Public Employee Unions – An Anvil Chained to the Democratic Party

by Fabius Maximus, FabiusMaximus.com

Summary:  The Democratic Party has received one of the greatest boons possible in the madness of its major opponent. But they have a burden that offsets much of this advantage in their core supporters — attorneys and public employee unions. The former exract their benefits from society like leeches, disliked but low-profile. The size of the latter makes their cost difficult to conceal, and during the next decade or so they might become both resented and envied for their good pay, great benefits and superior job security.

The rebellion in Wisconsin against the public employee labor unions might be the first successful strike against their power. More might arise as the bills come due for generations of government employees, and the public finds that the promised pension and medical payments — far greater than those given most workers in the private sector — have not been adequately funded, and that additional large annual contributions must be made for another two generations — on top of the funding for future benefits of current public sector workers.

These wonderful compensation packages — especially in the core blue states — were granted by elected officials of the Democratic Party since WWII.  Which would have been fine if our local and State governments fully funded the retirement packages, each year paying both their wages and the present value of their future retirement benefits.  That would have cost much more, and revealed to the public the true lavishness of these employment contracts.

These wonderful deals were, of course, negotiated as a quid pro quo for the unions’ political support. It was a happy partnership during the decades since WWII, as the future obligations accumulated.  Now that era has ended, forcing an ugly choice.  The unions will devote their political power to preserving their benefits at all cost. But what will the Democratic Party do?

The battle will take place over two issues.

(a)  What to do with current public sector employees: their wages, current benefits, job security (ie, civil service protections), and retirement benefits?  As the costs of paying retirees increases, treatment of current employees will inevitably be questioned by the public. These contracts will get renegotiated.

(b)  What about the cash needed in the coming decades to pay retirees? As described in April 2010, many local and State pension plans will become problems during the next decade.  And more going red each year.  Funding levels have dropped as a result of the poor stock market returns during the great recession and the low bond yields since 2007.

Pension benefits cannot be avoided easily, being compensation for past employment. Courts do not like renegs on past deals, just because we no longer want to pay.  States are sovereign, so depending on their Constitutions some can default on their contracts. For local governments the only way out is bankruptcy under Chapter 9 (see Wikipedia). This would create one of the great political battles of our time, as judges decide how to cut the obligations of municipal government:  to creditors and retired employees.  Two great political powers. One red, one blue.

This battle will require the Democratic Party — leaders and voters — to make difficult choices. Defending the current and retired civil service employees might alienate other voters.  Especially private sector workers not as well paid as their public counterparts, with much less job security, and far fewer benefits.  The splits in the GOP coalition gets much attention, but this division might prove even more problematic for the Democrats than anything the GOP faces today.

We can only guess at how these conflicts in the Democratic Party and the nation will play out.  Reducing the power of the public employee unions seems likely to push the Democrats even further to the right.  This drift, kick-started by President Carter, has pushed the GOP to the right as the Democrats copy their policies (eg, massive military spending, crushing civil liberties, RomneyCare).  What might our political system look like if this continues?

The only sure bet is on change. Each swing of the electoral scales produces confident forecasts of an enduring majority for the party on top. But these have proved ephemeral as the demographic, geographic, and economic patterns of America rapidly evolve.  Since this looks likely to continue — or even accelerate — during the next few generations, both major parties must rethink what they stand for — and each candidate must decide who they want standing next to them.

Should we wish to re-engage ourselves in governing America, these political battles will provide opportunities to do so.  If we continue to snooze, we’ll lose no matter who wins.

Looking at this from a different perspective

Crushing the public sector employee unions — a possible (even likely) result of public anger as the bills come due — will destroy one of the last remnants of unions in America, and one of the few remaining well-paid secure jobs for Americans. It’s important that we see this as another step in the destruction of the American middle class, and the creation of a New America — a plutocracy.  We might become like China, where the top 10% own 90% of the nation’s wealth — and control not just the nation, but almost every organization of every type in the nation.

No easy choices lie ahead of us.

For More Information

• About the coming crisis in public pensions, 8 January 2010
• American States on the brink of financial catastrophe, 5 April 2010
• The world of wonders: Democratic Party takes center, pushes GOP right to madness, 19 February 2013