I recently listened to a lecture about the Soviet Union and why despite its economic dysfunction the Evil Empire lasted for 70 years. The lecturer explained that for a long time the USSR lived off of a “capital reserve.” That is, the wealth that was confiscated during the revolution essentially had a half-life. Moscow was able to live off the fat of the pre-communist days until gradually the wealth was completely exhausted. As I read the attached article from Ed Ring at the California Policy Center I was reminded of this lecture.
That isn’t to say that California is the Soviet Union. Though there is a preponderance of commies in the Golden State, the weather is WAY better. I kid. I kid.
But one does get the sense that the government infrastructure and the state level crony class is bleeding the productive part of the economy. One has to wonder how long this can continue?
To put this in perspective, while veteran employees of the City of Palo Alto are paying for 10% of their annual health care premiums, middle aged married couples working as private sector independent contractors with base incomes comparable to the average non-safety Palo Alto city worker are paying household premiums – either to individual health insurers or on the exchanges – including deductibles, of approximately $30,000 per year. Thirty thousand dollars. While their taxes then pay for 90% of these same premiums as they apply to their public servants.
To further put this in perspective, while someone working for the City of Palo Alto may retire after 30 years work with a pension that averages $91,348 per year, an independent contractor with comparable annual earnings will contribute 12.4% of their gross earnings to Social Security – more than virtually anyone in local government contributes to their pensions via withholding – in return for a projected Social Security benefit of around $25,000 per year beginning after 40+ years work. Yet their taxes are being increased to maintain these pensions for their public servants.