Bashing Bailouts and Inflexible Unions

No CAP bedwetter to debate in this segment.

Labor Day, Unions, and the Role of Government

In a free society, people obviously should be free to join unions and companies should be free to negotiate with unions. But that also means that companies should be free to resist union demands and hire non-union workers. There is no right or wrong in these battles, just as there is no right or wrong when McDonald's decides to sell french fries for a particular price. The market will reward good decisions and penalize bad choices. The only appropriate role for policy in this area is to enforce contracts and protect public safety. The government should not attempt to tip the scales either in favor of unions or in favor of employers. Our friends on the left, however, want the rules rigged in favor of unions, in part because of a reflexive desire for coerced equality. E.J. Dionne waxes nostalgic in the Washington Post for the good ol' days, when unions held significant power in the American economy.

Only 12.3 percent of American wage and salary workers belong to unions, according to the Bureau of Labor Statistics, down from a peak of about one-third of the work force in 1955. A movement historically associated with the brawny workers in auto, steel, rubber, construction, rail and the ports now represents more employees in the public sector (7.9 million) than in the private sector (7.4 million). Even worse than the falling membership numbers is the extent to which the ethos animating organized labor is increasingly foreign to American culture. The union movement has always been attached to a set of values -- solidarity being the most important, the sense that each should look out for the interests of all. This promoted other commitments: to mutual assistance, to a rough-and-ready sense of equality, to a disdain for elitism, to a belief that democracy and individual rights did not stop at the plant gate or the office reception room. You might accuse me of being a union romantic, and in some ways I am, having grown up in a union town, loved the great union songs, and imbibed such novels about labor's struggles as John Steinbeck's fine and underrated "In Dubious Battle."

There would be nothing wrong with Dionne's love letter to big labor - but only if he also agreed that the government should not take sides. Unfortunately (and predictably), that's not the case. Like other statists, he wants a thumb on the scales to help unions. He thinks he is being pro-worker, but his mistake is failing to understand that above-market wages (at least in the private sector) are not sustainable in the long run. Workers ultimately get paid on the basis of what they produce and if it costs $25 per hour to employ a worker and that worker produces $23 per hour of output, that ultimately is a recipe for unemployment. A good example is the American auto industry, which has declined in part because of a compensation system that is not matched by productivity. This does not necessarily mean that wages are too high. It could mean that productivity is too low. Some of that, to be sure, is the fault of government policies such as a corporate tax system that penalizes investment (thus making it more difficult for workers to boost productivity). But unions also have used their government-granted power to insist on absurd workforce practices. The picture below, taken from Mark Perry's excellent blog, compares union contracts in 1941 and 2007. With all the bureaucracy that is buried in those pages, is it a surprise that American auto workers don't produce as many cars per hours as their main foreign competitors?

Hurricane Katrina's Huge Silver Lining

This video from Reason TV about school choice in New Orleans is a perfect example of something good resulting from a bad event. Lemonade out of lemons!

Can Governor Christie Save New Jersey?

My default assumption is that all politicians will do the wrong thing when they have to choose between defending freedom and appeasing special interests. Even the ones that spout good rhetoric often do the wrong thing, particularly after a couple of years in office (sort of like being assimilated by the Borg, for you Star Trek fans). So I did not hold out much hope that Chris Christie would have any positive impact on New Jersey. I'm glad to report that (at least so far) I was wrong. Here's a excerpt from a National Review article about what he's accomplished. The excerpt is long, but the details are important. And since I obviously had to summarize, you should read the entire article to more fully appreciate how Christie seems to be the real deal.

...on February 11, Christie addressed a special joint session of the state legislature, replacing the vague promises of the campaign trail with first principles, and elaborating the constraints under which he was determined to govern: "Our constitution requires a balanced budget. Our commitment requires us to begin the next fiscal year with a prudent opening balance. Our conscience and common sense require us to fix the problem in a way that does not raise taxes on the most overtaxed citizens in America. Our love for our children requires that we do not shove today's problems under the rug only to be discovered again tomorrow. Our sense of decency must require that we stop using tricks that will make next year’s budget problem even worse." And in an extraordinary move, he then declared a fiscal state of emergency, announcing that by executive order he would impound $2.2 billion in appropriations from a fiscal year that was already seven months gone. That figure represented virtually every dollar the state was not legally obligated to pay out for the remainder of the year. In Bagger’s words, it was “everything that wasn’t nailed down.” “By doing that so quickly and so dramatically, and by executive action, it really set the stage,” Bagger says. “It was just a very clear declaration that there’s a new reality.” There was much wailing and teeth-gnashing about the cuts among Democrats. Sweeney accused Christie of “pick[ing] someone else’s pocket,” and senate majority leader Barbara Buono went so far as to say the executive order had “declare[d] martial law” in New Jersey. This raised the stakes significantly for the FY 2011 budget battle, which was then only beginning. In the year to come, the state would face an $11 billion deficit that made the previous shortfall look like a gratuity. It was a big hole, and Christie needed Democratic votes to close it. But he had no intention of mollycoddling the other side. On March 16, the governor went back before a joint session of the legislature and introduced a $29.3 billion budget that doubled down on his most controversial measures, trimming fat — and muscle, and sinew — from virtually every department and every entitlement in the state. The budget did small things, like reducing overtime hours, shrinking the state’s fleet of official vehicles, replacing paper with digital filing, and consolidating government office space. It cut the pay and pension eligibility for members of a number of state boards and commissions, many of whose duties required them to do little more than attend once-monthly meetings. It saved $216 million by eliminating a number of wasteful programs, and another $50 million by privatizing others. But the budget did big things as well. It shrank the state’s major spending programs — including many that were, the governor admitted, not without merit — by reducing base appropriations and either scaling back or eliminating scheduled funding increases. It converted the state’s property-tax rebate system — long funded by borrowing, at interest, to cut checks to homeowners — with tax credits. It cut $466 million in local aid, against Trenton’s trend of corralling more and more municipal tax dollars for the purposes of redistribution, while pushing a constitutional amendment that would limit towns’ ability to raise property taxes in the future. And like Corzine before him, Christie deferred payments to the state’s pension program to secure $3.1 billion in savings, under the justification that it was imprudent to sink more money into a failing system. But unlike Corzine, Christie pushed through tough pension reforms that rolled back overgenerous payment increases, limited payouts for unused sick leave, and enrolled new workers into 401(k)s. He’d also signed a law requiring public employees to pay at least 1.5 percent of their salaries toward their health benefits, which would save the state and local governments hundreds of millions each year. But what caused the first and most strident wave of opposition to Christie’s agenda was his decision to slash funding for public education, by some $820 million. ...A near-pristine version of Christie’s budget passed at 1:13 a.m. on June 29, less than 24 hours before the constitutional deadline. ...But as significant as his early victories have been, Christie must now turn to pushing the structural reforms that will institutionalize his vision of leaner, meaner state government. ...Even as he was fighting the budget battle, the governor was barnstorming the state to talk up perhaps the most significant of these reforms: his “Cap 2.5” initiative, which would constitutionally limit the ability of municipalities to raise property taxes. The cap is popular among residents, most of whom pay the preponderance of their non-federal tax liability in property taxes. ...But Christie’s amendment is at the mercy of the Democratic legislature, whose assent is required for a popular referendum on it. ...Christie has vowed not to give up the fight. Other battles loom wherein the governor’s chances for success are highly uncertain. He has promised yet more pension and compensation reforms, moves that could break his tenuous alliance with the reformist elements in the Democratic party and push his openly hostile relationship with labor beyond Thunderdome. ...Senator Kean, who hopes to move from minority to majority leader, has confidence that Christie will continue to stick to his guns. “The governor has an internally strong constitution — that’s who Chris is — and he has an externally strong constitution in the constitution of the State of New Jersey,” Kean says. “I think he is absolutely the genuine article. That’s why we won’t ever go back to the status quo, at least not under Chris Christie’s governorship.”

Taxpayers vs. Bureaucrats, the Video Version

Regular readers of this blog know about our "Taxpayers vs. Bureaucrats" series. Well, now we have the video version.



There are three things in the video that deserve special emphasis. First, bureaucrats are vastly overpaid. The government data cited in the video show that total compensation for the federal civil service is twice as high, on average, as it is for workers in the productive sector of the economy. There are some bureaucrats who deserve above-average pay, such as scientists dealing with nuclear weapons, but it is outrageous that the average drone in the federal bureaucracy is getting twice as much compensation as the taxpayers (serfs) who pay their salaries.

Second, this mini-documentary debunks the silly argument (put forth by government employee unions, of course) that bureaucrats are underpaid compared to the private sector. The Department of Labor has data looking at voluntary departure rates by profession. If government workers were being underpaid, you would expect them to be more likely to leave their jobs in order to take new positions in the (supposedly higher paid) private sector. Instead, the video reveals that people in the private sector are six times more likely to switch jobs than federal bureaucrats.

Third, the video concludes with the essential point that most federal bureaucrats should be paid nothing because they work for departments and agencies that should not exist.

School Choice Issue exposes Gap Between Honest Leftists and Politicial Hacks

There are a handful of issues that expose hypocrites on both sides of the philosophical spectrum. Republicans and conservatives love to talk about free markets, for instance, but you often find them voting for completely sleazy and corrupt forms of corporate welfare such as the ethanol subsidy for big agri-business. For Democrats and leftists, a powerful example is education. They claim to want to help the poor, especially minorities, yet all too often they cast aside those people and instead side with the teacher unions by opposing school choice. So kudos to the Philadelphia branch of the ADL, as well as a local Democratic politician, for doing the right thing and putting kids before special interests. Jeff Jacoby explains in his Boston Globe column:

Three months ago, the executive committee of ADL’s Philadelphia chapter voted overwhelmingly in favor of a resolution endorsing vouchers. Now it is urging the entire organization to follow suit."We believe school choice to be an urgent civil rights issue,’’ the committee argued in a brief being circulated among ADL’s 30 regional offices. Despite decades of increased spending on K-12 education, "the evidence that our public education system is failing to educate our children is staggering.’’ ADL should reverse its longtime position "as a moral imperative,’’ the Philadelphia leadership urges, and "issue a resolution in favor of school choice.’’As it happens, the ADL regional board isn’t the only liberal voice in Philadelphia calling for expanded school choice. State Senator Anthony Williams, a black Democrat and a candidate in Pennsylvania’s gubernatorial primary this week, is the founder of a charter school, a champion of vouchers, and an ardent believer in the power of competition to improve the quality of education. His position puts him sharply at odds with the state’s largest teachers’ union, which opposes choice and has endorsed his main opponent. But Williams — like the local ADL leadership — sees school choice as the great civil rights battle of the day."Anybody who was for Brown v. Board of Education — it baffles me that they would be against vouchers,’’ he told me last week.

Why Do I Hate Republicans? Let Me Count the Ways

Apologies to Elizabeth Barrett Browning, but I had to paraphrase her famous line after reading this Bill McGurn column in the Wall Street Journal about how Republican political hacks in the Illinois state legislature voted to kill a voucher bill that would have rescued inner-city children trapped in terrible government monopoly schools. If you don't hate government and despise politicians after reading this excerpt, there is something deeply wrong with your soul:

Illinois has given us a new breed of Republican: Roger Eddy. Mr. Eddy is what they call a downstater, an assemblyman who serves an east-central Illinois district hugging the Indiana border. His day job turns out to be in government as well, as a public schools superintendent. Last week Mr. Eddy became the face of the Republican failure to get a voucher bill through the Illinois assembly. The bill had passed the Senate. Yet despite being pushed by a remarkable coalition involving fellow Republicans, a free-market state think tank, and a prominent African-American leader, only 25 Republicans in the House voted yes. That was 12 votes short. Mr. Eddy was one of 23 Republicans who killed it by voting no. ...the GOP failure is striking. Republicans typically complain about not getting black support for reforms that would benefit primarily black families. In this case, however, they had that support, in the form of the Rev. James Meeks, a African-American state senator leader whom Barack Obama has called a spiritual adviser. ...According to the Illinois State Board of Elections, since 2002 Mr. Eddy has accepted more than $76,000 in campaign contributions from the Illinois Education Association, the Illinois Federation of Teachers, and the Chicago Teachers Union. ... Less than a month ago, the same teachers unions that have given so generously to Mr. Eddy made up a large chunk of the 15,000 protestors who converged on the state capital shouting "Raise Our Taxes" as the solution to the state's $13 billion budget gap. ..The pity is there were 25 Republicans who did come through. The Republican house leader did what he could. One Republican legislator, a former public school teacher, was in tears on the House floor, begging for this bill. All these people went out on a limb with Mr. Meeks—and Republicans like Mr. Eddy sawed that limb off.

Some More Political Humor

On a more serious level, this isn't funny, but definitely a well-done cartoon. When I do a post on the article that accompanied this cartoon, there definitely won't be anything to laugh about.

The Real Cost of the Government School Monopoly

Here's a great video, put together by my Cato colleagues, exposing the real cost of government-run school systems.