Michael Barrera: Consequences of Federal Government Growth for Hispanic Communities

In order to not only create but sustain prosperity in our country, America needs to embark on increasing Economic Freedom for its entrepreneurs and indeed its citizenship.  Economic Freedom allows businesses to trade their products, provides predictability in terms of future costs and expenses, and does not burden businesses with excessive regulation.  The true path to Economic Freedom is achieved by promoting Free Markets, Self Reliance and Less Government.  The American people agree according to a January, 2012 Rasmussen poll.  According to Rasmussen, Americans still put a lot more faith in the private sector than in government when it comes to making the economy work as 70% of American adults think a free market economy is better than one managed by the government.   The American people realize that the market should choose winners and losers, not a particular Administration, friends of Congress or government regulators.

A truly strong and vibrant private sector grows the economy from business profits and increased spending by workers who not only employed, but also have a sense of better job security.  Keeping a laser focus on growing the private sector will lead to more innovation, increased investment and better economic stability.

However, there are national leaders who continue to believe bigger government is the key to growing our economy.  In fact, Majority Leader Reid recently stated the private sector is doing fine and that it was time to grow jobs in the government sector.  With all due respect to the Majority leader, more government only increases the burdens of debt and regulation thereby strangulating our economic recovery.  Rather than grow the U.S. economy, the Majority leader prefers that we grow government.  Government growth and economic growth are not one in the same as big government only serves to decrease our nation’s economic freedom.

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This view is validated in a December 2011 Gallup poll, wherein 64% of Americans believe the growth of government is the biggest threat to our country.  This compares to 29% who felt big business was a bigger threat.  People realize that our growing government is creating a quicksand of debt that we may never recover from.

A major contributing factor to our federal debt is the money we owe federal government workers.  According to a recent article by Dennis Cauchon in USA TODAY, the debt being incurred in order to fund retirement programs for former federal workers  is growing so fast that American taxpayers now face a multitrillion-dollar shortfall nearly as big as Social Security.  Moreover, this federal retirement debt is much worse than the Social Security debt due to the fact that Social Security is funded through payroll taxes. However, there is no funding mechanism for federal worker obligations requiring the federal government to tax and borrow to pay for these obligations.   The following costs provided by USA TODAY demonstrate the alarming extent of U.S. taxpayer obligations.

• The government paid a record $268 billion in pension and health benefits in the year (2010) to 10 million former civil servants, military personnel and their dependents, about $100 billion more than was paid a decade earlier after adjusting for inflation.

• In 2010 the federal government committed more money to the 10 million former public servants than the $690 billion it paid to 54 million Social Security beneficiaries.

• The retirement programs now have a $5.7 trillion unfunded liability, compared with a $6.5 trillion shortfall for Social Security.

Unlike the federal government, private companies are legally required to put money into pension funds to match retirement promises.  USA Today reports that private pensions have $2.3 trillion in stocks, bonds, real estate and other assets.  Even state and local governments have $3 trillion set aside in retirement funds. The federal government has nothing set aside!  This means the federal government will be required to tax and borrow even more money from not only today’s taxpayers, but also from our children, grandchildren and beyond.  This growth in spending further demonstrates that the federal government continues to act like a teenager in college running up their parents’ credit card bill with no regard for who is responsible for making payments.  In addition to taxing the American people, the government’s other primary solution is to borrow money from other countries further increasing our debt and interest payments.  This growing debt to other counties is also a detriment to our national security.

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The government is hiring non-Hispanic federal employees at a significantly higher rate than Hispanics despite the fact that Hispanics continue to suffer more than 11% unemployment.

A contributing factor to the growth of federal employee debt is the lock unions have on federal agencies and their spending.  It is practically impossible to remove anyone for inefficiency.  In fact, it is often said that if a federal employee voluntarily quits or passes on, they still receive a hearing before they can be legally terminated!  In other words, many feel they have lifetime appointments like our Supreme Court justices.  I don’t recall lifetime federal employee appointments being in the Constitution.

With this kind of “perceived” or real protection, there is no motivation to go above and beyond, no fear of being terminated and no reason to leave.  This is entitlement in its worst form.  Federal unions claim federal workers contribute heavily in paying federal taxes.   While this is true they should not forget that it is the American taxpayers who pay for their salaries, as well as the employment taxes the federal employees pay back to government.

It is a given that some functions, like military functions must be done by federal employees.  However, there has to be a serious effort to outsource more activities so that taxpayer money is circulated back into the private sector, thereby creating private sector jobs rather than growing the debt with more government jobs.

In addition to growing our debt, a bigger government continues to increase the regulation burden on every day Americans and businesses.  In fact, a recent report found that in addition the flurry of federal mandates, 40,000 new state laws were implemented throughout the country both nationally and locally as of January 1.  It is interesting to note, more government employees seems to correspond with more government intervention, more taxes, more spending, more borrowing and less and less accountability.

Please understand this opinion piece is not meant to denigrate federal employees.  Many of the federal employees I have encountered are dedicated public servants and some of the most talented and professional people I have worked with.  However, if America cannot afford to pay all of them now, we definitely won’t be able to afford to pay them later.  It isn’t fair to these workers and the American taxpayer.

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Now what does this mean to Hispanics?  First of all, while Hispanics are 15% of the population, they only occupy 8% of the federal work force and a smaller percentage of management and upper management positions.  In fact, according to a report by the federal government’s human resource department (Office of Personnel Management), the Hispanic percentage within federal government grew from only 6.5% in 2000 to 7.9% in 2008, while the last 2 years have remained flat at 8%.  This 8% employment remained flat despite the fact that 7000 additional Hispanics were hired. Moreover, the new Hispanic hires only represented 6.3% of all new hires within the federal government.  It follows, the government is hiring non-Hispanic federal employees at a significantly higher rate than Hispanics despite the fact that Hispanics continue to suffer more than 11% unemployment.  The private sector is doing better in terms of overall employment as Hispanics account for close to 15% in the private sector.

Additionally, increasing federal debt will start to put a squeeze on profit margins for the growing number of entrepreneurs.  It is a given that both federal and state governments will need to raise taxes from businesses to pay off the debts they are incurring.  Businesses will then need to reduce salaries, cut benefits, stop hiring and indeed lay people off to comply with government obligations.  In addition to businesses, the feds and local governments will also need to raise money from individuals to pay these debts.  In the long run this will be a detriment to individual spending thereby causing even more harm to businesses and employees.  In sum, this creates a vicious cycle wherein big government continues to intrude on our Economic Freedom.

There are many issues of concern for Latinos.  However, we need to be just as concerned about the exploding debt and its underlying causes if we want to ensure economic prosperity for ourselves, our children and indeed our fellow Americans.  If we want to preserve this nation’s status as one of the most free and powerful countries to ever exist, the Hispanic community must also do its part and hold our leaders accountable.  We must continue to demand they spend our money wisely and to keep the government out of our lives as much as possible.  In other words, we must hold them responsible for protecting our freedoms.

Michael L. Barrera is a Regional Director of The LIBRE Initiative, and formerly served as President  & CEO of the United States Hispanic Chamber of Commerce and as National Ombudsman of the Small Business Administration.