Many Americans are concerned with our nation’s skyrocketing national debt and fret over the possibility of us not being able to pay our bills. But America’s impending fiscal apocalypse looms not on the federal level where our nation, but rather on the state and local levels where public sector employees are owed billions in unfunded pension and health care benefits. A day of reckoning is fast approaching for states such as Illinois and California, whose own public union bosses are beginning to recognize that the present systems are unsustainable.
State lawmakers have for years found it easy to promise lavish benefits to unions while sticking future generations of taxpayers and politicians with the full costs. At first glance, it appears as though the unfunded liability is not the fault of public sector unions, but of state legislatures. Much of the underfunding is because states have not made their required contributions on a yearly basis, opting to make the promises but not pay for them.
Why are pension costs such a burden to state budgets? Because they are a massive force in helping to elect liberal politicians, unions are often negotiating with the very people they were allied with prior to Election Day. This means that the unions and politicians work in lockstep to increase salaries and benefits for state employees. Because of this, noted liberal FDR even admitted that collective bargaining for public employees was fiscally untenable.
Last year, Wisconsin Governor Scott Walker attempted to put a stop to this when he implemented reforms which curtailed certain collective bargaining rights and reduced pension benefits. Walker paid a high price politically, as he was thrust into a recall election which gripped both labor sympathizers and Tea Party-activists nationwide. Walker’s reforms have largely been successful, and the state no longer faces a budget deficit.
What tells us the most about the long term impact of the fracas in Wisconsin is not the recall campaign itself, but what happened in the aftermath of Governor Walker’s reforms. One of Walker’s reforms allowed public sector workers to decide whether or not to remain in their unions. Possibly in part because the negotiating rights of the unions had been curtailed, many union members decided that the dues were not worth it. That union membership declined once Walker’s reforms made it optional is an indication that American workers do not see the value of joining a union when given a choice. It should come as no surprise that unions fight hard against Right to Work laws which give workers the right to decide for themselves if they wish to join a union.
In the private sector, where unions must negotiate with profit-maximizing firms which have no election-based sympathies, union membership has been declining for years. Long ago, more than 35% of all private sector workers belonged to a union. Today, fewer than 7% of private sector workers do. This is because private sector unions tend to do more to diminish an employee’s productivity than they do to boost his wages through collective bargaining. Unions place restrictions on what sort of work each employee can do in the name of protecting jobs, reducing worker flexibility and thus productivity. Therefore, unions have turned their focus to the public sector, where lobbying politicians can do much more to boost employee salaries than union related inefficiencies can hold them down.
Walker’s victory will not have as great of an impact on the 2012 elections as it will on future legislative sessions. While the conservative base was heartened by Walker’s victory, there is still far too long before the general election for that momentum to carry forward.
However, as governors and state legislators are faced with budget problems akin to Wisconsin’s, they will be more confident of their ability to withstand political pressure from unions when making necessary choices. If multiple state governments curtail the excess benefits given to public sector employees at once, national labor organizations simply will not have the resources to fight electoral battles across the nation.
In a speech at the recent Young America’s Foundation Conference, Scott Walker said that freedom needs courageous advocates. Ironically, Scott Walker’s reforms weren’t all that courageous. All Walker’s reforms did was eliminate collective bargaining for benefits, but not wages. His reforms reduced the gap between public sector and private sector renumination from 29% to 22%, a gap that will probably need to be further reduced in the future for Wisconsin’s government to be sustainable in the long run, and asked public sector workers to begin to contribute to their pensions. Walker’s reforms have been praised, but more for being a step in the right direction rather than an ultimate solution to bloated state budgets. Walker eliminated the right for state employees to collectively bargain for benefits, but they are still permitted to collectively bargain over wages. In doing so Walker has staked out a “radical” position that is actually to the left of Franklin Delano Roosevelt.
Many people are pessimistic about the nation’s ability to reverse course before our lavish entitlement programs turn us into an even larger Greece. I fear that we may be headed in that direction, and I predict that the moment we decide whether or not we will run off the cliff will occur when a state goes bankrupt and defaults on its obligations to state employees. If the United States federal government bails out the state, especially via inflation, you may as well start writing our obituary as an exceptional nation. If the state (probably either California or Illinois) is told “tough” and forced to deal with the consequences of decades of overspending, we may yet still have a chance.