How Government Unions And Their Allies On Wall Street Are Destroying California
by Editor
December 19, 2011

How Government Unions And Their Allies On Wall Street Are Destroying California

With government employees, a union agenda is inherently in conflict with the public interest, because unless taxes are raised, there is always a choice between higher wages for government workers, or investing in improving government services. With unions in the government, the overall union agenda – more wages and benefits, more union members – is not necessarily in the public interest.

Also, unionized government workers are organized politically, and especially at the state and local level they exercise huge, if not absolute control over who can fund their campaign and get elected. Government unions negotiate with the people they elected. And it’s hard to imagine anything more pernicious than the way public sector unions have gotten in bed with Wall Street to hold taxpayers hostage to backstop a 7.75% annual return to fund government worker pensions that are five-to-ten times better than social security. In general, whenever government spending creates deficits, Wall Street bankers get to extend loans to government entities, and by extension, to taxpayers.

The more organized labor operates in a monopolistic environment, the more potential exists for corruption, collusion with management, and broader damage to economic health. In competitive industries, the role of organized labor is not as problematic. If a union asks for too much, they kill the company – this creates some restraint on those unions. Government agencies are monopolies however, and simply raise taxes to fulfill their demands.

Here are some facts (with links to analysis and source data) to help illustrate how public sector unions have hijacked California’s government and are destroying California’s economy:

(1) Public sector employees, on average, make 50% more in base pay and 100% more in total compensation than private sector employees. In California, using core data and using very conservative assumptions, the average base pay of a government worker is $65,000 per year; adding benefits, the average total compensation of a government worker is $102,000 per year. By comparison, the average base pay of a private worker in California is $46,000 per year; adding benefits, the average total compensation of a private sector worker is $57,000 per year. The real average for private sector workers is undoubtedly much lower than this, since the estimates here did not factor in California’s nearly 2.0 million private sector workers who are independent contractors:

Calculating Public Employee Total Compensation

(2) About 80% of all state and local government expenditures in California are for personnel costs:

What Percent of California’s State and Local Budgets are Employee Compensation?

(3) Public employee union spokespersons grossly understate the average pension awards:

CSEA Spokesperson Understates Average State Pension

How Much Do Government Pensions Really Cost?

(4) Public employee unions spend at least $250 million per year, just in California, to influence the elections and policy priorities of our state and local politicians:

Public Sector Unions And Political Spending

(5) Overall, corporations do outspend unions, but by a ratio of about 2-to-1, not the preposterous 15-to-1 claimed by union spokespersons. And corporate political spending is split roughly equally between Republicans and Democrats, while 95% of union political spending goes to Democrats:

Is Union Reform Partisan?

It is false to suggest that public sector union spending is necessary to counteract corporate spending. Corporations almost never challenge the public sector union agenda, which is more pay and benefits for unionized government workers, and more government workers. They really only start to fight when taxes are raised, but that is a different fight. Corporations are terrified of the public sector unions, who not only will always outspend them on the issues that matter to them (more pay and benefits for public employees), but can target them in other ways.

(6) Public sector unions now exercise nearly absolute power over the political process in California and are attempting to suppress the state initiative process as well as local efforts at fiscal reform:

California’s Government Unions Fight Reformers

Unions Continue Efforts to Suppress California Initiatives

California’s Legislature Continues to Propose Laws to Preserve Union Power

California Legislature Targets Initiatives

Lobbyists hired by public sector unions, alongside lobbyists hired by Wall Street, are trying to make our politicians enshrine the pension liabilities – sold by Wall Street lobbyists to union-backed politicians – permanently into our tax code. And together, Wall Street and public sector unions have made public sector agencies collection agents for Wall Street. Wall Street hedge funds now bypass brokerages to manipulate market liquidity and asset values, and public sector pension funds are the biggest players on Wall Street. Not only do they control about $4.0 trillion in assets, but they have the full backing of the public sector unions, the politicians they control throughout America’s states, cities and counties, and the taxpayers as the final guarantors.

(7) Public sector unions are in a partnership with some of the worst elements of Wall Street – through their pension funds they extract 7.75% annual interest out of an economy and investment market that has been stagnant for nearly a decade – forcing taxpayers to cover the difference:

Government Pension Funds ARE Wall Street

Public Sector Pensions Investing in Hedge Funds

Union Influence on Pension Funds

(8) Public employee union members, including officers and former officers, occupy board memberships on the major public employee pension funds as well as a super majority on the board of the influential National Conference on Public Employee Retirement Systems (NCPERS):

Union Influence on Pension Funds

The symbiotic relationship between public sector unions and Wall Street cannot be overemphasized. Both entities profit when government entities go into debt – the unions get to expand headcount and compensation for government workers beyond what normal tax revenues would sustain, and to cover government budget deficits, Wall Street banks get to engage in money-lending at a titanic, literally trillion dollar scale. Because government workers are unionized, and because these unions have an agenda that has more in common with Wall Street bankers than with taxpaying ordinary workers, there was little to stop the government unions from pressuring politicians to calibrate government compensation packages based on inflated asset values and inflated, overheated salaries that came and went during the economically unsustainable internet bubble of the 1990’s, followed by the early 21st century real estate bubble.

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