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Sunday, October 17, 2010

The Failure of Socialism

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I can't seem to leave some news stories alone...

The Failure of Socialism

Maybe this should be about just who the bad guys really are...

It's popular right now here in the US to bash various unions (teachers, police, firefighters, civil servants, etc.) for having contracts that provide big benefits. It seems that the benefit most often attacked by my conservative colleagues is pension and retirement packages. Nearly everyday you'll hear one or another right wing pundit fussing about how some person or another is getting $300,000 a year in pension payments. Frankly, you're probably expecting the same from me.

Well, you're not gonna get it.

I don't blame the unions or their membership one tiny bit for getting everything they can from whoever the employer happens to be. In fact, I praise their negotiating techniques. Anyone would do exactly the same thing. That's not only human nature, but it's a good survival skill.

No, I blame the employers for giving in to the demands.

Let's put this in perspective, shall we?

In a nutshell, there isn't a single company in the private sector that would ever agree to the kinds of contracts that the public sector has signed. Why? Simply because a private sector company knows that such agreements are not sustainable and can't be funded and still break even, let alone make a profit.

The closest employer in the private sector in terms of number of employees is Wal-Mart. The only entity that employees more people than Wal-Mart is the US Government.

Imagine, if you can, if Wal-Mart promised to pay each retiring employee more after they retire than while they were working.

Anyone want to explain to me how that will work? Other than saying it won't, because that's obvious.

Here's some numbers for you...

Assume that Wal-Mart has 2,000,000 employees at an average of $30,000 a year. That means that Wal-Mart has to turn a profit of $60,000,000,000 a year just to meet payroll. Oh, and we're going to ignore other things like payroll taxes, SS, unemployment, benefits, etc. for this back-of-the-envelope calculation.

Now, let's assume that 2% of Wal-Mart's employees retire each year, and Wal-Mart will pay them 90% of their pay for the rest of their lives and each will live for 20 years on retirement.

That means that each year, Wal-Mart will add 40,000 additional people to its payroll, each making about $27,000 a year. That all boils down to Wal-Mart needing to increase profits by $1,080,000,000 each year. In case you're wondering, that's a 1.8% growth in profits.

Anyone see a problem here? Yeah, me too...

It just won't work. Anyone with any common sense can see that. An economist could smell this pile of dung from a million miles away. Business people will likely pass right out.

And so, Wal-Mart-or any other company-would never enter into such agreement because they would be out of business very soon.

But now let's look at the public sector...

The rationale has always been that government isn't in the business of making money. Why the hell not? But, I digress...

OK, so we don't care if the government makes money, but we sure as hell should care that it breaks even. Failure to break even leads to (OK, all together now) DEFICIT SPENDING.

Deficit spending is a nice term for spending money you don't have and will never get. Just like when you buy a house you know you can't afford because the payments are $3,000 a month and you only make $2,000 a month.

The unions knew they had the government both over a barrel and right where they wanted them...

The government was over a barrel because if they didn't agree, the teachers (or whoever) would strike and shut down the schools. That isn't going to look good on the 5-o'clock news.

The government was right where the unions wanted them to be because the government, as a whole and regardless of party, can't say "no" to spending more and more money.

So, outrageous agreements were entered into. Staggering costs were pushed into the future. And unsustainable promises were made.

And now the time has come to pay the proverbial piper.

And just like the Pied Piper, our children are being led off down the road to pay for our foolish choices.

And that is the core problem of socialism...

Agreements and promises are made that can't be paid for. It all looks very wonderful and happy on the surface, though. As in France, everyone gets to retire at 60, and everything you need is given to you. You'll have food, and a place to live. You'll have health care. And all the rest. In most case, these things are in written contracts signed by the appropriate parties to the agreements. In a few, they are simple promises made to people verbally or in informal documents.

But France and most of the rest of the world is finding that the attractive crust of the socialist pie hides a nasty and rotten interior.

The promises can't be kept. The contract obligations can't be met. There just isn't enough money to do the wonderful things that lured intelligent people into an obvious trap.

I think the saddest part is that there is an easy answer to all of this...

In order to give all people a good living, good retirement at an early age, health care at American standards, and all the rest of the wonderful things that socialist can only promise, simply create jobs.

Remove the barriers to business and business growth. Encourage and reward investors. Provide appropriate education and training (no, not everyone needs a college degree). Support a friendly environment for business. Streamline government.

Do these things, and business will grow, and growing businesses hire people.

Why can't those in government see this?

Keep Loving!

Melodee Aaron, Erotica Romance Author

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