Thursday, July 14, 2011

Unionized Public Sector Workers vs. Free Market Enterprise

Lee Farkas in cuffs.
We all know what's wrong with our economy: It's those damn deficits, and those damn deficits are the fault of inefficient local, state and federal governments, wasteful of taxpayer dollars and ever ready to give those damn unionized public sector workers everything they demand.

We know if we listen to Governor Kasich or Walker in Wisconsin or Christie in New Jersey or the robots on Fox News that there can only be one solution: introduce business efficiency and free market principles to government operations.

So let's take a sampling of how the free market works in the real world. Let's see what conservatives really want. Here are a few examples, gathered randomly, in recent months:

A) Lee B. Farkas, the chairman (pictured left) of Taylor, Bean & Whitaker, one of the nation's largest mortgate lenders was convicted in April 2011 on 14 counts of securities, bank and wire fraud, a scheme that cost investors and the government $2.9 billion. (Six other company executives pled guilty.) 

Farkas's actions brought about the collapse of Colonial Bank, which was sold worthless mortgages, and when the whole scheme headed south, Farkas tried to convince Colonial to apply for $570 million in Troubled Asset Relief Program funds. 


B) In May we had a federal indictment of George H. Lee and Justin W. Lee, charged with four counts of bribery and one count of conspiracy. The Lees are only two of scores of contractors and military officers who face or have faced criminal charges related to manipulation of lucrative government contracts during the Iraq War. They gave away airline tickets, spa vacations and big bribe money in return for sweet deals to build warehouses for the U. S. military and provide bottled water and blankets to the troops at a healthy markup price.

According to the indictment, the Lees paid Major Gloria D. Davis $225,000 in bribes in return for $14 million in contracts funneled to their company. Davis shot and killed herself in Baghdad in 2006, after admitting her role.

In a related case, Maj. John Cockerham was sentenced to 17 years in prison for taking $9.6 million in bribes from various private contractors interested in doing "business" with the U. S. military in Iraq.  (New York Times, 5-31-11)


C) If the public sector is wasteful of tax dollars call in the business experts! A case in point, involving the New York City Public Schools, proves how much we can learn if we apply sound free market principles to education. Willard Lanham, just the kind of get-it-done fellow to show those unionized bums how it's done, won a contract to serve as a technology consultant to the New York City Public Schools. In the weeks and months ahead, Lanham is accused of stealing $3.6 million dollars, relying in large part on the old-fashioned profit motive to keep others from blowing the whistle on his scheme. 

Lanham hired five consultants, one of them his brother, who worked from home at a rate of $60-70 per hour. Lanham billed a cable subcontractor, Custom Design Communications for the work, but at a rate of $225 per hour. CDC held it's nose and billed Verizon and I.B.M. $250 per hour. Then Verizon and I.B.M. held their noses and closed their eyes and mouths and billed the Education Department $290 hourly, all for the same work.

If you like juicy stories, this one gets better. Lanham and his wife Laura Lanham are deep into an ugly divorce. Laura , 42, blogs about her pursuit of younger men and her "cougar" lifestyle and one story describes her as a hot "yummy mommy." The couple lived a lavish lifestyle before the indictment, with three luxury homes and a fleet of flashy cars: a yellow Corvette, a Porsche, a Lexus, a Mercedes and a Cadillac Escalade.


D) Now we have a story involving Rupert Murdoch and his paper News of the World in England. There is no bigger champion of free market principles than Murdoch and you don't have to listen to the folks at Fox News to hear them touting the absolute virtues of private enterprise and scaring up a little terror among viewers about evil unionized public sector workers. Unfortunately, the free enterprise system has no morality, except profit, and Murdoch has a bank book for a soul. To insure sales of newspapers editors at News agreed to bribe police to gain access to sensitive information, hacked the phones of celebrities and politicians illegally, and in the most egregious cases tapped the phones of murder victims, like Milly Dowling, 13. Murdoch employees deleted frantic messages left on Milly's phone by her parents when her in-box filled, so that new messages could be received and hacked, giving the family false hope that she was still alive and deleting the calls herself.


E) If you're an NFL fan (and what model of business efficiency out there can possibly be more impressive) you might have noticed that John Mackey died this week after a decade-long battle with dementia. Mackey, a Hall of Fame tight end, was 69, but showed the first signs of football-related brain damage in 2000. That same year, Jerry Jones, the Cowboys owner insisted there was no evidence that repeated concussions put players at risk.

A committee of doctors appointed by the league agreed. You know: no sense having the medical people stamping all over the golden eggs the league had laid.

By 2007, Mr. Mackey was using a spoon to drink his coffee, confusing coffee with a bowl of soup. On another occasion, when security agents at the airport asked him to remove his Super Bowl and Hall of Fame rings before going through the scanner, he exploded and broke for the gate. When wrestled to the ground by armed guards he kept mumbling, "I got in the end zone."

Finally, with evidence piling up so high, not even a rich tycoon like Jones could ignore it, the NFL began making rules changes in 2010. Meanwhile, cities keep pouring tax dollars into new stadiums for billionaires, and much of the bill for the dozens of former players suffering from similar ill effects will probably have to be borne by government-financed health plans in the end.


F) Finally, if you haven't been paying attention, it has just been reported that Phillippe Dauman, top executive at Viacom made $84.5 million dollars last year and median pay for top executives at U. S. companies rose 23% last year. 

Leslie Moonves of CBS was second in pay, earning $56.9 million.

Put it this way: Dauman was "worth" as much as 1,690 police officers (at $50,000 yearly). Mr. Moonves did greater service to society than 1,625 first year teachers ($35,000) combined.

And last year the leading head fund manager, John Paulson, earned $4.9 billion for his efforts, equal to what the sweat of 184,000 average American workers could make in the same time. (You figure, maybe Paulson put in a few long weekends and a lot of overtime.)

But it gets better yet. Since Paulson makes money in a convoluted fashion, the tax code allows him to claim almost every penny he makes as "capital gains" and so he pays a much lower rate in income taxes than say your average state social worker or city prison guard. 

Yep, the man pays 15% federal income tax.

It's just killing him. It's killing his ability to create jobs. No way, no way, should we raise that poor man's taxes. 


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