Public-Sector Unions and Their Government Bosses: Partners in Crime

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The 3-day New
York City transit strike is a mere eddy in a noxious swamp that
is asphyxiating taxpayers in many states and localities.

While taxpayers
either weren’t looking or were being taken in by phony rights rhetoric,
an intolerably corrupt coalition of public employees and public
employers has gained muscle in the last 35 years.

Public employee
unions contribute heavily to political campaigns. They affect legislation
and crucially influence who is elected. They then sit down and bargain
over wages and benefits with the same units of government they have
so busily bought and paid for.

Breathing in
the stench, the taxpayers afterwards suffocate under the tax bills.
Unions hand in hand with politicians, lobbyists cheek by jowl with
statute-sellers — these faces fill the portrait of that ugly
and immoral creature we name democracy. A government with the powers
ours today has cannot help but fertilize fetid monstrosities assembled
by their creators to devour taxpayers.

Taxpayers no
doubt feel that (a) they are paying through the nose and (b) they
can’t easily do anything about it. Both are true. They will not
get out from under by anything less than radical downsizing and
privatizing of services that they now thoughtlessly assign to local
government. The swamp needs to be drained and cleared.

Trying to kill
the Hydra by chopping off one head doesn’t work. Two heads replace
the one cut off. Going for the jugular or the vital organs is essential.
The powers of government at all levels need to be mercilessly cut

State and local
property, income, sales and excise taxes are overflooding their
banks. The partnership between public sector employees and their
state and local employers is one of the many factors responsible.

State and local
sales taxes have risen steeply. California’s state and local sales
tax rate was 2.5 percent in 1943. Today it is 7.25 percent.

Local school
taxes have risen steeply. In Jasper County, Iowa, school districts
pulled in $39.1 million in 1991—1992 and $66.9 million 14
years later for an increase of some 71 percent. This outpaced the
population rise of 8.6 percent and the CPI rise of some 40 percent.

State income
taxes have risen steeply. Between 1937 and 1978, North Dakota’s
highest bracket began at $15,000 and the marginal rate was 6.0 percent.
Today, the rate is 10.5 percent for incomes over $50,000. However,
in today’s dollars, $15,000 is about $200,000. Therefore, North
Dakota today is absorbing the higher 10.5 percent rate at a far
lower income threshold than in 1937.

A pack of cigarettes
that cost 25 cents in 1955 today carries an excise tax of $3.00
a pack in New York City, encouraging not only bootlegging but the
substitution of other drugs for nicotine.

The public
sector union groups out to despoil the taxpayer are determined,
knowledgeable, and organized. But many others are entering the public
swamp by way of the thicket of laws already on the books. They include
medical workers, environmental specialists, discrimination officers,
child care counselors, human resource specialists, biologists, health
services consultants, juvenile program specialists, claims adjudicators,
family independence specialists, planning and research associates,
and social welfare workers. State and Federal-supported universities
provide the swell of groundwater for this swamp. They house numerous
departments churning out graduates to fill the government ranks.

Helping to
suffocate taxpayers are onerous levies exhaled by a syndicate composed
of public sector unions and public sector employers — the
school districts, towns, cities, counties, and states.

Local governments
not only throw vast sums of money at activities they should turn
over to private initiatives and enterprises, but also spend wastefully.
They overpay public employees many of whom, unionized and sitting
in more secure and easier jobs than in the private sector, also
get fatter health care and pension benefits.

James Ostrowski’s
Free Buffalo Policy Report No. 2 estimates that in the Buffalo area
a pay cut of 28 percent will bring public sector compensation to
the same level as that in the private sector. Higher public pay
is the norm that studies routinely refer to as the public sector
pay premium. Estimates of 5—30 percent are common. For example,
one report says that the median American public school teacher has
a salary of $37,000 compared to $30,000 for the private school teacher.
That’s 23 percent higher. The source attributes the difference to
unionization of public school teachers.

It is impossible
for studies of wage differentials to replicate or establish market-determined
wages. It is impossible for such studies, however complex, costly,
or complete, to control for the many relevant subjective variables
or their dynamic changes that determine marketplace compensation.
This is one reason why comparable worth is a very bad idea, whether
it’s called equal pay, pay equity, or some other benign sounding
name designed to hide the inflation of pay.

To complement
the empirical facts of pay, we have to consider the economic and
political logic of public sector unionism.

Some history
is in order. We are aided in this by the frankness, indeed boasting,
displayed by the American Federation of State, County and Municipal
Employees (AFSCME) on its web site.

The history
of American public sector unions is reflected in the story of AFSCME,
the largest public sector union with 1.4 million members. AFSCME
had its start in 1932. "The union’s primary tactic was lobbying
to pass or strengthen civil service laws."

AFSCME is not
bashful in telling us what strong civil service laws mean. They
mean making it hard to fire government employees (increasing their
job security); regularizing their raises; using tests, not work
or accomplishment, to measure performance; basing promotion on seniority;
across the board raises and no performance bonuses, etc.

In plain English,
the union wishes to tie management’s hands and encourage employee
mediocrity and low productivity.

AFSCME informs
us that a breakthrough for the union came in 1958 when Mayor Robert
F. Wagner, Jr. of New York "granted collective bargaining rights
to unions representing city employees." He did this "responding
to pressure from AFSCME." Wagner remained mayor until 1965.

It was Wagner
who, just before election day in 1960, ended a 1-day strike of the
United Federation of Teachers by setting up a fact-finding committee
dominated by the leaders of the city’s labor movement. Later, after
Wagner and the UFT helped replace the old school board with members
friendly to labor, collective bargaining by teachers became a fact.

Wagner also
promoted public housing, a City University system, and brought Shakespeare
to Central Park. Thus he is lauded as an outstanding public servant.
Wagner’s father, Robert F. Wagner, Sr., four-term U.S. Senator,
was a progressive democrat who fathered the Wagner Act of 1935,
which is the National Labor Relations Act that set American unionism
on its feet.

years later, Eliot Spitzer, cut from the same mold, calls for higher
teacher pay and more money to be spent on education while lauding
labor rights. The median teacher pay in New York City is $53,000
for 181 school days, or $36.60 an hour for an 8-hour day. The median
full-year dentist in the U.S. makes $117,000.

In New York
State, no matter how much any governor proposes for education, it
is never enough. When Republican Governor Pataki delivers his proposed
increased education budget, Republicans and Democrats both
criticize it!

President Kennedy,
a natural ally of Mayor Wagner, by Executive Order 10988, legitimized
collective bargaining for federal employees in 1961. From the 1960’s
onwards, more and more states also passed laws allowing collective
bargaining of state employees.

AFSCME pushed
and pushed. It found a strong weapon by piggybacking on and aligning
itself with the civil rights movement. It used the misleading and
erroneous ideology of "fair and equal treatment" to help
accomplish its goal. Fairness and equality sink to the bottom when
unions, facing the competition of immigrants or domestic minorities,
jettison them.

AFSCME is no
different from any of hundreds of other lobby groups whose rotten
activities comprise our democracy in action. AFSCME, however, unmuddies
how this foul system works. I quote:

Through Political Action
. AFSCME turned to increased political
action for two reasons: as an instrument to help organize new members;
and, as a way to increase AFSCME’s clout on behalf of its members.
Over the next two decades, AFSCME applied the lessons it had absorbed
from years of dealing with state legislatures. A Political Action
Committee (PEOPLE) was created in the 1970’s and today is one of
the largest PACs in America. All across the country, at every level
of government, candidates for public office learned they had to
pay attention to AFSCME’s political muscle."

The contract
of the New York City transit workers contains a no-strike clause
as many labor contracts do, but this does not stem the cozy arrangements
between political employees and employers. If a private company
overpays its employees, it eventually finds itself out of business.
If a government overpays its employees, it sticks taxpayers with
the bills. Since their cost of organizing against the system is
high, they usually hold their noses and pay.

Decades ago,
many large and renowned U.S. companies and industries that produced
quality products gave in to trade union demands. Sometimes they
felt the State’s pressures. Sometimes they blundered. Sometimes
they had government contracts. Sometimes they enjoyed isolated domestic
markets or believed they had monopoly powers. Sometimes they took
comfort if the whole industry had to pay higher wages and pensions.
But, in the end, the industries either went overseas in search of
lower-cost labor or else started non-union companies. America lost
many manufacturing enterprises. The older businesses restructured,
merged, limped along, failed, or passed major liabilities through
to government. Today, the strength of unions organizing private
business has fallen markedly.

Meanwhile the
strength of unions organizing the public sector rose sharply. Competition
and mobility work far less effectively here. School districts, state
and city departments do not move overseas. They deliver their services
on the spot. The only way to get out from under (apart from privatizing)
is for the taxpayer to move. This is costly.

Another extremely
potent driver is at work. Have you ever noticed that an attractive
low-tax locale turns into a higher-tax venue after awhile? This
happens because the built-in and systematic roots of power allow
it to happen. When a political system legally allows one
group to exploit another as ours does, it is only a matter of time
before the natural human drive for gain channels into and exploits
politics. Interest groups and lobbies form. Money flows. Politicians
get elected and pay off their constituents. People work out the
logic inherent in the established rules of the game.

The rules of
the game do change too, as when collective bargaining by
public employees becomes acceptable. Old and destructive ideologies
dressed up in new language change them, ideologies that claim to
bring peace, prosperity and justice at the point of a gun. Supreme
Courts change them. Politicians change them. Human frailties change
them. Individuals and groups have a hand in changing them.

The main rule
of the current game is that we have government rules of the
game. The main belief is that government is a servant of the people
that evolves and changes to secure peace, prosperity and justice
to a society. This fundamental axiom or article of faith undergirds
the process of expanding and altering the government’s rules. Once
society accepts a Constitution, it is altered and corrupted by degrees
until the original is no longer recognizable.

is teaching us a difficult lesson, that government is the enemy
of society, that it directly and of necessity undermines peace,
prosperity and justice. We live better without government rules
in our lives. This is possible. For a time, Americans lived with
a higher degree of peace, prosperity and justice under far fewer
government rules than today prevail. America was the beacon of the
world. If we hold out the objective of no government rules as an
ideal, one that in our current situation seems difficult or even
impossible to attain, it will at least provide us with a proper

26, 2005

S. Rozeff [send him mail]
is a retired Professor of Finance living in East Amherst, New York.
He is the author of the free e-book Essays
on American Empire: Liberty vs. Domination
and the free e-book
The U.S. Constitution
and Money: Corruption and Decline

Best of Michael S. Rozeff

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