Past the Tipping Point and the Watershed

"The word "Tipping Point" ... comes from the world of epidemiology. It's the name given to that moment in an epidemic when a virus reaches critical mass. It's the boiling point. It's the moment on the graph when the line starts to shoot straight upwards." (The Tipping Point by Malcolm Gladwell)

The May 25, 2010 issue of USA Today included an article about "Private Wages Fall in Historic Pay Shift". The main point of the article is that the amount of compensation and employee benefits provided to government employees and the benefits provided by Social Security, unemployment insurance, food stamps and other social benefits was substantially greater than the wages and benefits paid to employees of private companies. According to USA Today, "Paychecks from private business shrank to their smallest share of (total) personal income in U.S. history during the first quarter of this year. ... A record low 41.9% of the nation's personal income came from private wages and salaries in the first quarter, down from 44.6% when the recession began in December, 2007".

So we have long passed the watershed event where total government benefits and employment compensation exceeds the income of the private sector. That is, more than half the economic income of the populace is derived from government. According to the Tax Foundation, the top 50% of the taxpayers (as measured by adjusted gross income) paid 97.11% of the Federal income tax. Thus, the lower income half of the U.S. population has no reason to support any effort to restrict, modify or eliminate the income tax. And it appears that a significant part of the top half (by income) also receives a substantial amount of government benefits, employment compensation or payments to government contractors whose employees indirectly depend on government spending.

In the 3rd quarter of the 20th Century, it was a common belief that government employees received less compensation and benefits for the same kind of work done in the private sector -- but that the government employees preferred the job security over the compensation and benefits. In the last quarter of the 20th Century, the common belief was that government employees enjoyed greater job security and employee benefits but lower wages than non government employees.

But it seems times have changed. USA Today reported in their March 4, 2010 issue that government employees received 20% more in compensation and benefits than similar employees in the private sector. So we have reached the point where a job in government offers higher pay, better benefits and far greater job security than a similar job in the private sector. So who chooses to work in the private sector? A relatively few who are able to secure wages and benefits at the top of the scale (some MBA's, doctors, lawyers, CPAs, engineers) and a lot of other people who aren't able to get a job with the government.

And, more than half the population derives more benefits from the income tax than they pay in income taxes.

Meanwhile, in little more than than a year, we have effectively nationalized health care, we are trying to legalize more than 12 million illegal aliens who are mostly non-taxpayers and are likely to get government subsidies and we are also trying to impose a costly "cap and trade" tax on the entire energy sector. That's in addition to spending more than a staggering $8.5 billion on nearly two dozen different bailout and stimulus programs. (Based on an analysis attributed to Bloomberg)

Is this what they mean by the tipping point when the line on the graph shoots straight upward?

Vern