responses to that defense.

First, it was wrong for Senator Obama to do it. That doesn't make it right now. There was a difference when Senator Obama voted against raising the federal debt ceiling. There was no way there were going to be enough votes against raising the debt ceiling to actually defeat the bill. So, no one anywhere actually considered that there was any chance the United States would default on its financial obligations. But, that didn't make it right for Senator Obama to vote against it. It was wrong. And the fact that it provides an excuse - no matter how flimsy - for madmen to justify their similar votes now is just one reason why it was wrong. (See my previous articles where I refer to the Law of Unintended Consequences.)

My second response is: Do the people who are threatening a default of the United States' financial obligation really want to gauge the appropriateness of their behavior by Senator Obama's actions? Really? "It's okay for me to do it because Obama did it"? Really?