This week has seen the most amazing events unfold in Madison Wisconsin. Most of us have considered Wisconsin sort of a lost cause. The Progressive Party began there with the La Follette family and Robert La Follette who broke with Teddy Roosevelt in 1912 and later ran for president on a Progressive ticket in 1924. His family dominated Wisconsin politics, although Senator Joe McCarthy showed the odd character of their politics, too. The German socialism that influenced the Progressives has waned but the shock of the first real stand against the public employee unions has highlighted the recent changes in Wisconsin.
The Republicans swept the state as part of the 2010 electoral route of Democrats and the political left. Governor Scott Walker is not well known but his stand against the unions will make him a national figure by this weekend. The legislation he has introduced will limit the unions to bargaining for salary only. Benefits will not be subject to collective bargaining. In addition, teachers and other state employees, except those in police or firefighter unions, will be required to contribute small amounts to their pension and health care plans. My brother-in-law is a retired policeman in Chicago. My sister tells me that they have always had to contribute to his pension and the health plan. In Wisconsin, up to date, none of these employees have been required to contribute anything. Zip ! Zero !
The Republicans took over the majority in the state Senate 19 to 14. Apparently, Wisconsin law requires a super quorum including at least one member of each party to vote on legislation affecting the budget or funding state programs. As a result, the Wisconsin Senate Democrats, all 14 of them, fled the state. It turns out their hideaway was spectacular and they have announced that they may stay away for weeks.
President Obama has intervened by saying “Wisconsin is conducting an assault on unions.” In addition, his “Organizing for America” group, which has become part of the DNC, is now helping organize the demonstrations in Madison.
The state Capitol is occupied by union demonstrators who apparently plan to shut down the government. They are carrying outrageous signs and there may be violence not far below the surface. Where will this lead ?
Here is an estimate of what is at stake and the stakes are high.
It has long been understood that the 2010 elections were just the beginning of the struggle to reverse America’s current decline. It will take at least two or three election cycles to correct decades of bad policy choices. We aren’t staring into the fiscal abyss because of any single policy or event, but rather the cumulative effect of dozens, if not hundreds, of flawed decisions made by fickle politicians who capitalized on the fact that the American public was largely disengaged. In the end, these decisions created a vast political class who live off the fruits of others’ labors.
When a business wants to increase its future earnings, it has to find new markets and sell more of its product. For the political class its the same, only their markets and products are government services. As a result, every year, public sector unions spend tens of millions of dollars lobbying for bigger government and filling the campaign coffers of the politicians who acquiesce to their demands. In addition to bigger government, they’ve won pay packages higher than the private sector, almost 100% job security and the ability to retire in their fifties with lifetime retirement income and health benefits. All paid for by us. Unlike private sector unions, every dollar funding government employees’ pay, pension and benefits comes out of our paychecks.
The moral hazard of public employee unions was known to Franklin Roosevelt who opposed them. John Kennedy permitted government workers to unionize by executive order. Ironically, Wisconsin, in its Progressive era, was the origin of the largest public employee union.
If there is any doubt how important the fight in Wisconsin is, look no further than the left’s reaction to it. Governor Walker’s proposal calls on public employees to pay more into their retirement fund and pay around 12% of their health insurance premiums. It also ends collective bargaining for most public employees, which mostly affects union bosses rather than rank and file members and is an important measure to forestall a future fiscal crisis.
Actually, as I understand it, the collective bargaining is still permitted for salary but not benefits.
For this, tens of thousands of public school teachers called in ’sick.’ So many, in fact, that hundreds of schools across Wisconsin have been closed for days. They pressed school children into service as fellow protesters, most not understanding the issue at hand. They drew up signs comparing the governor to Hitler and called the GOP Nazis. Several GOP Senators have faced multiple death threats. When all of this wasn’t enough to stop the proposal, their allies in the Senate simply fled the state to prevent a vote from happening.
The rest of the nation is starting to notice.
Among key provisions of Mr. Walker’s plan: limiting collective bargaining for most state and local government employees to the issue of wages (instead of an array of issues, like health coverage or vacations); requiring government workers to contribute 5.8 percent of their pay to their pensions, much more than now; and requiring state employees to pay at least 12.6 percent of health care premiums (most pay about 6 percent now) …
In an unusual move, he would require secret-ballot votes each year at every public-sector union to determine whether a majority of workers still want to be unionized. He would require public-employee unions to negotiate new contracts every year, an often lengthy process.
The result has resembled Cairo and the demonstrations seem to be building up into a national showdown with public employee unions. Scott Walker is under enormous pressure but a large part of the nation is behind him. The union tactics may well alienate an even larger share of the public.
The Hitler meme is as common as it was with George W Bush. Democrats seem to have limited imagination.
The Wall Street Journal sees the riots as a European phenomenon brought here.
For Americans who don’t think the welfare state riots of France or Greece can happen here, we recommend a look at the union and Democratic Party spectacle now unfolding in Wisconsin. Over the past few days, thousands have swarmed the state capital and airwaves to intimidate lawmakers and disrupt Governor Scott Walker’s plan to level the playing field between taxpayers and government unions.
Mr. Walker’s very modest proposal would take away the ability of most government employees to collectively bargain for benefits. They could still bargain for higher wages, but future wage increases would be capped at the federal Consumer Price Index, unless otherwise specified by a voter referendum. The bill would also require union members to contribute 5.8% of salary toward their pensions and chip in 12.6% of the cost of their health insurance premiums.
If those numbers don’t sound outrageous, you probably work in the private economy.
This looks to be building up to a national showdown with public employee unions. I hope Scott Walker is safe and keeps his courage in spite of demonstrations on the front lawn of his and other legislators homes. He looks like he is not weakening.
More to come.
UPDATES:
1. John Fund adds some background to the story with an explanation of the issues behind the furious union response.
2. Here is a rebuttal to a false story the Democrats are circulating to the effect there was no deficit until Walker “ginned one up.”
We re-read the fiscal bureau memo, talked to Lang, consulted reporter Jason Stein of the Journal Sentinel’s Madison Bureau, read various news accounts and examined the issue in detail.
Our conclusion: Maddow and the others are wrong.
There is, indeed, a projected deficit that required attention, and Walker and GOP lawmakers did not create it.
More on that second point in a bit.
The confusion, it appears, stems from a section in Lang’s memo that — read on its own — does project a $121 million surplus in the state’s general fund as of June 30, 2011.
But the remainder of the routine memo — consider it the fine print — outlines $258 million in unpaid bills or expected shortfalls in programs such as Medicaid services for the needy ($174 million alone), the public defender’s office and corrections. Additionally, the state owes Minnesota $58.7 million under a discontinued tax reciprocity deal.
The result, by our math and Lang’s, is the $137 million shortfall.
Sorry folks, the head-in-the-sand version is not true. The only state with a surplus is North Dakota.
3. Now, we have a doctor (or a fake) handing out excuse slips for the teachers that called in sick. This is illegal and apparently there are multiple folks in white coats handing out these slips with his name. This is practice of medicine without a license and treating (for him) patients without a good faith exam. How does he know they are or were sick ? Digging deeper and violating the first rule of holes.
4. Here is a new blog reporting on the antics of the runaway Democrat Senators.
5. Here is a video of one of the physicians committing fraud.
She doesn’t seem concerned. I sure hope Walker sets the medical board on them.
6. Here are more local accounts of the standoff. I like this sentence.
The Governor stands firm. I understand that there are strategies in place for next steps which will shake up the stalemate….I have known him for at least 15 years, but he is different now. He is a man who has met his time and his place, and he seems to know it.
Here is a very important comment from a Newsbusters thread on the Wisconsin situation.
Would someone please note that Unions make the great lion’s share of their $ from negotiating “benefits”, not salaries… or collection of dues.
This is why the decoupling of the Salaries and Benefits so important to Unions in Wisconsin. And why the Union’s have countered the way they have. They’ll give up Salary and Jobs for Teachers in a second, but they will fight to death for Benefit negotiation position. In another life as an executive in CA, I used to do administration for two Teamster’s “Health and Welfare” benefit packages. Do your research, but you’ll find I’m correct about motivation of Unions. I also believe that the amount of money kept by Unions will be very interesting to both your viewers, and the tax payers of the US of A. The way it works is that the Unions negotiate with the “Employer” regarding how much money per member/per month they will need to support the benefit options required in Union contract. In the case of WI, they negotiate with each of the 77 counties. Then the Unions negotiate the terms of benefits with “providers”/Ins Co’s, etc. They make the lion’s share of their money off of what is called the “breakage” created by Employees choosing between plan options, and the administration of the programs.
Let me explain with an example: A Union begins by negotiating with the Employer/State. They’ll claim their buying leverage will afford Employer significant savings. They’ll end up with a 3-tiered cost structure which allows the Union a profit even with the highest benefit option available as Union already has a very good idea about what Providers will be charging. But it gets even more lucrative for Unions at this point. Let’s say high-end Blue Cross PPO coverage costs $400 for the Family tier. What a Union will do is require $425 from Employer, plus a loaded in admin fee, as a charge for all Families in the employer group. So far, so fair? But, the Union will also offer a few other plans for Employees to choose from. The Union will also have developed relationships with a few cheaper HMO plans, and lesser PPO benefit structure plans that charge, as an example, $325 and $375, respectively.
At an Open House, employees will choose what fits their needs and the Union is in line for the “breakage“. The left over breakage is then, to my experience, placed in a fund where only the Union has the checkbook. Cars, Vacations and Condo’s, oh my. The Union also makes a “commission” off of things like Pre Legal, Dental and Term Life. As another profit source, the Union also leans on the Administrator for favors I’d rather not list, but usually involving idiocy like buying thousands of dollars of “raffle tickets” and leasing cars for the Union’s Business Agents, not entirely above board. Of course I am relating my experience, and what little I know of others who also did Union administration. I’d expect any simple research by an actual reporter would open up a Pandora’s box of Slush in the Badger State.
Very revealing comment. This is why “benefits” is such a life and death issue for the unions.
Here is more on the lefty physicians writing fake “sick leave” notes for demonstrating teachers. The comments are very interesting and have more on applicable Wisconsin laws.
Nice summary, Mike. You need one of those share buttons for Facebook.
Thanks for the link and as it turns out these are real physicians. Two have been identified by myself and at other sites.
I hope they are all identified and asked by the Medical Board to produce the medical records for all those sick excuse slips.
Excellent piece, doc.
Beyond government pensions though is the question of whether ANY pensions provided in part or in full by an employer makes sense in this day and age.
Frankly, if I could snap my fingers and outlaw pensions I would.
Why?
Because to one extent or another all pension funds are supported by Ponzi scheme, luck, or a mixture of both.
How does the private company of today know what it’ll be able to afford in 20 or 30 years – or even know it’ll still be around in 20 or thirty years?
As to third party fund investment… well… even if we’re talking guaranteed annuities, a lot can happen on the macro stage over a few decades.
I mean, doc… how many times have we seen government forced to be the guarantor of last resort?
Nope. I’d do away with pensions and indeed all benefits. I mean think about it, all “benefits” are is a smoke and mirrors way of getting around a dysfunctional tax code. Better to reform the tax code – making it as flat as possible and regardless of how flat that turns out to be getting rid of deductions – and pay people a “fair” wage that the recipient can decide is “fair” or not depending upon whether it meets his needs to purchase the lifestyle he feels he requires.
I’m not saying don’t save. No! What I’m saying is take responsibility for your own savings… for your own life!
Defined contribution plans are not a problem so long as the employee has control of his or her money. Roth IRAs are another opportunity to save with deferred taxes. The tax benefits, which encourage saving, are the reason for pensions. Bush tried to carve out an ownership segment of Social Security and got trashed for his trouble.