Economist James K. Galbraith Sorts Out the Mess in LA Times

University of Texas economist James K. Galbraith takes a crack at explaining what is going on with the economy and what Team Obama got wrong in 2009. Read his op-ed piece in the LA Times that I picked up from poet Garrett Hongo on Facebook.

One Response to Economist James K. Galbraith Sorts Out the Mess in LA Times

  1. Greg Page says:

    Paul, thanks for posting. I read this and generally agree that structural fixes (like the banking reforms or infrastructure bank Galbraith talks about) are what’s needed to restore our long-term economic health. Spending for its own sake without first addressing root causes seems about as worthwhile as a football bat, soccer mitt, or hockey cleat.

    Still, I wish Galbraith had offered more specifics in that Op-Ed.

    One thing that Simpson-Bowles addressed, but maybe isn’t getting enough airtime now, is the issue of Federal Employee Wage Creep (FEWC, depending on your accent, might be a more colorful way to describe it).

    What’s happened over the past decade-plus is this: Inflation has stayed in check, private sector productivity and work-hours have gone up, and meanwhile a steady series of generous, percentage-based, year-over-year federal wage increases have totally tipped the scales on the old model, which was that by deciding to work for the federal gov’t, you were trading in a lower salary in exchange for guaranteed work, limited hours, good benefits, and a solid pension.

    The new model is just like the old model, except the part about the wages.

    Don’t get me wrong — this isn’t some reflexive screw-the-public-sector rant, and I’m not saying to trim the SIZE of the government workforce (which is how this sometimes get misinterpreted). In fact, it’s kind of the opposite…I’m saying that enacting the Simpson-Bowles recommendation about federal wage freezes is precisely what might be needed to help prevent the system from melting down, and then not being able to sustain the jobs of the very people who were yelling and waving pitchforks when President Obama talked about freezing federal pay.

    On the state and local level, there’s more scrutiny and sense of collective ownership to prevent the problem from spinning into what it has on the federal side.

    I know I’m being anecdotal here and I’m not armed with lots of numbers, but having spent the past seven years in or around the federal workforce, I can tell you that we (as in, we the taxpayers) are paying a LOT of people a very comfortable wage (upper 5/lower 6-figure range) to work far shorter weeks with far less responsibility than their private sector equivalents.

    I think that Simpson and Bowles were getting at is that the model is totally unsustainable, and I think what the President saw when he brought it up is that it’s a true political third rail.

    Hopefully this new budget committee is willing to go there.