The potential for government leaders (of any country) holding conflicts of interest has always been there.  In fact, while mainly a secret that few will admit, this is a big reason why many people pursue public office.  Unfortunately the allure of greed leads many to leverage newly-granted powers for personal gain.  It is a nice thought to imagine that there are those that get into politics to “serve the people”.  It must be true that this occasionally happens.  However, it appears that the recent presidential election left the American people for all practical purposes to choose between two people, both of  whom appear to be people so consumed by and addicted to power, and what that power brings, that they will say just about anything to win office.  The 2016 presidential election is like a case study to determine the most narcissistic, most untruthful candidate (this comment does not include any third party candidate).  The same can be said about the elections of the two party candidates which led up to the presidential election.

This brings us to conflicts of interest.  One reason Clinton lost the election was due to perceived impropriety concerning the Clinton’s use of their Foundation.  That is, conflicts of interest.  Certainly Trump has noticed over the years how his friends the Clintons (let’s face it, it is hard to doubt that they are friends, in spite of the showmanship leading up to the elections, given that the Clintons attended Trump’s wedding to Melania) benefited from conflicts of interest.  Is it not a valid point that during the years of their friendship, Trump became a “student” of the Clintons abuse of power, and wants this for himself (editors note:  some good has arisen from the Clinton Foundation)?

Trump has stated that he will set up blind trusts for his businesses, to be run by his children.  This will not be adequate to meet the spirit of the laws that control conflict of interest, since Trump says correctly that such conflict of interest laws have not heretofore applied to presidents.  Therefore, it is clear that Congress needs to make laws for this purpose, and they need to make these laws BEFORE Trump is sworn in as president.

If new laws are not written, the prospect of having a President Trump for at least 4 years is guaranteed to net many conflict of interest benefits for himself and his family.  In either case, we can only hope and pray that some of these benefits (as well as campaign promises) will also trickle down to the people, especially to the people that were led to believe that their lives will be better in 4 years.

Trump himself should want these laws to be written and signed.  Otherwise, there will be pressure by those in Congress to not look away while the potentially unprecedented abuses of power occur.  At least if the laws are in place, Trump should make attempts (with proper counsel) to control his actions.  Imagine the alternative, where Congress determines that large abuses of power have taken place.  In this case there will be a mandate to impeach Trump.  Something like what happened to (his golfing partner friend) Bill.   Surely, Trump would not like to be only the 3rd sitting president to be impeached, would he?

The Labor Department official jobs report issued today, showing that 287,000 jobs were created in June (http://www.bls.gov/news.release/empsit.nr0.htm).  Fortunately, this report shows that the size of government did not increase in June.  This blog covers government jobs in addition to the private sector.  For the Labor Department to mention both sectors at the same time, while this has been done for a long time, has always been somewhat surprising giving that governments should exist mainly to support economies, rather than be considered as profit centers.  In fact, in 1900, Federal government expenditures have increased from 3% of the economy to a whooping 24% of the economy in 2012, and it is likely even larger than that today.  Why, in less than 4 generations, have we allowed government to become so big?  Or rather, why have we allowed governments to grow themselves to the humongous size that they currently are?

In a more perfect world, governments should still exist, but in the US they clearly should be much smaller than they have become.  Governments exist mainly to serve the governed people and to serve as facilitators, not to be a large if not the largest segment of any economy.  This is where the Federal and many State and Local governments are today.  Having said that, it is still true that Governments not only need to exist, but in fact there are times that Government not only needs to spend, but to spend heavily.  A prime example is when the economy is weak or in a recession, where growth needs to be manufactured, and it is most conveniently and easily done by increasing expenditures such as infrastructure spending.  However, it now seems that governing bodies of all sorts have become so addicted to these types of measures that they just don’t stop spending, and therefore continue to grow in relation to the private sector.

But there are other, perhaps even more major concerns than Governments that become too large.  This blog space is too small for a full, in-depth analysis of these other concerns, such as the exponential rise in both public and private sector debt since 2000.  The attention of this blog space is to focus on what has happened in State and Local Government wages and benefits in the last 10+ years.

Let’s look first at State and Local Government wages compared to a variety of private sector wages:

In this chart is shown that that State and Local wage growth is trending similarly to a cross-section of private industry sectors, according to data obtained from: Employment Cost Index Historical Listing – Volume III   April, 2016 Bureau of Labor Statistics, see www.bls.com.  OK so far, so good (although this data makes no mention of how many more government employees exist today compared to yr2005).

However, when we look at benefits, an entirely different picture emerges:

In this chart we see something much different.  In this case, we see two sectors rising to the top of the chart.  Here we see the BENEFITS of state and local government workers (countrywide) taking off compared to the private sector, and even more than for Union workers.

It is important to note that we need to also combine both wages and benefits to get the complete picture:

Unfortunately, what we still find is that even by adding the more equivalent wage picture to benefits, the overall compensation picture PER EMPLOYEE, at least for State and Local governments, has grown significantly more in the last 10+ years than for the private sector.

What this tells us is that not only have government expenditures grown from 3% to 24% of the economy in less than 4 generations (ie massive growth of the public sector), but that in the last 10+ years, we have allowed our State an Local officials to pay themselves better than we get paid ourselves (ie, those in the private sector), especially when it comes to benefits.

So much attention is always focused on reigning in spending by corporations large and small when times get tough. Shouldn’t we also focus on the public sector as well?  A recent article in the local paper provided some very revealing insights concerning the typical thought process of elected leaders.  It happens to be quoted on by a local county government official in Illinois, a state where there are an incredible number of elected and especially appointed officials (this reality along with the related pension fiasco go hand-in-hand with the fact that Illinois has had so many budget problems for so many years and is now considered by many to be the most poorly governed state in the US).  In this county in Illinois, the board chairmen noted that the only way they could balance the county budget for fiscal 2017 was for department heads and elected officials to 1) cut staff, 2) increase revenues,  3) cut services, and/or 4) raise property taxes.  Clearly this contagion runs not only through the Illinois state capitol, but in counties as well.

How about this one:  5) eliminate the redundant/unnecessary elected and appointed government positions, and the massive pensions that go along with them.  It will be painful, but at some point it will be necessary to clean house throughout the state of Illinois.  And to some extent, as the charts and information above show, likely every state (as well as the Federal Government) need to clean house as well.

US government authorities have tried to assure us that they are cracking down on so-called “inversions”, which allow the merging of US-owned with foreign-owned companies, followed conveniently by the combined entity paying corporate taxes in the much lower taxed foreign country.  This effectively allows the formerly US-based company to pay significantly less in taxes (or none at all) to the US.  This accounting slight of hand, where US companies basically “renounce their US citizenship” so that they can pay less in taxes (a shareholder-favored/US citizen disfavored move) has been going on for at least 20 years now.  However, it has become more popular in recent years.  Any limitations on this practice attempted by US government authorities recently has not decreased the exodus, presumably in order to not upset major shareholders of the corporation.  This kind of thinking must stop, because it is slowly eating away at the very fabric of our great country.  It appears that even some of our largest companies are beginning the inversion process (most recently the Milwaukee-based Johnson Controls, and the New York-based Pfizer), companies founded well over 100 years ago.

So, how bad is the problem today?  One way to define the problem is to determine how much US Corporation tax is lost annually, compared to total tax receipts.  For example, according to the Office of Management and Budget, in 2014 there was $320,731,000,000, or approximately $320 billion tax paid by US corporations.  It is estimated that US companies that have already completed inversion generate approximately $70 billion annually in sales.  At the current US corporate tax rate of 38%, this translates to as much as $26.6 billion in US corporate tax dollars averted, or over 8% of the total 2014 taxes collected.

This 8% number may not seem huge, but it does nothing to quantify the damage to the US workforce and the future of our country.  In other words, when US companies merge into a foreign company, jobs are almost always lost, and may never come back.  Further, the lost taxes only makes the federal deficit worse.  Its time for our representatives in Washington to get back to work, and take this problem much more seriously before it gets any worse.

This is not a difficult problem to fix, guys.  It’s mainly a matter of determining the level of taxation (read: lower) where it does not make sense for at least some of these companies to leave.  That number is going to be between 38% and 15% (the tax rate of Ireland, where most of these companies seem to be going).  Further, the US as a whole is going to need to become more prudent about how it spends tax dollars (read: cut out more of the fat).  Although this is the fix, it will not come easy, and it will no come fast.  But it must be done.