Measures 66, 67 and the Zero Sum Game

It’s not often that an “out of state” writer clearly captures what’s going on in “we’re different here” Oregon. But Reason magazine editor-in-chief Matt Welch has done just that in his February editorial, “More Than Zero.” He can’t vote on tax Measures 66 and 67, but everyone who can should read what he has to say.

The editorial”˜s subtitle reads:

Why won’t people who love to make zero-sum arguments about the economy apply their own lessons to government spending?

A few key sections:

“It’s an alluringly simple vision, this notion that public policy challenges can be solved merely by lifting some gold off one end of the scale and plopping it down on the other.”

“There are three fatal flaws in this line of thinking. The first is that it fails to acknowledge, let alone explain, the fact that we keep placing more and more gold on the ‘government services’ end of the scale without seeing anything like a commensurate increase in results.”

“The second flaw in zero-sum economic logic is that by consciously whittling down issues to a single, hermetically sealed scale, policy makers overlook the complexity of consequences, whether intended or not.”

“Nor do soak-the-rich types entertain the idea that their high-value targets might respond to new incentives in ways that could have negative side effects. The rich are so different from you and me, the thinking goes, that their behavior won’t change.”

“The third and most infuriating aspect of zero-sum economics is that its practitioners suddenly forget to apply the same standard to one of the few entities that can accurately be described with a pie metaphor: government budgets…”

“”¦public-sector unions are not just growing the pie of government on all levels; they are brazenly gobbling up two, three, and even 20 times the amount that they were taking just a few years ago””on guaranteed contributions to their pension plans alone. Wherever you see a politician or public servant warning about “draconian” cuts to public services, you almost certainly are witnessing an agency whose employees have negotiated a sweetheart pension deal within the last decade. It’s awfully hard to balance a budget, let alone improve public services, when you’re tripling a major line item.”

Read the entire editorial yourself and you’ll have a better understanding of what’s at stake in Oregon’s current Measures 66 and 67 campaign.

Two other columns in the February Reason issue seem ready-made for our current election also:

“¢ Who Wants to Tax a Millionaire?
The “millionaire’s tax” will affect more people than you think.

“¢ Class War
How public servants became our masters


Steve Buckstein is founder and senior policy analyst at Cascade Policy Institute, Oregon’s free market public policy research center.

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Posted by at 03:55 | Posted in Measure 37 | 30 Comments |Email This Post Email This Post |Print This Post Print This Post
  • eagle eye

    public-sector unions gobbling up 20 times the amount that they were taking just a few years ago?

    What state is he talking about, not Oregon, that’s for sure.

    If Oregonians are really fed up with the unions, they’ll have to take them on. I don’t see that happening.

    • Steve Buckstein

      The editorial was talking about the increase in public employee retirement costs over a number of years, not the growth of total public employee compensation. Oregon did recently report:

      “In the second quarter of 2009 the average cost of total compensation for all private employment was $27.42 per hour compared to $39.66 for state and local government employees.”

      A big part of this 44 percent pay advantage is likely the overblown PERS system.

      source: https://www.qualityinfo.org/olmisj/ArticleReader?itemid=00006781

      • eagle eye

        At best, the piece was misleadingly written, at least the excerpt. And I still don’t believe that PERS has increased by a factor of 20. OK, maybe over 50 years, but so what?

        In any case, PERS is what it is, there’s little likelihood it can legally be changed much more. Even Lars Larson said as much the other day. Oregon made a dumb deal, now it will have to live with it.

        Maybe by cutting salaries? But then we’re talking about taking on the unions.

        The public/private pay differential is meaningless without adequate, valid comparisons. I see legions of poorly educated people working in low-level private jobs. I don’t see many public jobs like that.

        If you think that high school teachers should work for what blackberry whackers get, I disagree, and I think you’re being unrealistic, too.

        • v person

          Eagle….don’t disparage blackberry whackers. It’s tough but necessary work, and can be dangerous if using machinery.

          Other than that you are right on. A huge number of private sector jobs are low education, low skill retail or manufacturing. Many if not most public sector jobs require at least some college and higher levels of specialized training. And of course another point is that very few private sector workers are still unionized cue to decline in American manufacturing. That should not be held against public sector employees, who by and large are unionized, as is their right.

          Beyond that, “zero sum” cuts in 2 directions. For 30 or more years the top 5% of American income earners have seen increases in their incomes. Everyone other category is stagnant or declining. That in large part explains why present efforts to increase taxes target “the rich.” They are the only ones with enough money.

          • eagle eye

            I wasn’t disparaging blackberry whackers, just comparing the skill and responsibility level to that of teachers.

        • Rupert in Springfield

          >I don’t see many public jobs like that.

          I sure do.

          Most public sector jobs one comes into contact with are burger flipping jobs.

          DMV? Pretty much burger flipping. School custodian? Pretty much burger flipping, and the amount those guys get paid is legendary.

          What’s going on down at the courthouse?

          Sure see some burger flippers there collecting parking fines etc.

          Building permits?

          Plenty of burger flippers there at the counter. Want to talk to someone who knows something? Yep, there will be one guy there at the counter. The guy you are talking to? Sorry, he just takes the checks.

          School Teacher?

          Ok, that’s not burger flipping, It requires some skill.

          But again, we find public school teachers are vastly overcompensated for the job at hand. They make way more than their counterparts in the private sector and have some pretty short hours compared to the rest of us to boot!

          Since schools are the single biggest budget item it becomes real hard to argue that the bulk of wage money that Oregon pays out doesn’t go to some pretty inflated salaries.

          You might not like those facts, but those are the facts at hand.

          • eagle eye

            Well, we see things differently.

            As far as the school teachers go, I think you’re just plain nuts.

          • Rupert in Springfield

            Well, you can think Im nuts regarding teachers, but facts are facts.

            According to the Bureau of Labor Statistics teachers are paid quite a bit more than their private counter parts (61% on a national average, that would correspond to what the situation was in New York City, where I was familier with what private and public school teachers made.) and work less hours than the rest of us which was my assertion.

            You might think thats nutty, but that is the state of affairs according to the governments figures.

          • retired UO science prof

            From my own experience, science majors in college tend not to consider school teaching (K-12), especially not the better students. Reasons: the hours and pay are not commensurate with what they can make in a career outside teaching.

            Those are science majors. But it’s interesting that almost half of all teachers drop out of the profession within 5 years. That tells me it’s not just an easy job with fat pay.

    • Rupert in Springfield

      >public-sector unions gobbling up 20 times the amount that they were taking just a few years ago?

      >What state is he talking about, not Oregon, that’s for sure.

      20 times might be a little high, but I could beleive something close to that.

      PERS guarantees a return for a lot of employees. In other words, if the funds are invested in say the stock market as opposed to municipal bonds, even though the securities they are invested in may go down in value PERS employees are still guaranteed a minimum rate of return by the state.

      Well, turns out the stock market did a nose dive and a lot of these funds went down with it.

      Why did the state invest in securities instead of bonds? Simple, a lot of agencies had promised to pay the employee share of the PERS contribution instead of giving raises. ( which says a lot about the raises they were handing out, obviously they must have been more than the 6% PERS contribution. This would be on top of COLA’s. Nice work if you can get it ).

      The real tricky thing about member contributions is two fold. First of all, the unions have it rigged so the members contribute the smallest portion of the PERS financial pie. That’s bad, but what is worse is the unions worked out a real slimy deal where for the past few years, their PERS contributions don’t support the main pension system at all. They also got their contributions limited to 6% by law.

      What is the result of that for the PERS system? Well, it means that no matter what happens the beneficiaries of the system are immune from not only any down side on the pay out end, but they are also immune from any increase in contributions on the pay in side of the equation.

      Well, when the stock market wasn’t doing so well, and PERS contributions went up to compensate because of the guaranteed rate, that meant what was paid in had to go up.

      But wait a second. because of the unions slimy deal, they couldn’t be charged a single penny more!

      So what does that mean? Well, it means state agencies now have to contribute more. They cant cut the pay out, that is set at a guaranteed rate. They cant increase the contributions, because that is set at a guaranteed rate as well. All that is left at that point is to increase investment risk, and hopefully return, or raise taxes and hope you don’t kill the economy.

      Given the situation now, the stock market having been cut to half its value at one point, and given that an increasing number of PERS retirees are needing to be paid out this guaranteed rate, it wouldn’t be surprising at all to see just the employer side of this contribution alone go up by several multiples.

      Remember, if your portfolio loses half its value one year, it has to double the next year just to stay even. Well, you add a bunch more people retiring under the guaranteed return of PERS and pretty soon you can see how that’s going to add up.

      >If Oregonians are really fed up with the unions, they’ll have to take them on. I don’t see that happening.

      I would agree with you there. No one wants to take on the unions. Any candidate who challenged them at all would be met with an advertising budgets only George Soros could match. There are roughly 300,000 PERS members in Oregon. That’s bigger than the population of some of our larger counties. Combine that with the incredible amount of funds as well as the ability to use government resources as your advertising medium ( yes, supposedly illegal, but the law is virtually ignored ) and you have a pretty impenetrable wall.

      Does that make it right or mean Oregonians support this system? No one would really argue it does.

      Does that make Oregon’s downwards spiral of taxing and spending to support these folks inevitable? Most probably.

      • v person

        “Remember, if your portfolio loses half its value one year, it has to double the next year just to stay even.”

        So does this experience with PERS and the tanking market mean conservatives will no longer argue that we do not need Social Security, and that everyone could do better by investing their money in the stock market?

        • Rupert in Springfield

          Why in the world would it mean that?

          No, it means that you dont do sleazy deals to fat cat union members that puts everybody but them on the hook for the risk and no one but them as benificiaries.

          As for everyone else currently working, why would it mean that? Currently there is no bigger investment rip off than SS. SS guarantees a loss after decades of investing. Even with todays stock market one would would have had ten years of gains wiped out, not decades worth as SS promises everyone now working.

  • matthew vantress

    who in the private sector gets anything close to the level of pers pension money that the fatcat govt class gets?we can make comparisons to the private sector because no one in any private sector company gets anything close to the level of pension money going into state workers bloated pers pensions and thts a fact too.who in the private sector in tough economic times gets a guranteed 8% return on their money?

  • neo-fascist

    So, how many of you are planning on moving your families and businesses out of Oregon if these Measures pass? Just curious.

    • old-fascist

      “So, how many of you are planning on moving your families and businesses out of Oregon if these Measures pass? Just curious.”

      Oh, please, don’t be so simplistic – dean’s already got that covered. Besides, that’s not the point. There are other actions or inactions that will harm the state besides people and businesses moving out.

      Is your idea of good tax policy “tax ’em right up to the point at which they leave”?

      Just curious.

    • retired UO science prof

      So is this stie going to have people who openly call themselves “fascist”, for whatever reason?

      • Steve Buckstein

        I agree with your concern. Everyone should read the Posting rules in About OregonCatalyst.com at the top of the page. They include:

        “There is a strict prohibition of fundamentally anti-American ideologies. Nazis, Environmental Terrorist, Communists, and racists are unwelcome at OregonCatalyst. The proprietors of this site are the sole and final judges and enforcers of this policy.”

        • neo-fascist

          Steve,

          Allay your concerns, the use of charged terminology in a half-assed effort to be humorously sardonic is in no way an endorsement of an anti-American ideology. This is a privately owned and operated website (I assume) and its owners therefore have the right to censor whatever they please, though to do so would arguably be more anti-American than any abstraction that could possibly be expressed in these comments. Whether one finds even the smallest amount of humor here or not, there is no doubt that given the recent history of and trends in our national political discourse that the use of the word “fascist” is far from out of bounds.

          Regards,
          neo-fascist

        • v person

          Steve, you might consider adding homophobes to your list, which Nazis famously were. Not that being homophobic is un-American obviously, but it is pretty poor taste and a bit out of synch with the times we live in.

          • Steve Buckstein

            The “list” is not mine, but the owners of this blog. I simply worry that using such emotion-charged names will detract from the discussion of important issues.

        • retired UO science prof

          Pleased that Steve Buckstein agrees. I posted a bit about this on another article.

          The last thing an avowedly conservative or libertarian website needs is people posting as fascists or neo-fascists, whatever their motivation or intent.

          In any case, if the proprietors here “censor” that stuff, it’s fine with me. They have no obligation to host fascists or anyone else that they regard as anti-American, totalitarian, murderously anti-minority or anyone else. Any more than they need to host Klansmen or suicide bombers.

          • neo-fascist

            Dear Professor,

            How surprising that something apparently so harmless as a word seems to upset you so much. If the proprietors here were to disallow the use of my handle it would be fine with me as well. I agree that they are under no obligations of any kind whatsoever. If they were to take such an action, however, I would hope that they would similarly disavow the political movement, as well as all the media personalities who have endorsed it, that has brazenly labeled President Obama (and by extension his supporters, of which I am one) as a Nazi and a fascist. Until that time…

            Adieu,
            neo-fascist

    • mike

      I am. Fired our three guys last year (their salaries were about 30,000 a year). Will be leaving soon. Taking advantage of residency to re train and then we are gone. It wasn’t rocket science to figure out 66 & 67 were coming along.

  • Roger

    This so-called “professor” can’t handle the truth.
    What a left wing nut!
    What a fool.
    I think he is really crazy, although I can’t prove it.
    But his rants and his constant name-calling belie a simple man without much upstairs.
    I guess he is really bored in his retirement if he posts here so much and with so much of what he posts being drivel.
    Oh, well, I guess we should all just try to get along.
    I know I do.

    • retired UO science prof

      Nobody could ever accuse you of being a name caller!

  • hammer

    Vote NO on 66 & 67, do it for the kids

    The education mafia has gotten over 50% of the state’s budget for years and the kids are still functional illiterates. They can’t do math or science and don’t know American history, and those are just the teachers. If they can’t get along with half the state budget now vote NO on 66/67 so they can do just as bad a job educating with less. Salaries for state employees and educators should be reduced to the state average income, and retirement benefits reduced to 20% of salary.

    I own a small LLC business and already get nothing for my what I do pay, and can’t afford to pay more money for nothing. I’ll close the LLC and move the business out of state if 66/67 passes. I don’t owe the state of Oregon any portion of my labor and refuse to be an economic slave for the plantation owners of Salem.

    • Anonymous

      Vote YES on 66 & 67, do it for the kids.

      The educational system has been underfunded and undervalued for years and society is full of functional illiterates. They can’t do math or science and don’t know American history, and those are just the parents. If they can’t keep their idiot children away from the TV, out of the streets, or at home reading a book vote YES on 66/67 so they can do just as bad a job parenting with less. Teachers are not to blame for the willful ignorance of the masses, the value system of our contemporary culture (and the low regard for education and educators) is at fault.

      PERS was renegotiated in 2003 and the new OSPRP pensions are very comparable to many private sector defined benefit plans. No new hires after 01-01-04 are on either the Tier One or Tier Two plans. Overly generous state pensions are an economic problem nationwide (worldwide even, look at the UK). Whoever was doing the negotiating back in the day messed up, get over it already; or at least stop blaming school teachers for the stupidity and lack of direction of your children, friends and neighbors.

      Hammer, please leave Oregon, even if 66/67 doesn’t pass. Your attitude sucks.

  • Connie S. Moody

    I have a question. How is majors 66 & 67 going to effect small business. It seems to me these small businesses are the ones opening up opportunities for the unemployed. Are they going to have to pay more taxes along with the big corporations & wealthier individuals with jobs adding up to more than $250,000? I want to know if the small business is finally going to get a break so they can grow not be taxed out of business?

    • Steve Buckstein

      Neither Measure 66 or 67 will give small businesses any breaks. At the least, most small businesses will see their minimum tax rise from $10 to $150, but if their profits amount to more than $125,000 or $250,000 under M66 they will see their marginal tax rate increase by 20 percent or more. That’s because as LLCs or sub S corps all their business profits flow through to their owners personal tax returns. And, if they’re C corps with any significant Oregon sales they’ll see their minimum tax increase well above $150 even if they’re losing money.

      • Anonymous

        So when are we going to do something right? As far as I am concerned little business should not have to pay a dime unless they become a big Corp. Then maybe they can fit in the same category as big corp. and pay $10. a year or no more than $150. They deserve a break! How unrealistic is that. Since when has the little guy got a break. That’s probably not going to happen as long as we have the big man making all the rules.

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