The Counter Intuitive Nature of Budget Cuts
will a reduction in city worker hours save money?
Eric LaMont Gregory
The recent controversy in Wilmington suggesting that all non-union city employees have their hours reduced from 40 to 35, at first glance appears to be a rational alternative to more threatening cost cutting measures such as the loss of jobs.
Congress in the last round of Continuing Resolutions to keep the Federal Government running, but took aim at private contractors to the federal government as a way of reducing the growing federal shortfall between revenues and expenditures. The problem is that expenditures exceed revenues.
Local government, as well as state or federal governments receive the majority of their revenue from taxes and not an inconsiderable amount from licenses, fines and other fees.
The problem with cutting the wages of workers is that it reduces not only the amount of money those workers can spend in the community, but also the revenue the city receives from the purchases and other economic activity that workers' expenditures generate.
Those private federal government contractors paid the wages of workers who in turn paid local taxes and support for local schools.
We as a nation and as a community cannot just cut hours, jobs, and inevitably services to solve the budget crises. The budget crisis results from a slowdown in economic activity, and we cannot solve that problem by slowing down economic activity further.
If we, as a nation, begin retiring the mountain of debt laden bonds as they mature, instead of paying the millions in interest, those savings could be put to productive purposes, like increasing economic activity.
When the majority of currency bills in the average citizens purse read United States Note, and not Federal Reserve Note, we will be on our way to an increase in economic activity, jobs and a return to rational monetary policies.