Collective Bargaining Rights, Wisconsin, and the end of Western Civilization as we know it….

A Facebook friend’s debate has me writing too much over there in private that should be written here in the bright light of the blogging sunshine where everybody can check in and …. YELL about it!

The question over there from my pal in Wisconsin was this:  “What will be the benefit and what will be the cost of removing the right of public workers to form collective bargaining groups?”

We went round and round about what I see as a critical issue in that debate which are the unfunded liabilities – mostly pension obligations – that seem to have come from collective bargaining aggressiveness.    Surprisingly to me there are still a few large hold out advocacy organizations claiming we don’t have a pension crisis – NIRS is the best example.   But clearly we DO have a crisis and it’s potentially very serious.

I’m hoping to hear from Fools Gold and Horatiox on this one as  I think we  may be coming close to an informed answer.  The benefit to society: Slightly lower taxes from the reduced pressure on public spending. Assuming that bargaining bumps up public compensation costs by 10% (based on a conservative CATO paper that should not tend to make this a low number) we are probably talking about something like 5-7% “savings” to taxpayers if we eliminate bargaining (I’m assuming 50-70% of the cost of public sector is in form of compensation and related liabilities).

The cost to society: reduced public worker morale, perhaps reduction in productivity, and probably a reduced quality of workers who chose public service. Although these costs are hard to measure, it seems to me that the modest tax increase is probably worth those benefits to the extent the government services are justified.

A caveat for me would be whether collective bargaining tends to increase total public sector employment. To the extent it does it presents potentially much higher costs to the system. I do not believe the public sector is sustainable in current form and size without tax increases that are politically impossible (and ill advised anyway).

So for me a far more important current question is how we can  get the softest landing as we scale back the bureaucracy from its current bloated conditions to a manageable size.

22 thoughts on “Collective Bargaining Rights, Wisconsin, and the end of Western Civilization as we know it….

  1. That’s good. We should do more cost-benefit analyses on everything the government does.

    The problem with that is, the workers already agreed to cuts in wages and benefits, so your benefit analysis is not valid.

    • Ben I should have been clearer – the 10% estimate of “increased costs” from bargaining was over a long period of time. Also this was more about general trends than specifically Wisconsin. Clearly, bargaining rights will tend to raise the benefits/costs to society compared to no bargaining rights (the alternative is absurd = “unions create lower compensation for those they represent”.

  2. Pension funds are nothing but a canard in the discussion about removing collective bargaining rights.

    Who has, and always had, the say about pensions and how they get funded (more on that later)? The legislature. Simply by passing a law, the legislature could have “fixed” (it works regardless of how you want to use that word) simply by passing legislation. No contract modification or bargaining table argument is needed.

    We can also look at Florida for some elucidation that really isn’t what it’s cracked up to be.

    Yes, there are pensioners there getting over $100K. The top pensioner was an engineer that worked for the state for 43 years. The cry has been, he should have been paying something towards that pension. Guess what? He did. Up until 1974 when the workers that would work four to eight years, quit, and take all of what they contributed to the pension out, leaving the pension severely underfunded. Instead, the state decided to kick all the money in, which meant that if the employee only worked eight years, the money stayed in the pension fund, never to be touched (and probably never even drawn as a pension either I suspect…)

    I know when I worked for the State of Ohio in the ’90s, I sure as hell was paying into my pension plan, and when SS went up, so did my contribution!

    So you have to wonder just what is it about taking collective bargaining rights away that has anything to do with fixing with what they say needs to be fixed? Absolutely nothing.

    And when it comes do to it, yes the legislature and the governor have their own pension plans (just where the hell is that being discussed in the current discourse? I doubt very much that their pension plans are in better shape), but political appointees ARE covered under the state workers’ pension plan. So I fully expect to see political appointees one way or another being made whole from the problems that will arise. Especially if too many people start retaking their pension payments back. And I’m pretty sure that’s federal law, so passing some sort of law that says you MUST keep your pension payments where they’re at after you quit just isn’t going to go anywhere (just like your company’s 401(k)).

    I’ve argued with some people that say it’s class warfare. It might be very much class warfare, but it’s not between the average tax payer and the union state employee that might or might not be earn a couple of thousand dollars more, but the ones that are making multiple orders of magnitudes more but are happy to lead the bourgeois into thinking that they’re fighting for something truly valid, when it isn’t.

    • No canard at all – it’s the big ticket in the compensation packages. Like most advocates you are dodging the key issue here – WHO IS GOING TO PAY? As it stands right now the answer is “our children” because you are unwilling to ask for the higher taxes required to make these plans solvent. I’d give more credibility to your case if you said “public employees are worth more than we pay them so lets raise taxes NOW”. Sure you and others (like my wife who is on Oregon PERS) chipped in *some*, but the point is that this amount is not enough to cover the benefits you are projected to get in the future. Yes the legislatures are also to blame, but they acted with pressure from advocates.

      • “WHO IS GOING TO PAY?”

        Technically, the pension fund is supposed to pay for it. Now, since the market has gone to shit in 2000 and in 2007 (and even with the current news, still wildly out of sync considering the unemployment and underemployment rates), they’ve lost money, and they don’t have the 20+ years it’s going to make up for that lost money (even if they could, but I wouldn’t take that bet either…) Now who is going to pay for it? The Pension Benefit Guarantee Corporation will be first in line if it can’t. ( Not that I expect it to be around much longer either. I fully expect despite what any extra taxes that may have to be raised, the pensioners will be the ones that ultimately pay in significantly reduced payouts.

        “because you are unwilling to ask for the higher taxes required”

        Not me, Kimo Sabi. And I certainly wasn’t the one that decided to pass a tax cut right before all this shit hit the fan either.

        There is little doubt that both spending cuts AND raised taxes are going to be needed to get the US out of the hole that it’s currently in (despite what others I’ve discussed this with think, they think growing the economy should be fix enough, but they are clueless when it comes to how to get that to happen). And we’re not going to see either one happen. The Republicans might want to see some programs cut, especially those that they hate with a passion (an emergency bill to cut NPR funding, really?), but everything they want to cut is small potatoes. And if they DO get the big cuts they would like to see (Medicaid/Medicare), they know that’s not going to happen because they’ll be immediately voted out of office and the spending will resume. Meanwhile, the Republicans are only about the tax cuts when it comes to taxes.

        “Sure you … chipped in *some*”

        I chipped in the majority of it. The pension plan is supposed to manage its wealth to make sure that it has the money to cover when I do start drawing on it. See my second sentence.

        “Yes the legislatures are also to blame, but they acted with pressure from advocates.”

        It is to laugh. The legislatures ALWAYS get pressure from all sorts of advocates. Why do you think they keep passing tax reductions and shitting on everybody else? They don’t do ANYTHING without somebody telling them to do it.

        But it’s still a canard, you haven’t linked collective bargaining with pension plans in any way.

      • Several good points in your last comment Bryan. For me the *main frustration* is the idea that we won’t need to do something and fast to fix the problem to avoid simply kicking it down the road to our kids. I predict (in fact I’m sure) that we will keep kicking the national problems down the road because the feds – with control of monetary policy and printing – can do this a lot more easily than states.

        Your point about you chipping in “most” is interesting. I wonder what that percent would be if we used quality accounting methods. Based on the limited research I’ve done so far it seems to me the key problems were that the employer “buy in” was too low for long term solvency but since legislatures could kick the problem down the road by promising benefits they could not deliver … they kept promising them. You seem to think unions had no role in that process and I’m very skeptical of that – I think everybody closely involved knew the score, and just hoped the robust economy would bail them out of the mess when the time came. But the time’s coming soon (when payouts will exceed ability to pay them) and it’s not looking good without big taxes or big cuts.

  3. Both sides are bloviating at a record pace but my reading leads me to believe that, one, the pension battle really concerns who gets to manage the pension funds, and, two, the WI-GOP may be trying to circumvent Fed. law which does grant C.B. rights to public employees.

    That Walker/WI wants to alter existing contracts should bother even shall we say libertarian types, IMHE. The pension funds come out of an employee’s salary, obviously. In effect Walker’s just asking for pay cuts–though I think the real casus belli involves not only budget shortages, but…greed. The GOP/TP has connections to banks/financiers who want a slice of the P.E. pension pie; ie, it looks like they are using the state to force the employee to choose other 401k/IRAs–rather than say credit unions–so that their own finance people can use those big accounts to gamble with in traditional capitalist fashion. Or something like that.

    Not to say I completely support the ..Demos on this issue–teachers/cops are not plumbers electricians, etc. Harry Truman opposed giving CB rights to teachers/PE.
    Assuming teachers (cops, firefighters, state clerks, etc) are entitled to union-membership (ie collective bargaining), per Fed law (JFK signed it in, IIRC), however, then one would have to grant they have a right to protest, or even strike. Or something.

    • Interesting angles on this Horatiox wrt pension fund management. I had not really thought of that as an issue but it makes sense it would be because that pile of chips is one of the largest in history.

      Still, seems to me the key issue here as well as in the US economic situation at large is how we’ll deal with the trillions and trillions in unfunded liabilities. Barring an economic miracle, we need to cut spending or raise taxes … and soon.

      • “”raise taxes … and soon.””

        yes. Like on say your associate Eric Schmidt and the Google cronies. They can afford it….an increase of a few clicks on capital gains rates (at Fed and state levels) and teachers all over the US could be paid.

      • Horatiox I think taxes are the real issue here, but employee advocates know that’s not a good negotiating tactic. For me the optimal solution is not to raise taxes, rather it is to take the money needed to pay the obligations by scaling back Govt over the coming decades. Note that Govt size is *massively larger* than it has been historically. This fact is overlooked by almost everybody in the debate, yet it’s a key point and probably a good way to solve problems without creating much hardship. Much of the bureaucracy now deals with … negotiating bureaucracy … and this redundancy could be eliminated at great savings to the taxpayers. Even more easy to reduce are the massive costs of *weapons building, destroying and nation rebuilding* which come from our usually misguided, bureaucratic military policies. The problem isn’t Halliburton, it’s …. bureaucracy.

      • Even more easy to reduce are the massive costs of *weapons building, destroying and nation rebuilding*

        I agree–though for the price of a few drones you could pay thousands of teachers. Either way tax rates on the wealthy are still fairly low, historically speaking.

        Tax increases are not a matter of punishing the wealthy …but at some point normativity enters the picture. I doubt Eric Schmidt is say…..20 IQ points above than you or I Duck. But he has at least 20 million+ times the income, after hitting it big at the silicon valley casino

      • Horatiox I agree with you and Buffett that we probably should tax certain groups at higher rates because, as Buffett notes, he pays 25% on capital gains where his janitor may well be paying more than that on a basic family living wage. I’m NOT as convinced as you or many others in this debate that those proceeds should flow to our very large mid-level bureaucracy. But this gets philosophical. I do not believe that the success of the American experiment was mostly from Govt actions and policies and pork, so I think we have good reason to trim Govt now.

      • I do not believe that the success of the American experiment was mostly from Govt actions and policies and pork

        Was the success of the Amer.Ex. due to….robber baron capitalism? Not really. There were no Sergey Brins funding the Amer.Rev. Or even….Carnegies or JP Morgans, etc. Some bureaucracy is needed–Tomahawks for Jeeezuss, Duck! And school teachers. But not all bureaucracy .

        It’s not unreasonable to have like, silicon valley billionaires foot the bill, or at least more of it. The Ueber-wealthy have all profitted greatly from the lower capital gains rates since the beginning of Bushco–arguably, since ’86 or so when Reagan cut the CG tax rates (and pretty much eliminated the older bracket system). Clinton did not raise them much.

        The libertarian/Ayn Randian policies of the…Demopublicans resulted in many of the current problems, including mortgage meltdown of ’08. That’s why the WI-GOP/TP perspective seems somewhat ridiculous: they complain there is not enough money to pay public employees–say grazi to the demopublican “austerity” plans for that.

  4. Government stability is important to all, so Govt should not be allowed to fail. Unlike businesses where culling the weak or unprofitable or inefficient is desirable and it’s fine to let the business die. For this reason Govt spending needs extremely robust checks and balances to avoid the pitfalls of unsustainable spending. Since we can’t simply let the govt fail and die as we do with businesses, we need to make sure govt spending is sustainable for long term. We do NOT have those needed checks and balances. A good step would be to insist on defined contributions rather than defined benefits because the former puts the risk on the beneficiaries where it belongs, not on future taxpayers who have no current say in the matter.

  5. The issue is skewed power over the purse strings. The major examples are bloated state and local governments and the most visible target is the pension system (which are deferred salaries) but the real target is the power to affect present salaries.

    For a long time we’ve had everybody hopping on the bandwagon of increased government spending. It doesn’t matter where you start in the circle, its a matter of get elected, vote appropriations to reward the unions who financed your election.

    FG mentioned bankruptcy of cities with high police and fire pensions. Well, who put those programs into effect but the various teachers, police and firemen sponsored candidates for elected and appointed offices?

    The cycle of spending programs and bleeding off money in salaries (and deferred salaries) is being attacked by stripping the public employee unions of the bulk of their power.

    Long ago the US military had problems trying to close bases that were costly and accomplished nothing but feeding payrolls into the local economy. Now we have school systems that accomplish nothing but feeding payrolls to the local economy. Its the same with police, fire, bus drivers, whatever.

    Its a matter of spending and there is no system in place to control spending because much of the spending is in mandated programs such as mandated salary increases, mandated athletic programs, mandated anti-drug lectures, … its simply a mandated gravy train.

    Now the question is: who gets first crack at the feeding trough? Cops, firemen, teachers, nurses, bus drivers, armies of paper shufflers?

    You can go back to a deranged Vietnam vet who opened fire on a school playground decades ago: he did it because all the kids in the public school were Cambodians. He chose to shoot the school kids rather than the voters who approved the school budget. The voters all think he made the right decision albeit an emotional one: he went after the visible and vulnerable target rather than the cause of the problem.

  6. Its not necessarily unions, legislators, the press, or whatever … all aspects of our life are based on deferring paying for what we do today.
    Deferred maintenance on infrastructure is a case in point. You say a few drones would buy teachers? Sure they would… but what on earth do we need more teachers for? To teach Cambodian or Spanish? Those few drones could have been used to keep bridges repaired.
    We issue bonds to pay for everything but at some point our promises won’t be worth all that much.
    Schoolteachers want schools. Recent immigrants want schools because its all those recent immigrants who have so many kids they want educated. The Whites who fled to the suburbs to escape immigrants have had their kids graduated from school now, they don’t want to vote for school budgets. Sun City retirees don’t want to vote for ANY school taxes (or any other taxes). Even immigrants are fleeing some urban areas and moving to third tier cities or rural areas. I’m not one of those who are writing California off completely but many are doing so because they just don’t see fiscal restraint ever appearing on the horizon.

    • State taxes are a fairly small portion of total payroll taxes and it’s not that big of a deal. HOWEVER, I actually agree there are …representation issues related to public education that some phony liberals overlook. Some education should be funded. You don’t care for Spanish teachers (kids, at least one college bound should have to take one western foreign language IMHE ), but what about the athletic departments? Or basketweaving , music, or home economics? Do they get only mathematics/science? They’re probably better off studying spanish than practicing free throws or attempting to get in the big leagues, when like one in a thousand if that makes it. But the typical boot camp school doesn’t want …scholars; it wants soldiers, or at least athletes. Pull the funding of HS athletics and Cal would save millions

      I’m not one of those who are writing California off completely

      Heh heh. California has fallen to the Enemy!

      Actually FG away from Sodom and Gomorrah (SF and LA, of course), there are still many whites …many of them the descendants of the WASP settlers who wanted California to secede from the Union. Interesting historical factoid: John Breckenridge, later a Confederate general, nearly won Cal in 1860, his running mate Lane was from Oregon. Lincoln managed to take SF area and go to victory, but that was it.

  7. Good luck trying to yank the dog obedience classes (oops, Gym Classes) out of the school systems.

    Keep the Gym Classes. We need physically fit illiterate hooligans entering our prison system.

  8. >Pull the funding of HS athletics and Cal would save millions
    Yes, but the teachers would still get their salaries even if not working since the unions are indeed that strong and the politicians that weak willed.
    Also the colleges would lose money since college athletics is what raises funds for them. You would put a dent in the income of quite a few bookies too.

  9. Athletic depts might lose money but the state would save a bundle. And few or no sporting events might curtail alcohol consumption as well, and gambling for that matter….(and Im not convinced legalized gambling is an inherent “good”).

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