President Obama says that we are a  ”generous and compassionate” country and that “through government, we should do together what we cannot do as well for ourselves.” And to fulfill that “progressive vision,” he’s going to work on “making government smarter, and leaner and more effective. ”

Today, under the rubric “Breakaway Wealth/Reaping Riches from Federal Spending,” the Washington Post gives us a front-page picture of where a lot of those generous and compassionate federal dollars actually go:

Millions of dollars worth of federal contracts transformed Anita Talwar from a government accounting clerk into a wealthy woman—one who can afford a $2.8 million home in the Washington suburbs with its own elevator, wine cellar and Swarovski crystal chandeliers.

Talwar, a 59-year-old immigrant from India, had no idea that she and her husband would amass a small fortune when she launched a company providing tech support to the federal government in 1987. But she shrewdly took advantage of programs for minority-owned small businesses and rode a boom in federal contracting.

By the time Talwar sold Advanced Management Technology in 2004, it had grown from a one-woman shop to a company with more than 350 employees and $100 million in annual revenue—all of it from government contracts.

Talwar’s success—and that of hundreds of other contractors like her—is a key factor driving the explosion of the region’s wealth over the last two decades. It also has exacerbated the gap between high- and low-wage workers, which is wider in the D.C. area than almost anywhere else in the United States.

Washingtonians now enjoy the highest median household income of any metropolitan area in the country…

More than $80 billion in federal contracting dollars will flow to the region this year, up from $4.2 billion in 1980.

That’s my kind of smart, lean, and effective government!

Your Tax Dollars at Work is a post from Cato @ Liberty - Cato Institute Blog

It looks like Peter Thiel won’t be unopposed advising kids to stay out of college

Thanks to a new report from Georgetown University economist Anthony Carnevale, and a David Leonhardt column based on Carnevale’s study, over the last few days the college-for-all crowd has been striking back. But they seem to have missed something in their own college training: correlation does not equal causation.

Carnevale, Leonhardt, and others’ argument is basically that there are big, positive returns on a college degree. It’s something, frankly, that’s not generally in dispute. I say “generally,” because while on average college grads make a lot more than people without a degree, there’s a lot more to the story than averages. Indeed, there are at least three major problems with making averages the basis for a universal-college offensive, problems that Andrew Gillen recently laid out in a terrific blog post. I won’t reinvent the wheel by going into them all (read Andrew’s post) but I’ll summarize them: (1) There are huge throngs of people who attempt college and never finish, a giant population ignored when you just look at completers; (2) at least part of the college wage premium is simply a function of a degree signaling something about the intelligence, work habits, etc. that graduates already possessed; and (3) there are some majors and degrees that confer no great wage premium and are in about as much demand as Betamax or gangrene.

What is most concerning about the Carnevale report, however, is how the report and its fans make the very basic mistake of conflating correlation with causation in implying that the roughly one-third of bachelor’s holders in jobs not requiring degrees are much better workers thanks to their BAs. They base that conclusion on degree-holders in non-degree jobs earning appreciably more than workers with only high-school diplomas. Heck, a graphic to go with Leanohardt’s column trumpets that dishwashers with college degrees make a lot more than dishwashers without them, a data point seized on by the Fordham Institute’s Peter Meyer to attack anyone who dares say college isn’t the best option for everyone.

Once the dishwasher example comes up, is there any way to escape the causation/correlation problem? Any way to not at least seriously contemplate that it isn’t what someone learned in college that makes him or her a better dishwasher, but that someone able to graduate college will tend to be more punctual and reliable? Heck, even if you believed that the proverbial underwater basket weaving major existed, it would be very hard to conclude that the skills one would need to make the finest submerged wickerwork would be useful for getting dinner plates spotless, even though that often occurs underwater.

And many of the public service jobs cited in the graphic, such as firefighters? At least from what we know about teachers, government employee pay scales often give salary bumps for degrees, but degrees don’t necessarily have any bearing on job effectiveness.

People like Carnevale and Leonhardt are right to guard against efforts, especially by public-school employees, to actively push kids away from college, in particular if that’s driven by students’ class or race. But shoving everyone into ivy walls? Based on what we know, that’s equally unjustifiable.

Did They Learn Correlation and Causation in College? is a post from Cato @ Liberty - Cato Institute Blog

“Even Robert Nozick gave up on libertarianism,” says Stephen Metcalf, more or less. “So what’s wrong with you?” (Aside, of course, from the fact that Nozick didn’t give up.)

I probably should hesitate before declaring my allegiance to the evil league of evil. But you’re reading this at the Cato Institute, so it may be too late for that. Metcalf’s piece falls into a large and (sadly) growing category for me, one labeled “People Condemning Libertarians for Strange Things That Never Occurred to Anyone, Let Alone to Us.”

It never occurred to me, for example, that by citing Wilt Chamberlain as someone who became wealthy in a morally blameless way, Robert Nozick was playing the race card. Metcalf writes:

“Wilt Chamberlain” is an African-American whose talents are unique, scarce, perspicuous (points, rebounds, assists), and in high demand. We feel powerfully the man should be paid, and not to do so—to expect a black athlete to perform for (largely) white audiences without adequate compensation—raises the specter of the plantation.

Raises the specter of the plantation? Does it now? Let’s generalize: Your forcing anyone to perform without what they consider adequate compensation should raise that same specter. If someone is going to perform for you, they must do it for a wage that they consider adequate, whether their “performance” is a show of basketball prowess or just working on an assembly line.

If they don’t like the wage, they should be free to seek a better one. If the employers pay a giant wage, and if they do so because they really, really like the work, then that’s also their right.

Those who want to interfere — to tax wages, to restrict entry or exit, or to prohibit whole lines of work — they are the ones who bear the burden of proof. Not the willing buyers and sellers of labor. That’s what Wilt Chamberlain’s example is supposed to show.

Maybe you’re not ready to go whole-hog and declare that taxation is theft. Eh, fine. Still, taxation should make all of us pretty uncomfortable, especially when we look at its philosophical implications. The arguments that justify taxation might actually be unavoidable—truthfully, I wouldn’t know how to run a government without them—but that doesn’t make them any less dangerous.

Of the many errors in a long and error-ridden article, I think the worst has to be the idea that libertarians hold all concentrations of wealth to be good. As long, I infer, as we gather it in sufficiently large heaps. Metcalf writes:

But being a star athlete isn’t the only way to make money. In addition to earning a wage, one can garnish a wage, collect a fee, levy a toll, cash in a dividend, take a kickback, collect a monopoly rent, hit the superfecta, inherit Tara, insider trade, or stumble on Texas tea. For each way of conceiving wealth, there is at least one way of moralizing its distribution. The Wilt Chamberlain example is designed to corner us—quite cynically, in my view—into moralizing all of them as if they were recompense for a unique talent that gives pleasure; and to tax each of them, and regulate each of them, according to the same principle of radical noninterference suggested by a black ballplayer finally getting his due.

This is simply wrong. For a libertarian, it’s only Wilt Chamberlain’s particular type of wealth that is morally blameless, not all the rest. Which kind is his? The kind acquired through voluntary transactions, without coercion or fraud. The kind that comes from Nozick called capitalist acts between consenting adults.

Some wealth is blameless. Some isn’t. And yes, some cases are truly hard to judge: Is Wal-Mart a free-market success story? Wellll…. kind of. But what about all those special tax privileges? What about that eminent domain abuse?

Wilt Chamberlain makes a good example not because he’s a black man struggling sympathetically in a white man’s world. His example is useful because it strips away every possibility of force, fraud, corporate welfare, and government favoritism. When we do that, we can see that it’s still possible to grow wealthy through honest, voluntary methods. That’s a valuable insight, even if you don’t necessarily agree with everything else Robert Nozick ever wrote. (Don’t sweat it; I don’t either.)

Finally, Metcalf strangely neglects Chamberlain’s fans. When we talk about Wilt Chamberlain’s right to collect a paycheck, it’s partly because he’s highly visible. But we should not forget that when we take away that paycheck, we also take away an entertainment choice for millions of ordinary people.

If we remove enough choices like these, we won’t merely have made life less cushy for the talented. We’ll also have made it a lot poorer for the rest of us. We could be taking away not just basketball, but breakthroughs in science, technology, and the arts. And why? Because someone found someone else’s voluntary transfer of wealth distasteful. That shouldn’t be much of a reason.

Capitalist Acts between Consenting Adults is a post from Cato @ Liberty - Cato Institute Blog

“In the last decade, the average income of the bottom 90 percent of all working Americans actually declined,” Obama said on April 13. “The top 1 percent saw their income rise by an average of more than a quarter of a million dollars each.”

Politi-Fact, partly on the basis of my own research, generously rates the president’s claim as “Half True.”

The truth is that the President’s source, Thomas Piketty and Emmanuel Saez, refer only to pretax, pretransfer income reported on individual tax returns (as opposed to being sheltered inside a corporation or IRA or simply unreported), and they have no data on the bottom 90%. Worst of all, they leave out transfer payments, which amounted to $2.3 trillion last year — 44% as large as all private wages and salaries ($5.2 trillion). The data also excludes refundable tax credits, which added about $170 billion to low and middle incomes in 2009 according to the the Joint Committee on Taxation (the EITC, child credit and Obama’s “making work pay” credit). And the Bureau of Economic Analysis estimates that gross income reported on tax returns is about $1 trillion less than actual income.

As for the top 1%, my research shows that top investors report more capital gains and dividends when those tax rates go down, which is why they paid such a big share of income taxes (up to 40%) in 1997-2000 and 2003-2007.  Raise the tax on dividends and capital gains to 23.8%, as Obama hopes to do by 2014, and somebody else would have to pay the taxes now paid by the top 1%. Using income reported to the IRS to measure actual living standards is foolhardy at best.

President Obama’s Dubious Claims about Incomes of the Top 1% vs. the Bottom 90% is a post from Cato @ Liberty - Cato Institute Blog

NPR reports on more doctors giving up private practices and going to work for hospitals. Hospitals think they can manage care better and get more patients, and doctors like being relieved of administrative headaches. But it isn’t a perfect solution. Reporter Jenny Gold notes one of the problems:

GOLD: This isn’t the first time hospitals have gone doctor shopping. In the 1990s, hospitals bought up as many practices as possible. Dr. Bill Jessee is the president of the Medical Group Management Association. He remembers the ’90s as something of a disaster.

Dr. BILL JESSEE (President, Medical Group Management Association): The first thing a lot of physicians did was took a vacation. And when they came back, they weren’t working as hard as they were before their practice was acquired.

Indeed. This is a standard insight of economics. People work harder when they have something to gain. There are real benefits to the division of labor, including corporations where salaried employees contribute to a joint product, but there are also risks that employees won’t work as hard when their compensation isn’t directly tied to their output. Managers and economists have searched for solutions to the “shirking” problem. In this case the hospitals are experimenting with bonus systems based on how many patients the doctors see. The problem is much more significant, of course, in government, which is far more restricted in its ability to use merit pay, bonuses, or other performance-related pay systems. Thus the widespread impression that government employees don’t work as hard as private-sector employees — and one reason that it’s a good idea to leave as many services as possible in the private sector.

The NPR story also reminded me of Malcolm Gladwell’s New Yorker article on Philo T. Farnsworth, the inventor of television. Gladwell dismisses the romantic notion of the lone inventor and says that Farnsworth would have been better off working for a big corporation, where other people would have worried about raising capital, fending off lawsuits, and all the little details of management and left Farnsworth free to invent:

Farnsworth was forced to work in a state of chronic insecurity. He never had enough money….he did not understand how to raise money or run a business or organize his life. All he really knew how to do was invent, which was something that, as a solo operator, he too seldom had time for.

This is the reason that so many of us work for big companies, of course: in a big company, there is always someone to do what we do not want to do or do not do well–someone to answer the phone, and set up our computer, and arrange our health insurance, and clean our office at night, and make sure the building is insured. In a famous 1937 essay, “The Nature of the Firm,” the economist Ronald Coase said that the reason we have corporations is to reduce the everyday transaction costs of doing business: a company puts an accountant on the staff so that if a staffer needs to check the books all he has to do is walk down the hall. It’s an obvious point, but one that is consistently overlooked, particularly by those who periodically rail, in the name of efficiency, against corporate bloat and superfluous middle managers. Yes, the middle manager does not always contribute directly to the bottom line. But he does contribute to those who contribute to the bottom line, and only an absurdly truncated account of human productivity–one that assumes real work to be somehow possible when phones are ringing, computers are crashing, and health insurance is expiring–does not see that secondary contribution as valuable….

Philo Farnsworth should have gone to work for RCA. He would still have been the father of television, and he might have died a happy man.

The Importance of Incentives is a post from Cato @ Liberty - Cato Institute Blog

The Bureau of Economic Analysis latest release of industry compensation levels shows that the average federal worker ranks up at the top along with employees in the finance and energy industries. That’s not exactly popular company these days.

The BEA presents compensation data for 72 industries that span the U.S. economy. Figure 1 shows the 20 industries with the highest levels of average compensation, which includes wages and benefits. It also shows the average for all U.S. private industries and the average for the industry with the lowest compensation. (The names of the industries have been simplified in some cases).

Federal civilian workers have the sixth highest average compensation of the 72 industries:

As yesterday’s post showed, federal employee compensation has exploded over the course of the decade. Figure 2 shows that this federal employee compensation growth has been the fifth highest of the 72 industries measured by the BEA:

Federal Government Is a Lucrative ‘Industry’ is a post from Cato @ Liberty - Cato Institute Blog

Concern about the pay, benefits, and performance of government employees seems to be growing. Chris Edwards’s articles on how government pay is outpacing private-sector pay have generated media attention, cartoons, and angry rebuttals from the head of the federal Office of Personnel Management. Steven Greenhut has a new book, Plunder! How Public Employee Unions Are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation, and is writing lots of newspaper articles on the high costs of government unions, also the topic of a recent Cato Policy Analysis. New Jersey unions are not finding much sympathy as they try to hold on to their raises, benefits, pensions, and work rules in the face of Gov. Chris Christie’s attempt to cut the budget. Liberal journalist Mickey Kaus is running for the U.S. Senate, trying to warn California’s voters and the Democratic Party about the excessive power and destructive influence of public employee unions.

And now Saturday Night Live. The zeitgeist-riding comedy show had a truly harsh sketch this weekend about the “Public Employee of the Year Awards.” It touched every element of popular resentment toward government workers: “people with government jobs are just like workers everywhere – except for the lifetime job security, guaranteed annual raises, early retirement on generous pensions, and full medical coverage with no deductibles, office visit fees, or copayments” — “retirement on full disability” by an obviously young and healthy worker — “Surliest and Least Cooperative State Employee” — “3200 hours [a year] on the job, all of it overtime” — New York school janitors living in Florida — employees with two current jobs and full disability — an entire workday at the DMV without serving a single customer — no-work contracts –  surprisingly early closings — and “he’s on break.”

Time for unions to start worrying?

Furor over Government Employees is a post from Cato @ Liberty - Cato Institute Blog

That’s the subject of a USA Today analysis, which reveals an outrageous increase in salaries at the top levels of the federal workforce. I’ve been complaining about excessive federal pay for some time based on one set of data, and now Dennis Cauchon provides strong support for my thesis using a different set of data.

Cauchon finds that since the economy fell into recession, the number of federal workers earning more than $150,000 has more than doubled. The federal government has become extremely bloated and top heavy, even as families and businesses across the nation have had to tighten their belts. With 383,000 workers earning six-figure salaries, the government has become an elite island of overcompensated administrators immune from the competitive job realities of average families.

There are a remarkable 22,000 federal civilians earning salaries of over $170,000, illustrating that Big Government works for the benefit of well-off insiders, not average Americans. And Cauchon only looks at salaries and wages. Average annual federal benefits are more than $41,000, which pushes total federal compensation even further ahead of the private sector average.

The Bush administration let federal pay and benefits grow completely out of control, as it did with other areas of federal spending. President Obama has an opportunity to fix these problems. He should call for a multi-year freeze on federal pay, work to overhaul a system that moves workers up the pay scales too rapidly, and begin purging the upper ranks of federal management.

Here are some of my recent analyses of federal pay:

• Federal Pay Continues Rapid Ascent
• Federal Pay: Response to the Critics
• Wall Street, Big Oil, and Federal Workers

Federal Salaries Explode is a post from Cato @ Liberty - Cato Institute Blog

Yahoo News is highlighting the story “10 Jobs With High Pay and Minimal Schooling.” Topping the list: air traffic controllers, who work for the federal government.

These workers make sure airplanes land and take off safely, and they typically top lists of this nature. The median 50% earned between $86,860-142,210, with good benefits. Air traffic controllers are eligible to retire at age 50 with 20 years of service, or after 25 years at any age.

Huge salaries and retirement after 20 years — sweet deal!

Air traffic controllers seem to provide a good illustration of my general claim that federal workers are overpaid.

I don’t know what the proper pay level for controllers is, but I do know that we should privatize the system, as Canada has, and let the market figure it out.

Federal Wages Fly High is a post from Cato @ Liberty - Cato Institute Blog

What do workers in finance, energy, and the federal government have in common? Very generous compensation packages, according to data from the Bureau of Economic Analysis.

When I posted federal compensation data last week, I received a flood of comments that disputed my contention that federal workers are overpaid. A common retort was that “federal workers are not burger flippers.” That’s true, but workers in the computer systems design, computer manufacturing, and chemicals industries are not burger flippers either, yet those folks also earn less than federal workers, on average.

The Bureau of Economic Analysis presents compensation data for 72 industries that span the U.S. economy (Table 6.2D). Figure 1 shows the 20 industries with the highest levels of average compensation, including wages and benefits. It also shows the average for all U.S. private industries and the average for the industry with the lowest compensation, which, indeed, includes burger flipping. (I’ve simplified the names of the industries in some cases).

Federal civilian workers have the seventh highest average compensation of 72 industries. Compensation in the federal civilian workforce is topped only by compensation in three finance-related and three energy-related industries.

Should federal compensation be so high? We are always told that the 1.9 million federal civilian workers are “public servants,” implying that they are selflessly sacrificing for the good of the nation. I’m sure that most federal workers are dedicated employees, but looking at these compensation levels, I don’t see much sacrificing going on.

It is true that there are some elite agencies in the government that need to have high compensation levels. But the bulk of the federal workforce is in sprawling bureaucracies such as the U.S. Department of Agriculture, which has a huge army of about 100,000 workers. The main job of USDA workers is to administer farm aid, food stamps, and other subsidy programs. That sort of paper-pushing work is not rocket science.

The other point I made last week is that the BEA data makes clear that federal compensation has skyrocketed this decade. Figure 2 provides more support for that claim.

Federal civilian workers had the fifth highest average compensation increase among 72 industries between 2000 and 2008. Average federal civilian compensation increased 57 percent, which compared to the overall average increase in the private sector of 31 percent.

Let’s slow this freight train down. Federal pay ought to be frozen for a period of years, at least until the economy recovers and private sector pay starts catching up.

Wall Street, Big Oil, and Federal Workers is a post from Cato @ Liberty - Cato Institute Blog

The Bureau of Economic Analysis has released its annual data on compensation levels by industry (Tables 6.2D, 6.3D, and 6.6D here). The data show that the pay advantage enjoyed by federal civilian workers over private-sector workers continues to expand.

The George W. Bush years were very lucrative for federal workers. In 2000, the average compensation (wages and benefits) of federal workers was 66 percent higher than the average compensation in the U.S. private sector. The new data show that average federal compensation is now more than double the average in the private sector.

Figure 1 looks at average wages. In 2008, the average wage for 1.9 million federal civilian workers was $79,197, which compared to an average $50,028 for the nation’s 108 million private sector workers (measured in full-time equivalents). The figure shows that the federal pay advantage (the gap between the lines) is steadily increasing.

Figure 2 shows that the federal advantage is even more pronounced when worker benefits are included. In 2008, federal worker compensation averaged a remarkable $119,982, which was more than double the private sector average of $59,909.

What is going on here? Members of Congress who have large numbers of federal workers in their districts relentlessly push for expanding federal worker compensation. Also, the Bush administration had little interest in fiscal restraint, and it usually got rolled by the federal unions. The result has been an increasingly overpaid elite of government workers, who are insulated from the economic reality of recessions and from the tough competitive climate of the private sector.

It’s time to put a stop to this. Federal wages should be frozen for a period of years, at least until the private-sector economy has recovered and average workers start seeing some wage gains of their own. At the same time, gold-plated federal benefit packages should be scaled back as unaffordable given today’s massive budget deficits. There are many qualitative benefits of government work—such as extremely high job security—so taxpayers should not have to pay for such lavish government pay packages.

Update: I respond to some criticisms of this post here.

Update 2: Compensation data for federal workers vs. other industries here.

Update 3: In September, the government revised the data for private sector workers. On 9/30/09, Figure 1 and the related text were updated to reflect this change.

Federal Pay Continues Rapid Ascent is a post from Cato @ Liberty - Cato Institute Blog

President Obama will hold a press conference tonight to answer questions about his health care reform proposal. This is what I would ask him:

Mr. President, during your campaign, you said, “I can make a firm pledge…Under my plan, no family making less than $250,000 a year will see any form of tax increase.”  You also said that “no one will pay higher tax rates than they paid in the 1990s.”

Your National Economic Council chairman, Larry Summers, has written that employer mandates “are like public programs financed by benefit taxes.”  Under the House health reform bill, an uninsured worker earning $50,000 per year, with no offer of coverage from her employer, would face a 15.3-percent federal payroll tax, a 25-percent federal marginal income tax rate, an 8-percent reduction in her wages (to pay the employer penalty), plus a 2.5 percent uninsured tax.  In total, her effective marginal federal tax rate would reach 50.8 percent.

Do you stand by those pledges, and would you therefore veto any employer mandate or individual mandate as a tax on the middle class?

(Add it to the questions I posed here and here.)

My Question for the President is a post from Cato @ Liberty - Cato Institute Blog

We own three iPods at my house, including a recently purchased iPod Touch. Since many of the iPod parts are made abroad, is my family guilty of allowing our consumer spending to “leak” abroad, depriving the American economy of the consumer stimulus we are told it so desperately needs? If you believe the “Buy American” lectures and legislation coming out of Washington, the answer must be yes.

Our friends at ReasonTV have just posted a brilliant video short, “Is Your iPod Unpatriotic?” With government requiring its contractors to buy American-made steel, iron, and manufactured products, is it only a matter of time before the iPod—“Assembled in China,” of all places—comes under scrutiny? You can view the video here:

In my upcoming Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization, I talk about how American companies are moving to the upper regions of the “smiley curve.” The smiley curve is a way of thinking about global supply chains where Americans reap the most value at the beginning and the end of the production process while China and other low-wage countries perform the low-value assembly in the middle. In the book, I hold up our family’s iPods as an example of the unappreciated benefits of a more globalized American economy:

The lesson of the smiley curve was brought home to me after a recent Christmas when I was admiring my two teen-age sons’ new iPod Nanos. Inscribed on the back was the telling label, “Designed by Apple in California. Assembled in China.” To the skeptics of trade, an imported Nano only adds to our disturbingly large bilateral trade deficit with China in “advanced technology products,” but here in the palm of a teenager’s hand was a perfect symbol of the win-win nature of our trade with China.

Assembling iPods obviously creates jobs for Chinese workers, jobs that probably pay higher-than-average wages in that country even though they labor in the lowest regions of the smiley curve. But Americans benefit even more from the deal. A team of economists from the Paul Merage School of Business at the University of California-Irvine applied the smiley curve to a typical $299 iPod and found just what you might suspect: Americans reap most of the value from its production. Although assembled in China, an American company supplies the processing chips, a Korean company the memory chip, and Japanese companies the hard drive and display screen. According to the authors, “The value added to the product through assembly in China is probably a few dollars at most.”

The biggest winner? Apple and its distributors. Standing atop the value chain, Apple reaps $80 in profit for each unit sold—an amount higher than the cost of any single component. Its distributors, on the opposite high end of the smiley curve, make another $75. And of course, American owners of the more than 100 million iPods sold since 2001—my teen-age sons included—pocket far more enjoyment from the devices than the Chinese workers who assembled them.

To learn a whole lot more about how American middle-class families benefit from trade and globalization, you can now pre-order the book at Amazon.com.

Is Buying an iPod Un-American? is a post from Cato @ Liberty - Cato Institute Blog

Those who think that the college-educated, or soon to be so, should have more and more of their education funded by taxpayers – whether those taxpayers themselves attended college or not – are shooting off the fireworks a bit early this year, celebrating increasingly generous federal aid going into effect today.

Perhaps the most galling part of all the increasingly free-flowing aid is how much is being targeted at people who work in “public service.” Ignoring for the moment that the people who make our computers, run our grocery stores, play professional baseball, and on and on are all providing the public with things it wants and needs, to make policy on the assumption that people in predominantly government jobs are somehow selflessly sacrificing for the common good is to blatantly disregard reality.

Consider teachers, as I have done in-depth. According to 2007 Bureau of Labor Statistics data, adjusted to reflect actual time worked, teachers earn more on an hourly basis than accountants, registered nurses, and insurance underwriters. Elementary school teachers – the lowest paid among elementary, middle, and high school educators – made an average of $35.49 an hour, versus $32.91 for accountants and auditors, $32.54 for RNs, and $31.31 for insurance underwriters.

So much for the notion that teachers get paid in nothing but children’s smiles and whatever pittance a cruel public begrudgingly permits them.

How about government employees?

Chris Edwards has done yeoman’s work pointing out how well compensated federal bureaucrats are, noting that in 2007 the average annual wage of a federal civilian employee was $77,143, versus $48,035 for the average private sector worker. And when benefits were factored in, federal employee compensation was twice as large as private sector. But don’t just take Chris’s word and data to see that federal employment is far from self-sacrificial – take the Washington Post’s “Jobs” section!

And it’s not just federal employees or teachers who are making some pretty pennies serving John Q. Public. As a recent Forbes article revealed, it’s people at all levels of government, from firefighters to municipal clerks:

In public-sector America things just get better and better. The common presumption is that public servants forgo high wages in exchange for safe jobs and benefits. The reality is they get all three. State and local government workers get paid an average of $25.30 an hour, which is 33% higher than the private sector’s $19, according to Bureau of Labor Statistics data. Throw in pensions and other benefits and the gap widens to 42%.

Recently, my wife and I have been watching the HBO miniseries John Adams, and I couldn’t help but make the observation: In Adams’ time, many of those who served the public truly did so at great expense to themselves, often risking their very lives and asking little, if anything, from the public in return. Today, in contrast, many if not most of those who supposedly serve the public do so at no risk to themselves – indeed, unparalleled security is one of the great benefits of their employment – but are treated as if their jobs are extraordinary sacrifices. And so, as we head into Independence Day, it seems the World has once again been turned upside down: In modern America, the public works mightily to serve its servants, not the other way around.

Those Who “Serve” Us Celebrate is a post from Cato @ Liberty - Cato Institute Blog

Despite being hit by the global recession, the ruling Congress Party-led coalition swept to an unexpected victory in India’s general election, mainly because of rural prosperity in a country where 70 percent of the population is rural. Good monsoons and high agricultural prices—linked partly to the global commodity boom—helped agriculture grow at a record annual rate of almost 4.5 percent for five years. The combination of high prices and high output yielded a happy peasantry. High food prices did not outrage rural workers because of a new rural employment scheme guaranteeing up to100 days work, and this helped despite corruption in implementation. Many states raised minimum wages too, raising worker pay faster than prices, and this was sustainable because of high crop prices. The government had partly or fully forgiven bank loans to small farmers, and this too won its votes.

However, this policy will encourage loan defaults in future: far better would have been cash payments to the needy, while maintaining loan discipline. The world commodity boom made it possible for the government to hike its support prices for crops as well as minimum wages, but such happy conditions will not last. India needs agricultural reform that focuses on raising productivity rather than loan waivers and hikes in controlled prices. And it must carry on its good work in improving rural infrastructure.

Most election forecasts predicted a hung parliament and an unstable government. But Congress’ victory means India will have a stable government for five years. Unlike last time, it will not depend for survival on the Marxist parties, which thwarted several economic reforms and opposed the nuclear deal and defense framework agreements with the USA . Prime Minister Manmohan Singh’s courage in risking his government on this issue has been vindicated, and the two countries can now raise cooperation to a higher level. This could be especially important in checking Islamic terrorism, a serious problem for both countries.

The Congress must now proceed with legislation earlier thwarted by the Marxists—on pension reform, allowing private investment in coal mining, and raising foreign investment limits in insurance, telecom and retail. Victory and stability should also make it politically possible to avoid brazenly protectionist measures advocated by some sections of industry. The new agenda should include education reform—school vouchers to promote choice, liberalized rules for private schools, permission for foreign universities to set up shop in India . India badly needs administrative reforms to make civil servants and the police more accountable to citizens. A perceived lack of justice is an important cause for Maoist insurrections in some states, to which force alone cannot be the answer.

Elections in India is a post from Cato @ Liberty - Cato Institute Blog