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Moral Values That Underlie Opposition to Government Unions

Often missing from entirely legitimate criticism of government unions is an accompanying explanation of the moral values that underlie the criticism. Last month we published a post entitled “Deceptive and Misleading Claims – How Government Unions Fool the Public,” which listed ten myths that government unions use repeatedly in their propaganda campaigns. Missing in that post, and added here, are the moral values that underlie the need to expose each of these myths.

TEN GOVERNMENT UNION MYTHS AND THE MORAL ARGUMENTS AGAINST THEM

Myth #1:  Government unions are protecting the middle class.

Reality:  Government unions are protecting government workers at the expense of the private sector middle class. The agenda of government unions is more wages and benefits for government workers, and more hiring of government workers. To adhere to this agenda, failure of government programs still constitutes success for these unions. More laws, more regulations, and more government programs equates to more unionized government workers, regardless of the cost, benefit, or need for these programs. The primary agenda of unionized government has nothing to do with the welfare of the private sector middle class, whose taxes pay for it.

Moral value:
The dignity and security of ALL workers is important, not just government workers.

Myth #2:  Government unions are a necessary political counterweight to “Wall Street,” big business, and billionaires.

Reality:  When government is expanded to serve the interests of government unions, the elite and privileged special interests are relatively unaffected, and often benefit. Large corporations can afford to comply with excessive regulations that drive their emerging competitors out of business. When governments borrow to finance deficits created by an over-built unionized government, bond underwriters profit from the fees. Government pension funds are among the biggest players on Wall Street, aggressively investing hundreds of billions each year to secure their 7.0% (or more) per year returns. Billionaires can afford to pay taxes and fees – it’s the middle class taxpayer who can be overwhelmed by them. When powerful special interests want favorable legislation passed in California, they go to the government unions and make a deal. Government unions are the brokers and enablers of special interest cronyism. They are allies, not counterweights.

Moral value:
As government contractors and as representatives of public servants, financial special interests and their government union partners should care about ALL citizens, not just themselves.

Myth #3:  Government unions represent and protect the American worker and the labor movement.

Reality:  For better or worse, government unions represent and protect government workers. Government unions and private sector unions have very little in common. Unlike private unions, government unions elect their own bosses, and their agencies are funded by compulsory taxes, not through profits earned by creating products and services that are voluntarily purchased in a competitive market. Moreover, government union members operate the machinery of government, giving them the ability to harass their political opponents under cover of authority. Private sector unions – properly regulated – have a legitimate role to play in American society. Government unions, on the other hand, exist to serve the interests of government workers, not the ordinary American citizen.

Moral value:
Democratic government represents and serves ALL Americans, not just government workers.

Myth #4:  Public employees are underpaid.

Reality: In past decades, prior to the unionization of government, a public worker exchanged lower base pay for better retirement benefits and more job security. But today, not only have retirement benefits been greatly increased from what was normal back in the 1980’s and 1990’s, but in most cases the base pay of government workers exceeds the base pay for private sector workers performing jobs requiring similar skills. A 2015 study by State Budget Solutions estimated the total compensation of California’s government workers to exceed private sector workers by 31%. But these studies typically omit lower paid independent contractors who now constitute one in three workers. A California Policy Center study that examined 2012 data showed the average pay and benefits for California’s city workers was $124,058, county workers $102,312, and state workers $100,668. And this study did not take into account the value of additional paid vacation benefits, extra paid holidays, and generous “comp time” policies, which add significantly to the total value of annual compensation. Just how much public employee pay exceeds private sector pay for equivalent jobs is the topic of ongoing debate. But they’re not underpaid by any reasonable measure.

Moral value:
Taxpayer funded government benefits – whether they are generous or minimal – should extend to ALL workers according to the same set of formulas and incentives.

Moral value:
Public service should not automatically bestow better pay, more job security, and superior benefits compared to private sector workers.

Myth #5:  The average public sector pension is only $25,000 per year (or some similarly low number).

Reality:  The problem with this profoundly misleading statistic is that this low average is the result of including participants who only worked a few years in state/local government, barely vesting a pension. Should someone who worked less than a decade (or two) in a job expect a pension based on a full career of service? When normalizing for 30 year careers and taking into account the uptick in retirement benefit formulas that rolled through California starting in 1999, the average state/local retiree in California collects a pension and retirement health benefit package worth over $70,000 per year. For a private sector taxpayer to collect this much in retirement, they would have to save at least $1.5 million.

Moral value:
We support modest, financially sustainable retirement security benefits for ALL American workers, not just government workers.

Myth #6:  California’s state/local pension systems are being reformed and will be just fine financially.

Reality: Virtually every official post-reform projection among California’s 80+ public sector pension systems are predicting eventual financial health based on a huge, extremely risky assumption – that the average annual returns of these funds over the next few decades will exceed 7.0% per year. Common sense should tell any unbiased observer that ongoing 7.0% average annual returns are not a safe bet. If they are, why are Treasury Bills only yielding 3.0%? What are mortgage bankers only able to get 3.5% on 30 year fixed mortgages? Why are bank CD’s only offering 2.0%? The spread between equity returns and truly risk-free returns has never been this large for this long. Pension funds are basing future performance projections on past results. The problem is that over the past 30 years, interest rates have been steadily lowered to allow people to borrow more. This borrowing stimulated the economy, creating corporate profits and driving up the price of corporate equities. But interest rates cannot be lowered any further. We are at the end of a long-term credit cycle, and pension funds are just beginning to deal with the consequences.

Moral value:
Government worker retirement funds should be managed cautiously and responsibly, not gambled on Wall Street with taxpayers liable if returns don’t meet unrealistic expectations.

Myth #7:  The teachers unions care about student achievement more than anything else.

Reality: The evidence simply doesn’t support this assertion. Consider the reaction of the California Teachers Association to the recent Vergara decision, in which a Los Angeles superior court judge agreed with student plaintiffs who challenged three union work rules. The CTA criticized the ruling and announced their support for an appeal. What does the Vergara lawsuit aim to accomplish? It would take away the ability for teachers to earn tenure in less than two years. It would end the practice of favoring seniority over merit when deciding what teachers to layoff. And it would make it easier to fire incompetent teachers. These are commonsense, bipartisan reforms that the teachers unions oppose.

Moral value:
Good educations for our children matter more than job security for bad teachers.

Myth #8:  Billionaires are trying to hijack California’s public education system.

Reality:  Wealthy individuals come from a diverse background of political orientations. All of them share a desire to rescue California’s next generation of citizens from a union monopoly on education. And unlike the unionized traditional public school, public charter schools and private schools survive based on the choice of parents who want a better education for their children. And if they don’t do a great job, the parents can withdraw their children from the failing charter or private school. Introducing competition to California’s unionized K-12 education system is a healthy, hopeful trend that gathers support from concerned citizens of all incomes, ethnic groups, and political ideologies.

Moral value:
What matters is the character and intentions of philanthropists and investors, not whether their ideology is right-wing or left-wing.

Myth #9:  Proponents of public sector union reform are “anti-government workers.”

Reality: This sort of claim is a distraction from the reality – which is that public sector unions have corrupted the democratic process and have been attempting to inculcate public employees with the “us vs. them” mentality that is the currency of unions. Sadly, the opposite is the truth – government unions alienate the public from their government, and, worse, alienate government employees from the public. They have created two classes of workers, government employees who have superior pay, benefits, job security and retirement security, and everyone else in the private sector. They know perfectly well that this level of worker comfort is economically impossible to extend to everyone. Government unions have undermined the sense of common rules and shared fate between public and private individuals that is a foundation of democracy. Those who oppose government unions recognize this threat. It has nothing to do with their support and respect for the men and women who perform the many difficult and risky jobs that are the role of government.

Moral value:
All American citizens should live according to the SAME government laws, rules, incentives.

Myth #10:  Opponents of government unions are “right wing extremists.”

Reality: The problems caused by government unions should concern everyone, and they do. Conscientious left-wing activists who favor an expanded role for government expect positive results, not failed programs that were created merely to increase union membership. They realize that unionized government is expensive and inefficient, leaving less money or authority to maintain or expand government services. Public libraries and parks with reduced hours and curtailed maintenance. Pitted, congested roads. After school recreation programs without reliable funding. Public schools where students aren’t learning and apathetic teachers are protected from accountability. Government has to be cost-effective, no matter how big or how small. Opponents of government unions can disagree on the optimal size of government, yet passionately agree on the problems caused by a unionized government.

Moral value:
Good government is something EVERYONE believes in, whether they are right-wing or left-wing.

This list of ten myths promulgated by spokespersons for government unions only begins to chronicle their many deceptions. But each of these myths offer strategic value to these unions – giving them the ability to put reformers on the defensive, change the topic of discussion, redefine the terms of the debate. Each of them has powerful emotional resonance, and each of them – along with many others – is continuously reinforced by a network of professional communicators backed by literally billions in dues revenue. But they are myths, not facts, and equally if not more important, they rely on premises of questionable moral worth.

Although intellectual integrity and emotional resonance are important and necessary elements of any effective argument critical of government unions, it is the moral worth of those arguments that matters above all. When you consider these myths – which is a charitable way to describe these distortions, deceptions, and misleading claims – in the context of the moral arguments that impel critics to refute them, what emerges is a new and decisive approach to countering union propaganda. Because government unions are destroying our democracy, our freedom and our prosperity, merely to enrich themselves. The moral high ground belongs to their critics, not to the government unions.

*   *   *

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

Deceptive and Misleading Claims – How Government Unions Fool the Public

California’s public sector unions collect and spend well over $1.0 billion per year. When you have that much money, you can hire thousands of skilled professionals to wage campaigns, litigate, lobby, negotiate, and communicate. You can hire the best public relations firms money can buy. You can commission research studies that spin facts to support your agenda. You can silence voices of dissent, voices of reason, voices of reform, with an avalanche of misinformation. And it works.

Here, then, for what it’s worth, is a list of some of the biggest deceptions and misleading claims made by California’s government unions.

1 – Government unions are protecting the middle class.

FALSE. Government unions are protecting government workers at the expense of the private sector middle class. The agenda of government unions is more wages and benefits for government workers, and more hiring of government workers. To adhere to this agenda, failure of government programs still constitutes success for these unions. More laws, more regulations, and more government programs equates to more unionized government workers, regardless of the cost, benefit, or need for these programs. The primary agenda of unionized government has nothing to do with the welfare of the private sector middle class, whose taxes pay for it.

2 – Government unions are a necessary political counterweight to “Wall Street,” big business, and billionaires.

FALSE. When government is expanded to serve the interests of government unions, the elite and privileged special interests are relatively unaffected, and often benefit. Large corporations can afford to comply with excessive regulations that drive their emerging competitors out of business. When governments borrow to finance deficits created by an over-built unionized government, bond underwriters profit from the fees. Government pension funds are among the biggest players on Wall Street, aggressively investing hundreds of billions each year to secure their 7.0% (or more) per year returns. Billionaires can afford to pay taxes and fees – it’s the middle class taxpayer who can be overwhelmed by them. When powerful special interests want favorable legislation passed in California, they go to the government unions and make a deal. Government unions are the brokers and enablers of special interest cronyism. They are allies, not counterweights.

3 – Government unions represent and protect the American worker and the labor movement.

FALSE. For better or worse, government unions represent and protect government workers. Government unions and private sector unions have very little in common. Unlike private unions, government unions elect their own bosses, and their agencies are funded by compulsory taxes, not through profits earned by creating products and services that are voluntarily purchased in a competitive market. Moreover, government union members operate the machinery of government, giving them the ability to harass their political opponents under cover of authority. Private sector unions – properly regulated – have a legitimate role to play in American society. Government unions, on the other hand, exist to serve the interests of government workers, not the ordinary American citizen.

4 – Public employees are underpaid.

FALSE. In past decades, prior to the unionization of government, a public worker exchanged lower base pay for better retirement benefits and more job security. But today, not only have retirement benefits been greatly increased from what was normal back in the 1980’s and 1990’s, but in most cases the base pay of government workers exceeds the base pay for private sector workers performing jobs requiring similar skills. A 2015 study by State Budget Solutions estimated the total compensation of California’s government workers to exceed private sector workers by 31%. But these studies typically omit lower paid independent contractors who now constitute one in three workers. A California Policy Center study that examined 2012 data showed the average pay and benefits for California’s city workers was $124,058, county workers $102,312, and state workers $100,668. And this study did not take into account the value of additional paid vacation benefits, extra paid holidays, and generous “comp time” policies, which add significantly to the total value of annual compensation. Just how much public employee pay exceeds private sector pay for equivalent jobs is the topic of ongoing debate. But they’re not underpaid by any reasonable measure.

5 – The average public sector pension is only $25,000 per year (or some similarly low number).

FALSE. The problem with this profoundly misleading statistic is that this low average is the result of including participants who only worked a few years in state/local government, barely vesting a pension. Should someone who worked less than a decade (or two) in a job expect a pension based on a full career of service? When normalizing for 30 year careers and taking into account the uptick in retirement benefit formulas that rolled through California starting in 1999, the average state/local retiree in California collects a pension and retirement health benefit package worth over $70,000 per year. For a private sector taxpayer to collect this much in retirement, they would have to save at least $1.5 million. If public pensions weren’t so generous, these pension systems would not face severe financial challenges. Which brings us to the next myth….

6 – California’s state/local pension systems are being reformed and will be just fine financially.

FALSE. Virtually every official post-reform projection among California’s 80+ public sector pension systems are predicting eventual financial health based on a huge, extremely risky assumption – that the average annual returns of these funds over the next few decades will exceed 7.0% per year. Common sense should tell any unbiased observer that ongoing 7.0% average annual returns are not a safe bet. If they are, why are Treasury Bills only yielding 3.0%? What are mortgage bankers only able to get 3.5% on 30 year fixed mortgages? Why are bank CD’s only offering 2.0%? The spread between equity returns and truly risk-free returns has never been this large for this long. Pension funds are basing future performance projections on past results. The problem is that over the past 30 years, interest rates have been steadily lowered to allow people to borrow more. This borrowing stimulated the economy, creating corporate profits and driving up the price of corporate equities. But interest rates cannot be lowered any further. We are at the end of a long-term credit cycle, and pension funds are just beginning to deal with the consequences.

7 – The teachers unions care about student achievement more than anything else.

FALSE. The evidence simply doesn’t support this assertion. Consider the reaction of the California Teachers Association to the recent Vergara decision, in which a Los Angeles superior court judge agreed with student plaintiffs who challenged three union work rules. The CTA criticized the ruling and announced their support for an appeal. What does the Vergara lawsuit aim to accomplish? It would take away the ability for teachers to earn tenure in less than two years. It would end the practice of favoring seniority over merit when deciding what teachers to layoff. And it would make it easier to fire incompetent teachers. These are commonsense, bipartisan reforms that the teachers unions oppose.

8 – Billionaires are trying to hijack California’s public education system.

FALSE. To the extent wealthy individuals have decided to involve themselves in education reform and private education initiatives, they come from a diverse background of political orientations. But all of them share a desire to rescue California’s next generation of citizens from a union monopoly on education. And unlike the unionized traditional public school, public charter schools and private schools survive based on the choice of parents who want a better education for their children. And if they don’t do a great job, the parents can withdraw their children from the failing charter or private school. Introducing competition to California’s unionized K-12 education system is a healthy, hopeful trend that gathers support from concerned citizens of all incomes, ethnic groups, and political ideologies.

9 – Proponents of public sector union reform are “anti-government workers.”

FALSE. This sort of claim is a distraction from the reality – which is that public sector unions have corrupted the democratic process and have been attempting to inculcate public employees with the “us vs. them” mentality that is the currency of unions. Sadly, the opposite is the truth – government unions alienate the public from their government, and, worse, alienate government employees from the public. They have created two classes of workers, government employees who have superior pay, benefits, job security and retirement security, and everyone else in the private sector. They know perfectly well that this level of worker comfort is economically impossible to extend to everyone. Government unions have undermined the sense of common rules and shared fate between public and private individuals that is a foundation of democracy. Those who oppose government unions recognize this threat. It has nothing to do with their support and respect for the men and women who perform the many difficult and risky jobs that are the role of government.

10 – Opponents of government unions are “right wing extremists.”

FALSE. The problems caused by government unions should concern everyone, and they do. Conscientious left-wing activists who favor an expanded role for government expect positive results, not failed programs that were created merely to increase union membership. They realize that unionized government is expensive and inefficient, leaving less money or authority to maintain or expand government services. Public libraries and parks with reduced hours and curtailed maintenance. Pitted, congested roads. After school recreation programs without reliable funding. Public schools where students aren’t learning and apathetic teachers are protected from accountability. Government has to be cost-effective, no matter how big or how small. Opponents of government unions can disagree on the optimal size of government, yet passionately agree on the problems caused by a unionized government.

This list of ten myths promulgated by spokespersons for government unions only begins to chronicle their many deceptions. But each of these myths offer strategic value to these unions – giving them the ability to put reformers on the defensive, change the topic of discussion, redefine the terms of the debate. Each of them has powerful emotional resonance, and each of them – along with many others – is continuously reinforced by a network of professional communicators backed by literally billions in dues revenue.

Compensation reform, pension reform, other fiscal reforms, reforming work rules, education reform – all these urgent reforms must first go through one powerful special interest that stops them in their tracks: Government unions. Reformers must confront not only the myths these unions promote, challenging and debunking them, but they must also redefine the role of government unions, if not question their very existence.

*   *   *

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

Pension Funds and the Ultimate Hedge, Taxpayers

“We’re trying to make these guys’ money toxic because, as we’ve seen, their money is toxic,” Jonathan Westin, the director of New York Communities for Change, told Business Insider on Thursday. “I think it’s connecting the dots that many people don’t always connect.”
–  “Activists think they found a way to convince Democrats to stay away from ‘toxic’ hedge fund money,” March 13, 2015

There’s nothing new about this talking point, courtesy of the labor funded ACORN successor “New York Communities for Change.” If you don’t like an idea, don’t attack by arguing its merits. Just attack the “dark money,” or the “toxic money,” that funded whomever had the inspiration and did the work to develop the idea.

The long list of causes whose advocates may or may not have accepted “toxic money” just got longer, since the New York Communities for Change – and their inevitable spawn in other states – are now accusing Charter Schools of being financed by “hedge fund billionaires.”

Here in California, charter school advocacy, and, more significantly, charter schools themselves, are indeed supported by many wealthy individuals, but the vast majority of them are self-made entrepreneurs who earned their riches by actually creating something of value to society, from high-tech innovations to office parks and housing developments. Others earned their money in the entertainment business, or through providing legitimate financial services including managing investments on behalf of clients. The idea that “hedge fund billionaires” are the primary force behind the charter school movement is a convenient myth.

With that out of the way, let’s “connect the dots that many people don’t always connect.”

When union activists accuse the financial industry of being overbuilt and riddled with corruption, they’re right. But they are unable to distinguish between honest advisers who manage investments for their clients with integrity and prudence, and rapacious predators whose unchecked greed and insatiable appetite for risk literally threatens to crash the global economy. And the most salient method to distinguish between good and bad investment managers? The good ones are personally accountable for their losses, and the bad ones depend on government bailouts.

There’s no defense for investment managers who use supposedly risk free, low yield consumer deposits as collateral to make high risk investments, and then collect taxpayer bailouts to restore solvency to their client accounts when their schemes fail. Financial bailouts are bad. Financial firms that take risks because they know they will get bailed out are bad. We agree. So why are the pension funds for government workers not included? Why aren’t they at the top of the list? Why aren’t the unions who pay for reinvented former ACORN activists to identify “toxic money” not including pension funds among their targets?

Why aren’t those dots being connected?

Back in 1999, California’s pension funds lobbied California’s politicians to increase pension benefits. California’s all-powerful government unions were quick to hop on that bandwagon. Pension benefits weren’t just enhanced, they were enhanced retroactively. And since the market was roaring, nobody thought it would cost a penny more to fund all of this.

Fast forward to 2015, after years of market volatility, pension funds in California, collectively, are only about 75% funded. With the debt fueled bull market of the past few years beginning to sputter, pension funds are midway through imposing a roughly 100% increase in required contributions by cities and counties. That is, by taxpayers.

Pension funds, which control over $4.0 trillion in assets on behalf of state and local government employees in the United States, are the biggest players in American finance. They invest in anything that will get them a rate of return, after inflation, that averages 4.5% per year – that’s currently 7.5% before taking inflation into account. They invest in hedge funds, they invest in private equity, along with real estate and public equities. And when they don’t hit their numbers, taxpayers bail them out.

Why aren’t those dots being connected? Pension funds rely on taxpayers to hedge their bets. They can make whatever promises they want, take whatever risks they wish, indulge in optimistic projections and lobby for excessive benefit formulas, because taxpayers will bail them out. How deep is the hole? We’re talking trillions, not billions.

Connect the dots. Government pension funds and “hedge fund billionaires” are cut of the same toxic cloth. Perhaps taking money from taxpayers to fund government unions and their activist “volunteers,” and taking money from taxpayers to bail out government pensions are the bigger “toxic” threats to our democracy and our economy.

*   *   *

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