Mathematics is a bitch ain’t it? Despite what a contract may say, -3 + 2 = -1 … inconvenient as that may be to the champions of the entitlement culture now on display in the statehouse of Madison, WI.
Wisconsin’s heated budget battle is but the latest episode in what many of us on the fiscally conservative right have been warning about for years. The current pension systems in place—indeed the current national entitlement structure as a whole—are mathematically unsustainable and have always been at the mercy of an economic downturn. And just such a systemic contraction of revenues occurred in 2008, stressing and then finally breaking the state, local and municipal governments whose obligations remained fixed while their incomes imploded.
The Washington Post’s Ezra Klein makes this predictable argument that could have been written by a union boss desperate to retain his perks and power at taxpayer/dues-payer expense:
“Whatever fiscal problems Wisconsin is — or is not — facing at the moment, they’re not caused by labor unions…Blame the banks. Blame global capital flows. Blame lax regulation of Wall Street. Blame home buyers, or home sellers. But don’t blame the unions. Not for this recession.”He then goes on to implicate Wisconsin Governor Scott Walker for his state’s fiscal crisis by enacting a series of pro-business measures that include better tax treatment (ostensibly to avoid the fates of states like neighboring Illinois currently facing a business flight over high taxes).
“The Badger State was actually in pretty good shape,” insists Klein.
“It was supposed to end this budget cycle with about $120 million in the bank. Instead, it’s facing a deficit. Why? … The governor called a special session of the legislature and signed two business tax breaks and a conservative health-care policy experiment that lowers overall tax revenues (among other things). The new legislation was not offset, and it helped turn a surplus into a deficit [see update at end of post].”(Remember that “update” by the way.)
This argument fundamentally misses the point of what is happening all across this country.
Personally I do not blame the unions for “causing the recession.” But I do blame them for stubbornly ignoring the fact that we have a recession—regardless of the reasons—and that the pension systems in many states were drafted by left-leaning representatives and union bosses whose contracts were predicated upon a level of growth that assumed the good times would go on forever. Indeed many required an 8% annual return to remain solvent. But a cursory look at the DJIA average for the past hundred plus years (from 47ish in 1902 to +/-12,400 today) shows roughly a 5.4% ROR. 30-year Treasuries currently yield 100 points less even.
So the only way to make these collapsing pensions work was an unsustainably supercharged growth economy—the illusion courtesy of those same culprits now being vilified since the façade has collapsed exposing the pensions to their unrealistic assumptions. Thus were the unions quite complicit, even dependant upon, the scams that ideologues like Klein prefer to lay at the feet of everyone but the unions themselves.
Moreover, Klein sees in Governor Walker’s actions an attempt to weaken the unions by using the fiscal crisis to press a jackboot to the collective bargainers’ throats. And of course, President Obama, ever beholden to labor, weighed in, accusing Governor Walker of an “assault” on unions with his emergency legislation aimed at cutting the state budget. Obama’s voice was also heard vicariously through Organizing for America, a residue of his 2008 campaign apparatus, that loaded buses, manned phone banks and descended upon Madison in a mob that eerily resembled the protestors of Athens. (“Centrist” Obama indeed!)
You see, organized labor knows how high the stakes really are in Wisconsin, hence the passion. Madison is now the battleground of the old versus new world re: the continued role of collective bargaining in this nation.
The progressive Badger State has a history of leading the pack when it comes to the expansion of union power and influence. First to enact a worker’s compensation program (1911) and unemployment relief (1932). The founding state of the powerful American Federation of State, County and Municipal Employees (1936). The first state to grant public employees collective bargaining rights (1959), and so on. (In case one wonders how a supposedly ruggedly individualistic Midwestern state could vote so consistently to the left, here’s your answer.)
As far as the union bosses go, the threat from Mr. Walker is not merely closing a $173 million deficit by union concessions. They must know his requests are reasonable and necessary to help prevent laying off 5,500 state workers by their contributing 5.5% of their incomes towards their own pensions and 12.6% towards health insurance. The former is the national average for public unions, the latter still just half of the average.
To the Bastille!!
No, the real danger the union heads see is Walker’s desire to curtail the public employees’ power to negotiate contracts and work rules going forward—something John Fund points out [WSJ] is already limited or banned by 24 states. And here’s the real kicker. Walker would require unions to be recertified every year by a majority vote of all members as well as end the government practice of automatically deducting union dues from state paychecks. These dues go to the unions who then funnel them back to candidates who support this perpetual income stream of more benefits and pay, economics be damned. (Bosses know that union dues fall dramatically when contributions are voluntary, showing their popularity is waning even among the workers themselves.) Far from an assault on unions, Walker’s proposals are an assault on corruption and cronyism that has manifested itself in a collective-bargaining system whose need has far out-lived the days of Upton Sinclair’s Jungle when they were very much for the social good.
Back to Mr. Klein. I notice at the bottom of his article, after splashing much ink blaming Governor Walker’s tax-cutting for the state’s financial woes, he slips in almost as an after-thought an addendum:
“…the deficit spending he created in his special session is about equal to the deficit Wisconsin faces this year, but it’s not technically correct to say that Walker created 2011’s deficit.”Ah, so there already was a deficit? Nice catch there, Mr. Klein. Maybe next time if you lead off with this clarification, the rest of your piece will have more legitimacy. As I said -3+2 always = -1. Even in liberal Wisconsin.
Big Journalism
