Of the various hyperbolic leftist talking points against the recently enacted Wisconsin collective bargaining law, the “war on teachers” was easily the most shrill, dumb, and tiresome. It was also flat wrong.
Now a similar collective bargaining reform by the Kaukauna Area School District (part of the Appleton metro area) is projected to shift the District’s budget from a substantial deficit to a large surplus. The Appleton Post Crescentreports:
As changes to collective bargaining powers for public workers take effect today, the Kaukauna Area School District is poised to swing from a projected $400,000 budget shortfall next year to a $1.5 million surplus due to health care and retirement savings.
The Kaukauna School Board approved changes Monday to its employee handbook that require staff to cover 12.6 percent of their health insurance and to contribute 5.8 percent of their wages to the state’s pension system, in accordance with the new collective bargaining law, commonly known as Act 10.
“These impacts will allow the district to hire additional teachers (and) reduce projected class sizes,” School Board President Todd Arnoldussen wrote in a statement Monday.
Teachers unions have been advocating reduced class sizes for years. Whatever the merit of smaller classes — and there is no universally accepted definition of what constitutes an “ideal” classroom headcount — they would require the hiring of more teachers, resulting in more dues-paying union members.
Now Kaukauna is poised to give the unions that, in exchange for some modest increases to their health insurance and pensions. Yet I doubt the state’s NEA affiliate will be celebrating (hat tip: Iain Murray).
For more on public sector unions, see here and here.
AFL-CIO President Richard Trumka is warning Democratic politicians today: Push our agenda, or we won’t support you in the 2012 election. It’s hard to imagine those Democrats quaking in their boots. As The Huffington Post’s Sam Stein notes,
The labor community — the AFL-CIO especially — has been taking steps towards greater independence from the Democratic Party as its disappointments with the Obama administration and congressional Democrats have mounted. The typical response from party insiders has been dismissive assumptions that labor has nowhere else to go.
Indeed, Trumka’s threats ring hollow. It’s not like the Obama administration hasn’t been trying to advance Big Labor’s agenda. It’s been Republican opposition in Congress that has thwarted card check legislation and the confirmation of some pro-union executive branch nominees. Yet it seems that Trumka still had to find some reason to throw a public tantrum. The HuffPo’s Stein reports:
Trumka also says in the prepared remarks that party affiliation alone won’t determine how the federation allocates its resources in 2012. If Republican lawmakers embrace parts of the AFL-CIO’s agenda, the union federation will respond in kind.
The likelihood of a rush of Republican politicians (beyond perhaps a couple of rust belt outliers) seeking union endorsements by supporting Obamacare, card check, foreign trade barriers, more spending, and higher taxes is, to put it mildly, nil.
Today, government employees make up a majority of all union members, so it is in public sector employment where the future of organized labor will be decided. So far, the unions aren’t doing well.
At the state and local level, a growing number of Democrat elected officials are taking on public employee unions for the simple reason that their jurisdictions are broke. Facing a decision between angering either the general public through increased taxes and service cuts or their union supporters through spending cuts, many are choosing the latter.
The taxpaying public will put up with the diffuse costs they bear to pay for public sector unions’ concentrated benefits only as long they remain relatively low enough per payee. When those costs start rising and government employee compensation starts to drain resources from essential public services, public resistance will tend to rise with it.
By the same token, voters aware of their states’ and cities’ deep financial problems will likely reward elected officials who seriously address those problems. Thus, Democrats for whom losing union endorsements was once a worrying prospect may now find taxpayer ire a bigger concern.
While the nation’s attention has focused on government employee unions’ fight to retain their collective bargaining privileges, unions in the private sector are in an even bigger fight for their own survival.
Many major private sector unions’ pension funds are severely underfunded to the the extent that they threaten the unions’ own solvency, as well as their biggest selling point for attracting new members: a stable and secure retirement. At The Weekly Standard, Mark Hemingway explains just how bad things could get.
[T]he problem of bankrupt union pension plans is not going away. It’s more than likely a number of big union pension plans will go bankrupt. All of a sudden, union employees who were expecting generous pension plans will be dumped onto the Pension Benefit Guaranty Corporation, the government-sponsored enterprise that backstops pension plans. The maximum payout is just under $13,000 a year, or “dog-food money,” notes McMahon.
That’s when things are likely to get really ugly. Multi-employer pension plans are by law governed by boards equally divided between employer and union representatives. There’s already no love lost between rank-and-file union members and the class of political consultants and executives that has come to dominate union leadership. Both of the SEIU’s national pension plans issued “critical status letters” to their members in 2009?—?the Pension Protection Act requires such letters to be issued when funds can cover less than 65 percent of their obligations. The SEIU, however, maintains a separate pension plan for its national officers that was funded at 98.3 percent, according to the latest data.
Expect waves of class action lawsuits over pension mismanagement aimed at recouping money from the employers and unions responsible. This could well bankrupt unions. And when union pension plans begin failing, unions will be deprived of perhaps their biggest selling point — job stability with unrivaled retirement benefits.
While the Obama administration has said it wanted to submit the U.S.-South Korea FTA by July of this year, no timetables have been announced for the other two trade pacts that have been stalled for several years. In the case of the Colombia FTA, the AFL-CIO has been the main campaigner against the agreement, charging that the Colombian government is allowing trade union officials to be killed with impunity. Yet research has shown that while Colombia is still a country with a high but declining level of violence, union officials are actually less likely to be crime victims than the average Colombian.
I’m currently in my home state of Minnesota, a place known to non-lefty residents as the People’s Republic of Minnesota, a place where the state’s Democratic party affiliate is still called the Democratic-Farmer-Labor (DFL) Party (Democrats here are known as “DFLers”), and a place that is home to the predictable, bland, left-wing newspaper, the Minneapolis “Red” Star Tribune.
Unsurprisingly, the Star Tribune employs a host of authors and editors that sanctimoniously support virtually every government spending program, including really, really stupid ones such as low-density rail transit and non-high-speed “high-speed” rail projects backed by the Obama administration.
Also unsurprisingly, the “Labor” portion of the DFL is backing these not-so-high-speed rail projects, even when the projects are outside of Minnesota. The Green Bay Press Gazette reports that the Minnesota AFL-CIO is pushing Wisconsin Governor-elect Scott Walker to switch his position on the proposed passenger rail corridor in his state — from oppose to in favor.
Last week, I authored an article published in the Milwaukee Journal Sentinel explaining why Walker won’t be killing any high-speed rail projects in his state: because the proposed project is not high-speed rail by industrialized-world standards. The union is clearly not concerned by speeds or costs or any other facts; they just want their government-subsidized jobs, jobs, jobs!
On Sunday, The Cleveland Plain Dealer published an op-ed by Iain Murray and I on the speed angle. Like Wisconsin, voters in Ohio recently elected John Kasich to the governor’s office, who ran on an anti-rail platform.
Arkansas Lieutenant Governor Bill Halter’s failure to win his state’s Democratic nomination is a crushing defeat for organized labor, which went all-out in supporting Halter in order to punish incumbent Democratic Senator Blanche Lincoln for her failure to support the unions’ top legislative priority, the so-called Employee Free Choice Act, which was unpopular in her fairly conservative state.
Big Labor did get something out of this, in that it gave Lincoln enough of a scare to make other Democrats think twice before crossing the unions, but her having won shows Democrats that placing their constituents’ priorities over those of their party’s most powerful interest group can be a winning strategy. This is to the good, as politicians of both major parties, especially at the state level, now need to confront some powerful public sector unions — which now represent the majority of all unionized workers — to bring government budgets under control. And across the nation, more and more citizens seem to support imposing such fiscal discipline.
A political tide that has helped fuel the growth of government finally seems to be turning in favor of taxpayers. With the nation’s unemployment rate still hovering at just below 10 percent, the public is turning its anger on a protected class of workers who have largely escaped the economic uncertainty, at everybody else’s expense: government employees.
State and local politicians are listening, and some are proposing reforms to curb extremely generous public employee compensation packages that are beyond anything available in the private sector. In short, they are trying to deal with the mess left behind by their predecessors. During the 1990s boom years, many state and local governments, buoyed by increased revenues, spent those new tax dollars as soon as they came in, without much forethought of possible future downturns.
Even worse, a lot of the benefits came in the form of pensions. While the possibility of taxpayer backlash may have put some sort of check on how much union-supported politicians can pay their union supporters in the present, it provided little incentive for such caution into the future. When the bill for those pensions would come due, the politicians who approved those benefits would be out of office, and figuring out how to pay for those benefits would be somebody else’s problem.
Such reckless spending made today’s state and local government budget crises inevitable in an economic downturn. Now that a downturn has come to pass, many state and local policy makers have no choice but to try to get their states and municipalities off the road to financial catastrophe. That’s commendable, however belated, and it will be difficult. Yet the time to act is now. The consequences of doing nothing are now apparent, which underscores the urgency of the situation.
And it is fitting that both Republicans and Democrats are coming around to addressing it — because they both helped create it. As Politico reporters Maggie Haberman and Ben Smith note, “local Republicans from coast to coast have often accepted the support of unions and defended their perks.” However, “That day appears to be over, at least for now.”
State and local politicians who want to establish themselves as fiscally responsible stewards of their constituents’ tax dollars now need to show results. There are already some encouraging signs. Recently, the California State Senate approved a bill to address the problems known as double dipping and pension spiking, and the Illinois General Assembly approved a bill to address double dipping and cap pension benefits. Double dipping is the phenomenon whereby a government employee “retires” from one job and then takes on a different government job, while collecting the pension from the first job. Pension spiking occurs when a government employee who is about to retire boosts his income during his last year of employment — either by putting in a huge amount of overtime or temporarily taking a higher paying job — thus freezing that final year’s income into pension benefit amounts that are based on an employee’s final year salary.
That’s a good start, but much more needs to be done.
As a final note on Halter, this video, in which he refuses to answer a question on card check, is worth remembering.
For more on public sector unions, see here and here.
Service Employees International Union (SEIU) President Andrew Stern made a big splash last week, when he announced his retirement from leading what is arguably America’s most powerful union. As I noted then, Stern leaves SEIU with the union’s pensions for rank-and-file members seriously underfunded.
Yet he may have a plan to bail out those pensions — at taxpayer expense. Worse, Stern and his labor allies are working with the Obama administration to facilitate a direct government takeover of pensions. (It’s worth noting that the Obama administration includes a lot of organized labor appointees, especially from SEIU, as well as Vice President Joe Biden’s chief economic adviser, Jared Bernstein, who was previously chief economist at the labor-backed Economic Policy Institute.)
As The Washington Examiner‘s Mark Hemingway explains, one vehicle being used to push this agenda is the White House’s Middle Class Task Force.
The section of the [Task Force's] report devoted to “Protecting Workers and Creating Middle-Class Jobs” reads like organized labor’s policy wish list. It pushes expensive “high road” federal contracting, plans for project labor agreements, enforcing labor standards, a “National Equal Pay Enforcement Task Force” and, most perniciously, “retirement security.”
Social Security is bankrupt and the average union pension plan only covers 62 percent of its liabilities, well below the 65 percent threshold at which the government considers the plan “endangered.” Given these facts, the Economic Policy Institute has teamed up with two of the most powerful unions in the country — the AFL-CIO and Service Employees International Union — to push something called “Retirement USA” (visit Retirement-USA.org).
Retirement USA looks like a scheme to prop up trillions of dollars worth of failing pension plans by seizing your personal savings. It would create a universal retirement plan for all Americans that centralizes all existing retirement plans — including your personal 401(k) savings and private pension plans — into the same retirement system.
Free-market advocates often accuse those on the Left of trying to turn America into France, but would follow a model even more bureaucratic and dysfunctional: Argentina, where the government of President Cristina Fernandez (pictured above) has seized pensions to pay for its profligacy. Kirchner seems to have learned little from her country’s epic economic decline during the 20th century, which was due largely to abysmal policies. For America to consider something even slightly similar today is terrifying.
The Wall Street Journal explains the significance of the crucial shift in union membership that reached a tipping point last week: More union members now work for government entities than for private businesses. (I discussed this development last week.) The Journal editorial states:
Unions once saw their main task as negotiating a bigger share of an individual firm’s profits. Now the movement’s main goal is securing a larger share of the overall private economy’s wealth, which means pitting government employees against middle-class taxpayers.
And as union membership has grown in government, so has union clout in pushing politicians (especially but not solely Democrats) for higher wages and benefits. This is why labor chiefs Andy Stern (SEIU) and Rich Trumka (AFL-CIO) could order Democrats to exempt unions from ObamaCare’s tax increase on high-cost health insurance plans. To the extent Democrats have become the party of government, they have become ever more beholden to public unions.
The problem for democracy is that this creates a self-reinforcing cycle of higher spending and taxes. The unions help elect politicians, who repay the unions with more pay and benefits and dues-paying members, who in turn help to re-elect those politicians.
Indeed, today public sector unions constitute a permanent, organized, well-funded lobby for bigger government. However, that doesn’t mean that organized labor is giving up unionizing private sector workers.
In fact, private sector decline is a major motivation for unions to push as hard as they can for changes in labor law that would favor unionization — most notably the misleadingly named Employee Free Choice Act (EFCA), which, in its current form, would effectively eliminate the secret ballot in organizing elections, enjoin a federally appointed arbitrator to impose a contract upon a newly unionized company if the union and the employer cannot reach an agreement after 120 days, and increase employer penalties for unfair labor practices, which can arise from resisting unionization.
The current version of EFCA is in political trouble, due largely to the overwhelming unpopularity of its card-check provision, which would allow unions to bypass secret ballot elections by having employees sign union cards. The cards are signed in public, thus exposing workers to high-pressure tactics, which secret ballots are intended to avoid.
But EFCA is far from dead. Union-friendly Democrats in Congress could try to pass EFCA in parts, either by inserting its different provisions in other bills or by introducing those provisions as stand-alone bills. EFCA’s binding arbitration and increased employer penalty provisions haven’t received as much public attention as its card-check provision, which makes this stealth strategy attractive for EFCA supporters. EFCA-minus-card-check is something to watch for and guard against.
For EFCA supporters, this piecemeal EFCA strategy becomes even more attractive with the possibility that they could get either card check or some other legal mechanism to favor unionization through non-legislative means. The most obvious vehicle for this is the National Labor Relations Board (NLRB). Big Labor is going after the NLRB, with help from the Obama administration. Current NLRB nominee Craig Becker, a former SEIU associate general counsel, has said that employers should be cut out of the organizing process. (His nomination is on hold in the Senate.)
Meanwhile, as unions’ share of the public sector workforce continues to grow, so will those public employees’ union dues. Greater revenue from dues allows unions to increase their support for Democratic politicians, thus puting greater pressure on them to move further to the left — both by working to increase the size of government, where unions’ greatest prospects for growth lie, and by seeking to change the law to facilitate unionization in the private sector as well.
For more on public sector unions, see here and here.
Workers may get violent if their wages are cut. The United Auto Workers union (UAW) has a monopoly and was an anchor on the Big Three U.S. automakers. These two ideas were professed by two labor leaders at the recent Federalist Society Convention in Washington, D.C.
There may be violence, says Damon A. Silvers, Associate General Counsel for the AFL-CIO and Deputy Chair of the Congressional Oversight Panel for TARP. Silvers spoke on last Friday’s panel “Labor: Wall Street, Labor Unions, and the Obama Administration: A New Paradigm for Capitol and Labor?” Speaking to the panel, he claimed economic downturns which cause people to have their wages cut, can have devastating results.
Silvers pointed to wage cuts in Brazil and spoke of the violence which ensued. He argued that when people are starving they may get violent, that the have nots will take from the haves. Quickly cautioning that this could not happen in the United States, he smirked and added, “but it may.” Not so subtly, Silvers implied that if you cut union wages there may be violence.
Another gem from the convention came from Thursday’s lead discussion “Redistribution of Wealth.” One presenter, when asked what happened to the auto industry in regards to unions, stated, “Unions missed the most basic fundamental economic role they have to play, which is to take wages out of competition. What happened was when they had a monopoly or took wages out of competition for the Big Three people competed more inefficiently…When the transplants came…the union didn’t do its job, it was an anchor to the competitive field as opposed to a help.”
Which right leaning free-market intellectuals stated this fact? None other than any Andrew Stern, the president of the SEIU!That is correct, Andy Stern blamed the collapse of the Big Three in part to the union monopoly of the UAW and called it an anchor to competition.
More characteristically, Stern also spoke of redistribution of wealth saying, “I do no support, I condemn, the redistribution of wealth — that is to say, the redistribution of wealth upwards.”
Advocating the redistribution of wealth? Cautioning of violence if wages are cut? Is this really the message top officials in the two largest labor unions want to be sending? Both Stern and Silvers knew their audience did not agree with them – Stern was sweating during his presentation – but did make an effort to speak to the constitutionally minded lawyers association.
Unfortunately, while tempered, their message was a clear endorsement of class warfare. Espousing unions as the only way for workers to get ahead in America, they chastised the Reagan era and directly blamed the demise of unions for what they claimed were lower worker wages. They ignored facts of other presenters showing that most workers’ standard of living has actually gone up in the last 30 years.
Stern should be given credit for acknowledging that the UAW monopoly helped almost destroy the American auto industry. He must acknowledge that hard work, innovation, and ingenuity are the real engine of the American economy, not collective bargaining. The monopolistic nature of unions in many industries is a liability to both workers and unions. As Stern pointed out in the context of the failure of the U.S. auto industry, unions’ inflexibility can drag down companies and work as a hindrance, not a help.
The AFL-CIO, at its recent convention in Pittsburgh, had much to celebrate, including the fact that a Labor Secretary showed up to pay tribute to her biggest supporters when she campaigned for Congress. Reports Investor’s Business Daily:
Late last Friday, the White House decided to slap a 35% import tariff on Chinese tires. In doing so, the administration sided with the United Steelworkers despite the risks of a trade war with China, the largest holder of Treasuries at a time of record U.S. deficits.
That’s only the most recent example of Washington’s union friendliness.
The auto industry bailout — though painful for all parties — largely preserved unions’ generous wages and benefits at the expense of creditors and taxpayers.
Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., sent the convention videotaped hellos with effusive praise. “I look forward to working with your leadership team in the future,” Pelosi said.
Labor Secretary Hilda Solis echoed Pelosi in her speech Monday. She also called Sweeney “my good friend and colleague” and “our president.”
“I am proud and humbled to be your humble servant as labor secretary,” she told the convention. She said the department was adding 670 labor law investigators. [Emphasis added.]
Maybe those new investigators will look into abuses by union officials, as well, as employers, but such talk from a Cabinet secretary and the Obama administration’s recent actions are not encouraging.
For more on the Obama administration’s and Congressional Democrats’ fulfillment of Big Labor’s wish list, see here.
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