Tag Archives: public sector unions.

Obama wants to help liberal states

Obama wants to help liberal states

It is clear now the agenda behind the recent jobs program President Obama has proposed. He wants to help liberal states with their budget problems.

One Reason Obama Wants Another State Bailout

Posted by Tad DeHaven

I recently discussed why the additional federal subsidies for state and local government that President Obama is proposing as part of his “job plan” are a bad idea. A new study from two Harvard economists suggests that the president’s affinity for these subsidies might have something to do with the fact that the aid would be particularly helpful to states with more left-leaning legislators and strong public sector unions.

The study from Daniel J. Nadler and Sounman Hong (see here) found that states with stronger public sector unions and a higher proportion of left-leaning state legislators face higher borrowing costs:

We find that, all things being equal, states with weaker unions, weaker collective bargaining rights, and fewer left-leaning state legislators pay less in borrowing costs at similar levels of debt and similar levels of unexpected budget deficits than do states with stronger unions and more left-leaning legislators. More practically, these findings suggest that the strength of public sector unions has become among the most important factors in bond market perceptions of a state’s risk of financial collapse.

Why do these states face higher borrowing costs? Nadler and Hong explain:

These “political” factors might signify to the bond market whether a state government has the willingness and capacity to initiate needed fiscal adjustments and austerity measures during the state fiscal crises that followed the financial crisis, and thus might provide some information to market participants about the likeliness that a given state government will choose to default on its debt instead of making politically difficult or undesirable budget cuts. Similarly, public sector labor environment variables, such as union strength, might signify to market participants the degree of organized political opposition state lawmakers would have to overcome to implement such austerity measures.

In a corresponding Wall Street Journal op-ed, Nadler and Paul E. Peterson, director of Harvard’s Program on Education Policy and Governance, do a nice job of explaining why the separation of responsibility between the federal government and the states has been crucial to the country’s economic rise:

Federal rescue of states is a dramatic departure from past practice. State bankruptcies date back to the 1840s when, amid a financial crisis, Pennsylvania, Michigan, Illinois and five other states discovered they had invested too heavily in infrastructure. The last state bankruptcy was in Arkansas during the 1930s. But overall the instances were few; in each case the federal government refused to come up with a fix.

Bankrupt states paid the price, but for the country as a whole, a system of fiscally sovereign states has proven incredibly beneficial to the nation’s economic well-being. Every state is responsible for its own police, fire, schools, transport and much more, and most of the time they do reasonably well. If they manage their affairs so as to attract business, commerce and talented workers, states prosper. If states make a mess of things, citizens and businesses vote with their feet, marching off to a part of the country that works better.

It is this exceptional federalist system that helped drive the rapid growth of the American economy throughout the first two centuries of the country’s history. Because state and local governments competed with one another for venture capital, entrepreneurial talent and skilled workers, governments generally had to be attentive to the needs of both citizens and commerce.

Unfortunately, the 20th century’s trend for the federal government to subsidize and manage more and more state and local affairs has worsened in the last 10 years as the chart in my blog post shows. If our bloated federal government is ever to be reined in, a return to fiscal federalism is a must. And if the states are to get their financial houses in order, state policymakers can’t be allowed to believe that a federal policy of “too big to fail” applies to them. (See this Cato essay for more on fiscal federalism.)

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Brummett: Republicans think Wisconsin “public employee unions are too fat”

John Brummett in his article, “Economic expansion comes to Wisconsin,” August 15, 2011, asserts:

So this estimated $35 million got spent by national special interest groups on these recall campaigns, these temper tantrums. This is a big chasm; generally speaking, Republicans think public employee unions are too fat while Democrats think they are noble champions of working people in a world the Republicans want to hand over to the untaxed super-rich.

This is where Brummett misses the boat. The problem is not just that the public employee unions are too fat, but that they exist at all. Take a look at this article below:

February 19, 2011

FDR’s Ghost Is Smiling on Wisconsin’s Governor

By Patrick McIlheran

 

Somewhere, Franklin Delano Roosevelt is grinning past his cigarette holder at Wisconsin’s governor. They are on the same page regarding government unions.

Except that Scott Walker — Republican cheapskate, his visage Hitlerized on signs waved by beet-faced union crowds besieging the Capitol — is kind of a liberal squish compared to FDR. He’s OK with some collective bargaining.

Walker, you might have heard, wants some changes in how Wisconsin deals with unions. He wants state employees to pay 5.8% of their salaries toward their pensions (they pay almost nothing now) and he wants them to cover 12.6% of their health care premiums (their share would go up from $79 a month to about $200; the average private-sector sap pays about $330).

Unions are enraged. They’ve been calling such increases unspeakable since Walker was elected handily in November. Then, Feb. 10, Walker went further. He’d allow public-sector unions to negotiate only pay, not benefits, mainly because he wants HSA-style health plans and 401(k)-style retirements for state workers, and unions would fight that, tooth and ragged red claw.

So unions erupted. Teachers faked illness in such numbers as to close school districts for days. Mobs beat on the doors of legislative chambers. And in some heavenly Hyde Park, the great liberal god of the 1930s is saying he saw it all along.

Roosevelt’s reign certainly was the bright dawn of modern unionism. The legal and administrative paths that led to 35% of the nation’s workforce eventually unionizing by a mid-1950s peak were laid by Roosevelt.

But only for the private sector. Roosevelt openly opposed bargaining rights for government unions.

“The process of collective bargaining, as usually understood, cannot be transplanted into the public service,” Roosevelt wrote in 1937 to the National Federation of Federal Employees. Yes, public workers may demand fair treatment, wrote Roosevelt. But, he wrote, “I want to emphasize my conviction that militant tactics have no place” in the public sector. “A strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government.”

And if you’re the kind of guy who capitalizes “government,” woe betide such obstructionists.

Roosevelt wasn’t alone. It was orthodoxy among Democrats through the ’50s that unions didn’t belong in government work. Things began changing when, in 1959, Wisconsin’s then-Gov. Gaylord Nelson signed collective bargaining into law for state workers. Other states followed, and gradually, municipal workers and teachers were unionized, too.

Even as that happened, the future was visible. Frank Zeidler, Milwaukee’s mayor in the 1950s and the last card-carrying Socialist to head a major U.S. city, supported labor. But in 1969, the progressive icon wrote that rise of unions in government work put a competing power in charge of public business next to elected officials. Government unions “can mean considerable loss of control over the budget, and hence over tax rates,” he warned.

There was “a revolutionary principle rather quietly at work in American government,” he wrote.

The principle was working at about 100 decibels in Wisconsin’s Capitol last week, once the union drum-beaters got going. What worked them up was the money they’d concede, they said, but even more that Walker would make their unions surrender the control they’d gained over every government budget.

Walker, like other Republicans, was long accused of hating government. For eight years as chief executive of heavily Democrat Milwaukee County, he would not raise taxes, which opponents said showed his contempt for government.

Yet all this past week, he praised public employees and he said the work government does is so necessary, taxpayers should get as much of it for their money as possible. Meanwhile, thousands of schoolteachers on the Capitol lawn manifested their intent to obstruct Government and their belief that the tots back at Roosevelt Elementary could darn well spend a day or three watching Nickelodeon at home.

And, to beat all, the president who now professes to be the new Reagan weighed in to say Walker was being unduly mean to unions. President Obama gave no audible word on whether unions were being unduly mean in shutting down schools.

Walker, good Republican, is no FDR but he is offering Wisconsin a new deal, lower-case. Wisconsin’s been a seedbed of bad ideas since it hatched Progressivism, and for years it’s stuck with unionized government even as the price swelled. Walker’s radical shift is to try securing necessary government at a better price. The unions, whose model depends on making government labor as costly as taxpayers will bear, object.

May they be haunted by the ghost of the 32nd president, and his little dog, too.

Patrick McIlheran is a Milwaukee Journal Sentinel editorial columnist who blogs at jsonline.com/blogs/mcilheran. E-mail pmcilheran@journalsentinel.com