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Monday, February 21, 2011

The Return of the Taxpayer

For reasons, both good and bad, I have chosen to go for the trilogy.  I will write one more lengthy post concerning the public unions.  There are great challenges to the third segment in a trilogy.  Often the source material has been nearly exhausted and with the loss of beloved characters in the second act, bitter feelings remain.  Additionally, as the story arc leads to its ultimate climax, all story threads must be woven together to create something larger than their individual parts.  “The visual fabric [must be] maintained while the metaphor plays on different levels.”*  Not only must there be a conclusion, but one must feel that the journey has been worth the effort.
* Bonus points if you recognize the quote

As we learned from Randy in Scream 3, a true trilogy is all about going back to the beginning and learning something that wasn’t true at the get-go.  Also, there are certain rules for the concluding chapter of a trilogy.  One, the [villain] is a super human.  Two, anyone, including the main character, can die. Number three, the past will come back to bite us in the [posterior]. Whatever we think we know about the past, forget it.  The past is not at rest.  The sins of the past are about to break out and destroy us.  The rules say, some of us ain’t gonna make it.
During the Great Depression, business owners found that the high unemployment gave them a lever that could be used on their workforce.  It was this unfair imbalance that drove the labor movement as well as the governments need to stimulate the economy that resulted in the National Labor Relations Act of 1935.  It was passed, but not without controversy.

In the 1920’s, the movement to organize had run afoul of anti-trust laws.  The mood changed following the economic troubles of the 1930’s.  During times of high employment and high earnings, workers had leverage.  But when employment falls below a certain point, the balance of power would shift to the employer.  The NLRA was created to establish a balance between the worker and the owner allowing for the workplace relationship to stabilize.  Further legislation has cemented some of the labor movement’s agenda in covering even the non-union workforce in America.

The slow decrease in the membership of private-sector unions is a direct result of the success of the unions in establishing certain standards to the employee/employer relationship.  Workers no longer needs to join a union to enjoy a standard 40 hour work week, overtime pay, paid holidays and vacation time and enjoy other benefits such as healthcare and a retirement fund.  As long as the threat of unionization is present, employers will usually seek to treat workers fairly.

I am a member of the negotiating committee for my local.  Our contract ends this year.  My fellow members and I understand that without a viable company, the contract is meaningless.  But with a fair agreement, we know that when the company prospers, we will prosper too.  It’s a win-win for both the workers and ownership.

But today’s crisis is putting that relationship into jeopardy.  Even now, our state has legislation pending that would make it a Right-to-Work state.  Management at our company is opposed to this, seeing that it would  put them at an economic disadvantage to newer competitors.  Not everyone will agree but the voters will decide the matter since our collective bargaining rights are statutory in nature.

Unfortunately, the public unions in Wisconsin have failed to understand this.  The anti-democracy forces have spent the past week forming mass protests in Madison.  The elected Democrats in their Senate have left the state.  Whatever my opinion of it, the will of the voters should not be blocked by force or cowardice.  As many have pointed out, the protests in the mid-east seek democracy, while the protest in the mid-west seek to block democracy.  This is shameful.

Like the Trilogy rules state, anyone can be killed.  Any look at the long-term finances of the federal, state and local governments can tell you a change is coming.  Whether we make the choices now or wait till the last dollar has been spent, a day of reckoning is coming.  There is no way to avoid the truth, but it doesn’t mean it has to end in this Mexican Standoff that currently exists in Wisconsin.  If the public unions, both there and other states, wish to make their last stand moment, so be it.  But as long as the private unions are there to hold their hand, we will be caught in the cross-fire. 

Governor Walker, far from wanting to bust the unions, has offered a middle ground.  The response has been an offer to give up the money, but not the bargaining rights.  What they have yet to see is that the money isn’t the problem, it’s just a symptom.  Kill the monster, take the money, but the beast will rise again.  Walker’s goal is to kill any future resurrection of what is wrong today.

In light of our last Trilogy rule, we now go back to the beginning of our story – the balance of power in the employee/employer relationship - to discover something that wasn't true from the get-go.  The NLRA gave workers the right to fight their exploitation at the hands of ownership.  But government workers cannot be exploited since they are also part of ownership.

Collective bargaining depends on an adverserial relationship between employee/employer. As David Denholm put it,

Unions view the employer-employee relationship as an adversarial one. Unions believe, or at least want their members to think, that employers are by their nature exploitative and that without the collective power of the union, the unorganized individual employee is helpless against the various forms of capital formation which employers represent.
While this may be true in the private sector, there is no reason to believe that it would be true in the public sector. The private sector is governed by an economic incentive – the profit motive. This system of economics has provided Americans with more goods and services, and a higher standard of living, than any other economic system in the world. But it is not applicable to many areas of the public sector of our economy.
Competition and the profit motive are at the heart of the union contention that employers are exploitative. That viewpoint leads the unions to an adversarial relationship. The absence of competition and profit motive from the public sector should cause us to then ask whether an adversarial relationship is necessary or desirable in public sector employer-employee relations.
The government by its very nature is monoplistic in providing society essential services.  Any services not essential, should of course not be offered by the state.  Unfortunately, some are.  The necessity for those services are now being used as the lever against their fellow citizens for whom they serve, while politicians, without a profit motive and dependant on votes from these citizens, have an incentive to keep these workers happy.

Since Wisconsin gave government workers collective bargaining rights,  total compensation (pay and benefits) and employment has risen faster than the private sector and is now higher.  Some of this is due to the often inverted supply/demand in the public sector.  In an economic downturn, tax receipts will fall, but demand for government services rise.  A more recent effect has also been the stimulus spending in which the Democrats in Washington sought to repay the support of the public unions. 

What we currently have is a system that is unsustainable.  All workers have the ability to make their voice heard individually and as a group.  Federations and associations have a long history in speaking for public workers.  But the right to collectively bargain is illegitimate outside the free market.  In the absence of a profit motive, that right becomes political rather than economic.  Denholm again, 
In the private sector the strike is an economic weapon. The employer faces economic losses through a lack of business, and the employee faces economic losses through a loss of wages. If there is a strike at one provider of a good or service, consumers – the public – can shift to another provider or not purchase at all.
In the public sector the strike is a political weapon. The employer does not suffer an economic loss, and in many cases (e.g., particularly in education where most public sector strikes occur) neither does the employee.
Because of its political impact, the public sector strike is disruptive of the normal political process. Under normal circumstances, various interest groups within society, all of whom have a legitimate interest in public policy questions, exert pressure from various directions on elected representatives. Of these groups, a union of public workers is the only one that has the power, if not the legal right, to unilaterally deprive the rest of society of an essential service. Once this occurs, divergent political forces show a strong tendency to coalesce into a unified voice demanding a restoration of service.
The only way to restore the service, in most instances, is to give in to the union's demands. Thus, by using a strike or the threat of a strike, the union can dominate the decision-making process and control the size, cost, and quality of government service.
If my employer negotiates a poor contract with us, the company may lose market share, may lose money, which may cause me to lose my job.  There is a moral hazard inherent to our negotiations.  But when the government negotiates a poor contract with their workers, the state's spending increases can cause deficits which can lead to tax increases hampering job growth affecting private businesses leaving me with either higher taxes or no job.  Without a moral hazard, it's heads you win, tails I lose.

When we gave government workers the right to collectively bargain, we breathed life into the monster that we sought to kill when we gave private workers the same right.  The private-sector employees were given a tool to bring balance between workers and owners.  The public employees have been given an axe and a mask with which to run roughshod over the taxpayers.  Even when the taxpayers revolt, the past pension & other benefits rise again, bringing the unstoppable monster back from the dead.  It's clear we’re not all going to make it out of this alive.  

In a Trilogy, the sins of the past will come back to destroy us.  But now, the taxpayers have returned and this time it's personal.  They seek to restore balance to the [work] force.  We are our only hope.

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