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  1. Jacq

    My understanding is that government jobs have benefits like the ‘crazy pension jackpot’ to make these jobs attractive vs the corporate job market. My mom was a teacher and thus eligible for state benefits. I decided I could make more in the corporate world. The year she retired, I was making more than her. I don’t have a pension (I have a 401k and employee stock (some grants, some purchase plans depends on the company )). I save in other ways.
    But we need good teachers, fire fighters, police, DOT, etc. Because so many pieces of local, state, federal government work with minimal issues, we don’t notice. I send in my taxes, county services continue. I hear the sirens, see the police cruise through neighborhoods, see the schools busy. Thank you to the person who opened the envelope and cashed the check. The people who make things run smoothly are so valuable I’m glad for crazy pension jackpot etc.

    • Mr. Groovy

      I love it, Jacq. You’re making me feel less guilty. But seriously, government employees shouldn’t be put on a pedestal. I didn’t become a government employee because I had a burning to desire to make the lives of the taxpayers easier. And neither did any of my fellow bureaucrats. I became a government employee because I had no skills to speak of and my neighbor, who was influential in local government, got me in. This doesn’t mean, of course, that government employees should be treated like crap and that government employees with valuable skills should be poorly compensated. Government employees should be paid the market rate for their services. No more, no less.

      • Jacq

        If government jobs’ pay and benefits could keep up with the corporate world, I agree. But getting fed / state legislature to pay market rate will be amazing.
        I think we should pay teachers, and emergency responders more, and sport-ballers millions less. Until the pay is more equitable between gov’t and industry, the benefits serve to off-set.

        Also, Don’t you dare touch my NPR. I’ll ask -YOU- another…

        • This. As a government employee who did get into public service specifically to help people, I would very much appreciate it if I could be paid closer to market rate. The private sector salary I was offered for the same position was almost triple my government salary.

          100% agree that we should be drastically increasing pay for teachers and emergency responders. They do such important work and are so underpaid.

          • Mr. Groovy

            Matt, you’re a freak–and I mean that in a good way. Selfishness, not selflessness, is the norm for our seriously flawed species. So I do salute you, sir. But I do think you unfairly discount the value of security, generous paid leave, and modest accountability that come with government jobs. Bureaucrats are hard to fire, have copious time off, and aren’t held to exacting standards. This is the main reason why government salaries are generally less than private-sector salaries. People covet secure easy jobs with plenty of time off, and they’re willing to sacrifice higher paid in order to get such jobs. If this wasn’t the case, governments everywhere would have a very difficult time filling available job openings.

            As far as paying teachers more? I have mixed feelings on that. On the one hand, it does seem that teachers are underpaid. But on the other hand, I can’t bring myself to reward a system that so mismanages the money it’s currently given. Case in point. The per pupil cost of K-12 education in North Carolina is around $9,500. The typical North Carolina teacher is paid around $40K per year. Now consider this. If a teacher has a class with 20 students in it, that class is bringing in $190,000. Subtract $40K from $190K and you get $150K. Does the overhead and the teacher’s fringe benefits really add up to $150K? And if not, where is all that money going?

        • Mr. Groovy

          Valid points, my friend. But don’t discount the value of security. As long as you’re a mildly conscientious worker, it’s practically impossible to get fired or laid off from a government job. Not so much in the corporate world. That security has a value, and that’s why government employees are generally paid less than their private-sector counterparts. If people didn’t value security, and would rather get compensated with more pay, then governments everywhere would have a difficult time hiring staff. But this isn’t the case, of course. How often do you hear about a government agency complaining about the paltry number of a applicants for open positions? And as far as NPR goes, I hear you loud and clear. Only a fool would stoop to separate a citizen from his or her unfettered enjoyment of publicly supported broadcasting!

          • Jacq

            I have friends and relatives who are or were (before retiring) teachers. My undergrad was a dual major, science & teaching.
            I just think we need (collectively) to re-assess salaries for educators & other ‘public servants’. Considering I’m younger than my mom by > 20 years, that I was making more than she was at retirement, says people in that job, may not be able to save for retirement like I am. (Therefore yay pensions to help).
            I keep in mind how much teachers truly give daily of their time and energy, both in class room management, caring about the students, and trying to innovate new lessons (by order from the administration, or their own love of their subject). With SOP’s in place my ability to innovate is limited.
            While there is a certain level of security, I also watched from the sidelines as the administration increased observations and those female teachers closer to retirement age got poor-er reviews than younger females. My mom doesn’t put up with that sort of thing and requested evidence based discussion of the observations. A co-worker was often near tears in fear of an year long rating being low & putting her job at risk. The administration was careful to toe the line of what was allowable.
            In that state, others had raided / invested unwisely with the pensions, scaring some into retiring sooner before a possible reduction in benefits was enforced.
            I also know a history major who didn’t know what else to do, so decided to teach, but didn’t have much interest in the parts other than talking about history (grading tests, papers, classroom management). I think we’ve all met people in roles who ended up there, but did the bare minimum.
            Just like in the corporate world, evaluations should relate to pay. But perhaps conscientious inspired individuals would be drawn to public service if the compensation was more comparable. I’d have considered it.

            • Mr. Groovy

              Agreed, Jacq. I would like our teachers to be paid more, especially the great ones. But here’s my problem. Why aren’t they being paid more right now? The money’s there. In my childhood school district the per pupil cost is now $25,000. A class of 20 kids therefore brings in $500,000 of revenue. Let’s say the teacher is getting $100,000 a year in salary and benefits. Where does the remaining $400,000 go? If I’m not mistaken, insurance companies under Obamacare must spend at least 85% of their premium revenues on healthcare. Only 15% can go toward overhead. Perhaps we need a similar law in public education. If just 25% of per pupil spending had to go to compensating teachers, teachers in my childhood school district would get an immediate $25,000 raise–without increasing school taxes a cent.

      • (Responding to your later comment)

        I agree that there is a value to the leave and the security. There is also a big value to the work/life balance that you get as a government lawyer that you cannot get as a big law lawyer. But 1/3 seems pretty drastic. Plus, shouldn’t the government be trying to offer more than the private sector so that we can get the best and brightest fighting for the taxpayer?

        As to teachers, I agree that the system needs to be reformed, but I’m uncomfortable with punishing teachers because of administrative failures. And again, from a free market perspective, we want the best and brightest becoming teachers! These are the people whose performance will determine the success or failure of the next generation of Americans. We should make teaching a top notch, uber competitive career path so that instead of going to hedge funds or consulting firms or law school, the smartest people want to be teachers. That’s obviously a bigger task than just adjusting pay and benefits, but it’s a start.

        • Mr. Groovy

          Bravo, my friend. Excellent response. And I agree with you wholeheartedly. But here’s the problem when it comes to teachers and education. In Finland, for example, teachers are culled from the top 10% of college students. Not so here. In general, students in our undergraduate education programs are in the bottom 50% of academic ability. We could, of course, change this and elevate standards to match Finland’s. But would that pass muster with those who value diversity above all else? I’m afraid not.

          • I think there are ways to increase standards without harming diversity. We’d need to adjust a lot of different aspects of the education system to make any real substantive improvements, though. One day you and I will have to have a couple beers and hash out how to save American education.

  2. Goodies all have their strings attached to them when it comes to government, right?

    Goodie: Tax-advantaged retirement accounts.

    String: At the time of retirement, Uncle Sam says, “I want YOU, to pay tax on the goodie I gave you.”

    Death & Taxes….a matter of when, not if.

    • Mr. Groovy

      Excellent question, Francesca. And the answer is, “it depends.” Many state constitutions (Illinois and New York, for instance), guarantee public pensions. But no state that I’m aware of guarantees paid healthcare for retired civil servants. So when things get dire, paid healthcare will be the first retirement benefit to go. Next, pensions will be cut in those states that don’t grant pensions constitutional protections. Pensions that are guaranteed are most likely safe. But if there’s no money, what’s a state supposed to do? My guess is that pension protections will be removed from state constitutions and the our courts will side with the states and taxpayers against pensioneers. At the federal level there are no constitutional protections for Social Security and Medicare. Congress can reduce promised benefits whenever it wants. So that’s the story. We have a mess over on this side of the pond. The next 20 years should prove to be very interesting.

      • The unions here in NY have been pushing all members to vote no to a constitutional convention fearing that a convention might lead to weakening of the pension guarantee.

        • Mr. Groovy

          Did not know that. And oddly enough, New York’s pension system is relatively healthy. The estimate I saw last was that its 88% funded. That’s extremely good compared to Illinois, New Jersey, and Kentucky. But I understand the union’s fears. Legacy labor costs (i.e., pensions and paid healthcare) are increasingly crowding out current spending on infrastructure, police, education, and welfare, so they’re a juicy target. Sorry union. Better to adjust now than in the future. The pain will be much greater the longer we wait. 457 for new employees, scaled back benefits for those in the system, and basing the system’s solvency on 4% returns rather than 8% returns are the three key reforms necessary to salvage the state’s finances. Is New York up to the challenge? The plot thickens.

  3. I appreciate that you go after both the actual spending and the “tax expenditures.” Most people will either attack spending while ignoring the cost of their deductions and exemptions (Republicans) or will attack the tax expenditures without addressing spending (Democrats).

    I think we need to actually look at the money going into government and coming out of government and decide what our priorities are as a nation. Personally I would be okay with paying more taxes if that money went into improving education or health care. I also am sure that we could go into most spending programs and find wasteful spending (and unhelpful tax expenditures) that could be reallocated into better uses. I remember a few years ago the Department of Defense asking Congress to buy fewer tanks for them (they’re not as useful or prevalent in modern warfare) and Congress wouldn’t do it.

    Nobody wants to get into nuance these days, though, which makes good policy tough to enact.

    Thanks for the shoutout, as well. I always appreciate the respectful disagreements that take place in your comments section.

    • Mr. Groovy

      I love it, Matt. Excellent analysis. Our politicians are pathetic because we’re pathetic. A sound infrastructure and the rule of law is all the middle-class and rich need to flourish. Government help should mainly go to the poor. But because the middle-class the rich want help too, the poor become an afterthought, and the government’s finances are in tatters. Sigh.

  4. I feel the same way about the pension. How is it possible that 10 years of 3% contribution cover the entire cost of the pension especially when you’re making so little the first 10 years compared to the final 3 years when they calculate how much you’ll get. Well they put a stop to that for the new tiers…they constantly take goodies from the newer and younger hires. The pension is one goody that I’d be willing to give back (dumb as that may be). I’d prefer a really good 457 plan with lots of matching. Right now the pension is a golden handcuff…it’s tough to leave when you expect a big payout…but I’d have to wait until I’m 55 which is another 18 years. Whereas with a good matching 457 plan, the money is mine once I’m vested and I don’t feel tied to the job.

    • Mr. Groovy

      Wow, Andrew. You really know your stuff. When I started in my government job, I was making $6.90 an hour. When I left, I was making nearly $37 an hour. Paid 3 percent on the $6.90 but not the $37. And the 457 plan with a nice match is the way to go. Better for the government employee (no golden handcuffs), and better for the taxpayer in the long run (no legacy labor costs that long-gone politicians locked in).

    • Mr. Groovy

      Ah, yes, the joys of being income poor but asset rich. You are so right, NNL. With some clever planning, you can mitigate your income and avail yourself to a crapload of goodies.

  5. Those numbers are insane! Only 10k in and 700k out? Ugh… This is the exact reason, as you pointed out, that we need to be very aware of our financial situations and not dependent on the government. It is extremely unfortunate that so many are banking on SS or other programs and it is my hope they are able to get them. It seems the US economy is a sinking ship that will be near impossible to right. As Brian pointed out, if we have the opportunity to help those around us we can perhaps right their ships instead. I have been looking at how we try to fix issues in this economy and it always seems to be from the top down. My thought is that working from the bottom up makes for a better outcome. Neighbors, communities, cities, states, to country makes sense. Fix the foundation before you add a new roof.

    • I agree, Miss Mazuma. We need to figure out a way to shore up the foundation, and it starts in our own homes, or we’ll never make real progress. Something those of us in this PF community are all striving to do.

    • Mr. Groovy

      Wait, it gets worse. I retired with 21 years of service. If I had worked 9 more years and retired with 30 years of service, my annual pension would have been $55,000–plus paid healthcare insurance for me and Mrs. Groovy. The value of those benefits would easily eclipse $2 million if either Mrs. Groovy or I lived to 90 years old. So for most of my former co-workers the equation will be $10 thousand in and $2 million out. For the life of me, I don’t see how this is sustainable. There will be a lot of Detroit-like implosions in our future. My only advice to my follow Americans is threefold.

      1. Get completely out of debt.
      2. Become as self-sufficient as possible. Install solar on your house, collect rain water, maintain a garden, and learn basic handyperson skills.
      3. Count on no more than 50% of Social Security or any pension you’re entitled to.

      I wish I could put a happy face on our fiscal position, but I can’t. The financially responsible will manage; the financially irresponsible will get destroyed. Sigh. I’m with you Miss M. Our job in the FI blogosphere is to build the foundation, to make sure there are as many financially responsible Americans as possible.

      • Yikes is that ever a warning! I mean it’s half way sounding like a doomsday warning. I guess I can learn how to collect rain water, Seattle has a lot of it.

        Jared and I are not counting on SS at all. Jared figures by the time we’re old, they’ll be free robots to do the work.

        • Mr. Groovy

          Haha! Collecting rain water is a bit drastic. But I was thinking more along the lines of a couple of rain barrels below a couple of gutters. This way you’ll always have plenty of water for your garden.

  6. Mrs. ONL had a great post on how nomenclature affects our thoughts and feelings. For example, a tax deduction sounds desirable yet subsidy sounds like an undeserved handout. They’re both a way for people to get more money from the government, but they carry different levels of bias and stigma.

    All of these programs deserve analysis and many should be reduced or discontinued, yet these decisions don’t seem to be based on utility or logic.

    • Excellent point, Julie. How does the Congressional Budget Office refer to a tax deduction or a loophole? Isn’t it “tax expenditure”? According to the Tax Policy Center (whatever that is), here are some of the largest tax expenditures in the US budget.

      Exclusion of employer contributions for medical insurance premiums: $235.8 billion.
      Capital gains: $108.6 billion.
      Mortgage interest expense: $68.1 billion.
      Earned income tax credit: $63.6 billion.
      Deductibility of state and local taxes: $63.3 billion.
      Deductibility of charitable contributions: $51.2 billion.
      Accelerated depreciation of machinery and equipment: $50.3 billion.

      That’s a lot of money being excluded from the taxman. And it’s a lot money not being stigmatized with the words subsidy and welfare.

  7. This is something I’ve thought a lot about, since I paid off my mortgage in Dec 2014. Now that I don’t itemize, I often joke with my friends about how I subsidize them since they all have substantial mortgages as well as a couple kids.

    I’d really like to see change begin with the discontinuation of the mortgage interest deduction, pre-tax medical insurance premiums, and deductions for charitable donations. I think these would be the least painful.

    Maybe people would be more inclined to pay off their debt, or not sign up for it to begin with (or at the very least get a more affordable mortgage).

    I’m on an HDHP through work so paying taxes on an additional $35/paycheck really wouldn’t bother me. But I’m sure people with family coverage would feel very differently, though.

    People either donate to charities or they don’t. I doubt that the deduction really has an impact. I’ve continued to donate even though I don’t itemize and this won’t change, regardless of tax laws.

    Thanks for opening up the discussion. It illustrates just how easy it is to create entitlements and how insanely difficult it is to remove them.

    • Mr. Groovy

      Hey, maybe we’ll have a soft landing. There is the old saying that God watches after drunks, orphans, and the United States of America. But something tells me we’re not going to get away so easily. We’re too fractured as a society. Nearly every one has retreated to his or her own tribe–we’re all hyphenated Americans now–and there’s little willingness to empathize with other tribes, much less be the first tribe to surrender whatever largess it’s getting from the government. Sigh. Wouldn’t it be great if people started clamoring for less from the government rather than more? Wouldn’t it be great, for instance, if homeowners asked for a cap to the mortgage interest deduction? And then insisted that that cap be reduced $1,000 a year until it was completely wiped out? That’s what we all got to start doing, especially the rich and middle-class. Cap and then gradually reduce goodies. Thanks for stopping by, Kate. It’s encouraging to know that at least one other person recognizes that the One-Percent aren’t the cause of all our woes.

  8. Amen. For 2017 we accepted ACA subsidies (first time our income was low enough) to help offset health insurance costs. Paying $1,000/month for a high-deductible plan is just nuts. We might look into the health-sharing options for next year since so many things are in the air with ACA; It might not even exist moving forward in anything near its current form if any of the current health bill attempts get traction.

    • Mr. Groovy

      Hey, Brad. Mrs. G and I are paying $115 a month for both of us, and our deductible is $2,000. I wanted to go for the high-deductible plan. That would have completely eliminated our monthly premium (Obamacare would have paid the entire premium). But the deductible for the high-deductible plan would have been $13K. Out of network would have been $26K. Mrs. G had no stomach for taking on that amount of risk. But it really is insane. Affordable insurance isn’t really too affordable for a lot of Americans. I thoroughly believe that healthcare will never become affordable until 1) doctors and hospitals are forced to advertise their prices, 2) patients/consumers are giving incentives to choose the cheapest providers, and 3) European, Canadian, and Japanese drug companies are allowed to compete in America. But since I’m just a little ol’ country blogger, and not the Grand Poo Bah of the United States, that’s never going to happen. Oh, well. There’s always medical tourism. Thanks for stopping by, Brad. I feel your pain.

  9. The not my problem attitude hurts us all. If we each did a small part, or help someone, imagine how much improvement we would see.

    I certainly agree we need to reevaluate the goodies we give away. Sure change/cuts would hurt at first, but over time it gets better.

    • Mr. Groovy

      Thank you, Brian. I couldn’t have said it better myself. A little sacrifice now will stop a world of hurt later.

  10. Steveark

    I don’t agree we are all part of the problem. Many of us are a net input into the country bank balance while many others are a net drain on the country account. I’m getting no mortgage deduction, pay every imaginable tax plus both halves of social security since I am self employed, pay unsubsidized medical insurance premiums since I retired early but still working two days a week, have no pensions from my 30 plus years at one private corporation. So how am I responsible for the country’s debt? I have paid well a huge amount in income taxes already in my life and I’m pretty sure by the time I check out I will have collected far less than that in what you call freebies. I’ve also given hundreds of thousands away to help less fortunate people. I love this country and if it was populated solely by people with my income and tax history then it would have zero debt and be flush with cash. I’m not judging the less fortunate and I admit I’ve been very lucky, I’m just talking math. The entitlement programs and government pensions are the problem. I will never get close to recouping what I’ve “invested” in taxes. But I have gotten to live in this great country so I consider taxes a very small price to pay for that. And I do love your posts. I’m just not buying that all of us are responsible for the debt, although I guess as a voter I probably am.

    • Mr. Groovy

      Point well taken, my friend. Clearly not every citizen in the United States is a net moocher. But it would be an interesting study to see how many Americans are net givers in any particular year and how many Americans are net moochers. My guess is that 90 percent of the populace are net moochers (i.e., they consume more in government services and benefits than they contribute in taxes). After all, if 90 percent of the populace were net givers, we wouldn’t have $20 trillion in national debt. So, again, I stand corrected. Saying everyone is part of the problem was definitely hyperbole. I was being lazy and should have included the appropriate qualifier. Thanks for pointing this out, Steveark. And thank you for being a net giver. Without people like you, our country would be in even worse shape.

  11. “If something can’t go on forever, it will stop” Herb Stein’s law.


    Money that isn’t there cannot be paid. At some point, we will be unable to continue borrowing our way in order to pay these debts (look at Illinois right now).

    Then there will be a great wailing and nashing of teeth, as folks we made promises to 20-30 years ago are told they have to take massive pay cuts.

    Better to live a frugal life and be ready for it (I am not counting on getting any of our $40k/year Social Security money for my wife and I).

    Its going to be sad to see, and I have family who will suffer when it happens.

    • Mr. Groovy

      Exactly, Kevin. I don’t want to throw these depressing posts out there, but Herb Stein’s law is correct. And if we in the personal finance community fail to address this problem, tens of millions of Americans will indeed be “gnashing their teeth” when the money runs out. Like you alluded to, your best defense against the coming fall is as follows:

      1. Get completely out of debt.
      2. Become as self-sufficient as possible (i.e., invest in solar power, home gardens, rain water collection, etc.).
      3. Expect no more than 50% of your promised Social Security and pension benefits.

      Thanks for stopping by, Kevin. There’s a lot of wisdom in your comment. And thank you for mentioning that famous Herb Stein law. I forgot all about that one.

    • Mr. Groovy

      You know I love you, Emily–in a totally honorable way, of course. I don’t need Jon and Mrs. Groovy smacking me around. And when are you going to be a guest picker on Talking Trash? If you’re interested, I’ll have my people reach out to your people.

  12. Yup, the government is a nice support system, but they also take from those that can give. I don’t mind paying the federal taxes so much, but when you add state taxes to it too it can be a bit depressing.

    Enjoy the subsidy. No guarantee they will be there in a year which will lead to a lot of uninsured folks out there.

    • Mr. Groovy

      Hey, EJ. I hear ya, my friend. The government is a nice support system. But this is what kills me. The United States is supposed to be a rich country. Why then do so many Americans need support? At what point does all that government “investment” start bearing fruit? It seems the more government support there is, the more dependent we become. Sigh. Thanks for stopping by, my friend. I love the way you think.