A Failed Session : Politicians Come and Go but Public Employees Rule

March 8, 2010

For release Tuesday noon March 9 and thereafter (702 words)

The proven job- and wealth-creating policies were dismissed early this session as “non-starters,” to use a bit of legislative lingo. There was never any chance of reforming the Collective Bargaining Act, for instance, or introducing a right-to-work law or opting out of wage controls.

Instead, we were asked to trust in tax credits for start-up companies, mandated percentages of officially designated “citizens” at work sites and my favorite, a request that the state Economic Development Corporation focus on counties with high levels of job loss.

Was that the problem? We forgot to tell the Statehouse we needed jobs?

No serious economist thinks that list of measures will work. Neither, you can suspect, do the behind-the scenes sponsors, the bosses of the public-sector unions. They simply prefer an irrelevant legislature over one that might cut into government payrolls or make systemic changes threatening their grip on power. They look after their own, and they do a better job of it than your elected representatives.

Even so, how can legislators go home this year without meaningfully addressing the historic drop in Hoosier jobs and income?

For the answer you have to go back almost 50 years to the day government workers were first allowed to unionize. Their political apparatus has since grown to dwarf both Indiana political parties. It is technically and economically the largest political machine in history, a privileged class of neo-mandarins, the factionalism that the Founders sought to avoid. And they are the reason Indiana sits on a debt bomb — unfunded pensions of $7,418 per capital with tax revenue declining at a rate of 7.7 percent a year.

“Over time, (public-sector unionization) transformed the Democratic Party into a public-sector dependency,”  Daniel Henninger writes in the Wall Street Journal. “They became different than the party of FDR, Truman, Meany and Reuther. That party was allied with the fading industrial unions, which in turn were tethered to a real world of profit and loss.”

The central battle of our time, then, is over political primacy, not between Republicans and Democrats.

This year, the average federal salary (including benefits) is set to jump from $72,800 to $75,419. Steven Greenhut, writing in Reason Magazine, reports that: 1) 14 million government workers and six million retirees are owed $2.37 trillion by more than 2,000 different states, cities and agencies; and 2) state and local pension payouts have increased 50 percent in just five years.

“Government employees are a permanent lobby for continual government growth,” he concludes. An organization, in other words, run by its employees, an organization upside down.

Maryann O. Keating, an adjunct scholar of the Indiana Policy Review Foundation and co-author of “Microeconomics for Public Managers,” reminds us in the foundation’s spring journal that at the end of 2008 Indiana held $15.5 billion in two pension funds. The state estimates the present value of these future commitments at an optimistically low $36.4 billion while independent researchers guess it will be nearly twice that, or $62.4 billion, a gap of more than three times the amount of Indiana tax revenue collected each year.

The Wall Street Journal  reports that this year for the first time in history the number of workers in government unions (state and federal) surpassed that of private-sector unions. The news prompted a warning from the editorial board: “As we can see from the desperate economic and fiscal woes of California, New Jersey, New York and other states with dominant public unions, this has become a major problem for the U.S. economy and small-d democratic governance. It may be the single biggest problem.”

The election of Scott Brown in Massachusetts weakens the common Republican excuse — that challenging union power is “politically impractical,” that it “won’t get out of committee.” This year, though, voters in the private sector (union and non-union) are struggling to find jobs at pay levels scorned by those in public-sector unions. Virtually all GOP voters and a great number of other voters are unhappy about that — very unhappy.

Nonetheless, there will be a few legislators who come home this month repeating what they told us last session, that all of this is beyond political remedy. They will not be displaying their Statehouse savvy, however, they will be practicing their retirement speech.

T. Craig Ladwig is editor of the Indiana Policy Review. Contact him at cladwig@inpolicy.org.


RESOURCES

1. Asher Hawkins, “Trillion-Dollar Pension Gap Just Beginning of States’ Fiscal Woes.” Forbes, Feb. 18, 2010.
2. Daniel Henninger, “The Fall of the House of Kennedy.” The Wall Street Journal, Jan. 21, 2010.
3. Editorial, “Taxpayer Ambush in Oregon.” The Wall Street Journal, Jan. 20, 2010.
4. Kevin Leininger. “Profiting at the Polls.” The Fort Wayne News-Sentinel, Feb. 1, 2010.
5. Op. cit. Editorial, the Wall Street Journal.
6. Op. cit. Henninger, the Wall Street Journal.
7. Charles Freeland, “The Teacher Unions: Cutting Out Paper Dolls.” The Indiana Policy Review, winter 2001.
8. Steven Greenhut, “How Public Servants Became our Masters.” Reason Magazine, February 2010.
9. Editorial. “The Public-Union Ascendancy.” The Wall Street Journal, Feb. 3, 2010.



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