Understanding government waste

Writer: Understanding government waste

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Everyone seems to realize there is a problem with Medicare and Social Security. The latest news from the federal government itself is that both are going to be broke faster than previously thought-before mid-century.

This didn't happen overnight. The financial implications started the day social security was implemented for three separate and completely different reasons:

1. Money collected from private sector workers was not invested, therefore did not accrue interest (income) so those receiving payments get back more money than government received from their payroll deductions.

2. Government employees do not contribute to their social security because their pay is tax revenue taken from the heart of the economy, the private sector, often referred to as unfunded benefits. That simply means that government taxes the private sector and pays government employee entitlement (government expense) at the time retirement payments are made.

C. Payments to beneficiaries who paid nothing into the social security fund, welfare recipients, step children until age 18 when an American man marries a foreign woman then she divorces him, adult handicapped for life, etc.

Government states that payments to those who didn't contribute to social security comes out of a different fund, but all government money comes from the same source, private sector taxes, therefore they are all the same unfunded entitlement obligation.

As the size of government increases, the source for revenue decreases (fewer private sector workers to pay taxes). Government does not generate income but rather only creates expense.

No solution is ever easy, or popular, but there is always a workable solution to every problem. The only solution to government financial woes is to privatize all essential government services. 

Privatization of services lowers cost, improves services. Most importantly it eliminates government entitlements, shifting the burden for retirement benefits to the employees and businesses, where actual funding occurs.

These are often referred to as funded benefits, which simply means that money is deposited for the future benefit of the employee. We know it is possible, and we know it works because a few bold cities in America have already taken the path and privatized services.

That action not only solved their financial woes. It also created jobs that support the tax base rather than depend on it for government payroll.

Privatization is more efficient, in part, because employment is dependent on workers doing their jobs efficiently. Businesses can only survive when they balance income with expense, unlike government which can and does hire more people and/or prints more money instead of improving efficiency. 

The postal service is one example of the few government agencies that generate income to cover part of their operating expense. It does that with the sale of postage. But it still comes up short.

According to treasury reports, postal workers' average salary and benefit is $79,000 per year. Multiply  that by 200,000 workers, and you have $15.8 billion per year, or 85 percent of the cost to deliver mail. That's using rounded-down figures. The actuals are higher.

Postal service debt at the end of 2009 was about $13 billion and adding $5-7 billion each year.  Mail delivery has dropped an estimated 40 percent, which means that $5.06 billion is paid out to employees each year for doing nothing. 

These unionized employees want, and say they are entitled to a pay raise and more benefits when they already make $18,000 (not including future medical benefits) more than private sector employees. The union does not allow the postal service to cut jobs or hours. Maximum debt allowed by law is $3 billion, which is $10 billion less than the current debt. 

As a taxpayer you also pay 100 percent medical expenses for postal retirees. That's not a benefit you are likely to ever receive.

We all hear about the national debt, but most don't realize this figure reflects the borrowed money only. Officially the debt approaches $15 trillion. 

When added to government obligations for government employees and underfunded benefits for private sector workers, welfare and other recipients of medical and retirement pay, the number is estimated to be more than $75 trillion.

Because of the way to government operates and the way politicians can't stop spending our future money, the national debt is really five times that which is reported.

Dale Hellewell, Royal City