Saturday, February 27, 2010

Consequences of laying off employees.

People are getting laid off so they can be replaced by entry-level low wage workers who will have absolutely no spending power, and from whom the city and state won't be able to extract tax revenue.

Businesses are collectively sinking their own ships to try and economically reduce government.

The timing is different for each business, between the time a business cuts it's costs by laying off employees and when the negative consequences occur, but in every case the delay is long enough for the cause of those negative consequences to be vaguely blamed on "the economy," rather than the businesses own practice.

The state and city cut a tiny bit deeper into it's own throat by laying off highly paid government workers. The tax loss won't be felt for a while, but it's inevitable.

The shock to the local private sector economy is three-fold for every government worker laid off, by virtue that most government employees are paid at least twice the private sector average wage, even more if you include benefits.

No customers, intermittent fire and police protection, utilities rendered unreliable, If you own your own business and you own the building too, you've doomed yourselves.

My advice is to continue to hype the local economy long enough to sell your business. Oh, sorry about giving away that secret.

Sunday, February 21, 2010


Dave Bakke's column in the State Journal-Register is a testament to my previous blog post.

•Illinois State Journal-Register 2/21/2010 [ ]
• 2/10/2010[ ]

The downward spiral of the economy is self-sustaining.

Laid-off private-sector workers = less consumerism = less tax revenue = laid-off public-sector workers = less consumerism = laid-off private-sector workers.

The cycle repeats. This cycle will continue to repeat until there is nothing left but land owners with natural resources that are still in demand. That is unless those who control the government begin to arbitrarily seize land so they can pay their own ridiculously high government salaries and pensions.

Government salaries in the upper levels will increase drastically because they can see this coming. Once they retire they can sit back and just let the money flow into their coffers.

Wednesday, February 10, 2010


The business news media keep reporting claims that the economy is slowly climbing out of a recession. It is for a few companies that managed to cut their costs temporarily enough to report an upward trend in their profit-expense ratios; just enough to get more investors the same way Enron did shortly before its fraud was discovered. Unfortunately, this is more than just Enron, it’s the few businesses that are used in calculating the gross domestic product (GDP) for the entire country.

Several stories published in the Illinois State Journal-Register (SJ-R) combine to foretell the doom of our economy, more so than any temporarily distorted PE ratios; a tale of greed so strong that long-term consequences are ignored for instant gratification and knee-jerk reactions.

Public universities are depleting financial reserves in order to make payroll, according to a story by Deanna Bellandi of the Associated Press. “the state isn’t giving them the money they’ve been promised,” Twelve public universities are in trouble, even after raising tuition, the state owes the universities nearly three quarters of a billion dollars.

The souring economy and consequent layoffs, increased temporarily the number of enrollees at colleges for re-training, but for some reason, the increased enrollment and tuition combined still has the universities operating at a loss. The universities apparently are not self-sustaining. The income from tuition is going somewhere, but where?

It was reported February 3, 2010 that enrollment was up at the University of Illinois at Springfield, however, one commenter online referenced the economy and stated “More kids are staying home and commuting rather than going away. SIU-C is taking a pounding for the same reason.”

The state of Illinois is running a deficit, climbing toward thirteen billion dollars.
Sean Driscoll of Gatehouse News Service reported today that without help from the U.S. Congress, sixty five thousand Illinois residents are slated to lose their unemployment benefits in March and two hundred and thirty five thousand by June. Tim Landis reported a twenty eight percent increase in the number of unemployment claims between 2008 and 2009, in Springfield, to about sixteen thousand claims. The unemployment rate is the second lowest in the state behind Bloomington-Normal, according to Landis.

Springfield is not a microcosm of every medium sized town across the state because it’s the state capital, has colleges, a major medical district, and international historical notoriety.

On February 4, 2010, Dean Olsen reported that the Illinois Supreme Court overturned the cap on medical malpractice claims for constitutional reasons, making Illinois very unattractive to medical practitioners because malpractice insurance premiums will skyrocket, consequently so will health care and general health insurance costs in the state.

On February 9, 2010 it was announced in the SJ-R that the local power and water company, City Water Light and Power (CWLP), issued six pink slips to employees, with the promise of fifty four more pink slips if the union rejects concessions for furlough days and pay or benefit reductions.

On February 5, 2010 it was reported in SJ-R that another twenty-one layoff notices went out to other city employees who are members of the American Federation of State, County and Municipal Employees (AFSCME) if they don’t concede to furlough days and smaller pay raises.

On February 6, 2010 it was reported that The Springfield Police Benevolent and Protective Association Unit 5 announced that ninety seven percent of its organization voted against conceding to furlough days and lower salary raises. According to SJ-R the police union rejected the proposal because there was no guarantee that if accepted; no police officers would get laid off.

On February 8, 2010, it was reported that approximately half (two of four) of Springfield, Illinois City Clerk employees were issued notices of “possible layoffs.”

On February 4, 2010, it was reported that Springfield city alderman approved a spending budget that closed all but one of the city’s public libraries.

On February 3, 2010, Chris Dettro wrote in SJ-R that in Central Illinois Foodbank’s twenty one county area, over a hundred and five thousand people, including thirty-nine thousand children already receive food assistance annually, over seventeen thousand in a given week.

While all this is taking place, management at state and municipal levels are being promoted so they get higher pensions when they retire, often as an incentive to retire early, such as the outgoing Springfield, Illinois police chief, as reported on February 10, 2010 in the SJ-R.

What does this mean? Well, remember the promise that a lower prime lending rate would translated into lower credit card interest rates for customers? Remember that it never materialized and that all the profits were pocketed instead of being passed on to customers?

The same goes for your taxes. You aren’t going to see a dime of tax savings because management will be enriched further at the expense of laid-off labor. They are currently gorging themselves on what little is left of federal, state and local money.

Soon there will literally be nothing left, and they will be long gone. The baby boomers are gutting the economy and hoarding cash. I hesitate to suggest electing a new generation because it will be another generation of the same people, and the same type of people.

If you look at all the hoops you need to jump through to get elected, it’s not much of a stretch to conclude that the whole system is completely rigged.

Looking on the bright side, Scheels super sporting-goods store will be coming soon to compete with Gander Mountain and Dick’s Sporting Goods. This could mean that tents and sleeping bags at K-Mart, Target, and Shopko will be even more affordable for the rest of us.