Wisconsin

I love Wisconsin.  My favorite area is what is known as the Driftless Area, a strip about 30-50 miles wide running from Eau Claire down into Illinois that is free of the drumlins and moraines and erratic detritus of the glaciers that covered the northern states in the last glacial period which ended some 20,000 years ago.  It is hilly beautiful country bounded on the West by the Mississippi river and on the east by sandy glaciated plains.  I would probably move there if the income taxes were not in the range of 7%.

Most of those protesting in Madison, the state capital, probably are blissfully unaware of the geological history of their state in which an island arc glommed on to the northern part of the state a couple of billion years ago in the Penokean Orogeny, throwing up some mountains which have since eroded.  They probably also do not realize that there is a continental rift that failed to split North America a little over a billion years ago if memory serves, just like the rift creating a new sea in the Afar region of Africa, which is spreading Saudi Arabia off from Africa, among other things.

I have been watching the story of the public unions protesting against austerity measures imposed by the Republican Governor and Legislature.  I have not heard any of the commentators accurately characterize the union position.  So let me see if I get this straight.  It seems to me the Union position is this:

“We, who make at least 40% more in wages and benefits than people in the private economy, will not accept any reduction in pay or benefits in the form of increased contributions out of our pockets to our pensions or benefits.  We have been promised these wages and benefits by former Demunist politicians in exchange for our campaign money to get them elected and our votes.  We will not give them up.  If the state lacks the revenue to honor these obligations, then it can raise taxes and fees on all those ingrates who make 40% less than we do to pay for our secure retirement.”

Hmmm.  If only conservatives, including the governor could make this characterization in print, on the airwaves and online, I am sure that public opinion would swing against these people.  Never mind that unionization for public employees makes no sense as ultimately the same people are sitting on both sides of the table, with no one having a real interest in representing the interests of the electorate.  There is a reason that roughly half of states have prohibited unionization for public employees.  It is a bad idea.  Yet the left gets out there  making a case how these events are a victimization of the unions.  Walker and others need to better state the case in order to crush the public unions under the weight of public opinion.  The best way to do this is to publicize exactly what it is these unions are really saying.  It could be better said than the stab at it I have taken above, but until the public realizes what an outrage it is that everyone from the “President” of the United States on down are trying to perpetrate in Wisconsin and elsewhere, the problem will continue to threaten everyone with a crushing tax burden which will make the entire country poorer and less secure.

3 Responses to “Wisconsin”

  1. Bob Heeter Says:

    Just keep in mind that the vast majority (80 percent plus) of public-sector workers in Wisconsin (and elsewhere) do NOT belong to unions. It’s convenient to bash the unions… and public sector workers should NOT be unionized… but the issue is broader and deeper than that.

    I think the real problem is not so much that the states are paying their workers too much. Rather, it’s that they haven’t made the “want vs. need” decisions to pay the right workers to do the right things, and eliminate the less-vital departments.

    For instance, supposedly in California it costs $45K/year to put someone in prison. And yet we routinely jail people whose crimes are quite minor compared to the cost of the incarceration. And the jails are frequently “criminal schools” with high recidivism. This is piss-poor public policy.

    Taking another angle — the state budget deficits are small compared to the Federal problem. Fixing the $2,000,000,000,000 federal deficit is the real economic problem facing the country. We could fire every civilian federal worker and contractor, and we would still have a budget deficit — because the deficit is driven by the runaway military, the entitlement spending, and the horrible tax code. We need to make want-vs-need decisions in the “discretionary” part of the Federal budget too, but you can’t get $2,000,000,000,000 there.

    The other obvious issue is that corporate profits as a share of national GDP are at record highs, while wages and proprietors income are at historic lows, and concurrently, fraud and financial injustice are destroying faith in the capitalist system. Historically this has not been good for the economy or for political stability. It’s quite likely that those benefiting from the record profits are pushing hard on the media to keep the malcontents from following the money…

    I’d like to see the source of your comparison claiming that public sector workers are “paid 40% more in wages and benefits” … usually these stats are horribly disingenuous because the median public sector worker has a higher level of education and a more valuable skillset than the typical private-sector worker. (There are plenty of fluff workers to be culled, but that’s a matter of setting priorities and firing people, not reducing the salaries of everyone.) Anyway, I’m quite confident that the public sector doesn’t pay that much more, because if it did, it would attract much higher quality workers!! Where I am, the brain drain routinely runs the other way, with the exception of the teachers and prison guards (unions).

  2. t0mmyBerg Says:

    Well said as usual Bob. I also have grave concerns about the issue you have raised about widening gap between the haves and have-nots, and the related issue of big corporations doing better than small business, because they are the ones with people in Washington (which makes the case for less involvement of Washington; see my post on the need for a constitutional amendment regarding the separation of business and state). I have not yet written anything about these issues, or about 50 other things on my mind. Writings here are sort of hit or miss as I do not have a lot of free time. I am not sure how that problem gets solved in a way more creative than just more progressive taxation. Highly progressive taxation of course, as I am sure you are aware as a resident of a state that has elevated it to an art form, looks great on paper but leaves the taxing authority in a bind during downturns when the rich are not making as much as they used to. Also you have the problem that, outside of social security and medicare taxes, there is a really large percentage of people who do not pay any income tax. I believe that nearly everyone should pay something, even if a nominal amount, just to indicate they are part of the program.

    As for the 40% statistic, I read it most likely in a Wall Street Journal editorial, and I grant it may be overstated or have some hidden and unjustified assumptions, but I threw it in for shock value. I should shock you more often as I enjoy your comments.

  3. t0mmyBerg Says:

    Bob, here is a good summary of the arguments against the public unions in Wisconsin found at http://whiskeyandgunpowder.com/ :

    “The main reason so many state and local governments are bankrupt, or on the verge of bankruptcy, is the combination of government-run monopolies and government-employee unions. Government-employee unions have vastly more power than do private-sector unions because the entities they work for are typically monopolies.

    When the employees of a grocery store, for example, go on strike and shut down the store, consumers can simply shop elsewhere, and the grocery-store management is perfectly free to hire replacement workers. In contrast, when a city teachers’ or garbage-truck drivers’ union goes on strike, there is no school and no garbage collection as long as the strike goes on. In addition, teachers’ tenure (typically after two or three years in government schools) and civil service regulations make it extremely costly if not virtually impossible to hire replacement workers.

    Thus, when government bureaucrats go on strike they have the ability to completely shut down the entire “industry” they “work” in indefinitely. The taxpayers will complain bitterly about the absence of schools and garbage collection, forcing the mayor, governor, or city councilors to quickly cave in to the union’s demands to avoid risking the loss of their own jobs due to voter dissatisfaction. This process is the primary reason why, in general, the expenses of state and local governments have skyrocketed year in and year out, while the “production” of government employees declines.

    For decades, researchers have noted that the more money that is spent per pupil in the government schools, the worse is the performance of the students. Similar outcomes are prevalent in all other areas of government “service.” As Milton Friedman once wrote, government bureaucracies — especially unionized ones — are like economic black holes where increased “inputs” lead to declining “outputs.” The more that is spent on government schools, the less educated are the students. The more that is spent on welfare, the more poverty there is, and so on. This of course is the exact opposite of normal economic life in the private sector, where increased inputs lead to more products and services, not fewer.

    Thirty years ago, the economist Sharon Smith was publishing research showing that government employees were paid as much as 40 percent more than comparable private-sector employees. If anything, that wage premium has likely increased.

    The enormous power of government-employee unions effectively transfers the power to tax from voters to the unions. Because government-employee unions can so easily force elected officials to raise taxes to meet their “demands,” it is they, not the voters, who control the rate of taxation within a political jurisdiction. They are the beneficiaries of a particular form of taxation without representation (not that taxation with representation is much better). This is why some states have laws prohibiting strikes by government-employee unions. (The unions often strike anyway.)

    Politicians are caught in a political bind by government-employee unions: if they cave in to their wage demands and raise taxes to finance them, then they increase the chances of being kicked out of office themselves in the next election. The “solution” to this dilemma has been to offer government-employee unions moderate wage increases but spectacular pension promises. This allows politicians to pander to the unions but defer the costs to the future, long after the panderers are retired from politics.

    As taxpayers in California, Wisconsin, Indiana, and many other states are realizing, the future has arrived. The Wall Street Journal reports that state and local governments in the United States currently have $3.5 trillion in unfunded pension liabilities. They must either raise taxes dramatically to fund these liabilities, as some have already done, or drastically cut back or eliminate government-employee pensions.

    Government-employee unions are primarily interested in maximizing the profits of the union. Consequently, they use civil-service regulations as a tool to protect the job of every last government bureaucrat, no matter how incompetent or irresponsible he or she is. Fewer employed bureaucrats means fewer union dues are being paid. Thus, it is almost guaranteed that government-employee unions will challenge in court the attempted dismissal of all bureaucrats save the occasional ones who are accused of actual criminal behavior. This means that firing an incompetent government school teacher, for example, can take months, or years, of legal wrangling.

    Politicians discovered long ago that the most convenient response to this dilemma is to actually reward the incompetent bureaucrat with an administrative job that he or she will gladly accept, along with its higher pay and perks. That solves the problem of parents who complain that their children’s math teacher cannot do math, while eliminating the possibility of a lawsuit by the union. This is why government-school administrative offices are bloated bureaucratic monstrosities filled with teachers who can’t teach and are given the responsibilities of “administering” the entire school system instead. No private-sector school could survive with such a perverse policy.

    Government-employee unions are also champions of “featherbedding” — the union practice of forcing employers to hire more than the number of people necessary to do the job. If this occurs in the private sector, the higher wage costs will make the firm less competitive and less profitable. It may even go bankrupt, as the heavily unionized American steel, automobile, and textile industries learned decades ago.

    No such thing happens in government, where there are no profit-and-loss statements, in an accounting sense, and most agencies are monopolies anyway. Featherbedding in the government sector is viewed as a benefit to both politicians and unions — but certainly not to taxpayers. The unions collect more union dues with more government employees, while the politicians get to hand out more patronage jobs. Each patronage job is usually worth two or more votes, since the government employee can always be counted on to get at least one family member or close friend to vote for the politician who gave him the job. This is why, in the vast literature showing the superior efficiency of private versus government enterprises, government almost always has higher labor costs for the same functions.

    Every government-employee union is a political machine that lobbies relentlessly for higher taxes, increased government spending, more featherbedding, and more pension promises — while demonizing hesitant taxpayers as uncaring enemies of children, the elderly, and the poor (who are purportedly “served” by the government bureaucrats the unions represent).

    It is the old socialist trick that Frédéric Bastiat wrote about in his famous essay, The Law: The unions view advocates of school privatization, not as legitimate critics of a failed system, but as haters of children. And the unions treat critics of the welfare state, not as persons concerned with the destruction of the work ethic and of the family that has been caused by the welfare state, but as enemies of the poor.

    This charade is over. American taxpayers finally seem to be aware that they are the servants, not the masters, of government at all levels. Government-employee unions have played a key role in causing bankruptcy in most American states, and their pleas for more bailouts financed by endless tax increases are finally ringing hollow.

    Regards,
    Thomas DiLorenzo

    Thomas DiLorenzo is professor of economics at Loyola University Maryland and a member of the senior faculty of the Mises Institute.