Medical Tuesday Blog
President John F Kennedy understood what drove the economy. He instituted tax cuts with a Democratic Congress. This was a much too conservative issue for his party. He was very persuasive even though this was the antithesis of what his party would normally stand for. He seems he was rather conservative for being a Democrat. But he was able to obtain the large tax cut in the 1960s. This cause a large increase in revenue because of the stimulation of the economy which increase the basis for taxation. Thus, the lower tax rate produced more revenue.
His party generally didn’t understand how a decrease in taxes could increase tax revenue. The very idea of lowering taxes apparently upset so many in his own party that his payback was to facilitate the unionization of government workers. This has been devastating. The government employee’s unions are getting so huge that they control much of the state’s income.
In California, according to the California Policy Center, the average state or local government worker earns over $100,000 per year. However, the average in the most productive sector of the economy, the private sector worker, makes at most $57,000 per year. Furthermore, he then has to pay exorbitant taxes to support the public workers. And that’s not all. The average public employee retires after a full career with a pension that exceeds $60,000 per year.
A pension plan that pays $60,000 a year, $5,000 per month, requires an investment in a pension plan of $1.2 million that is yielding a 5 percent return to support such a retirement. CalPERS is doing somewhat more favorably and only one million dollars has to be contributed by the state tax payers to earn $60,000 a year or $5,000 a month.
It is understandable now why over 60 percent of California state budget goes to pay employee compensation, benefits and lifelong retirement. The only way to decrease this ratio is to decrease the state worker’s wages, or benefits, or delay the retirement to age 72 or after 40 years. To correct this would cause a great deal of unrest in the government. It may also cause a number of legislators to lose their next election. This correction is very unlikely to ever happen.
Thus, a move such as President Kennedy’s acquiescence to a government worker’s ability to unionize is a continuing financial harm to taxpayers. This type of harm is frequently not recognized for many years. When it is recognized, it is so entrenched that it no longer can be corrected.
Thus, President Kennedy’s tax decrease caused a political backlash and continuing harm to the taxpayer, our country, and the citizens in general.
Medical Gluttony thrives in Government Programs.
It seldom disappears or is correctible.