Tragic as the Queensland floods have been, the real lesson we are about to learn with the proposed flood tax is that government, and its inability to curb spending, not the weather, is the greatest threat to the future.
Tragic as the Queensland floods have been, the real lesson we are about to learn with the proposed flood tax is that government, and its inability to curb spending, not the weather, is the greatest threat to the future.
Not everyone will see the situation as clearly as that, especially so soon after the loss of life and damage done to family homes, roads and bridges by the floods.
But, the truth about the flood levy being considered by the Australian Government is that it is on the political agenda because government is unable to cut costs in the same way the private sector has been forced to cut costs in the wake of the global financial crisis.
Nothing made this point clearer than a table of pay rates in t he U.S. carried first in a newspaper last year, and repeated last week in a financial newsletter. It showed how government workers are being paid more than private sector workers doing the same job.
The essential point of the analysis is that government, which relies entirely on taxes for its income, had become a better place to work in terms of both pay rates and security of tenure - at the expense of the private sector which is the wealth creating part of all economies.
While it is a U.S. example it does contain a valuable lesson for Australia in that shows how the once balanced relationship between government and the private sector has run off the rails. Not only do government workers get tenure, they now get the money as well.
Civil engineers are a prime example because they are at the base of the wealth creation process. A U.S. Government civil engineer is said to now earn an average annual salary of $US85,970. His colleagues in the private sector earn $US76,120.
That one example, and there are plenty more to come, asks a question. Why would any civil engineer take the risk associated with private sector work, especially the potential to lose his job in an economic downturn, when he can get more pay and job security in the government?
The same discrepancy, which has largely risen in the wake of the GFC thanks to governments being able to print money (and raise taxes) rather than earn it, can be seen in jobs for surveyors (government $US78,710, private $US67,336), crane driver ($US54,900 v $US44,044), and librarian ($US76,110 v $US63,284).
Better examples are in jobs for economists and financial analysts, where the private sector should be clearly ahead, but isn't. A government economist gets $US101,020 v $US91,065 for his private sector colleague, and a government financial analyst gets $US87,400 v $US81,323 for the private sector worker.
Now for the best, and the one which you will, unfortunately, know is all too true. A government public relations manager gets paid $US132,410, a whopping $US44,169 more than his private sector colleague who is on $US88,241.
Who said government spin doesn't pay?
Snide observations aside the message from the U.S. examination shows how government in that country has become a threat to its private sector. Little wonder that the U.S. is struggling to re-emerge from the deepest recession since the 1930s.
Australia is not the U.S., but we are travelling the same road of relying on higher-and-higher tax rates to feed a growing, and totally unproductive, government sector.
Saving us, for now, is a strong resources export sector thanks to Chinese demand for our raw materials.
But, that situation will not last forever thanks to another example of government taxes, the proposed resources super profits tax, or whatever it's called today, on iron ore and coal - with other minerals certain to follow no matter what promises are made today.
Raising taxes, imposing levies, and inventing new taxes, is always the easy option for government because taxpayers so readily swallow government spin - from the highest paid spin merchants in the business.
Real cost cutting, and real incentives for the private sector to create jobs and build businesses have become too politically difficult for government, though the end result will be Australia eventually finding itself in the same position as bankrupt Europe where every man and his dog has his hand out for a taxpayer funded hand-out.
