Government Employees, Unions, And Bankruptcy

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During an economic boom, exuberance finds itself lodged in all types of industries. When profits soar, so does the public’s disregard for prudence. And as tax revenues rise, politicians can’t help but give in to their bread and butter of buying votes. Periods of accelerated economic growth typically come in two different forms. If capital is drawn from a pool of real savings to finance investment in more efficient forms of production, the boost in wages and income will be sustainable as long as consumers remain willing to purchase whatever is being produced in greater amounts. In the case of a credit-expansion boom fueled primarily by fractional reserve banking and interest rate manipulation through a central bank, the boom conditions are destined toward bust. Liquidation then becomes necessary as the bust gets underway and malinvestments come to light.

For private industry it means slashing costs, laying off workers, and possible bankruptcy to discharge debt. For government, it typically means shoring up the lost revenue due to unemployment by raising taxes and promising to cut spending by some significant amount. Usually those promised cuts never come to fruition. Political reelection hinges too much upon filling the pockets of voter blocs. When private enterprise tightens its belt, the state hardly bats an eye since its revenue is dependent on how much it decides to fleece from taxpayers in any given year.

Some levels of government aren’t so lucky however. Without ready access to a printing press or eager creditors, local municipalities in the U.S. are facing tough choices as the Great Recession drags on. Unable to cope with the rising cost of providing public services, many cities are taking drastic action. Three major cities in California have recenlty declared bankruptcy; including San Bernardino which is the second largest city to do so in recent history. The city council of Detroit, which is facing about $12 billion in pension and benefit obligations, has voted to allow a state advisory board to assist the former manufacturing powerhouse grapple with a fiscal future that is anything but promising. North Las Vegas, Nevada is facing the same kind of hurdle with a gaping $30 million budget deficit. According to Mayor Sharon Buck, “We’ve balanced our budget, we’ve paid all of our bills [and] all of our bonds are paid…Our biggest issue is salaries and compensation and benefits. And they’re very unsustainable.” Most recently, the mayor of Scranton, Pennsylvania cut the wages of city workers to the state’s minimum wage of $7.25 an hour. The unions which represent the city’s firefighters, police officers, and other public workers are taking the issue to court.

In carrying out such a drastic pay cut, Mayor Chris Doherty defied a previous court order. The unions’ attorney called the defiance “incredible.” The president of the International Association of Fire Fighters, Local 60, lamented that “there are kids working at ice cream stands earning more than their fathers, which is ridiculous.”

In actuality, there is nothing ridiculous about Mayor Doherty’s behavior. The city is out of money to pay its workers. After riding the taxpayer-funded gravy train, the trip has come to an abrupt end. The mayor can’t pay money he doesn’t have. In his words “I can’t print it in the basement.”

But to this writer, Doherty didn’t go far enough in cutting the pay of city workers. In a just world, public sector workers would be paid the rightful amount equal to their contribution to society: zero dollars an hour. If production is to entail mutual exchange and careful consideration toward profit and loss accounting, then government produces nothing without a negative effect on some individuals. The government worker is paid solely through whatever funds were forcefully taken from actual producers of wealth. The kid working in an ice cream stand whom the president of the firefighter’s union referred to is providing a valued service to society. His pay is based off of whatever marginal revenue he brings in. The firefighter paid by tax dollars is a functioning leech whose pay is totally separated from any measure of consumer satisfaction. Government workers have little, if any, incentive to serve the public in an efficient or convenient manner. In America, police have no legal obligation to assist you. And if you think the local fire company will be there at your beck and call, just ask Gene Cranick of Tennessee who watched his house burn down with fire crews standing by as he neglected to pay a $75 dollar fee beforehand. The selfless civil servants simply watched the spectacle of a man’s home being destroyed even as Cranick offered to pay the fee for service right then and there. Compare this to the private, for-profit firefighting that existed in many towns in 19th century America. As urban historian Mark Tebeau describes it in an interview with NPR’s Robert Siegel nearly two years ago:

SIEGEL: Now, I read this today – and you tell me if there’s any truth to it -that sometimes competitive fire brigades in their zeal to be the one to put out fire, maybe to get an award or be backed by an insurer, might actually have played a little defense against another competing fire company.

Prof. TEBEAU: Yeah. They would race to the fires. This reflected community tensions of the era, as well as a sort of manly pride in being first not only to get to the scene, but first to put the fire out.

No doubt Cranick, who found himself on the wrong end of government’s over-bureaucratization, would have jumped for joy at the prospect of multiple fire brigades rushing to save his home.

By virtue of its monopoly on coercion, the public sector exists wholeheartedly at the expense of society. Worse are the unions that piggyback off this extortion and kick taxpayers in the gut even harder just to take a few extra dollars out of their wallets. Unions remain empowered through their government-granted privilege of forcing employers to bargain with them; including the various levels of government. But this only scratches the surface to the despicable nature of both private sector and public sector unions. As libertarian economist Walter Block notes:

Yes, unions are disgusting and repulsive institutions, as the right side of the political spectrum properly emphasizes. They restrict entry into the labor market, and either beat up potential competitors who they characterize as “scabs” (where are the politically correct opponents of hate speech when we need them?), and/or get the government to do this evil deed for them, via legislation such as the Wagner Act which forbids employers from hiring replacement workers on a permanent basis.

What the city of Scranton has in common with San Bernardino, Detroit, et al. is that its dire fiscal condition is due to one thing and one thing only: benefits promised to unionized workers. For decades, public sector workers and their professionally dressed cohorts in plunder known as union representatives have operated under the fallacious assumption that government is the gift that never stops giving. But in today’s environment of economic stagnation, their dreams of living off of stolen fruits of labor are thankfully starting to represent reality. Whole countries in the European Union are beginning to crumble under the weight of their bloated government workforces and entitlement programs. American cities are currently facing up to the extravagant benefits promised to public workers. In a mater of years, Illinois and California will likely follow.

To quote Pat Buchanan,” The salad days of the government employee are coming to an end, as they have already in Greece, Italy and Spain.” To those sick and tired of the tax-eater mentality that is destroying the very core of society’s productive capacity and moral base, those days can’t come soon enough.

Who Is John Sweeney, AFL-CIO?

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Former president of the AFL-CIO
Member of Democratic Socialists of America
Former president of the Service Employees International Union
Repealed an AFL-CIO rule prohibiting Communists from being leaders of its member unions
Instituted “Union Summer” program to radicalize union activists and inculcate class warfare ideas and tactics

From 1995 to 2009, John Joseph Sweeney served as President of the powerful American Federation of Labor-Congress of Industrial Organizations (AFL-CIO), affiliated with 54 unions whose combined membership is nearly 10 million people.

Born in May 1934 in the Bronx, New York, Sweeney grew up in a union family. His father was a city bus driver; his mother, a maid for wealthy families on the Upper East Side of Manhattan.

After graduating from Iona College, Sweeney tried unsuccessfully to get a union job. He worked a year for IBM and then was able to secure employment as a research assistant with the International Ladies Garment Workers Union [ILGWU] in New York in 1957.

In 1960 Sweeney was hired as a contract director for New York City Local 32B of the Service Employees International Union (SEIU), where he worked his way up to President and led two citywide strikes of apartment maintenance workers.

In 1980 Sweeney was elected President of SEIU International. While being paid for this full-time job, he continued to receive paychecks from the New York City local union. These payments from his former local, some adding up to $80,000 a year, continued until 1995 when Sweeney’s “double-dipping” became an issue in his successful run that year for the presidency of the AFL-CIO.

During his 1995 AFL-CIO campaign, Sweeney had a spokesman announce that he would no longer take money from his former local New York union because Sweeney had “decided both the amount of time he was spending with the local and the amount of money he was receiving was inappropriate.” Nonetheless, Sweeney never returned any of the “inappropriate” nearly-half-million dollars he had taken from his former union.

In four terms as SEIU President, Sweeney increased that union’s membership from 625,000 to 1.1 million members.

According to activist and author Joel Kotkin, a longtime fellow at the Progressive Policy Institute:

“The public-sector unions have pushed the entire labor movement to the left. The [SEIU] has embraced organizations with a New Left origin, such as ACORN and Cleveland’s Nine to Five, and has even set up its own gay and lesbian caucus. … The rise of these unions led to the elevation of SEIU’s boss, John Sweeney, to head of the labor federation. No George Meaney-style bread-and-butter unionist, Sweeney is an advocate of European-style democratic socialism. He has opened the AFL-CIO to participation by delegates openly linked to the Communist Party, which enthusiastically backed his ascent. The U.S. Communist Party [CPUSA] says it is now ‘in complete accord’ with the AFL-CIO’s program. ‘The radical shift in both leadership and policy is a very positive, even historic change,’ wrote CPUSA National Chairman Gus Hall in 1996 after the AFL-CIO convention.”

Sweeney is a card-carrying member of Democratic Socialists of America (DSA), the principal American affiliate of the Socialist International.

In 1995 Sweeney was the leader of a troika elected to head the AFL-CIO. The other members of that ruling triumvirate were Linda Chavez-Thompson and Richard Trumka.

Sweeney’s threesome called itself “New Voice,” and ran pledging to repeal the policies of moderate AFL-CIO leaders. With government workers now the fastest – indeed, almost the only – growing segment of a shrinking organized labor movement, Sweeney, Trumka and Chavez-Thompson represented a turn away from blue-collar industrial unionism and the AFL-CIO’s traditional emphasis on raising wages and improving working conditions. That old path had succeeded in boosting blue-collar union member wages so high that up to 40 percent of these union members began voting Republican and complaining about higher taxes and bigger government.

Sweeney’s “new” unionism, by contrast, focuses on government workers who benefit from higher taxes and bigger government, and who therefore implicitly support socialism and the pro-Big Government Democratic Party.

Sweeney’s 1995 election as AFL-CIO President was in part a reaction to the Republican Party having won control of both houses of Congress in November 1994. Since then Sweeney has diverted hundreds of millions of dollars in union member dues to Democratic Party candidates in an effort to restore power to Democrats who permit the de facto taxation of workers by their unions.

Like his fellow triumvirs, Sweeney favors radical approaches to resuscitate a dying labor movement. One of their first projects after winning the 1995 election was “Union Summer,” an effort “to recruit and train hundreds of young people as organizers and political activists,” wrote University of Pittsburgh Johnstown labor economist Michael Yates.

According to Yates, the apparent agenda of Sweeney, Chavez-Thompson and Trumka is to promote “class-based organizing.” Research, says Yates, shows that “those unions which mobilize rank-and-file workers around a program of aggressive solidarity and conflict with their employers have the best chance of winning union elections, bargaining good contracts, and resisting decertification.”

In other words, the “New Voice” leaders promote class warfare, anti-capitalism, big government, and high rates of taxation. As an avowed socialist, Sweeney is ultimately devoted not to coexisting with capitalism but to making capitalism extinct.

The “Union Summer” indoctrination materials use explicit class-warfare rhetoric. Young participants are told to recite a pledge called “Working Class Commitment” that includes the Marxist dogma “that we produce the world’s wealth, that we belong to the only class with a future, that our class will end all oppression.”

Sweeney, Trumka and Chavez-Thompson also were quick to rescind a founding AFL-CIO rule that banned Communist Party members and loyalists from leadership positions within the Federation and its unions. The “New Voice” triumvirate with open arms welcomed Communist Party delegates to positions of power in the Federation.

In 2005 James Hoffa joined six other union leaders in a group calling itself the Change to Win Coalition, which opposed Sweeney’s reelection. When it became apparent that Sweeney’s reelection was inevitable, Hoffa announced that the Teamsters Union and its 1.4 million members were withdrawing from the AFL-CIO. Joining Hoffa was Andrew Stern, President of the 1.8 million-member SEIU, who announced that this union (which Sweeney had once headed) was also withdrawing from the AFL-CIO.

The departure of these two large unions shrank the number of union members represented by AFL-CIO unions by nearly 25 percent, from 13 million members to fewer than 10 million. Their departure also meant that AFL-CIO revenues were suddenly smaller by at least the $18-20 million per year which these two unions had been providing.

Sweeney lashed out at the schismatics Hoffa and Stern, describing their departure as a “tragedy” that benefited “our corporate and conservative adversaries.” At the July 2005 AFL-CIO convention, Sweeney agreed to divert more than $37 million in Federation funds away from mostly-Democratic Party support and into efforts to recruit and organize more union members.

Sweeney retired as AFL-CIO President on September 16, 2009. He was succeeded by Richard Trumka.

On February 15, 2011 President Barack Obama awarded Sweeney the Medal of Freedom in a special White House ceremony.

End Government Unions!

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This week, Arizona legislators are voting on a package of bills that would be “Wisconsin on steroids” – banning collective bargaining, release time and automatic deduction of union dues from paychecks. The unions plan state capitol protests this week, so things are heating up and the story has already appeared in various national publications. Since union protests are planned for the capitol tomorrow it will likely involve a lot of drama and TV coverage. Yet like every issue there are pros and cons, and government unions are a very sensitive topic to be sure. While the TV coverage will certainly focus on the favorable side of unionization (after all, what is better for the economy than more people collecting paycheks…. even if these are ever diminishing paychecks) here is an infographic from the Goldwater Institute looking at the cost side of the equation.

The Unions Vs We The People

Great article from C4L

SOURCE

For the past week, much attention has turned to Madison, WI, where Governor Scott Walker is taking on the public sector unions in an all-out battle royale.  The scene has been one of massive protests by the unions, and over a dozen State Senate Democrats actually fled the state to keep the legislature from having a quorum, which is necessary for them to hold a vote.
The Washington Examiner‘s Tim Carney has an excellent piece showing how “there’s no fat-cat owner wanting to pocket more profits here. The unions’ target in Wisconsin is the taxpayer.”

The ferment in Wisconsin is no workers’ uprising against the rich and powerful. It is instead political muscle-flexing by a well-funded special interest group, which is limbering up for President Obama’s re-election bid. Obama’s campaign, operating as Organizing for America, is bussing protesters to the state capitol and manning phone banks to apply pressure to state legislatures. Obama himself has called Gov. Scott Walker’s bill curbing government-sector collective bargaining “an attack on unions.”

I would encourage folks to read the rest and see how he makes his point.  But before you go feeling sorry for the public-sector workers, The Daily Caller ran an article today showing some of these teachers are making a “bit” more than they let on publicly…
For instance:

Wisconsin’s 2010 Teacher of the Year, Leah Lechleiter-Luke of Mauston High School, told CNN the budget changes would force her to look for additional part-time work.
“When people say that public sector employees live high off the hog, I’d like to share that for 13 of my 19-year teaching career I have held a part-time job either in the summer or teaching night class at the local technical college,” Lechleiter-Luke told CNN. “In addition to tightening the belt even more and crossing our fingers that nothing breaks, I will need to find part-time work again.”
Lechleiter-Luke makes $54,928 in base salary and $32,213 in “fringe benefits,” which include health insurance, life insurance and retirement pay.

Compare that to the average WI workers pay of $37,398 in 2009, according to the Department of Commerce.
In addition to the salary and benefits, teachers in WI, like most states, are only contracted to work part of the year.

Most teachers start their work year around Aug. 30 and end around June 3, according to the Wisconsin Department of Public Instruction. They also get vacation time during the student breaks, like during Christmas, fall vacation and spring vacation. Year-round, teachers in the state are out of the classroom for about 13 or 14 weeks.

There’s a major problem with public-sector unions, one that Tim Carney notes the WSJ points out:

As the Wall Street Journal pointed out, campaign contributions by government-sector unions, collected through mandatory dues, help elect the public officials who are then supposed to negotiate with them: “The unions sit, in effect, on both sides of the bargaining table.” [emphasis added]

Finally, remember the Tea Party and other like-minded groups being called extremists for making Hitler/Nazi comparisons?  Hmm, I do… Anyways, Heritage Foundation sent a film crew to separate out the myths and facts of what is being said in WI.  Here’s what they found.

Marxist Unions Continue To Rape California

By PETER SCHEER—For public employee unions–those representing police, firefighters, teachers, prison guards and agency workers of all kinds at the state and local level–these are the worst of times.

Despite record high membership and dues, and years of unparalleled clout in state capitols, public sector unions find themselves on the defensive, desperately trying to hold on to past gains in the face of a skeptical press and angry voters. So far has the zeitgeist shifted against them that, on one recent weekend, government employees were the butt of a Saturday Night Live skit, followed, the next day, by a New York Times magazine cover article proclaiming the “Teachers’ Unions’ Last Stand.”

Public unions’ traditional strength–the ability to finance their members’ rising pay and benefits through tax increases–has become a liability. Although private sector unions always have had to worry that consumers will resist rising prices for their goods, public sector unions have benefited from the fact that taxpayers can’t choose–they are, in effect, “captive consumers.”

At some point, however, voters turn resentful as they sense that: (1) they are underwriting, through their taxes, a level of salary and benefits for government employment that is better than what they and their families have; and (2) government services, from schools to the DMV, are not good enough—not for the citizen individually nor the public generally—to justify the high and escalating cost.

We are at that point.

In California, government sector unions, once among the most entrenched and powerful labor groups in the country, mainly have themselves to blame. For most of the post-war period, they were a force for progressive change, prospering by winning over public support for their agenda.

In the 1970s and 80s they backed laws like the Public Records Act and Brown Act to make state and local government more transparent. Because unions enjoyed broad-based political support, efforts to enhance government accountability and responsiveness to voters were seen–correctly–as benefiting the unions and their members.The public interest and public employees’ interests were aligned.

But the unions switched strategies. Although the change was gradual, by the 1990s California’s government unions had decided that, rather than cultivate voter support for their objectives, they could exert more influence in the Legislature, and in the political process generally, by lavishing campaign contributions on lawmakers. Adopting the tactics of other special interest groups, government unions paid lip service to democratic principles while excelling at the fundamentally anti-democratic strategy of writing checks to legislators, their election committees and PACs.

While not illegal (in fact, such contributions are constitutionally protected), the unions’ aggressive spending on candidates puts them on the same moral low ground as casino-owning tribes, insurance companies and other special interests that have concluded that the best way to influence the legislative process is to, well, buy it.

Public unions in California turned distrustful of voters and ambivalent about government transparency. In the mid-1990s unions backed improvements to the Brown Act, California’s open meeting law, but also inserted a provision assuring that the public would have no access to collective bargaining agreements negotiated by cities and counties—often representing 70 percent or more of their total operating budgets—until after the agreements are signed.

What happens when voters and the press have no opportunity to question elected officials about how they propose to pay for a lower retirement age, healthcare for retirees’ dependents, richer pension formulas and the like? The officials make contractual promises that are unaffordable, unsustainable (and, in general, don’t come due until after those elected officials have left office). In the case of Vallejo, in northern California, this veil of secrecy, and the symbiotic relationship it fosters, has led to municipal bankruptcy.

The biggest blow to unions’ public support has come from revelations about jaw-dropping compensation and pension benefits. Police have received unwelcome attention for budget-busting overtime and the manipulation of eligibility rules for “disability pensions,” which provide higher benefits and tax advantages. Other government employees, particularly managers, have been called out for “pension-spiking:” Using vacation time, sick pay and the like to boost income in the last years of employment, which are the basis for calculating retirement benefits.

Such gaming of the system boosts starting pensions to levels that can approach, and even exceed, employees’ salaries. Some examples from the reporting of the Contra Costa Times’ Daniel Borenstein: A retired northern California fire chief whose $185,000 salary morphed into a $241,000 annual pension; a county administrator whose $240,000 starting pension was 98 percent of final salary; and a sanitary district manager who qualified for a $217,000 pension on a salary of $234,000. At a time when most Californians anticipate an austere retirement (if they can afford to retire at all), government pensions are a source of real voter anger.

The harm to the credibility of public employee unions from these excesses is made far worse by the unions’ attempts to hide them. The revelations about pay and pension abuses have surfaced only as a result of lawsuits. (Disclosure: The First Amendment Coalition has been a plaintiff in several of these cases.) Public employee unions, rather than taking the lead to stop abusive compensation practices, have vigorously opposed disclosure of individual employees’ salaries and pension amounts.

Public employee unions need to reboot. The old strategy of cynically buying political influence and excluding the public from decision-making has run its course. Unions can rebuild public support by recommitting to an agenda of open government in the public interest. If they don’t, they will be further marginalized.

Peter Scheer, a lawyer and journalist, is executive director of the First Amendment Coalition.