Wall Street's War on the Middle Class: My Response to Hedge Fund President David Einhorn

Regarding your New York Times op-ed, "Easy Money, Hard Truths," your figures comparing federal civilian salaries with private sector wages are bogus.

First, federal employees are heavily weighted toward the highly educated and the highly skilled - lawyers, scientists, engineers, economists, physicians, educators and accounting professionals. There is just not that much call in the federal government for retail clerks, dishwashers, shampooers, day laborers, and restaurant wait staff.

Comparing them as a lump like you did is highly misleading.

It is much more accurate to compare federal and private employees by profession, and there the difference all but vanishes. Assistant Attorney Generals in Washington DC may have job security and benefits, but their salaries are several thousand dollars less than the earnings of their classmates toiling as contract attorneys, the lowest paid paeans in private sector law firms.

Do some research job by job and city by city and the pattern emerges; salary levels in the public sector are lower but balanced by better benefit packages and greater job security. Balancing lower salaries with higher benefits makes abundant economic sense. Given its size relative to most private entities, the Federal government can offer benefits more economically. Competing this way with the private sector for the top talent makes economic sense and actually saves the taxpayer money.

There are also good reasons why there is more job security. The federal government is not as vulnerable to the volatility of the business world. Whether it's Tyson, Perdue or any other competitor provisioning the nation's supermarkets, the nation's overall appetite for chicken and therefore the need for USDA, FDA and OSHA regulatory personnel is steadier than the market for any individual competitor's product.

But the greater natural volatility of the private sector has been greatly and unnecessarily exacerbated by the recklessness of our prevailing business culture. Thousands of jobs are eliminated or outsourced with the keystroke of an executive email. The constant firing and re-hiring of personnel is hugely wasteful and cruelly disruptive, but it pays off today's generation of executives in a cowed and fearful workforce and the relentless erosion of middle class pay and benefits, leaving more money for lavish pay and perks at the top.

Private sector employees in the middle and lower ranges have seen their earnings steadily diminish in the Reagan and Bush administrations, with some growth in the Clinton years. Trickle-down, a centerpiece of Reaganomics, has proven to be a fraud.

I'll believe your pious calls for Federal fiscal restraint, Mr. Einhorn, when you and your fellows put some serious money on the table. You can start by giving up declaring ordinary income to be capital gains because it's paid from clients' capital gains. That "death tax" nonsense? Give it up or give up stepped-up basis. Why should we subsidize you?

Instead you play the rest of us for fools, with ploys to con and cheat us, dividing us up, whipping up hate and resentment and setting us against each other. This is a racket, Mr. Einhorn, as contemptible as it is contemptuous.

And don't think we haven't noticed that attacking federal employees' salaries and benefits is a backdoor way of attacking regulation.

Hedge funds and their allied banks use an enormous amount of the nation's credit leveraging your financial plays to multiply your profits, crowding out of the credit markets the main street businesses that actually create jobs and wealth and local tax bases for the rest of us.
Much more insidious are the kind of "dumb money" deals revealed by the Goldman-Paulson affair - the targeting of less favored investors to take the losing end of deals deliberately designed to fail, creating a windfall for the player shorting the deal. Wall Street is currently smacking its lips over one of their favorite forms of "dumb money" - middle class retirement savings. With these unregulated deals, investors like you can effectively confiscate the lifetime retirement savings of thousands of middle class people in one fell swoop, by placing their funds in deals designed to fail for them and enrich wealthy insiders at their expense.

A neighbor recently confided how he paid into his retirement fund for over forty years through hard work and savings. Because of recent market events this retirement fund was decimated. If Wall Street gets their way many millions more middle class Americans will find themselves in this position. Union funds are fat, juicy targets and government employee pension funds are the fattest targets of all.

Whipping up hate like this means people may not notice when these funds are robbed and eviscerated by Wall Street tricks.

When it comes to protecting Middle Class America's hard-earned savings from financial shenanigans, I want the best regulators money can buy.

Federal employees are not overpaid, Mr. Einhorn.

You are.