FDR Was Right: Why Public Sector Unions Must Go

Last week we quoted President Franklin Delano Roosevelt on public sector unions. Here are two writers making the same point well.

Ruben Navarette in the Fresno Bee:

"One reason could be that more Americans are figuring out that there is a difference between private- and public-sector unions. In the private sector, what keeps everyone honest is that companies can only be pushed so far or they'll go bankrupt. If this happens, then everyone loses. In the public sector, cities and states don't go bankrupt all that easily and so unions can push and push, and take and take, until a system becomes insolvent."

Professor Thomas J. Lorenzo expands on this:

"When the employees of a grocery store, for example, go on strike and shut down the store, consumers can simply shop elsewhere, and the grocery-store management is perfectly free to hire replacement workers. In contrast, when a city teachers' or garbage-truck drivers' union goes on strike, there is no school and no garbage collection as long as the strike goes on. In addition, teachers' tenure (typically after two or three years in government schools) and civil-service regulations make it extremely costly if not virtually impossible to hire replacement workers.

Thus, when government bureaucrats go on strike they have the ability to completely shut down the entire 'industry' they 'work' in indefinitely. The taxpayers will complain bitterly about the absence of schools and garbage collection, forcing the mayor, governor, or city councillors to quickly cave in to the union's demands to avoid risking the loss of their own jobs due to voter dissatisfaction....

The enormous power of government-employee unions effectively transfers the power to tax from voters to the unions. Because government-employee unions can so easily force elected officials to raise taxes to meet their 'demands,' it is they, not the voters, who control the rate of taxation within a political jurisdiction....

Politicians are caught in a political bind by government-employee unions: if they cave in to their wage demands and raise taxes to finance them, then they increase the chances of being kicked out of office themselves in the next election. The 'solution' to this dilemma has been to offer government-employee unions moderate wage increases but spectacular pension promises. This allows politicians to pander to the unions but defer the costs to the future, long after the panderers are retired from politics.

As taxpayers in California, Wisconsin, Indiana, and many other states are realizing, the future has arrived."

Emphasis added.

UPDATE: Even David Brooks in the New York Times is willing to acknowledge the problem:

"Even if you acknowledge the importance of unions in representing middle-class interests, there are strong arguments on Walker’s side. In Wisconsin and elsewhere, state-union relations are structurally out of whack.

That’s because public sector unions and private sector unions are very different creatures. Private sector unions push against the interests of shareholders and management; public sector unions push against the interests of taxpayers. Private sector union members know that their employers could go out of business, so they have an incentive to mitigate their demands; public sector union members work for state monopolies and have no such interest. Private sector unions confront managers who have an incentive to push back against their demands. Public sector unions face managers who have an incentive to give into them for the sake of their own survival. Most important, public sector unions help choose those they negotiate with. Through gigantic campaign contributions and overall clout, they have enormous influence over who gets elected to bargain with them, especially in state and local races.

As a result of these imbalanced incentive structures, states with public sector unions tend to run into fiscal crises."


Posted by Gibbons J. Cooney