Two items in The Wall Street Journal today highlight a feature of organized labor that distinguish it from other special interests: Unions, as they have existed in the U.S. since the New Deal, are inherently political institutions.
An analysis by the Journal of union political giving shows that unions spend about four times as much on politics as previously thought and spend on a wider variety on political activities than do corporations. While union political action committees spent about $1.1 billion in support of candidates during 2005-2011, which they reported to the Federal Elections Commission, they also spent three times that — $3.3 billion — on other political activities, which were reported to the Labor Department. The Journal reports:
The costs reported to the Labor Department range from polling fees, to money spent persuading union members to vote a certain way, to bratwursts to feed Wisconsin workers protesting at the state capitol last year. Much of this kind of spending comes not from members’ contributions to a PAC but directly from unions’ dues-funded coffers. There is no requirement that unions report all of this kind of spending to the Federal Election Commission, or FEC.
Why the huge investment in politics? Because it’s the source of much union power. Since the enactment of the 1935 National Labor Relations Act (NLRA, also known as the Wagner Act), labor unions in the United States have operated under a regime of government protections that favored unions over other parties in the economy. Specifically, the NLRA’s closed shop provisions allowed unions to compel individuals to join — a power no other private sector entity enjoys.
It is the compulsory dues which many union members have to pay under that arrangement that makes union political giving problematic in a way that giving from other entities is not. As the Cato Institute’s Neal McCluskey rightly notes:
There would be no major freedom issue if all of this were spending by unions with completely voluntary membership, and which operated in truly free markets. There would, then, be no compelled support of politicking. But this is absolutely not the case when it comes to teachers unions and other public sector unions.
That is also not the case for many private sector unions in the 27 states without right to work laws — which is precisely why unions oppose such laws protecting freedom of association in the workplace.
The political war chests that a large and continuous flow of dues makes possible allow unions to help elect pro-organized labor politicians. Those politicians in turn will seek to maintain that union support by opposing measures to curb union power. And nothing seems to erode union power as much as giving workers the choice of whether to join a union or not. In Wisconsin, where Governor Scott Walker’s public sector labor reforms gave state workers that choice, membership the state chapter of the American Federation of State, County and Municipal Employees union dropped by half. In the Wisconsin American Federation of Teachers affiliate, it dropped by a whopping two thirds.
Thus, unions must necessarily rely on politics to maintain their power, especially as unionization has shifted away from the private sector and toward government.
That shift underscores another problem: government’s facilitating of economically unsound practices that priced unions out of the private sector. A case in point are defined benefit pensions, which promise fixed payout amounts that are independent of a pension plan’s level of funding. Such pensions are a great deal for unionized government employees, but pose a huge liability for taxpayers, who are exposed to bailing out underfunded pensions.
The Governmental Accounting Standards Board (GASB) recently issued new rules for calculating public pension liabilities. Under the new rules, underfunded pension plans — those with less than 80 percent of assets needed to pay out obligations — would have to shift from the overly optimistic discount rate many plans now use, based on an average return on investments of 7 to 8 percent, to a more realistic rate of 3 to 4 percent.
The problem, as the Journal notes in an editorial, is that plans that are supposedly fully funded would continue to be able to use higher discount rates. This will likely encourage many pension fund managers to engage in further accounting tricks in order to make plans appear fully funded. That’s an important concern, but the new GASB rules are still an important step in the right direction. It is important that they are applied correctly.
For more on labor, see CEI’s labor site, WorkplaceChoice.org. (Subscription needed for Wall Street Journal links.)