Where to Cut, and How

(Paul Jacob) – State and local governments have been hard hit by the current depression. What to do?

Cut.

But where?

Well, legislatures could simply repeal all increases and programs starting with the most recent, going back month by month, year by year to nix spending until total spending dips below current revenue. Legislatures around the country should go into sessions of repeal.

Or they could target endemic over-spending. According to a January Cato Institute Tax and Budget Bulletin, one area of over-spending in need of tackling is “Employee Compensation in State and Local Governments.”

According to the bulletin’s author, Chris Edwards, there are several distinct indicators that demonstrate that government workers are generally overpaid.

Comparisons of compensation between state and local workers and private sector workers show a 1.45 ratio, with government workers garnering nearly half again as much as private sector workers.

The percentage of government employees to receive benefit packages over salary is also significantly higher than private sector laborers.

Further, Edwards notes, “data show that the average quit rate in the state and local workforce is just one-third the rate in the private sector. This suggests that state and local pay is higher than needed to attract qualified workers.”

So, rational employers — that is, the citizenry — would start there, first by freezing wages and new hires, then by decreasing benefits and reining in profligate promises in retirement packages.

(Mr. Jacob is president of Citizen in Charge Foundation)