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How Government Unions are Hypocrites that Betray the Public

Government unions are not unions in any traditional sense of the word. They elect the bosses they “negotiate” with. They are paid through compulsory taxes rather than via a company that has to earn a profit in the competitive market. And they operate the machinery of government which allows them extraordinary latitude to intimidate any business interests who may challenge their agenda.

Among the informed, these assertions are beyond serious debate. Even supporters of government unions acknowledge them – just not on the record. But to inform the public, it is probably too abstract to question the legitimacy of government unions because they “elect their own bosses,” “use taxpayers money instead of earned profits,” or “control the bureaucracy.” Perhaps instead it is better to explain how union control of government harms people in their everyday lives.

To that end, here is a partial list of how the actions of government unions contradict their rhetoric, and betray the public they are supposed to serve:

(1) Demonizing “Profits.” From the classroom teacher to the professionally prepared press release, the rhetoric of government unions promotes the idea that “corporate profits” are unjust. The academic focus from primary school through public universities is invariably swayed, thanks to government unions, to challenge the capitalist system. Yet without profits there are no tax revenues. Governments survive financially because corporations make profits. Government unions support legislation that has made California the toughest state in the U.S. to do business. The impact: Brainwashed youth, and fewer successful companies offering fewer good jobs.

(2)  Demonizing “Millionaires and Billionaires.” Government union rhetoric frequently resorts to accusing anyone who wants to expose their destructive hypocrisy as funded by “millionaires and billionaires,” as if that should automatically nullify their arguments. These unions have carefully nurtured a public hostility and resentment towards individual wealth. The problem, however, is that almost anyone who retires after a full career in public service is a millionaire – often many times over. The average full career pension for California’s state and local government workers is over $70,000 per year. The ordinary private sector worker would have to save at least $1.5 million to generate a $70,000 annuity for the rest of their life – with no guarantees. The impact: Higher taxes and reduced services to support government worker pensions that make them all millionaires, leaving the rest of us behind to pay for it.

(3) Defending “Working Families.” That is one of the mantras of the government unions. Fighting for the “working families.” But how does this work in reality? California is one of the hardest states to practice a profession or trade. Certifications and licenses require prohibitive amounts of time and money, excluding the most deserving, aspiring citizens. Workman’s Compensation insurance rates are among the highest in the U.S., making it much harder for small companies to compete and grow their businesses. Crippling regulations. Absurdly time consuming and expensive permitting processes. The impact: Reduced upward mobility, far less opportunities for low income entrepreneurs.

(4) Always “For the Children.” The level of hypocrisy here almost defies description. Government unions have imposed their agenda on education, turning public schools into propaganda mills, indoctrinating students to believe their success or failure in life is primarily determined by whether or not they have “privilege,” and whether or not the state provides sufficient benefits, instead of teaching them the skills they will need to succeed in life on their own. Government unions have defeated any meaningful attempts to hold teachers accountable, or allow principals and superintendents to effectively manage. What they have done to California’s rising generation of students can be accurately characterized as child abuse. The impact: A generation of Californians who are unprepared to assume the responsibilities of adulthood.

(5) Respect for “Contracts.” The selective moral outrage mustered by government unions when it comes to “contracts” is exemplified by their response to pension reformers who want to lower the pension benefit formulas – just for work to be performed in the future. Because back in 1999, these same unions lobbied successfully to raise pension benefit formulas not just from then on, but back to the day each active government worker began their career. According to the same body of California contract law, they claim these retroactive benefit increases were justified, yet they fight – and win – in court whenever anyone tries to decrease these same benefits only from now on. The impact: Taxpayers are condemned to bail out these financially unsustainable pensions.

(6)  Fighting “Big Money in Politics.” The problem with this ersatz fight by government unions is simple: In state and local elections in California, nobody spends as much money as government unions. Just government unions, just in California, collect and spend over $1.0 billion per year in dues. About one-third of that, nearly $700 million every election cycle, is spend explicitly on politics and lobbying. An equal share probably goes to public education campaigns designed to promote the government union agenda. There is no special interest anywhere with the means, much less the desire, to challenge these unions. They are active in every political contest, no matter how small or how big, with access to as much cash as they need. The impact: Unions are the “big money in politics,” and their interests trump the public interest.

(7) Fighting “Big Business.” By now it should be clear enough – “big business” has no interest in challenging government unions. They collude instead, in a partnership where the government unions – who control legislation that will either favor or thwart business interests – are the dominant partner. And why shouldn’t big business partner with government unions? When oppressive regulations drive innovative competitors out of business, the monopolistic established corporations have the financial resources to comply. Why not let excessive government regulations destroy the competition? The impact: Less innovation, fewer new jobs, higher prices to consumers.

(8) Fighting “Wall Street.” This is the most ridiculous claim of all by government unions. Because when government unions successfully negotiate pay, benefit and hiring decisions that cause government deficits, Wall Street firms make billions underwriting new bond issues. And when government unions negotiate pension benefit enhancements, the union controlled pension funds invest even more money with Wall Street firms including hedge funds and private equity funds. Government is Wall Street’s biggest customer. The Wall Street influenced policies that have destroyed the ability of ordinary Americans to save for retirement or buy an affordable home have been a boon to the super rich and the pension funds. The impact: The government union alliance with Wall Street is a major factor in the hollowing out of America’s middle class.

The fact that most Californians still don’t understand the difference between government unions and private sector unions should come as no surprise. Government unions have spent literally billions of dollars over the past decades, hiring the best professional public relations talent in the world, to convince Californians they are on their side. But they’re not. Quite the contrary. Their hypocrisy is only matched by their corrosive impact on our economy, our freedom, and our democracy.

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Ed Ring is the president of the California Policy Center.

RELATED POSTS

Government Unions Benefit from the Asset Bubble that Harms Workers, July 19, 2016

Government Unions and the Financialization of America, May 24, 2016

The Hypocrisy of Public Sector Unions, March 15, 2016

Public Unions ARE the Political “Establishment,” February 23, 2016

In Search of a Legitimate Labor Movement, January 19, 2016

The Alliance Between Wall Street and Public Unions, December 1, 2015

Moral Values That Underlie Opposition to Government Unions, October 13, 2015

How Government Unions Are Destroying America, September 22, 2015

Deceptive and Misleading Claims – How Government Unions Fool the Public, September 8, 2015

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

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

Two Tales of a City – How Detroit Transcended Ideology to Reform Pensions

“I see a beautiful city and a brilliant people rising from this abyss.”
–  Charles Dickens, Tale of Two Cities

Traveling through suburban Detroit, a sprawling city of 143 square miles whose population has dropped from nearly two million to less than 700,000, you can often imagine you are in rural Tennessee. Rutted narrow roads bend past groves of cottonwood, oak and silver maple. Deer and jack rabbits forage in tall grass. Until you pass a burned out ruin of a home, not yet removed, obscured by greenery, it is difficult to imagine that these neighborhoods once were filled with homes, set 35 feet apart and carpeting the land for mile after mile.

According to the so-called “right wing propaganda machine,” the tale of Detroit’s demise is attributed to the unchecked power of labor unions. Private sector unions were inflexible in the face of foreign competition, driving Detroit’s auto industry into irreversible decline. Public sector unions gobbled up every dime of taxpayer revenue they could bully and intimidate politicians into granting, further straining the finances of an already imploding city. Financially unsustainable pension benefits, ultimately, drove the city of Detroit into bankruptcy.

20140722_DetroitDetroit’s Brightmoor neighborhood  –  Homes used to stand 35 feet apart along this street.

 A different tale emerges from the left side of the ideological spectrum. Taken from a guest column written for MSNBC.com, here’s a quote from Jordan Marks, executive director of the National Public Pension Coalition, a group largely funded by public sector unions:

“While public coffers were running dry, Wall Street banks were out to make millions. Mayor Kwame Kilpatrick, who now sits in jail, worked with Wall Street banks that designed an illegal borrowing scheme that evaded state debt limits and piled on unwise interest rate swaps. When interest rates plummeted, Wall Street demanded more than $300 million from Detroit to terminate these swap deals – making a bad situation even worse. These same Wall Street firms stand to make millions if other cities move to privatize their pension plans.”

These two tales of Detroit’s struggles both have elements of truth. With respect to Detroit’s municipal bankruptcy, it is unfair to blame public sector unions as the primary cause. While the city’s unions were unwilling to adjust their pensions and benefits until it was too late, even if they had, the city’s finances would have failed anyway because it lost nearly two thirds of its tax base. And while the automotive industry’s unions were unwilling to adjust their pensions and benefits until it was too late, that industry would have shrunk anyway, because very capable foreign competitors gained strength starting back in the 1960’s. It is unrealistic to expect, under any circumstances, that Detroit’s auto industry could have maintained the overwhelming global market share it had up to and through the 1950’s. Without economic diversification, Detroit was destined to fall hard.

The tale that comes from the left, however, strains credulity even further. First of all, public sector unions don’t represent the “left.” They represent the state. When Jordan Marks writes about banks colluding with corrupt politicians, he is referring to politicians elected and controlled by public sector unions. His assertion that “Wall Street banks” exploited Detroit does not reflect reality. Bankers issue bonds – debt – to cities who willingly borrow the funds because their union agenda forces them to spend more than they collect in taxes and fees. Government pension fund managers pour billions of dollars into Wall Street investment firms every year. Bankers and city governments – controlled by government unions – work together to exploit taxpayers and private businesses. They use the state power of imprisonment to enforce punitive levels of taxation, to pay down debt and unfunded liabilities incurred so they could live beyond their means. Wall Street bankers and municipal government unions work together to build a financial house of cards, and when it collapses they deserve equal blame.

How Detroit has solved its pension crisis will not please the ideologues. For the libertarian right, the failure to throw everyone into 401K plans must rankle. For the left, the new plan’s built in “triggers” that adjust benefits when necessary to compensate for possible future shortfalls in investment returns violates their goal of an immutable defined benefit. But it works. And the libertarian’s ideological enthusiasm for individual 401Ks contradicts their entirely valid criticism of overly optimistic investment return projections on the part of pension funds (Detroit’s was 7.9% a year). When the market tanks, and periodically it does, only a pooled plan with multi-generational, active payees plus retired participants, with adjustable benefits, can maintain solvency through a balance of contributions from active workers and returns from invested assets. A pooled 401K plan is nothing more than an ideologically impure version of individual 401K plans. An adjustable defined benefit plan is nothing more than an ideologically impure version of a fixed defined benefit plan. They can be functionally identical, two tales of the same thing, and they are both practical compromises.

Detroit’s failures, and Detroit’s probable ascendancy from now on, is easy to describe using hyperbole and polemics. But ultimately there is one destiny, one tale in reality, that will define Detroit’s future. Cutting through the rhetoric, cities around the nation may look to Detroit for answers, especially regarding their new pension plan, because Detroit has passed through a clarifying crucible of pain and self-evaluation that cities with better weather and more diversified economies have deferred. One big market correction will erase those advantages. The tale of Detroit makes for compelling analysis, from New York to LA.

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