Advancing a Free Society

The showdown between public unions and cash

Monday, February 21, 2011

The showdown between public employee unions and cash-strapped state governments on display in Madison should be bad news for President Obama and the Democrats. While millions of Americans are unemployed, and those lucky enough to have jobs pay for their retirement and benefits, what they see on their televisions are for the most part Wisconsin school teachers––nine-month employees who pay a pittance for their health care and nothing for their retirement, all the while they earn on average around 100K a year in salary and benefits–– carrying hateful signs, ditching school, shanghaiing students to swell the crowd, faking doctor’s notes, and trying to undo a recent election by physically occupying the state house while their Democratic legislators skedaddle like deadbeats avoiding a process server. Whatever legitimate complaints the protestors might think they have are being lost in these provocative images going out to the rest of the country.

And what many Americans are going to make of this spectacle bodes ill for the Democrats. The resort to bullying tactics in response to the recent Republican takeover of the governorship and the legislature confirms the notion that Democrats and progressives love democratic “hope and change” only when they win.  Otherwise, majority be damned. They seem to forget what President Obama said about elections and consequences. Then there’s the hypocrisy of those who squeal “hate speech” whenever anyone lays a metaphor on one of their own, and now are parading with hyperbolic placards calling the governor Hitler or, even more objectionably, equating their free, prosperous selves with the Egyptian protestors in Tahrir Square.

And let’s not forget Obama’s signature tin-eared politics, calling the governor’s attempt to rein in spending an “assault on unions,” and then unleashing his old campaign outfit, Organizing for America, to help orchestrate the protests. The President seemingly has forgotten that he runs the federal government, not the states, and his intrusion confirms the suspicion that he favors further expanding the reach of the feds into the states’ business in order to reward the unions that helped get him elected, and to achieve his statist dreams of income redistribution, “social justice,” or whatever utopian nostrum is used to camouflage a naked power-grab.

Worse than all this is the utter indifference to economic realities any village explainer understands. Many liberals talk as if money is something the government creates and lets rich people keep too much of. Of course, people create wealth–­–the government just confiscates it. Thus the liberal solution to economic straits is to “tax the rich,” as a sign in Madison has it. But we already tax the “rich”: the top 5% of tax filers in 2008 paid 58.7% of all federal income taxes, more than the bottom 95% combined. The bottom 50% paid 2.7%. As many have pointed out, our problem isn’t that we tax too little but that we spend too much. Increasing government spending, as Obama has done over the past two years on pork and entitlements, at the same time he has piled more impediments and disincentives on the entrepreneurs and businesses that create the wealth in the first place, is a recipe for the sorts of fiscal problems troubling the economies of several countries in the E.U.

One doesn’t need a degree in economics to understand this dynamic of capitalist wealth creation, the best economic system mankind has found for expanding and distributing wealth. But many liberals still don’t get it. In fact, their economic thinking reminds me of that episode of The Simpsons in which Homer discovers he can earn money from recycling grease, and so starts frying up bacon to create more grease:

Clerk: Four pounds of grease. That comes to... sixty-three cents.

Homer: Woo-hoo!

Bart: Dad, all that bacon cost twenty-seven dollars.

Homer: Yeah, but your mom paid for that.

Bart: But doesn't she get her money from you?

Homer: And I get my money from grease. What's the problem?

This sort of economic magical thinking has characterized the unholy alliance of public employee unions and state legislators, including at times Republicans. State functionaries can lavish generous benefits on state workers because it isn’t their money, and because in the short-term there are no market forces to punish their improvidence with financial ruin. So why not buy political supporters and donors? Just keep on fleecing the taxpayers to pay for the binge. It’s moral hazard on steroids, and eventually must end where all Ponzi schemes end.

That’s why the argument of the protestors in Madison that they’re willing to pay more for their bennies, and are fighting only to keep their collective bargaining rights, rings hollow. The problem is long-term: as recent history shows, in flush years state politicians can undo temporary sacrifices made today and start filling the trough once again with the generous contracts produced by collective bargaining negotiations in which the taxpayer who foots the bill has no say. And unless we remember the sorry show in Madison come November 2012, we’ll be right back where we are now, watching the state pension and health-care liabilities pig grow fatter and fatter until it devours the whole budget.