Monday, March 12, 2012

What Public Employee Unions are Doing to Our Country

William McGurn's speech to the 2012 Hillsdale College National Leadership Seminar is published in the March issue of Imprimis, Hillsdale's monthly contribution to public discourse.  If you don't receive it yet, it's worth reading, and you can subscribe for free by following the links at the appended issue.

McGurn's topic is public employees unions, specifically those at the state and local level.  His thesis is that "public sector unions have successfully redefined key relationships in our economic and civic life."

[T]he elected politicians who represent us at the negotiating table are not in fact management... our taxing and spending decisions at the city and state level are in practice decided by our public sector contracts, and ... when you put this all together, what emerges is a completely different picture of the modern civil servant. In short, we work for him, not the other way around.
McGurn illustrates the problem of politicians and union leaders being in bed with one another with the indelicate example of former New Jersey Governor, MF Global executive chairman and Democratic Party luminary, Jon Corzine.  The Governor actually was in bed with the New Jersey leader of the Communication Workers of America (CWA), Carla Katz, who pressed him in emails--and God knows where else--during sensitive negotiations over a contested contract with the union.

The dalliance only made ludicrous a widespread and grave phenomenon:
The public employees [that elected leaders] are supposed to manage in effect manage them. The unions provide politicians with campaign funds and volunteers and votes, and the politicians pay for what the unions demand in return with public money. 
In New Jersey as elsewhere, most leaders of public sector unions are not sleeping with the politicians who set their salary and benefits. They are, however, doing all they can to install and keep in office those they wish—while fighting hard against the ones they oppose. And until we recognize the real master in this relationship, we will never reform the system.
McGurn's second point is that contracts and spending, once negotiated with subservient politicians, set the policy agenda.  The tail wags the dog; the people no longer have anything to do with it, except pay.
You and I make spending decisions the way all households do. We take our income, and we live within our means. In sharp contrast, public employee unions have introduced a whole new dynamic: They negotiate pay and benefits in contracts we can’t rewrite. When the revenues to meet these obligations fall short, they push to raise taxes to make up the difference.
His final point follows from the first two: in reality, the public works for the public sector unions rather than the other way around.

Citing a Wall Street Journal interview with Fred Siegel, former editor of the left-leaning magazine, Dissent, McGurn notes the political dynamic that has brought this about.
[Public sector unions have "'become a vanguard movement within liberalism. And the reason for that is it’s the public sector that comes closest to the statist ideals of McGovern and post-McGovern liberals. And that is, there’s no connection between effort and reward. You’re guaranteed your job. You’re guaranteed your salary increase. There’s a kind of bureaucratic equality.' 
'This vanguard ... becomes in the eyes of many liberals the model for the middle class. Public-sector unions are what all workers should be like. Their benefits are the kind of benefits everyone should get.” So instead of the private sector defining the public, the public sector is thought to define the private.
Today, public sector union members outnumber their private sector counterparts for the first time in American history.  From the 1950's until now--a period of steadily rising prosperity, productivity and living standards--private sector employees in unions have dropped from one in three workers to one in fourteen: 33% to 7%.

McGurn ends hopefully--for taxpayers and those who realize that current arrangements are unsustainable as well as unjust--if grimly.
One of the few silver linings of our tough economy today is that it is forcing tough decisions. Big city mayors and governors are having issues with their public employees, because we’ve reached a point where we simply cannot afford business as usual. With a sluggish economy—and fewer taxpayers—the problems that have piled up are becoming too difficult to ignore.
President Obama and the Democratic Congress came to the rescue with 2009's stimulus gusher, which gave the status quo a lease on life by piling debt onto citizens (and threatening them with tax increases) in well-run red states for the privilege of being in union with corrupt blue states.  Laboratories of democracy, indeed.

Thanks to the voters rescuing the House from Nancy Pelosi in 2010, the President's 2011 American Jobs Act, which would have larded the trough with another half trillion dollars, was DOA.  That didn't stop the President from trying, and won't in the future.

The following chart of State and local government spending between 2000 and 2010 evidences a near doubling over the decade, despite 2008's ruinous financial crisis that crushed workers in the private sector who nevertheless had to assume the debt burden of the public sector bailout.

Why is it exactly that public service employees are exempt from economic shocks that private service employees who live in the real world are exposed to?  It's worse: they're exempt from the dislocations their economic security arrangements impose on private service employees via taxes and debt.   

Today's WSJ ran an apposite op-ed regarding California's Greecification by Stanford professors Michael Boskin and John Cogan.
Partly due to generous union wages and benefits, inflexible work rules and lobbying for more spending, many state programs and institutions spend too much and achieve too little. For example, annual spending on each California prison inmate is equal to an entire middle-income family's after-tax income. Many of California's K-12 public schools rank poorly on standardized tests. The unfunded pension and retiree health-care liabilities of workers in the state-run Calpers system, which includes teachers and university personnel, totals around $250 billion.
None of this addresses the influence of public sector unions at the federal level.  McGurn notes:
Plainly it is an issue when the teachers unions represent one of the largest blocs of delegates at Democratic conventions, when the largest single campaign contributor in the 2010 elections was the American Federation of State, County and Municipal Employees, when union money at the federal level goes at an overwhelming rate to Democratic candidates, and when the Congressional Budget Office tells us that federal employees earn more than their counterparts in the private sector. 
Nonetheless, I believe that the greater challenge today—to state and city finances, to democratic representation, to the middle class—is at the state and local level. This is partly because state and city unions have the power to negotiate wages and benefits that their counterparts at the federal level largely do not. More fundamentally, it is because we cannot reform at the federal level without correcting a problem that is bringing our cities and states to bankruptcy.
Public sector unions are a deeply troubling problem, perhaps the critical problem facing the nation this election season.  Beyond driving incessant and relentless tax grabs, they escalate our perilous federal debt, and perpetuate an entitlement mentality in government.

Last fall's credit downgrade was apparently insufficient to drive home the point.  The next one will hurt more, as will any rise in short or long term rates.

Unions haven't been discussed much during the Republican debates mainly because questions about their influence aren't asked by the Democratic journalists moderating them.  I hope but don't expect the deficiency to be supplied in debates between President Obama and the eventual Republican nominee.

Regardless, the public should be acutely aware of this ticking time bomb and corruption of democratic politics.  The problem will be fixed in accordance with economic reality, or the nation will collapse in the attempt to make economic reality accord with utopian visions of a highly remunerated workforce guaranteed prosperity by the stroke of a politician's pen.

Whatever security and entitlement such visions promise are illusory.  At the end of the day, nobody is secure if the bills can't be paid, or if they can but at such a high cost that the economy and middle class's nest-egg are crushed beneath their weight.

It is amazing to consider that both FDR and labor titan Samuel Gompers knew that private sector unions and public sector unions were fundamentally incompatible, but that modern day politicians, labor bosses and large segments of the population don't.  Today's travesty will end when the taxpaying voters, fair-minded recipients of government largesse and lovers of fair play put an end to it at the ballot box at all levels of governemnt.

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