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The Unholy Trinity of Public Sector Unions, Environmentalists, and Wall Street

May 6, 2014/0 Comments/in Infrastructure, Unions /by Edward Ring

Taken at surface value, there ought to be minimal identity of interests between these three special interests. But if you follow the money and power instead of the rhetoric and stereotypes, you will find this unhealthy alliance is alive and thriving. For example, unions use “greenmail,” the threat of a lawsuit on environmentalist grounds, to block developments until the businesses involved concede to union demands. Once they back down, the environmental problem magically disappears.

California’s much vaunted high-speed rail and delta tunnel proposals are also examples of the unhealthy rapprochement between unions (public and private) and environmentalists. Because the construction unions, God bless ’em, want thousands of good new construction jobs, and the only big projects that are environmentally correct are these monstrosities. The unions have a choice – fight the environmentalists in order to lobby for public works that actually yield economic benefits to society, or enjoy their considerable support for a couple of misguided mega-projects.

Beyond obvious examples, how unions, environmentalists, and America’s overbuilt financial sector collude – often unwittingly, does not lend itself to emotionally resonant, simple narrative. It can’t be expressed in a few declarative sentences. But because this web of collusion is stunting the economic growth of America and systematically destroying its middle class, it is a story that must be told. Here are some points that all exemplify the chain of cause and effect, linking the interests of public sector unions, environmentalists, and Wall Street.

Public sector unions demand, and get, over-market compensation and benefit packages. This causes budget deficits which, in turn (1) enables environmentalists to more easily fight and defeat infrastructure investments, and (2) creates hundreds of billions in business for Wall Street bond underwriters who finance budget deficits.
Politicians controlled by public sector unions declare new infrastructure – freeways, utility upgrades, improved water infrastructure, upgraded grid, investment in airports and seaports, etc., to be environmentally unsound. The real reason, however, is they want the tax revenue to go to increasing pay and benefits for public employees.
Wall Street investment firms work with pension funds to convince public sector unions that it is financially feasible and reasonable to enhance pension benefits – or not reduce them, as is more recently the case. As hundreds of billions each year of taxpayers money pours into these funds, investment firms make huge profits. If they don’t earn enough, they raise taxes.
Environmentalists come up with a “market-based” way to curb dangerous greenhouse gasses, an “emissions auction” plan, which in turn (1) enables Wall Street trading firms to collect a fee on literally every BTU of fossil fuel consumed in America, and (2) empowers public sector agencies to redefine their jobs (mass transit workers, firefighters, code inspectors, teachers – even police since crime increases during hot weather) as coping with, educating about, or mitigating the effects of global warming, allowing these government agencies to collect the proceeds of the emissions auctions.
Without an endlessly appreciating asset bubble, every public employee pension fund in the United States would go broke. To pump up this asset bubble, environmentalist restrictions artificially accelerate price appreciation for land, housing, gasoline, electricity, and other basic needs. And of course, financial institutions reap spectacular profits during periods of rapid asset appreciation.

It is reasonable at this point to wonder – what about business? What is their role in this? That is simple – big business benefits, by being able to afford to comply with excessive regulations and by being able to afford a unionized workforce. In general, smaller companies, innovators, emerging competitors, are crushed by the power of unions and environmentalists, just like the middle class.

There are consequences of an unexamined, unchallenged yet powerful de-facto alliance between public sector unions, environmentalists, and the financial sector that ought to animate anyone claiming to care about America’s working middle class – whether they adhere to the ideology of the Occupy movement, or the Tea Party movement. Because the consequences are a higher cost of living with minimal economic growth and new opportunities. The consequences are an increasingly monopolized, anti-competitive private sector, a perennially swollen financial sector, and an increasingly authoritarian, self-interested government. Public sector unions and Wall Street use the environmental movement for cover. This factor should temper any assessment of environmentally inspired policies.

Unions in the private sector, were they to adhere to their ideals and even their most cherished pragmatic goals, would use their considerable influence to rein in the unchecked power of environmentalists. Only then will their desire for more and better jobs, building tangible assets that are actually beneficial to society, be best realized. Public sector unions, on the other hand, whose entire reason for existence is inherently in conflict with society at large, should be illegal.

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Ed Ring is the executive director of the California Policy Center.

Construction Unions Should Fight for Infrastructure that Helps the Economy, April 1, 2014

Forming a Bipartisan Consensus for Public Sector Union Reform, January 28, 2014

Avoiding the Oversimplifications of ‘Right Wing’ vs. ‘Left Wing’, December 16, 2013

How Unions and Bankers Work Together to Protect Unsustainable Pensions, November 26, 2013

Bipartisan Solutions for California, October 27, 2013

The Prosperity Agenda, April 2, 2013

The Ideology of Public Sector Unions vs. Private Sector Unions, February 20, 2012

America’s Atlas Generation – The Forgotten 33%, January 9, 2012

Why Government Unions are Collection Agents for Wall Street, August 12, 2011

The Differences Between Public and Private Sector Unions, May 13, 2011

Construction Unions Should Fight for Infrastructure that Helps the Economy

April 1, 2014/2 Comments/in Infrastructure, Unions /by Edward Ring

One primary reason California has the highest cost-of-living (and cost of doing business) in America, combined with a crumbling infrastructure, is because California’s construction unions have allied themselves with environmental extremists and crony “green” capitalists, instead of fighting for what might actually help their state.

California’s construction unions ought to take a look around the rest of the country, where thousands of jobs are being created in the energy industries – really good jobs – doing something that actually helps ordinary people. Because the natural gas revolution unleashed in North Dakota, Texas, Wyoming, Colorado, Utah, New Mexico, Pennsylvania, West Virginia, and Ohio is creating thousands of jobs in those states at the same time as it lowers the cost of energy for consumers who struggle to make ends meet.

More generally, construction unions should remember that it is not only how much their own members earn that matters, but how much things cost everyone. If things cost less, you can make less yet enjoy the same standard of living. When unions fight for high paying jobs on projects that are useless, they only help themselves. When they fight for projects – such as natural gas development – that lower the cost of energy, they are helping everyone.

The California Public Policy Center released a new study this week entitled “The Benefits and Costs of Oil and Gas Development in California,” written by Dr. Tim Considine, an energy economist with the University of Wyoming. In the study, Considine estimates the recoverable reserves of shale oil in the South San Joaquin Valley to total 15 billion barrels, with another 10 billion barrels offshore in the Santa Barbara Channel, accessible now from land-based wells using slant drilling. At $100 a barrel, this is $2.5 trillion worth of oil. And where there’s oil, there’s gas – over 12 trillion cubic feet just offshore in the Santa Barbara channel. What are we waiting for?

Developing these sources of energy over the next 25 years in California, according to Considine, could create up to 500,000 high paying jobs in the energy industry and inject hundreds of billions of tax revenue into the state’s government. When are California’s construction unions going to fight for something that actually helps all Californians?

Instead, apparently, they are lobbying hand in hand with environmental extremists for a “Bullet Train” that almost nobody will ever ride – costing taxpayers over $100 billion so it can operate at a loss – and “Delta Tunnels” that will cost tens of billions and not increase the supply of fresh water in California by so much as one drop.

Can unions themselves be guilty of “labor malpractice”? Because unions are supposed to fight for the interests of ordinary people. They are not supposed to join hands with rich, elitist, misanthropic environmentalist fanatics who live in wealthy coastal enclaves, who would be thrilled if gasoline cost over $10.00 a gallon, and electricity rates were over $1.00 per kilowatt-hour. That’s where we’re headed in California if construction labor doesn’t wake up and fight for ordinary people.

Here are two visions of California’s infrastructure priorities:

(1) Spend $150 billion on a bullet train that almost nobody rides and operates at a loss, and build two “delta tunnels” that do not result in one drop of additional water storage or supply. Prohibit development of any fossil fuel reserves in California. Finance this prodigious waste of money through increasing taxes along with proceeds from “carbon emissions auctions” that enrich Wall Street billionaires and crony “green” capitalists. Continue to neglect California’s infrastructure.

(2) Develop California’s energy resources using private financing, creating hundreds of thousands of high-paying jobs, generating hundreds of billions in tax revenue, and lowering the cost of energy to consumers. Use proceeds to help finance infrastructure investments that benefit all Californians:
– New aquifer and surface water storage.
– Desalination plants on the Southern California coast.
– New power stations – natural gas and nuclear.
– New natural gas pipelines connecting California to the rest of North America.
– A liquid natural gas terminal off the Central California coast.
– Upgraded freeways, bridges, and existing rail corridors.

Which of these visions delivers prosperity to the most people? Which creates more jobs for members of construction unions? Which reflects truly beneficial infrastructure priorities for California?

California’s construction unions have thousands of members who want to build and produce real assets. This distinguishes them from public sector unions, who have an incentive to deny infrastructure spending because it takes tax revenue out of their own pockets. Public sector unions use environmentalist extremists for cover – it justifies them keeping public funds for their pay and benefits instead of investing in infrastructure. There is NO identity of interests between public sector unions and construction unions, other than a residual ideological affinity that falls apart under logical examination.

Perhaps it is time for California’s construction unions, joined by people of conscience from all unions, to care more about all of California’s workers. Perhaps it is possible for construction union leadership to agree to disagree with union reformers on the issue of open shops vs closed shops, or project labor agreements vs. free and open competition, and at least recognize together that environmentalist extremists have too much power in California. They should be challenged, before more money we don’t have is spent on projects we don’t need, simply because it was politically feasible and created a handful of jobs.

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Ed Ring is the executive director of the California Policy Center

RELATED POSTS

Bipartisan Solutions For California, October 27, 2013

Forming a Bipartisan Consensus for Public Sector Union Reform, January 28, 2014

Forming a Bipartisan Consensus for Public Sector Union Reform

January 28, 2014/2 Comments/in Unions /by Edward Ring

Across the United States there is an escalating political conflict over the role of labor unions in society. But it is inaccurate to characterize this conflict as one between Republicans and Democrats. There are members of both major political parties, as well as independents of widely diverse ideologies, who are concerned about civil liberties, the growth of authoritarian government, inadequate investment in infrastructure, and poorly funded social programs. Explaining to these diverse groups that public sector unions are a threat to civil liberties, impel authoritarian government, and preclude investment in infrastructure and social programs – and that by and large, private sector unions do not – is the key to successful public sector union reform.

While reformers who are immersed in the topic may consider this obvious, the fact that public sector unions are fundamentally different from private sector unions is still a relatively new concept to the general public. Some of these differences might be summarized as follows:

(1) Public unions elect their own bosses, private unions have minimal role in selecting their management.

(2) Unlike private unions, public union members run government agencies, which gives them the ability to intimidate their opponents with state-sanctioned force.

(3) Public unions derive their revenue from compulsory taxation, private unions depend on consumers voluntarily purchasing products and services.

(4) There is a trade-off between infrastructure spending that benefits private unions, vs. more pay and benefits for unionized government workers.

(5) Public unions and Wall Street financial interests benefit when public entities borrow money and enhance pension benefits, since financial firms underwrite the bonds and invest the pension funds. Private unions have no similar conflict of interests.

(6) Unlike private unions, public unions have an incentive to enact more laws even at the expense of civil liberties and economic growth, because it grows their organizations.

Recognition of differences between public and private sector unions can come from unlikely places. Last month the Boston Globe published a guest editorial entitled “Martin Walsh’s [Boston mayoral candidate] sensible kind of unionism.” The author, Hugh Kelleher, is executive director of the Plumbing-Heating-Cooling Contractors Association of Greater Boston. He writes:

“Construction unions in Boston and elsewhere are cognizant of the bottom line in these key ways:

Unlike public unions representing teachers, police, and firefighters — construction unions provide no job guarantees. There is no tenure or seniority.
Our layoff process rarely involves any subsequent arbitration. Workers understand that their jobs depend upon performance and the availability of work.
How much notice must the employer give a union construction worker before layoff? Fifteen minutes.

The construction industry’s emphasis on reliability and performance offers lessons for city government.”

Imagine if public sector unions had to work under these rules. Job security would be based on job performance rather than seniority. And as for retirement security, why should members of construction unions oppose public sector pension reform? The retirement plans that benefit unionized private sector workers must conform to ERISA (ref. “Actuarial Assumptions and Methods), meaning their pensions are modest but sustainable, because they have to use conservative rates of return when calculating the present value of their future pension payment liabilities.

It’s not just more efficient work rules and sustainable pensions that differentiate unionized government workers from private union workers, however. It is the profound difference in overall incentives that drive each of them. Public sector unions want more tax revenue for themselves. Private sector unions want that money for infrastructure. And funding infrastructure remains a pipe dream as long as public sector unions successfully resist streamlining and modernizing government, and prioritize allocating tax revenue to more compensation and benefits.

The agenda of private unions for infrastructure – real infrastructure, by the way, not environmentally correct useless monstrosities such as California’s “bullet train” and delta tunnels – is matched by the agenda of liberal Democrats for social programs. There will never be adequate money for either, as long as every spare dime goes to pay public employees literally twice as much, on average, as private sector workers earn.

Where the interests of liberal Democrats and libertarian Republicans may intersect is depicted on the table below. As shown, the “left” may oppose a union reform such as Right-to-Work (RTW) in the private sector, but for the public sector, they may view it as the only way to rescue their ambitious agenda for infrastructure projects and social programs. The “right” may support Right-to-Work for all unions, but will recognize that the most egregious threat to economic health and property rights comes from the government unions, who might be diminished if they were subjected to Right-to-Work laws.

FORMING A BIPARTISAN CONSENSUS FOR PUBLIC SECTOR UNION REFORM

Another area of intersection between liberal Democrats and libertarian Republicans would concern the special case of public safety unions. Despite troubling nationwide examples of how public safety unions use their immense power at the local level to negotiate unaffordable compensation and intimidate political opponents (ref. “Battle over police pensions in U.S. cities takes ugly turn,” Reuters, January 2014), Republicans have exempted public safety unions from public sector union reform legislation. Their omission, from Wisconsin to Pennsylvania and elsewhere, not only leaves intact what are perhaps the most inappropriate types of public sector unions, but precludes an alliance with reform-minded liberal Democrats.

Finally, a coalition of liberal Democrats and libertarian Republicans may jointly recognize that public sector unions are partners with Wall Street speculators and middlemen; entities who contribute nothing to the productive economy. For years, bond underwriters and hedge funds alike have had union controlled cities and states – and their public employee pension funds – as their biggest customers, and both reap short-term gain from accumulation of bond debt and unfunded pension liabilities that will eventually wreak financial catastrophe – that process has already begun.

Liberal Democrats and libertarian Republicans will never agree on the optimal size of government. But they can recognize together that public sector unions are the force behind an inefficient, over-built, over-compensated, increasingly authoritarian government that violates the spirit and diminishes the potential of the American dream, in all of its diversity.

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Ed Ring is the executive director of the California Public Policy Center.

How Unions and Bankers Work Together to Protect Unsustainable Pensions, November 26, 2013

Bipartisan Solutions for California, October 27, 2013

Exponential Technological Advances and the Role of Unions, July 23, 2013

How Public Sector Unions Skew America’s Public Safety and National Security Agenda, June 18, 2013

Why Public Sector Unions are “Special” Special Interests, June 11, 2013

The Prosperity Agenda, April 2, 2013

Should Police and Firefighters be Exempted from Union Reforms?, March 12, 2013

Would ANY Public Sector Union Reform Appeal to California’s Democrats?, February 12, 2013

The Ideology of Public Sector Unions vs. Private Sector Unions, February 20, 2012

The Differences Between Public and Private Sector Unions, May 13, 2011