Large budget deficits in both state and local governments across the country are on the rise. When the economy is good and tax revenues increase so does government spending. This all comes to a stop when the economy is bad and tax revenues plummet. This forces state and local governments to either raise taxes or make serious cuts in services.
How will deficits impact teachers, police, fire and other public sector employees? For some it will probably mean a wage freeze and an end to overtime hours. The fact is many states and local governments are going to have to lay people off. Politicians will begin to ask that public sector employees start contributing more to medical and pension benefit packages to avoid layoffs.
Governor Chris Christie has already demanded pay freezes and is pushing for more pension and health benefit contributions by public employees. Public employees in New Jersey contribute 1.5% of their pay to benefits and pension. Most teachers in that state contribute zero to their health plans. That is a great deal for hard working public employees, but it looks like it is going to have to change.
Other states will have to raise taxes or will have to follow Governor Christie’s lead and start freezing public sector pay and demanding more benefits and pension contributions. The other choice is to raise taxes on everyone.
The problem is that most private sector employees don’t have benefits and retirement plans that compare to those enjoyed by public employees. It will be a bitter pill to swallow for private employees to suffer a tax increase to support public sector benefits.
New Jersey is not the only state with a problem. California has a budget deficit that is even larger. The reality is that state treasuries are empty and cuts have to and will be made. We will all have to do with less government services. Those in government service may find that their jobs are no longer guaranteed.
Today’s reality is that everyone should consider alternative ways to supplement their income and save for retirement. America is still the greatest place on earth to live.
There are plenty of examples of people who start home business to make extra money. Go to Ebay.com and there are plenty of people who have set up small on-line shops. There are hundred of different Network Marketing Companies from Amway to the Numis Network selling everything from soap to collectible coins. There are literally thousands of people making extra money using network marketing. There are plenty of opportunities for people who look.