This blog is written weekly by Dock David Treece, a registered investment advisor with Treece Investment Advisory Corp. It is meant to share insight of investment professionals, including Dock David and his father, Dock, and brother, Ben, with the public at large. The hope is that the knowledge shared will help individuals to better navigate the investment world.

Tuesday, October 12, 2010

Working in Socialist America

In the past two years the United States has become more of a socialist nation than ever before in its entire history. We rode here, not as at a snail's pace, but galloping on the backs of vague notions like "Hope" and "Change." Yet few people, whether at the top of the political food chain or the bottom, ever stopped to think about what employment might really be like in the United Socialist States of America.

By the middle of the Great Recession that began with the financial crisis of 2008, the United States had begun to get a better picture of just what socialism looks like. With real unemployment over 17% and an increasing tax burden as a portion of GDP, the federal government became the “Nation’s single largest employer” with a payroll about 2 million strong.

According to the Bureau of Labor Statistics, in 2009 more than 7.5% of all jobs in this country were government jobs at some level. Even more disturbing, a recent report released by the Heritage Foundation reveals that the average government employee is paid 30-40% more than their private sector counterpart.

Of course, this astounding figure doesn’t even include the automakers and banks that were bailed out by the government, acting in conjunction with the Federal Reserve, nor does it include the US postal service, all of whom effectively work for the government.

Even though the federal government has grown to a grotesque size as an employer, it still provides assistance (read: handouts) in other ways. Of the 307 million people living in the US, July saw a record 41.8 million collecting food stamps (aka “nutrition assistance”). Then there were the 4.4 million Americans continuing to file for unemployment, not to mention government welfare programs, Medicare, Medicaid; and the list goes on.

Late last month AFL-CIO President Richard Trumka called for the US to “re-establish popular control over the private corporations…” What’s truly odd is his choice of words: “re-establish?” It sounds like Mr. Trumka needs a quick refresher course on American History.

This notion certainly isn’t completely outlandish; certainly not in the United Socialist States of the Americas, where the nationalization of business would be a commonplace occurrence. In 1938 Progressive Mexican President Lazaro Cardenas nationalized the then-wildly successful oil industry in Mexico.

At the time the oil companies operating in that country were foreign-owned and thought to employ anti-labor practices. Thanks to President Cardenas’ forward thinking, these anti-labor practices declined significantly, as did Mexico’s oil production. By 1957 Mexico had become a net importer of oil.

Like Mexico, the recent shift in the US to the left has changed the relationship between Americans and their government. The government has essentially become one big corporation, stretching its tentacles into every aspect of American life. Those at the top understand this shift, mostly because they orchestrated it.

The US Government, Inc., like any corporation, has expenses to pay. However, unlike most good corporations, its concerns regarding revenue to support those expenses are rather skewed. Its sole concern is raising revenue to expand operations (in Socialist speak: “give back to the people”), regardless of whether revenue increases are burdensome for productive citizens.

Unlike those it governs, the vast bulk of government produces almost nothing. Admittedly there are a few small exceptions (e.g.: bailed-out automakers) which actually create, engage in commerce, and contribute to society. However, most branches and agencies of the US government, particularly at the federal level, are completely UN-productive, but serve only as outlets for the redistribution of wealth. Examples include the EPA, the Departments of Education, Interior, Agriculture, etc).

These agencies, as opposed to producing, act solely as a drag on the US economy. There is an old quote from long-time House Speaker Thomas O’Neill that “all politics is local.” The same is largely true of business. By and large, government that is closer to the people tends to be significantly more helpful. The more distant it gets, the less positive impact it has on citizens’ lives.

The real challenge facing the United States today is in disconnecting the dots, bringing government back home to put what little power the government ought to have back where it belongs: in the hands of the governed.

1 comment:

  1. That was an excellent article. You made some great points and I am thankful for your information!
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